Commissioner of Inland Revenue v LivingSpace Properties Limited (in liquidation and in receivership)

[2019] NZHC 711

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2010-409-2323

[2019] NZHC 711

UNDER

Sections 261 and 266(2) of the Companies Act 1993

IN THE MATTER

AND

of the liquidation of LIVINGSPACE PROPERTIES LIMITED (in liquidation and in receivership)

IN THE MATTER

of an application by Ms Kristina Louise Buxton & Ors pursuant to s 284 of the Companies Act 1993

BETWEEN

THE COMMISSIONER OF INLAND REVENUE

Plaintiff

AND

LIVINGSPACE PROPERTIES LIMITED

(in liquidation and in receivership) Defendant

Hearing:

27 February 2019 and 3 April 2019 (by telephone conference)

Appearances:

G Neil and H Jones for Mr Robert Walker, liquidator of

Livingspace Properties Ltd (in liq and in rec) on 27 February 2019, and K Francis for Mr Robert Walker, liquidator of

Livingspace Properties Ltd (in liq and in rec) on 3 April 2019 J Moss and H Weston for K L Buxton, D Henderson, RFD

Finance Ltd, FTG Securities Ltd, Castle Operations Ltd and Tay Operations Ltd, the Applicants (in the s 284 application)

Judgment:

5 April 2019

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by me on 5 April 2019 at 12:30 p.m. pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

THE COMMISSIONER OF INLAND REVENUE v LIVINGSPACE PROPERTIES LIMITED (in liquidation

and in receivership) [2019] NZHC 711 [5 April 2019]

Introduction

[1]    This judgment addresses the challenge by Mr Robert Walker, the liquidator, to the admissibility of the affidavit evidence of Mr Kerryn Downey, chartered accountant, filed by the applicants, Ms K L Buxton, Mr D Henderson, RFD Finance Ltd and associated parties.

[2]    The background to the proceedings is set out in my earlier judgment of 7 March 2019.1 The affidavit of Mr Downey is filed in support of the applications for leave and for orders removing Mr Walker as liquidator under s 284 of the Companies Act 1993.

[3]    The liquidator, Mr Walker, objects to the admissibility of Mr Downey’s affidavit on the basis that a trial Judge is unlikely to obtain substantial help from    Mr Downey’s opinion in understanding other evidence in the proceeding or in ascertaining any fact that is of consequence to the determination of the proceeding.2 Counsel for the plaintiff referred to an earlier and related decision of this Court in Walker v Gibbston Water Services Ltd where Mander J held that evidence tendered by Mr Downey was inadmissible because it amounted to legal opinion.3 Mr Downey purported to give an interpretation or construction of legislation and legal principle which was the subject of adjudication in the case.

[4]    The liquidator further contends that parts of Mr Downey’s affidavit evidence are less than partial.

[5] At the conclusion of this judgment, at [16] below, I make further case management directions (by consent) for the disposition of this proceeding.

1      The Commissioner of Inland Revenue v Livingspace Properties Ltd (in liquidation and receivership) [2019] NZHC 366.

2      Evidence Act 2006, s 25.

3      Walker v Gibbston Water Services Ltd [2014] NZHC 1638 at [119]-[123].

Analysis and decision

[6]    There may be some merit to  the  submission  of  Mr  Moss,  on  behalf  of Ms Buxton and others, that the objections taken by Mr Walker to the affidavit should be determined by the trial Judge. However, in the circumstances here, where I find that parts of Mr Downey’s affidavit are inadmissible because they do not meet the requirements of s 25 of the Evidence Act 2006 (i.e. are not substantially helpful), the preferable and correct approach is to require that Mr Downey file an amended affidavit. That was the approach taken by the Supreme Court in Penny v Commissioner of Inland Revenue which I adopt here.4

[7]    I accept that an opinion by an expert is not inadmissible simply because it is about an ultimate issue to be determined in a proceeding.5 However, it is essential that the opinion expressed falls within the expertise of the witness and is not simply an assertion unconnected to any expertise, based on the untested evidence of other witnesses. The expert can, of course, express a view based on certain assumptions about the facts, but it is important that the opinion evidence proffered makes clear and identifies the factual assumptions upon which it is based.

[8]    I accept that it was legitimate for Mr Downey to address the question of self- funding by liquidators (a topic addressed at paragraph 25 of the affidavit) and, to a limited extent, the question of recovery against RFD (addressed at paragraph 16 of the affidavit). However, the intemperate language, clearly less than partial, used in paragraphs 19 and 20 (i.e. “vendetta” and “abuse of power”), particularly where the assumptions of fact upon which they are based are not identified, do not meet the requirements of s 25 of the Evidence Act. If those comments were allowed to stand, it is unlikely that a trial Judge could place much weight at all on Mr Downey’s evidence. An expert witness who is perceived as less than independent is unlikely to be recognised as providing substantial help to the Court.

[9]    The conclusion reached by Mr Downey at paragraph 27 is also unlikely to substantially help the trial Judge. The question of whether Mr Walker is fit to continue

4      Penny v Commissioner of Inland Revenue [2011] NZSC 95, [2012] 1 NZLR 433 at [32].

5      Evidence Act 2006, s 25(2)(a).

to act as the liquidator is not only the ultimate issue for the trial Judge to determine, but Mr Downey does not make it clear (apart from simply accepting and endorsing the contested evidence of other witnesses) which particular acts or omissions support his view. In its current form, paragraph 27 reads as if Mr Downey were the trial Judge reaching a conclusion based on his own findings of fact.

[10]   As to the issue of recovery against RFD, addressed at paragraph 16 of the affidavit, I accept, as Mr Francis submitted, that s 266 orders have already been made by Associate Judge Osborne and that any view expressed by Mr Downey as to the merits of making such orders, cannot be relevant.6 The s 266 orders remain in force and Ms Buxton’s compliance or otherwise with them, remains a live issue. I do accept, however, that it may be legitimate for Mr Downey to address from a liquidator’s perspective, difficulties in pursuing a recovery because, for example, there may be difficulties in determining the actual amount overpaid.

[11]   At paragraphs 17 and 23 Mr Downey refers to legal advice having been given to Mr Walker, the liquidator, and notes that he, Mr Downey, would be interested to see that legal advice. Those comments are, in my view, irrelevant. They tend to convey the impression that Mr Downey doubts the legal advice that has been given to       Mr Walker. Mr Downey’s views about that legal advice are irrelevant; it is not for  Mr Downey to express advice about legal issues.

[12]   For all these reasons, I conclude that the affidavit of Mr Downey should be redrafted and filed in admissible form. The amended affidavit needs to address the issues I have dealt with in relation to paragraphs 16, 17, 19, 20, 23 and 27 of the current affidavit.

[13]   This proceeding appears  to  be  part  of  a  longstanding  dispute  between  Mr Henderson and Mr Walker about decisions taken by Mr Walker in his capacity as liquidator of a number of companies.   In 2014 Mander J referred to the “obvious

6      Commissioner of Inland Revenue v Livingspace Properties Ltd (in liq) [2018] NZHC 1232. At

[37] Osborne AJ expressly recognised that through the process of production and examination of records the liquidator (i.e. Mr Walker) might not obtain any further information relevant to the issues he identifies in his affidavit evidence.

animosity” which marks the relationship between the two of them.7 In these circumstances, it is of particular importance that the evidence of professional expert witnesses not be drafted in such a way that they are perceived as acting as an advocate for a particular party.

Result

[14]   I grant, on the terms set out in this judgment, Mr Walker’s application objecting to the admissibility of the affidavit evidence of Mr Downey. I direct that Mr Downey’s affidavit be redrafted and refiled to address the concerns I have analysed above.

[15]   As to the question of costs, I am of the preliminary view that costs should be awarded to Mr Walker, the liquidator, namely 2B costs, on the basis that he was successful in relation to both his strike out application (dealt with in my earlier judgment of 7 March 2019) and in relation to the challenge to the admissibility of  Mr Downey’s affidavit. However, I incline to the view that Mr Walker’s interlocutory applications should be treated as one application only and the allocated hearing days limited to one day. If the parties cannot agree on costs, then memoranda are to be submitted within 14 days.

Timetable directions

[16]By consent, I make the following further timetabling directions:

(a)Ms Buxton is to refile the affidavits of Mr Henderson, dated 21 December 2018, and Mr Hide, dated 20 December 2018, removing the paragraphs that the parties have agreed upon by 25 March 2019. If the parties are unable to reach an agreement, leave can be sought to file memoranda on this matter.

(b)Ms Buxton is to refile an amended interlocutory application for stay/removal and other orders, removing any applications in relation to companies other than Livingspace by 5 April 2019.

7      Walker v Gibbston Water Services Ltd [2014] NZHC 1638 at [131].

(c)The liquidator is to file an amended notice of opposition to the application above by 15 April 2019.

(d)The parties are to file a further joint memorandum as soon as practicable after a response is received from Andru Isac QC in respect of the collateral use issue.

(e)Ms Buxton is to refile any further amended affidavit by 29 April 2019

(this is to include that of Mr Downey).

(f)The liquidator is to file and serve any evidence in reply by 13 May 2019.

(g)A one-and-a-half day hearing of the applications for joinder, leave and stay is to be set down for the first available date after 27 May 2019.

Associate Judge P J Andrew

Solicitors:

Mr G Neil, Ms H F Jones and Mr K Francis, Meredith Connell, Office of the Crown Solicitor, Auckland

Mr J Moss, Barrister, Christchurch

Ms H M Weston and Mr G Smith (applicants’ instructing solicitor), Canterbury Legal, Christchurch