Gibson v Official Assignee - [2018] NZHC 1077

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-404-3355

[2018] NZHC 1077

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 GIBSON and GRANT GRAHAM

Applicants

AND

OFFICIAL ASSIGNEE

First Respondent

FORTRESS CREDIT CORPORATION (AUSTRALIA) II PTY LIMITED

Second Respondent (discontinued)

PERPETUAL TRUST LIMITED

Third Respondent (discontinued)

Hearing: 16 May 2018

Appearances:

M D Arthur and H Wham for the Applicants

R O Parmenter on instruction from D Nielsen for the First Respondent

Judgment:

16 May 2018

ORAL JUDGMENT OF MUIR J

Counsel/Solicitors:
R B Stewart QC, Barrister, Auckland. M D Arthur and H Wham, Chapman Tripp, Auckland R O Parmenter, Barrister, Auckland. D Nielsen, Nielsen Law, Hamilton

GIBSON v OFFICIAL ASSIGNEE [2018] NZHC 1077 [16 May 2018]

Introduction

[1] The applicants, who are receivers of Capital + Merchant Finance Limited (in receivership and liquidation) (CMF), apply for discovery in the context of an originating application brought by them and a cross-application brought by CMF both of which are currently set down for hearing in August 2018. The time pressures which now apply in relation to this litigation mean that there is a premium on prompt delivery of judgment.

Background

[2] The background to the originating application is complex but for present purposes can be adequately summarised as follows:

(a)In 2014 the Official Assignee (OA) as liquidator of CMF entered into a settlement of claims against the company’s former auditors in the amount of $18.5 million. Such settlement was on a basis GST inclusive, if any. It was at least in part funded by the auditors’ insurers to the apparent knowledge of the OA.

(b)An issue has now arisen in terms of whether CMF has a liability to the Commissioner of Inland Revenue (the Commissioner) to account for GST on that settlement.

(c)The OA currently holds, pursuant to consent orders of this Court made on 26 February and 9 March 2015, the sum of $1.75 million which, apart from the unresolved GST issue, is now payable to the receivers pursuant to such orders. The receiver’s application seeks payment accordingly.

(d)As a result of the Commissioner’s claim, the OA seeks by way of cross application orders varying or amending the consent orders on the basis that, if CMF has any liability to the Commissioner, it is appropriately recovered from the funds held on deposit as “salvage costs” in a manner

similar to the OA’s recovery of the costs associated with the litigation
against CMF’s auditors.

(e)As against the Commissioner, however, the OA’s primary position is that it is not liable for GST on the settlement.

(f)Whether it is will at least in part turn on proper interpretation and application of s 5(13) of the Goods and Services Tax Act 1985 (the Act), and in particular whether CMF was a “registered person” who “receive[d] a payment under a contract of insurance”.

(g)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.

Continue reading Gibson v Official Assignee

Details

AGLC: Gibson v Official Assignee [2018] NZHC 1077
Case: [2018] NZHC 1077
Decision Date: 16 May 2018

CaseChat Overview and Summary

The case of Gibson v Official Assignee involves the applicants, who are receivers of Capital + Merchant Finance Limited (CMF), seeking discovery of certain documents in the context of an originating application and a cross-application. The Official Assignee (OA), who is the liquidator of CMF, opposes the discovery application. The primary issues include whether there was a qualifying mistake in the settlement of claims against CMF's former auditors and if the OA should be denied relief due to negligence in establishing CMF's GST status and assessing the settlement's GST implications. The receivers seek documents relating to the OA's records of CMF's GST status, any advice the OA received about CMF's GST status, the OA's interactions with the auditors' insurers, and the settlement agreement between CMF and its auditors.

The Court addressed the four categories of documents sought by the receivers. For the first category, the Court ordered discovery of the OA's internal records concerning CMF's GST status, as these records are relevant to the negligence allegation. Regarding the second category, the Court found that the documents were capable of supporting the receivers' case or adversely affecting the OA's case and ordered discovery, despite the potential for privilege issues. The third category, which concerns the OA's knowledge of the auditors' insurers, has been substantially resolved, with the Court reserving leave for further discovery if necessary. The settlement agreement has already been provided, so no further orders are required for the fourth category.

The Court concluded that discovery is appropriately ordered for the first and second categories of documents, while the third and fourth categories have either been resolved or do not require further orders at this stage. The costs of the application follow the event and will be payable on a 2B basis to the receivers. The next event listed is a mention in the Duty Judge list to discuss potential adjournments or a revised timetable for the trial.

Orders