Gibson v Official Assignee - [2018] NZHC 2107

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-003355

[2018] NZHC 2107

UNDER the 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 in liquidation)

BETWEEN

BRENDON JAMES GIBSON and GRANT ROBERT GRAHAM

Applicants

AND

OFFICIAL ASSIGNEE

First Respondent

FORTRESS CREDIT CORPORATION (AUSTRALIA) II PTY LIMITED

Second Respondent (discontinued)

PERPETUAL TRUST LIMITED

Third Respondent (discontinued)

Hearing: 13 August 2018

Appearances:

R B Stewart QC and M D Arthur for Applicants

C T Gudsell QC and D E G Nielsen for First Respondent

Judgment:

16 August 2018

JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 16 August 2018 at 3.30 pm
pursuant to R 11.5 of the High Court Rules Registrar / Deputy Registrar Date……………………….

GIBSON & OR v OFFICIAL ASSIGNEE & ORS [2018] NZHC 2107 [16 August 2018]

Introduction

[1] The Official Assignee is the liquidator of Capital + Merchant Finance Ltd (in receivership and in liquidation) (“CMF”). Brendon Gibson and Grant Graham are the company’s receivers. In 2015 the Official Assignee received a substantial payment in settlement of a claim against CMF’s former auditors (“the settlement sum”). The Official Assignee and the receivers reached an agreement regarding the application of the settlement sum, which was recorded in consent orders made by this Court (“the consent orders”). Under the consent orders, the Official Assignee was entitled to be paid a fixed amount in respect of the costs incurred in the litigation (the salvage costs). Further specific sums were to be set aside for determination of claims by other creditors. The balance was to be paid to the receivers.

[2] Before the balance could be paid to the receivers, an issue arose as to whether the settlement sum attracted GST. The consent orders did not allow GST to be paid from the settlement sum. The Official Assignee applied for an order varying the consent order. The application was scheduled to be heard on 13 and 14 August 2018 but the Official Assignee wishes to postpone the hearing of it until the GST position has been determined with the Inland Revenue Department (“IRD”). He has applied for an adjournment of the hearing1 and orders staying the proceeding2 or enforcement of the consent orders3 pending determination of whether GST is payable. The receivers oppose the application.

[3] For the reasons I come to, I do not consider it necessary to adjourn the hearing of the application to vary the consent orders, nor to stay the proceeding. I do, however, consider that enforcement of the consent orders ought to be stayed pending determination of the application to vary the consent order. Rule 17.29 permits a liable party to apply for a stay of enforcement against a judgment on the ground that a substantial miscarriage of justice would be likely to result if the judgment were enforced. Under the terms of the consent order, the…

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.

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Details

Case: [2018] NZHC 2107
Decision Date: 16 August 2018

CaseChat Overview and Summary

The case of Gibson v Official Assignee involved the Official Assignee, who was the liquidator of Capital + Merchant Finance Limited (CMF), and the receivers of the company, Brendon James Gibson and Grant Robert Graham. The dispute centred on a substantial payment received by the Official Assignee in settlement of a claim against CMF's former auditors, which was referred to as the settlement sum. The Official Assignee and the receivers had reached an agreement regarding the application of the settlement sum, which was recorded in consent orders made by the court. However, an issue arose as to whether the settlement sum attracted Goods and Services Tax (GST), which the consent orders did not allow to be paid from the settlement sum. The Official Assignee applied for an order varying the consent orders, and applied for an adjournment of the hearing of the application and for orders staying the proceeding or enforcement of the consent orders pending determination of whether GST was payable. The receivers opposed the application.

The primary legal issue before the court was whether the Official Assignee was entitled to vary the consent orders to allow for the payment of GST from the settlement sum. The Official Assignee argued that he had agreed to the consent orders under a mistake of fact and/or law, which resulted in a substantially unequal exchange of values and/or a benefit being conferred or obligation imposed that was substantially disproportionate to the consideration given. Alternatively, the Official Assignee argued that there had been a significant change in circumstances since the consent orders were made, justifying the variation. The receivers argued that the mistakes asserted by the Official Assignee were not qualifying mistakes under the Contract and Commercial Law Act 2017, and that even if there was a qualifying mistake, the Official Assignee assumed the risk for that mistake by agreeing to fully and finally settle his salvage costs without obtaining advice as to GST.

The court held that it was not necessary to adjourn the hearing of the application to vary the consent orders or to stay the proceeding, as the argument over mistake and negligence could be determined without the need to know whether GST was payable. However, the court granted the application for a stay of enforcement of the consent orders pending determination of the application to vary the consent orders, as there was a risk of irreversible prejudice to the Official Assignee if the receivers enforced the consent orders before the application was determined. The court considered that the overall interests of justice were best served by the receivers not enforcing the consent orders at that stage, as neither the Official Assignee nor the receivers would be unduly affected if the status quo was maintained pending determination of the application to vary the consent orders.

In conclusion, the application to either stay the application to vary the consent orders pending determination of the GST position or to adjourn the hearing of it was dismissed. The application to stay enforcement of the consent orders pending determination of the application to vary the consent order was granted. The Official Assignee was permitted to seek costs if counsel could not agree on the issue.

Orders