Commissioner of Inland Revenue v Chesterfields Preschools Limited (in liquidation)
[2015] NZHC 2938
•24 November 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2015-409-000043 [2015] NZHC 2938
BETWEEN THE COMMISSIONER OF INLAND
REVENUE Plaintiff
AND
CHESTERFIELDS PRESCHOOLS LIMITED (IN LIQ)
First Defendant
AND
THERESE ANNE SISSON Second Defendant
Hearing(by
telephone conference):
17 November 2015 Counsel:
S M Kinsler for Plaintiff
D J Hampton (seeking to be joined)
T A Sisson (Second Defendant) in personB M Russell for First Defendant (in liquidation) (excused from attendance)
Judgment:
24 November 2015
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to joinder of a new party
[1] This is the second judgment in this proceeding relating to the possible joinder of a party. The situation arises because the Court put Chesterfields Preschools Ltd into liquidation on 6 October 2015.1
[2] Persons associated with Chesterfields wish to pursue an appeal of the liquidation order.
1 The Commissioner of Inland Revenue v Chesterfields Preschools Ltd (in liq) [2015] NZHC
2440.
THE COMMISSIONER OF INLAND REVENUE v CHESTERFIELDS PRESCHOOLS LIMITED (IN LIQ) [2015] NZHC 2938 [24 November 2015]
[3] On the application of Therese Sisson, the Court on 29 October 2015 recalled the liquidation judgment for the purpose of joining Ms Sisson as an additional party to the proceeding.2
The application in relation to Mr Hampton
[4] Ms Sisson sought the joinder of not only herself but also David Hampton.
[5] Ms Sisson and Mr Hampton are former (domestic) partners as well as having had business interests together. Mr Hampton is bankrupt. Ms Sisson is the sole director of Chesterfields. Mr Hampton is described in the application as “trustee shareholder of Chesterfields Preschools Ltd”.
[6] The Commissioner, responsibly, did not oppose the recall of judgment and the joinder of Ms Sisson, having regard to her directorship. For the Commissioner, Mr Kinsler recognised, by reference to Aotearoa Kiwifruit Export Ltd v ANZ National Bank Ltd that the need to facilitate an appeal from a liquidation order constitutes a “very special reason” which may justify recall.3 The Commissioner accepted that the joinder of Ms Sisson (as a director) was a means of ensuring that Chesterfields could pursue an appeal.
[7] In my judgment relating to Ms Sisson’s joinder, I invited Ms Sisson to discuss further with Mr Hampton whether there was any longer a need to pursue the second aspect of her application, namely the joinder of Mr Hampton. They made the decision to pursue the second aspect of the application.
[8] Although the application before the Court is strictly that of Ms Sisson, I
heard submissions from Mr Hampton as if he were applicant.
[9] There are two aspects to consideration of Mr Hampton’s application. There
is both the application for recall of the judgment (for the purposes of joinder) and then the joinder itself. In my previous judgment I recalled the judgment for the
2 The Commissioner of Inland Revenue v Chesterfields Preschools Limited (in liq) [2015] NZHC
2667.
3 Aotearoa Kiwifruit Export Ltd v ANZ National Bank Ltd HC Tauranga CIV-2011-470-697, 3
February 2012.
purposes of joining Ms Sisson but not for further purposes. Mr Hampton must therefore satisfy me both that it would be proper to recall the judgment for the purposes of joining him and to then join him.
Legal principles for recall of judgment
[10] Pursuant to r 11.9 High Court Rules, a Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed. For the reasons identified in my earlier judgment, the general r 11.9 jurisdiction is available in this case.4
[11] The discretion under r 11.9 is on its face unfettered but the Court has recognised in particular three categories of case where recall may be appropriate. I adopt the observations of Wild CJ in Horowhenua County Council v Nash (No 2),5 where his Honour observed:
Generally speaking, a judgment once delivered must stand for better or worse subject, of course, to appeal. Were it otherwise there would be great inconvenience and uncertainty. There are, I think, three categories of cases in which a judgment not perfected may be recalled – first, where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the Court’s attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled.
[12] In Aotearoa Kiwifruit Export Ltd, Associate Judge Bell recognised that both shareholders and directors of a liquidated company are adversely affected by a liquidation decision and will have standing to apply for joinder.6 I adopt that conclusion.
[13] The real issue on this remaining part of the application to recall the judgment and join Mr Hampton is whether there is in these circumstances, some “very special
reason” requiring, as a matter of justice, that the judgment be recalled.
4 The Commissioner of Inland Revenue v Chesterfields Preschools Limited (in liq), above n 2, at
[6] – [7].
5 Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633 per Wild CJ.
6 Aotearoa Kiwifruit Export Ltd v ANZ National Bank Ltd, above n 3 at [15].
Mr Hampton’s written submissions
[14] Mr Hampton relied heavily upon the judgment of Associate Judge Bell in Aotearoa Kiwifruit Export Ltd. He noted the Associate Judge’s observations as to the different legal relationships between the director and the company on the one hand and the shareholder and the company on the other. He submitted that the Court should take account of the fact that a director has no obligation to engage shareholder interests in pursuing, through the appeal of the liquidation judgment, “the rights and interests of the director”. As a consequence, he submitted, the protection of shareholders’ interests would unfairly be lost if the director for any reason withdrew an appeal in a situation where an application for joinder of the shareholder to a recalled judgment had been declined.
[15] Mr Hampton did not address his position as a bankrupt in relation to the interests he wishes to protect. I was informed in the course of submissions that Mr Hampton had satisfied the Commissioner ahead of this hearing that the Official Assignee has accepted that Mr Hampton holds the Chesterfields shares as trustee and not beneficially.
The Commissioner’s submissions
[16] For the Commissioner, Mr Kinsler in his synopsis opposed the remaining application on three bases –
(a) There is no evidence as to the precise nature of Mr Hampton’s claimed shareholding interest to reliably establish standing (this ground falling away given the clarification provided through the Assignee and summarised at [15] above).
(b)With the joinder of Ms Sisson, joinder of Mr Hampton is no longer necessary to protect appeal rights.
(c) There is no other “very special reason” requiring recall.
Discussion
[17] The second ground of opposition relied upon by the Commissioner is sufficient to dispose of this application.
[18] The purpose of the requested joinder is to protect appeal rights. The joinder already ordered has afforded that protection.
[19] Mr Hampton has identified in his submissions a distinction between the interest of a director and the interests of shareholders and has raised the spectre of Ms Sisson withdrawing her appeal. There is no evidence to justify a basis for real concern in that regard. I take judicial notice of the long period of cooperation and mutual support between Ms Sisson and Mr Hampton in relation to years of litigation involving Chesterfields and their other interests. Ms Sisson is the formal applicant, has filed a notice of appeal, and there is no reason for the Court to anticipate that she will at some point for some reason depart from her consistent support of mutual interests. At the hearing, Ms Sisson and Mr Hampton confirmed that, although they hold no beneficial interests through trust, their children have interests. This increases the unlikelihood of a change of approach on the part of Ms Sisson to the neglect of the shareholders’ interests.
[20] There is no need to join Mr Hampton as an additional party to protect appeal rights.
Ms Sisson’s submissions
[21] Although Mr Hampton had presented the written synopsis for the hearing and initially presented oral submissions, Ms Sisson added orally to those submissions with a focus on a point not taken in the grounds of application or in Mr Hampton’s written synopsis. It relates to the preparation and presentation of the appeal.
[22] Ms Sisson submitted that the needs of the appeal will be that at least two people represent the interests of the company, after what she described as some 18 years of litigation between the parties. She said that counsel would have been engaged but for the lack of financial resources. She noted that at times in relation to
judicial review proceedings between the parties there have been up to four Crown counsel involved for the Commissioner. For the purposes of preparing for an appeal, Ms Sisson referred to the significant number of “man hours” which would be required, with a timetable already in place in relation to the appeal.
[23] Ms Sisson noted that although she and Mr Hampton both have legal qualifications, her field of expertise is in family law. She would never as counsel undertake work involving specialist taxation issues. Mr Hampton, on the other hand, has an extensive background in taxation law. He has not practised law but has, by leave, represented himself or his associated interests in litigation involving tax issues. Ms Sisson referred to Mr Hampton as having “the special skills in that area” to enable the appeal to be properly presented.
[24] Mr Kinsler submitted that the issues raised by Ms Sisson are matters relating to the representation of a party on appeal and the practical management of the appeal process and hearing. He submitted that these are different issues to those involved in determining whether, for very special reason, justice requires recall of the liquidation judgment. He submitted that it is more appropriate that the Court of Appeal determine, against the background of Ms Sisson’s right to pursue the appeal, how the appeal can most fairly be presented. Mr Kinsler referred to the right of a Court to
regulate the proceedings before it.7 Mr Kinsler referred to the concept of a
McKenzie friend.8 Mr Kinsler noted that, while permission to have a McKenzie friend is usually limited to assistance short of advocacy, the Court has a discretion to allow more than that.9
[25] On principle, I find Mr Kinsler’s submissions to be compelling. The factors raised in support of the application by Ms Sisson belatedly at the hearing fall short of the “very special reason” identified by Wild CJ in Horowhenua County Council as
his Honour’s third category of cases for recall. A meaningful right to appeal against
7 Mihaka v Police [1981] 1 NZLR 54 (HC).
8 The expression “McKenzie Friend” being derived from McKenzie v McKenzie [1971] P 33, [1970] 3 All ER 1034 (CA).
9 Mihaka v Police, above n 7, at 60 per Hardie Boys J, citing the limits stated in Collier v Hicks
(1831) 2 B & Ad 663 (KB), (1831); 109 ER 1290.
Chesterfields’ liquidation has been achieved through the granting of Ms Sisson’s
application in relation to her own joinder.
[26] Matters of the time and preparation to ready an appeal for hearing can be resolved by Ms Sisson utilising the assistance of Mr Hampton to whatever extent she wishes. If her resources (be they time, knowledge or other) are limited, she is entitled to have Mr Hampton assist. I recognise that the point at which Ms Sisson might be restricted in her utilisation of Mr Hampton’s time and skills is when she comes to present her submissions on the appeal. Essentially her present argument is that she will not fairly be able to present the appeal arguments on her own, because it is Mr Hampton who has the historical and legal understanding of the tax issues in particular which would make his involvement important for Chesterfields (including the interests of its shareholder). But whether some special arrangement for representation should be granted is a matter more appropriately for the Court which is to hear the appeal. As the decision of Hardie Boys J in Mihaka v Police indicates,
the Court of hearing has a discretion in relation to advocacy assistance.10
[27] In the course of his submissions Mr Kinsler noted that a court, when considering matters of representation, will take into account whether the appellant’s interests will be truly benefitted by the advocacy involvement of a particular person. Mr Kinsler recalled observations made by the Court of Appeal previously as to Mr Hampton’s involvement having added to the complexity of litigation involving Chesterfields. (Understandably, given that Ms Sisson had raised her issues in the course of oral submissions, Mr Kinsler did not cite a specific judgment.) Mr Kinsler’s point is well made – the Court of Appeal, in relation to a matter which concerns the conduct of an appeal before that Court, has the benefit of an institutional background which leaves it best placed to determine matters relating to just representation on an appeal.
[28] I add this. Although the point was not explored in the submissions presented, the Court will generally be disinclined (when considering joinder for the purpose of protecting appeal rights) to join two additional persons each having separate rights of
representation. It would take unusual circumstances to justify a conclusion that it
10 Mihaka v Police, above n 7, at 60.
would be just for the company to effectively have, on appeal, two advocates and two sets of representation. This reinforces my conclusion in the preceding paragraph that it is the Court of Appeal which should determine to what extent Ms Sisson should have leave to have assistance on the appeal.
Procedural history
[29] Finally, I briefly mention matters of procedural history as Mr Hampton raised them in his written synopsis. He there noted that he had intended to pursue leave to appear for the company in the liquidation proceeding but had ultimately not pursued leave given the Court’s indication that an application for leave was unlikely to be granted. Although the company ultimately obtained legal representation, Mr Hampton noted that, by reason of the lateness of the appointment of counsel, a statement of defence was submitted for filing out of time and was therefore rejected, with liquidation ensuing.
[30] Mr Hampton’s identification of the procedural background does not assist the application. If there are issues of procedural background which are relevant on the appeal, they will now be able to be explored provided they are properly identified in the grounds of appeal.
Outcome
[31] The aspect of the application which seeks to join Mr Hampton must be dismissed.
[32] Costs must follow the event. Although the application as issued was strictly that of Ms Sisson, the hearing proceeded on the basis that Mr Hampton could present submissions as if it were his application. In these circumstances, all parties accepted that any costs order against the applicant should be against Mr Hampton only.
Orders
[33] I order:
(a) That part of Ms Sisson’s application dated 16 October 2015 which sought the recall of judgment to join David John Hampton and then joinder of David John Hampton in this proceeding is dismissed; and
(b)David John Hampton is to pay to the Commissioner of Inland Revenue the costs of the application on a 2B basis together with disbursements to be fixed by the Registrar.
Associate Judge Osborne
Solicitors:
Crown Law, Wellington (S Kinsler)
The Insolvency and Trustee Service, Christchurch (G Slevin) Lane Neave, Christchurch (B M Russell)
Copy to: D J Hampton
T Sisson, Christchurch
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