Chatham Islands Council v Leslie
[2013] NZHC 751
•15 April 2013
IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY
CIV-2012-476-000272 [2013] NZHC 751
BETWEEN CHATHAM ISLANDS COUNCIL Plaintiff
ANDKELVYN ROSS LESLIE Defendant
Hearing: 11 April 2013
Appearances: H D J Holderness and J-L Day for Plaintiff
C A O'Connor for Defendant
Judgment: 15 April 2013
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
[1] The plaintiff is the territorial authority for the Chatham Islands, constituted under the Chatham Island Council Act 1995. By s 14(1) of the Act the Council may levy dues on goods imported into or exported from the Chatham Islands. The dues form part of the general revenues of the Council.
[2] The Council says that the defendant was appointed to and did collect dues on its behalf, but has failed to pay them to the Council. Mr Leslie says that whilst dues were collected, the obligation to do so was not his, but rather an obligation of Black Robin Freighters Limited, a company of which he was a director but which is now in liquidation. The issue in this case is whether Mr Leslie must personally pay the
Council for the dues collected on its behalf.
Solicitors:
Wynn Williams (J V Ormsby), PO Box 4341, Christchurch – [email protected]
Counsel: H D J Holderness – [email protected]
Gresson Dorman & Co, PO Box 244, Timaru – [email protected]
CHATHAM ISLANDS COUNCIL V K R LESLIE HC TIM CIV-2012-476-000272 [15 April 2013]
[3] The Council has applied for summary judgment against Mr Leslie, that is, judgment without a trial. Judgment can only be entered on this basis if the Council can satisfy the Court that Mr Leslie does not have a defence to the claim.[1] This procedure is not usually suitable for the determination of issues of fact, unless a plaintiff can show that a defendant’s allegations are utterly baseless[2] and that there is no defence. If the Council lays a foundation for this conclusion, an evidential onus shifts to Mr Leslie to demonstrate a tenable defence, but the onus of establishing entitlement to summary judgment remains on the Council.[3]
The Chatham Islands Council Act 1995
[1] High Court Rules, r 12.2.
[2] Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 (HC); Pemberton v Chappell [1987] 1 NZLR 1 (CA).
[3] Auckett v Falvey HC Wellington CP296/86, 20 August 1986, per Eichelbaum J; MacLean v Stewart (1997) 11 PRNZ 66 (CA).
[4] Section 16(1) of the Act imposes liability to pay dues on a range of persons who are involved in carrying goods to or from the Chatham Islands. Succeeding subsections set up a system for collection of dues which are payable.
[5] Subsections 16(3) and (3A) provide:
(3) Notwithstanding subsection (1), the Chatham Islands Council may from time to time, by written notice given to any person (being a person who operates a ship or aircraft between the Chatham Islands Territory and any other part of New Zealand), require that person to collect, on behalf of the Chatham Islands Council, any council dues payable in respect of goods imported into or exported from the Chatham Islands Territory on any ship or aircraft operated by that person.
(3A) A person required by notice under subsection (3) to collect council dues on behalf of the Chatham Islands Council –
(a) holds the dues collected in trust for the Chatham Islands
Council; and
(b) must pay those dues into a separate account at a bank.
[6] Section 16(4) allows a person who has received a notice under subs (3) to be reimbursed for all reasonable costs and expenses. Subsection (5) provides that any
dues collected in a given month are to be paid to the Council within 28 days after the
end of that month, less reimbursement of expenses, accompanied by a return setting out information supporting the payment. If this does not occur a penalty may be added. Subsection (7) provides that every person who fails to comply with a notice under subs (3), or to comply with the requirements of subs (5), commits an offence and is liable on summary conviction to a fine not exceeding $1,500.
Relevant facts
[7] On 28 March 2000 the Council issued a notice under s 16(3) by a letter addressed to Leslie Shipping Limited, for the attention of Mr Leslie. The text of the letter is this:
Pursuant to section 16 (3) of the Chatham Islands Council Act 1995 written notice is hereby given requiring you, Kelvyn Ross Leslie, to collect on behalf of the Chatham Islands Council, county dues payable in respect of goods imported into and exported from the Chatham Islands Territory on any ship operated by you.
Dated at Waitangi this 28th day of March 2000
Yours faithfully, C Melville
General Manager.
[8] At that time three companies under the directorship of Mr Leslie imported goods into and exported goods from the Chatham Islands. These were Black Robin Freighters Limited, Black Robin Shipping Limited, and Leslie Shipping Limited.
[9] Until October 2009, dues were collected on all freight carried by these companies, and from September 2000 until that month Black Robin Freighters Limited undertook this task, kept the monies in its general account, and paid them to the Council. However, although Black Robin Freighters Limited continued to collect dues from October 2009, it ceased paying them to the Council. Twelve invoices issued between October 2009 and September 2010 for a total of
$202,655.28 remain unpaid. All were issued by the Council to Black Robin Freighters Limited. There is no dispute that the dues for which these invoices were rendered were properly assessed, nor that they were collected from the three
operating companies, and placed into the general account of Black Robin Freighters
Limited. However, that company went into receivership in October 2010.
[10] The Council claimed an interest in the general account of Black Robin Freighters Limited and settled its claim with the receiver for the sum of $40,000. In this proceeding it claims from Mr Leslie the balance.
[11] In the course of negotiating with the receiver, the general manager of the Council, Mr Pickles, wrote an email to Mr Leslie on 23 September 2011 referring to an earlier discussion, attaching a copy of the notice issued to him under s 16(3)[4] and then stating:
[4] [7] above
I am trying to prove that the relationship between the Council and you was between the Council and Black Robin Freighters Ltd. 10 years of document exchange and payment history confirms this however the receivers solicitors are not convinced.
A letter from you explaining your understanding of your relationship as the dues collector with the council may assist further. Obviously if we end up in court an affidavit may be required.
[12] According to an email by which Mr Leslie forwarded this to another person, he did not reply to this email. Mr Pickles now says that the Council did not ever make any arrangement with Mr Leslie passing responsibility to collect the dues to Black Robin Freighters Limited, nor did it issue a notice under s 16(3) to that company. He says the invoices were addressed to the company as that was the most convenient way to make sure the invoices were received by Mr Leslie. Why that method of address should be more likely to produce that result than addressing them to Mr Leslie is not explained.
[13] Mr Pickles produced two more letters. The first was received by the Council on 22 May 2000 and refers to the first four voyages in respect of which dues were collected. It appears to be on a letterhead of Black Robin Freighters, C/o Leslie Shipping Limited, but is signed by Mr Leslie personally. In the letter he refers to a summary “for each of our first 4 voyages”, “the summary of our payment” and then says:
In future, we will show the commissions on each voyage summary. Future payments of those dues so far uncollected will be shown on our next months summaries.
A copy of each of the manifests concerned will be mailed to you, together with a copy of summaries and our cheque.
Best regards, Kelvyn Leslie.
[14] The second letter, also to the Council, is dated 21 October 2001. It has the same heading as the earlier letter and, as before, is written entirely in the first person plural, describing the system by which “we” would undertake collection of debts and pay dues to the Council. The letter is, again, signed “Best regards, Kelvyn Leslie”. Mr Pickles says these letters show that Mr Leslie was collecting the dues and paying them to the Council.
The case for the Council
[15] In the first amended statement of claim the Council pleads three causes of action. First, it says that Mr Leslie was under a statutory duty to collect and hold dues in a separate bank account and pay them to the Council, but that he breached that duty and is liable accordingly. Secondly, the Council says that Mr Leslie was bound to hold the dues collected on trust for the Council but did not comply with his duties as trustee as he held them in a bank account of Black Robin Freighters Limited rather than in a separate bank account as required by s 16(3A)(b), and failed to pay them to the Council as required by s 16(5). The same actions are relied on for an allegation that Mr Leslie breached fiduciary duties he owed to the Council.
[16] Thirdly, and in the alternative, the Council says that as Mr Leslie was at all times a director of Black Robin Freighters Limited, he was in control of its financial affairs including control of monies received by the company. The Council says that if it were found (as Mr Leslie maintains) that responsibility to the Council passed to Black Robin Freighters Limited, then that company is in breach of its obligations as trustee to hold the monies and pay them to the Council, and Mr Leslie in his capacity as a director is liable to the Council for dishonest assistance in a breach of trust.
[17] Mr Leslie says that although he was appointed by the Council under s 16(3), he does not owe the plaintiff a statutory or a fiduciary duty, as the obligation to collect the dues on behalf of the Council has passed to Black Robin Freighters Limited. He says he did not dishonestly assist that company to breach a fiduciary duty to the plaintiff.
[18] In support of Mr Leslie’s position, Mr O’Connor relies on the following:
(a) All the unpaid invoices were issued by the Council in the name Black
Robin Freighters Limited.
(b)The two letters sent by Mr Leslie to the Council in 2000 and 2001, on letterhead of Black Robin Freighters Limited and using the first person plural in respect of actions described in the letters,[5] made it clear that Mr Leslie was not collecting and holding the dues personally, but the Council did not object.
(c) The email sent to Mr Leslie by the general manager of the Council, Mr Pickles, in September 2011[6] showed a clear view on the part of the Council that Black Robin Freighters Limited was the party responsible for paying the dues to the Council.
[5] [13] and [14] above.
[6] [11] above
[19] Mr O’Connor accepts that the appointment of Mr Leslie has never been revoked, nor has there been an appointment of Black Robin Freighters Limited, or any formal transfer of the obligations of Mr Leslie to that company. He says, however, that the Council agreed to the obligations being assumed by Black Robin Freighters Limited, a position evidenced by the documents referred to. He also relies on the fact that the first call for payment of the unpaid dues was to the receivers of that company, and only when that failed to result in full payment did the Council turn to Mr Leslie personally. Mr O’Connor notes that these steps were taken over a
period of a decade.
[20] I am satisfied on the evidence that the Council did not ever agree formally to revoke or vary the statutory obligation imposed upon Mr Leslie personally in March
2000. Although the facts referred to by Mr O’Connor support the view that the Council readily acquiesced in the manner in which Mr Leslie chose to comply with the duty imposed on him, namely through the financial accounts of Black Robin Freighters Limited, it is quite another matter to suggest that the requirement of March 2000 was thereby varied or revoked. There is no evidence of any formal step being taken by the Council to that end. Indeed, in August 2003 the Council wrote to the manager of Leslie Shipping Limited, for the attention of Mr Leslie, drawing to his attention a number of changes to the dues collection system, and, of particular relevance to the present case, telling him:
(a) That dues collected for the Council are to be held in trust for the Council and must be held in a separate bank account (these being the provisions of s 16(3A), which was inserted into the Act by the Chatham Islands Council Amendment Act 2002, with effect from 19 December
2002), and
(b)That whilst a breach of the requirements of the Act may lead to conviction and a fine of up to $1,500, any person who deals with collecting dues in any way which is in breach of the trust requirements of s 16 would also be guilty of a breach of trust, would become personally liable to the Council for any dues not accounted for, and would also be subject to additional criminal penalties depending on the nature of the breach of trust.
[21] Apart from being referred to the attention of Mr Leslie, in the heading of the
letter, it also commences “Dear Kelvyn”.
[22] Mr Leslie says that he did not receive this letter. On an application for summary judgment where findings of credibility cannot generally be made, I am prepared to accept that position. It does not avoid the fact, however, that the relevant changes to the law which are described in the letter were in fact made and, whether
Mr Leslie knew of them or not, are binding on him. I also accept that the letter was in fact written and sent to Mr Leslie through another of his companies, and it is evidence of the Council’s intention that Mr Leslie personally was responsible to the Council for the duties imposed on him.
[23] I find therefore that Mr Leslie remains personally responsible to the Council in respect of his appointment as a collector in March 2000.
[24] From this finding it follows that the dues collected but not paid to the Council were held in trust by Mr Leslie. The fact that the account into which they were placed was in the name of a company under his direction, and not in his own name, does not alter this position. Mr Leslie was a director of the company which received the funds and spent them for its own purposes. I have no doubt that Mr Leslie knew that the monies were held for the Council, as the arrangement by which the funds were received and sent to the Council after the deduction of a collection commission had been in operation for nine years prior to September 2009. Further, a process for payment to the Council of the sums owing, over time, had been put in place before the receivership of Black Robin Freighters Limited.
[25] I find therefore that Mr Leslie does not have an arguable defence to the Council’s claim that he is in breach of trust and must account for the monies claimed.
[26] Given this, it is not necessary to consider in detail the other two bases upon which the Council claims that Mr Leslie is liable to pay the dues collected but unaccounted for.
[27] In deference to the arguments presented by counsel, I will express my views briefly on the claim that Mr Leslie is liable for breach of statutory duty. Both counsel accept that whether a statute creates a duty which is enforceable by private
action is a matter of construction of the act in question.[7] Both counsel emphasised
[7] Cutler v Wandsworth Stadium Ltd [1949] AC 398 at 407;
R v Deputy Governor of Parkhurst Prison Ex Parte Hague [1992] 1 AC 58 at 159.
See also, generally, Stephen Todd The Law of Torts in New Zealand (5th ed, Thom son Reuters, Wellington, 2009) at chapter 8.2.
indicia within the act which they say support their respective client’s position. Mr O’Connor says that the provision of alternative enforcement mechanisms for a statutory duty creates a presumption that Parliament did not intend that a private remedy for breach of statutory duty would be available. He points to s 16(5A) which imposes a penalty of 10 per cent on the amount owing, if it is unpaid, and the fact that not accounting for dues may lead to summary conviction and a fine not exceeding $1,500.
[28] Mr O’Connor also says that if the parties who have a duty to pay dues under s 16(1) do not in fact pay, s 24 expressly provides that the unpaid dues may be recovered as a debt in any court of competent jurisdiction, but there is no similar provision permitting claims against the appointed collector of dues if he does not then account for them to the Council.
[29] The Council says that the duties imposed on Mr Leslie were to collect the dues payable by parties identified in s 16(1), once collected to hold those dues in trust for the Council in a separate bank account, and to pay the dues collected to the Council within 28 days of the end of each month. The Council says these duties are owed to an identifiable subject, namely the Council, and accordingly the Council
may bring a claim as a private cause of action.[8]
[8] X (Minors) v Bedfordshire County Council [1995] 2 AC 633.
[30] The Council says that the general rule, that a private claim may not lie where Parliament has provided alternative enforcement mechanisms, does not apply in this case. The sanctions against non-payment of the dues which are set out in the Act are a penalty of 10 per cent of the amount owing, and a fine of up to $1,500. If there is no civil right of action in the Council, it would have no way of recovering the balance of the sum collected on its behalf.
[31] The argument for the Council is compelling. The Act sets up a regime whereby those who take goods to or from the Chatham Islands pay a levy to fund the operations of the Council. This is collected by a process by which a collector is appointed and given the duty to collect the dues to which the Council is entitled, to
hold them separate from the collector’s own funds, and to pay them to the Council.
The Council is readily identified as having the benefit of these provisions. The penalties for non-compliance are modest by comparison to the loss which would be incurred by the Council if the duties were not enforceable by private action. The lack of a provision in similar terms to that in s 24 may be seen as recognition that it would be superfluous in the context of a collector who receives and holds monies on trust. I find that a breach of Mr Leslie’s statutory duties may be enforced by private action.
[32] For these reasons Mr Leslie does not have an arguable defence to a claim based on breach of statutory duty.
[33] The third basis upon which liability is said to rest on Mr Leslie, dishonest assistance of Black Robin Freighters Limited in breach of trust, would be relevant only if I had found that Mr Leslie was not personally liable to the Council, under his appointment, but that liability had by some means been transferred to Black Robin Freighters Limited. I have found that is not the case.
Outcome
[34] Mr Holderness seeks interest for the Council on the sum invoiced but unpaid prior to the receivership, $202,655.28, up to 10 March 2012, the date on which the receiver paid the Council $40,000. In addition he seeks interest on the unpaid balance of $162,655.28 from that date to the date of judgment.
[35] In my opinion these claims for interest are appropriate. I enter judgment: (a) In the sum of $162,655.28.
(b)For interest at the rate or rates set out for the time being in the Judicature Act, on the sums and for the periods described in the preceding paragraph.
(c) For costs in favour of the Council on a 2B basis plus disbursements
fixed by the Registrar.
J G Matthews
Associate Judge
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