Davidson Armstrong & Campbell Solicitors Nominee Company Limited v Morrison HC Napier CIV 2008-441-276

[2008] NZHC 2661

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV 2008-441-276

BETWEEN  DAVIDSON ARMSTRONG & CAMPBELL SOLICITORS NOMINEE COMPANY LIMITED Plaintiff/Judgment Creditor

ANDCHRISTOPHER WILLIAM MORRISON Defendant/Judgment Debtor

Hearing:         16 October 2008

Appearances: J Krebs - Applicant

C W Morrison in person

Judgment:      30 October 2008 at 3.45 pm

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment was delivered by the Registrar  on 30 October  2008 at

3.45 p.m. pursuant to r 540(4) of the High Court Rules 1985.

Solicitors:           Davidson, Armstrong & Campbell, Solicitors, PO Box 54, Waipukurau 4242

McKay Hill & Co, Solicitors, PO Box 1143, Napier

DAVIDSON ARMSTRONG & CAMPBELL SOLICITORS NOMINEE COMPANY LIMITED V CHRISTOPHER WILLIAM MORRISON HC NAP CIV 2008-441-276  30 October 2008

Introduction

[1]      On  29  September  2008  the  applicant/defendant  Mr  Morrison  filed  an application in this Court seeking orders:

a)       For the charging order absolute made on 18 September 2008 to be discharged in relation to the item identified as the defendant’s share portfolio; and

b)For the execution of the judgment of this Court dated 12 August 2008 to be stayed with respect to the property the subject of the charging order absolute pending the outcome of this application for its discharge.

[2]      On 18 September 2008 this Court had made absolute a charging order nisi dated 23 July 2008 in respect of property described as:

a)       Such portion of the proceeds of sale of the property in certificates of title HBF2/663 and HBW2/575 as adequately represents the value of the defendant’s share of the lease and/or fee simple; and

b)The  defendant’s  interest  in  his  share portfolio  as  particularised  in Exhibit “G” of an affidavit of Hugh Edwards Staples Hamilton which was annexed to the order.

These items of property were to stand charged with the sum of $764,831.47 which was the amount for which the plaintiff Davidson Armstrong & Campbell Solicitors Nominee Company Limited had sought judgment in this proceeding.

[3]      I turn first to consider the application to discharge the charging order.

Application to Discharge Charging Order

[4]      On 24 July 2008 a first application by the applicant to rescind the charging order nisi before judgment was considered by this Court.   That application was

dismissed in so far as it related to the property the subject of the charging order absolute.  That decision was not appealed.

[5]      Then, on 12 August 2008, summary judgment was granted in this proceeding in favour of the plaintiff against the defendant in the sum of $752,983.77.  Again that judgment has not been appealed.

[6]      Notwithstanding the 24 July 2008 judgment given by this Court dismissing the application to rescind the charging order nisi, paragraph [36] of that judgment granted leave to Mr Morrison the defendant:

“…to bring any further application he may wish to seek rescission of the  charging  order  with  respect  to  the  share  portfolio  should additional evidence be available as to the ownership of these shares.”

[7]      That is effectively what the defendant Mr Morrison has now done with the present application.

[8]      So far as the “additional evidence … as to ownership of these shares” is concerned, with his present application Mr Morrison has filed an affidavit in support sworn 26 September 2008.  The property, the subject of the present application, is a substantial share portfolio.  Mr Morrison effectively claims that none of the shares in this share portfolio belong to him and therefore the charging order should be discharged in relation to it.

[9]      Mr Morrison’s application states that it is made in reliance upon rules 548,

565 and 585 High Court Rules and Amalgamated Finance Limited v Fairlie High

Court, Auckland, 3 September 1986 A1232/83 Wylie J.

[10]     As I see it, however, the present application is effectively made pursuant to r.

570 High Court Rules.  This rule states:

570.     Application for Relief by Persons Prejudicially Affected

(1)      Any person alleging that he is prejudicially affected by any charging order may at any time apply to the Court for relief in accordance with this rule.

(2)       On an application under subclause (1) the Court may – (a)    Vary or rescind the order; or

(b)       Cancel   the   registration   or   modify   the   effect   of registration of any order affecting land.

(3)      The powers of the Court under this rule are in addition to its powers under [rule 259].

[11]     It is clear that the onus of proof under r. 570 is on the applicant for relief – Isolare Investments Ltd v Featherston, High Court Auckland, 15 September 2006 – CIV 2002-404-1791, Williams J.

[12]     The general purpose of this r 570 was discussed in the judgment of Gault J. in Rural Banking Finance Corporation of New Zealand v Proprietors of Maraetaha No. 1 D High Court Gisborne, 29 August 1988, CP 15/88.  There at page 12 of his judgment, Gault J. noted that:

“Rule 570(1) provides for other creditors [or parties] to intervene and have their claims considered and determined by the Court before the judgment creditor levies execution.”

[13]     In the present case, however, the application before me is brought by Mr

Morrison.

Preliminary Points

[14]     As a first preliminary point, before me, Mr Krebs for the plaintiff contended that Mr Morrison does not have standing to bring the present application.  This is because he argued r. 570 only allows a person prejudicially effected by any charging order to apply for relief.  Mr Krebs maintains that the application ought to be brought by the alleged owner/owners of the share portfolio and not Mr Morrison particularly as Mr Morrison maintains that he has no interest in the portfolio.

[15]     In the present case it is clear that the alleged owners of the share portfolio have taken no steps with regard to the charging order.   The application before the Court as I have noted is brought by Mr Morrison alone.

[16]     Notwithstanding this, I am satisfied that under the present circumstances Mr Morrison is a person “alleging that he is prejudicially affected by the charging order”.  The rule requires alleged rather than proven prejudice and as I understand his argument Mr Morrison contends that in so far as the share portfolio is concerned he has acted purely in an agency position in arranging the acquisition of the shares. In addition, as I understand it, he has an involvement as a Trustee of certain trusts which he alleges are the beneficial owners of some of the shares in question.

[17]     For these reasons, I find that Mr Morrison is a person “alleging that he is prejudicially affected by the charging order” and is entitled here to bring the present application.

[18]     A second preliminary point arose here.   This related to r 571 High Court

Rules which states:

“571    Claim of Third Person on Property Charged

(1)      Where it is alleged that the land or money or other property affected by a charging order belong to some third person or that some third person has a claim thereon by way of lien, charge, or otherwise, such

third  person  may  be  ordered  to  attend  and  state  the  nature  and particulars of his claim.

(2)      Such third person may also attend without special order on the application to make the order absolute, or on any application to set aside or vary the same, on giving 24 hours’ notice of his intention to do so.”

[19]     With this r 571 in mind, at the hearing of this application before me, I invited Mr Morrison to consider whether he would wish to seek an adjournment of this hearing to enable the third parties who he said were the owners of the shares in question to provide additional evidence as to that fact or to attend a reconvened hearing to outline particulars of their claims to the shares.

[20]     Mr Morrison, however, declined this invitation and notwithstanding the need for all proper evidence (including evidence of third party claims) to be before the Court, he requested that the hearing proceed on 16 October 2008 upon the basis that only the evidence then before the Court would be considered.   On that basis the hearing proceeded on that day.

Additional Evidence?

[21]     I turn now to consider the “additional evidence” Mr Morrison has provided here.  The only further evidence before the Court is that provided in Mr Morrison’s

26 September 2008 affidavit filed in support of the present application.  Turning to that affidavit, at para. (4) Mr Morrison deposes that “The share portfolio, allegedly my property, is in fact owned by other entities”.  On this, it needs to be noted that, first, annexed as Exhibit “B” to his affidavit is a schedule of what Mr Morrison says is relevant trading activity relating to some of the shares, through First New Zealand Capital.  This detailed 10 page exhibit appears to show the passage of funds into and out of an account held with First NZ Capital.  Significantly, this account is headed “Christopher William Morrison PRIVATE ACCOUNT”.

[22]     As  I  see  it,  this  account  in  Mr  Morrison’s  own  name  and  noted  as  a

“PRIVATE ACCOUNT” does no more than set out trading activity for the account. It seems to disclose that funds were received into the account from a variety of bank account sources.  It does not determine the actual beneficial ownership of any of the shares purchased as a result of the introduction of those funds however.

[23]     Also of significance is the fact that, as Mr Morrison acknowledges directly, all funds paid out of this trading account with First NZ Capital went to his own personal bank account.

[24]     On this aspect, at paragraph [8] of his 26 September 2008 affidavit, Mr

Morrison does depose that:

“Those funds ($650,410.56) went initially to my personal bank account, but were remitted onwards to the client concerned.”

There is  no  further  explanation,  however,  or  independent  evidence  of any kind before the Court to detail or substantiate this claim by Mr Morrision.

[25]     Secondly, at Exhibit “C” of his 26 September 2008 affidavit, Mr Morrison sets out a summary of the total funds he says were introduced into First NZ Capital. Before me Mr Morrison acknowledged that it was he who prepared this Exhibit “C” document.

[26]     Exhibit “C” is a broad summary of the credit transactions which appeared in the First NZ Capital account funds summary at Exhibit “B”.

[27]     Of concern, however, is that this Exhibit “C” summary appears to directly contradict earlier evidence regarding the share portfolio provided in this proceeding by Mr Morrison himself.   In his affidavit sworn 24 July 2008 “In support of his (first) interlocutory application to discharge the charging order” Mr Morrison deposed at paragraph 15:

“15.The share portfolio is owned by the trustees of the CW Morrison Family Trust, as is the property at Waimarama.  Reference to page 10 of the Trust’s accounts show an entry for the shares.   The quoted

value  is  a  book  keeping  entry  at  cost,  thus  is  (sic)  bears  no relationship with the actual market value, which fluctuates with the state of the market.”

[28]     In addition, annexed to this 24 July 2008 affidavit as Exhibit “C” is an annual report and detailed set of accounts for the CW Morrison Family Trust prepared by Mr Morrison’s accountants, BDO Spicers for the year ended 31 March 2007.  Page

10 of the accounts details “share investments” held by the Trust at 31 March 2007 totalling $130,018.00.  These accounts also show that for the preceding year as at 31

March 2006 the Trust held no share investments.

[29] Mr Morrison’s deposition noted at para. [27] above and all these entries conflict in a major way with the entries Mr Morrison has himself prepared in the Exhibit “C” summary schedule to his 26 September 2008 affidavit. That schedule shows monies credited by the CW Morrison Family Trust for share acquisition on 15

November  2004  of  $13,823.29,  on  3  February  2006  of  $16,416.50  and  on  21

February 2006 of $16,981.91.  There are no entries for share acquisition for the CW Morrison Family Trust after 21 February 2006 notwithstanding the BDO Spicers Annual Report and Accounts for the CW Morrison Family Trust for the year 1 April

2006 to 31 March 2007 showing share investments for that period at a cost of

$130,018.00.

[30]     Further, as I have noted at para. [28] above, the CW Morrison Family Trust accounts do not show any share investments made in the year ending 31 March 2006 and certainly not the share investments Mr Morrison notes in his Exhibit “C” summary.

[31]     Nor does Mr Morrison provide any explanation of his sworn statement on 24

July 2008 that “the share portfolio is owned by the Trustees of the CW Morrison Family Trust”.  This is in the face of the later Exhibit “C” summary he prepared for his 26 September 2008 affidavit which claims that $349,194.98 was contributed for share purchase from the CW Morrison 1996 Business Trust, $70,148.59 from CWM Holdings Limited, $9,805.98 from Pandora Produce Limited, $57,665.79 from DG

Morrison, $28,832.89 from BD Morris and finally $36,078.52 from Mr Morrison himself.

[32]     In  addition,  no  independent  verification  or  explanation  of  any  of  these matters has been provided to the Court.  Mr Morrison’s 26 September 2008 affidavit is silent on the issue of why the contentions he sets out there conflict with his statement at paragraph 15 of his earlier 24 July 2008 affidavit noted above.

[33] The only independent verification before the Court of any of these matters would appear to be the BDO Spicers Annual Report and Accounts for the CW Morrison Family Trust noted at para. [28] above. As I have mentioned, these accounts for the year ending 31 March 2007 showed a $130,018.00 share investment at cost for the Trust for that year. On this aspect, although his 26 September 2008 affidavit did not address this issue, before me Mr Morrison endeavoured to suggest that the BDO Spicers accounts for the year ended 31 March 2007 were wrongly prepared and he was in the course of having this remedied. But, no evidence from or on behalf of BDO Spicers or any other party to confirm this was provided to the Court.

[34]     A third aspect arises from Mr Morrison’s 26 September 2008 affidavit.   This relates to other parts of the share portfolio in question which he says were arranged through Forsyth Barr.  It is reflected in Exhibit “D” which Mr Morrison deposes is a copy of the application form he completed with Forsyth Barr when he opened the account with that company together with an authorisation letter.

[35]     This Exhibit “D” appears to be a standard form Forsyth Barr application for opening a share trading account.  Under the heading “Applicant Details” it provides several options.  Although pages of this form appear to be missing from Exhibit “D” the options for an applicant provide for 5 alternatives.  The first covers the situation where an applicant is an individual or joint applicant, the second a company or an incorporated entity, the third a trust, the fourth a partnership or unincorporated entity such as a club and the fifth a deceased estate.

[36]     Significantly here, Mr Morrison has completed the first alternative section to indicate he makes the application as an individual applicant.   Mr Morrison provides his personal details as the applicant himself and significantly it is his IRD number

41-761-326 which is provided.

[37]     The details for a trust applicant and for a deceased estate applicant have been specifically struck out.  A line has been drawn through the details required for such an applicant presumably by Mr Morrison when he completed the application.

[38]     Mr Morrison has attached as part of this Exhibit “D” a letter purported to be dated 15 April 2005 addressed to Forsyth Barr and signed by him which states “I authorise  the  use  of  the  following  bank  account  in  day-to-day  dealings  on  my account with Forsyth Barr” – the CW Morrison 1996 Business Trust bank account details with the National Bank were provided.  In addition a deposit slip from that bank was attached.

[39]     Mr Krebs for the plaintiff notes that this letter is unconfirmed by independent evidence and is nothing more than a self-serving document.  Whilst this may be so, it does not in any way in my view detract from the fact that Mr Morrison chose to open his account with Forsyth Barr as  an individual applicant and provided  his  own personal IRD number to the company.   The provision of the CW Morrison 1996

Business Trust bank account details and deposit slip might simply suggest as one possible alternative that Mr Morrison intended to use the business trust bank account for his day-to-day monetary transactions for what were personal share dealings.

[40]     At paragraph 13 of his 26 September 2008 affidavit Mr Morrison goes on to state:

“13.All shares purchased on this account (with Forsyth Barr) were purchased with funds advanced by the Trustees (of the CW Morrison (1996) Business Trust) and the shares are owned by the Trustees.”

But as I see it there is no independent evidence before the Court to support this claim nor Mr Morrison’s earlier claim (at paragraph 10 of his affidavit) that:

“The account was opened in my own name simply because as a matter of practicality that is much easier for administration.”

[41]     In my view that claim is not consistent with the provision by Mr Morrison first of his personal details when the account was opened and  secondly and  in particular his personal IRD number.  Further, Mr Morrison does not address the fact that Mr Hamilton in his earlier 23 July 2008 affidavit annexed portfolio valuations of the shares in question on Forsyth Barr letterhead showing the shares as held by Mr Morrison. Mr Morrison’s claims regarding the Forsyth Barr shares, unsupported as they are by independent evidence of any kind simply defy common sense.

[42]     And effectively Mr Morrison goes on to claim now that the part he has played in the acquisition of these shares has been purely in the role as an agent or a broker for others.  With regard to this claim, it is relevant that in his earlier affidavit dated 24 July 2008 dealing with the share portfolio, Mr Morrison made no reference to this question of agency.   That earlier affidavit was prepared in support of his application to discharge the charging order over the shares and other assets and it seems inexplicable that he would not refer to this issue of agency in that affidavit if it was, in fact, the case.

[43]     Further, until his recent 26 September 2008 affidavit, it is clear that Mr

Morrison at no time alleged that any of the shares were owned by the CW Morrison

1996 Business Trust.   Indeed, as I have noted at para. 15 of his 24 July 2008 affidavit, Mr Morrison stated that “the share portfolio is owned by the trustees of the CW Morrison Family Trust …” and not the CW Morrison 1996 Business Trust as he appears to claim now.

[44]     Another matter arises here with regard to this CW Morrison 1996 Business Trust.   This Trust apparently was a guarantor of 2 preceding security and loan agreements with the plaintiff but not the third which has been the subject of the current recovery proceedings.

[45]     Mr Hamilton, a solicitor and partner in the plaintiff company has deposed that the CW Morrison 1996 Business Trust was not included as  a  guarantor in

relation to the third security and loan agreement because he was advised by Mr Morrison  that  the  only  assets  of  this  Trust  were  shares  in  a  company  called Dandelion Limited and that company was essentially insolvent.  Indeed Mr Hamilton has deposed at para. 24 of his affidavit dated 23 July 2008 that at a meeting with Mr Morrison on 1 November 2007 Mr Morrison confirmed that all the shares in question were his.  That conversation apparently occurred in the context of a loan reduction and a consideration of who might be “worth powder and shot” as a guarantor.  At that meeting Mr Morrison provided print outs of the share portfolio in question to Mr Hamilton.   On this, Mr Morrison at para. 15 of his 29 September 2008 affidavit refers to this meeting and states:

“15.I took the print outs of the share portfolio to his (Mr Hamilton’s) office as he has deposed.  I explained that the funds would be coming mainly from the sale of shares.  I did not represent to him that I had full beneficial entitlement to any of the shares.   I can see how he reached that conclusion, as my name is on the document.  However, at no stage did I refer to the shares as mine personally.”

(emphasis added).

[46]     In the undisputed context of the 1 November 2007 meeting outlined by Mr Hamilton  above,  in  my view,  this  rather  vague  and  equivocal  reference  by Mr Morrison to the share portfolio print outs does not assist his position greatly.   Mr Hamilton in his 23 July 2008 affidavit confirms his understanding that the shares were owned by Mr Morrison personally and indeed the detailed First NZ Capital and Forsyth Barr share portfolio lists left with Mr Hamilton at the time all referred to shares in the name of Mr Morrison alone.

[47]     Finally, in my view it is significant here that Mr Morrison has not put before the Court any independent evidence of any kind relating to his allegations that the shares are beneficially owned by others.  In particular there is no:

a)        evidence from those alleged other owners of the shares themselves;

b)        affidavit evidence from the 2 sharebroking houses, Forsyth Barr or

First NZ Capital;

c)       independent accounts from the alleged owners of the shares to back up Mr Morrison’s claims of agency;

d)bank statements confirming payments of the purchase price for any shares by the alleged owners or indeed that the proceeds of sale of any shares were paid out to the true owners from Mr Morrison’s own bank account;

e)       affidavit evidence from Mr Morrison’s accountants BDO Spicers to contradict  in  any  way  the  clear  statements  made  in  the  annual accounts they had prepared for the CW Morrison Family Trust which Mr Morrison himself annexed to his 24 July 2008 affidavit.

[48]     Further,  as  I have noted  above  it  is clear that  important  portions  of  Mr Morrison’s latest 29 September 2008 affidavit do nothing more than  attempt to “fudge” ownership issues and are completely inconsistent with earlier statements he has made including sworn statements in his 24 July 2008 affidavit.   All this is entirely unsatisfactory and unhelpful.

[49]     I noted earlier at para. [11] above that the onus of proof under r 570 rests with Mr Morrison as the applicant for relief to show that the charging order over the shares should be rescinded – Isolare Investments Ltd v Featherston.

[50]     The only additional evidence put before the Court here regarding the shares is that of Mr Morrison in his 29 September 2008 affidavit.

[51]     As  I have  already noted,  a  number  of  the claims  made in  that  affidavit confuse rather than clarify the issue before the Court, given particularly that in important respects certain contentions run entirely counter to Mr Morrison’s earlier statements.

[52]     For the reasons outlined above, I am satisfied that Mr Morrison has acted throughout and led Mr Hamilton and others to believe that he was and is the owner of all the shares in question and that they were his to resort to in so far as meeting any liability to the plaintiff was concerned.

[53]     Further,  in  my  view  that  evidence  which  Mr  Morrison  has  himself endeavoured to put before this Court leads to the conclusion that the share portfolio was his and he was the beneficial owner of the shares in question.

[54]     As I have noted there is no independent evidence before the Court to support directly any of the claims which Mr Morrison makes.   Further, the unequivocal decision by Mr Morrison to proceed with the hearing on 16 October 2008 and to decline my invitation to consider an adjournment to enable him to put before the Court additional evidence from third parties in terms of r 571, in my view also does not assist Mr Morrison’s position here.

[55]     For all these reasons I reach the conclusion that Mr Morrison has failed to discharge the onus on him to show that the charging order over the share portfolio should be rescinded.   That charging order is to remain.   This does not however prevent a third party who can prove ownership of any of the shares in question applying to the Court “at any time” under r 570 as someone prejudicially affected (or possibly joining an application in terms of r 571(2)) to seek an order to rescind the charging order.

Stay of Execution of Court Judgment

[56]     Given my findings regarding the application to discharge the charging order, I do not need to address Mr Morrison’s second application for an order staying execution of the Court judgment pending the outcome of the discharge application. That charging order remains.  The stay application therefore must fail.

Result

[57]     The application by Mr Morrison for an order discharging the charging order over the shares is dismissed.

[58]     Similarly the application for an order staying execution of the judgment of this Court also fails.

[59]     As to costs, I see no reason why costs should not follow the event in the normal way.   Costs are therefore awarded against Mr Morrison in favour of the plaintiff on these applications on a Category 2B basis together with disbursements as fixed by the Registrar.

‘Associate Judge D.I. Gendall’