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Gibson v Official Assignee

Gibson v Official Assignee

Case [2019] NZHC 532 21 March 2019

Receiverships Act 1993

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2014-404-3355

[2019] NZHC 532

UNDER Receiverships Act 1993 s 34(1) and s 284(1) of the Companies Act 1993

IN THE MATTER OF

Capital + Merchant Finance Limited (In Receivership and Liquidation)

BETWEEN

BRENDON JAMES GIBSON and GRANT ROBERT GRAHAM

Applicants

AND

OFFICIAL ASSIGNEE

First respondent

FORTRESS CREDIT CORPORATION (AUSTRALIA) II PTY LIMITED

Second respondent

PERPETUAL TRUST LIMITED

Third respondent

Hearing: 11-14 March 2019

Appearances:

R B Stewart QC, M D Arthur, and S R Holden for the applicants C T Gudsell QC and R J Southall for the first respondent

Judgment:

21 March 2019

JUDGMENT OF JAGOSE J

This judgment is delivered by me on 21 March 2019 at 4.30 pm pursuant to r 11.5 of the High Court Rules.

.....................................................
Registrar / Deputy Registrar

Counsel/Solicitors:
Robert Bruce Stewart QC, Auckland Chapman Tripp, Auckland
C T Gudsell QC, Hamilton
R J Southall, Barrister, Hamilton

GIBSON v OFFICIAL ASSIGNEE [2019] NZHC 532 [21 March 2019]

[1] In 2015, with the consent of the parties, this Court made interlocutory orders essentially disposing of the proceeding. The proceeding was the receivers’ originating application for directions in the liquidation and receivership of Capital + Merchant Finance Limited (the “Company”), in which the Official Assignee was the liquidator.

[2] The Official Assignee had secured $18.5m (“including GST, if any”) in settlement of the Company’s claim against its former auditors. The Official Assignee claimed reimbursement of his consequent expenses (or ‘salvage costs’) from that fund, and the second and third respondents also claimed entitlement to payments from the fund.

[3] By consent, this Court directed the Official Assignee to retain specified funds to meet the other respondents’ claims (if established), to pay himself “in resolution” of his own expenses claim, and to pay the remainder of the fund to the receivers. That was done, the receivers returning the net balance to the Company’s investors.

[4] The Court’s order included provision for further agreement or Court orders in relation to the retentions, which the Official Assignee expected to abide. Thus disposition of the whole of the fund was addressed. The second and third respondents’ claims ultimately were resolved for amounts less than the retentions, leaving the balance of the fund with the Official Assignee.

[5] It since has become apparent the settlement payment may impose a GST liability. There is at least a possibility that liability may fall on the Official Assignee. The Official Assignee disputes both, incurring further expenses in doing so.

[6] Recognising – in the words of the Official Assignee’s counsel, Christopher Gudsell QC – the ‘fortuity’ of his continued retention of the balance of the fund, the Official Assignee now seeks to have resort to it also to meet any such liability and expenses (including on its present application, essentially to vary this Court’s 2015 orders). The receivers, meanwhile, have amended their originating application, now for directions the Official Assignee also pay the retained…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Gibson v Official Assignee

Details

AGLC: Gibson v Official Assignee [2019] NZHC 532
Case: [2019] NZHC 532
Decision Date: 21 March 2019

CaseChat Overview and Summary

The case of Gibson v Official Assignee involved a dispute over the disposition of funds recovered from the auditors of a company, Capital + Merchant Finance Limited (the "Company"), in receivership and liquidation. The Official Assignee, who was appointed as liquidator of the Company, had secured a settlement of $18.5m from the Company's auditors, which included a claim for reimbursement of his expenses, known as 'salvage costs'. The Official Assignee, Fortress Credit Corporation (Australia) II Pty Limited, and Perpetual Trust Limited, each claimed entitlement to payments from the fund. In 2015, the Court made consent orders directing the Official Assignee to retain specified funds to meet the other respondents' claims, pay himself a sum in resolution of his expenses claim, and pay the remainder of the fund to the receivers. However, it later became apparent that the settlement payment may impose a GST liability, and the Official Assignee sought to resort to the balance of the fund to meet any such liability and expenses. The receivers amended their originating application, now seeking directions that the Official Assignee also pay the retained balance to them.

The primary issue for the Court's determination was whether to set aside the consent orders, which had been largely performed. The Court considered whether it had jurisdiction to grant relief from contractual mistakes, including by cancelling or varying the subject contract, and whether setting aside or varying the consent orders would effectively be to cancel or vary the contract. The Court concluded that it had extensive discretion to grant relief from contractual mistakes, and that setting aside or varying the consent orders was not precluded by any contractual resolution of the Official Assignee's claim to salvage costs.

The Court found that the Official Assignee had not acted appropriately in determining whether GST was payable on the settlement with the Company's auditors, as he had not had regard for the Company's GST status at the time of settling with the auditors. The Court also found that the Official Assignee did not turn his mind to whether he may incur salvage costs in addition to those agreed with the receivers. The Court concluded that the Official Assignee's belated apprehension of his own prospective GST liability did not warrant setting aside the consent orders, as the foundations for that liability were capable of being known in advance of agreement to the consent orders.

The Court granted the receivers' amended originating application, directing the Official Assignee to pay the remaining balance of the fund to the receivers. The Court also dismissed the Official Assignee's interlocutory application and reserved costs for determination on short memoranda if not agreed between the parties.

Orders