Harris v Bank of New Zealand

[2017] NZHC 1931

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2017-404-000996

[2017] NZHC 1931

UNDER

the Receiverships Act 1993

IN THE MATTER

of an application for directions under section 334 of the Act and agency

approval under section 31 of the Act.

BETWEEN

KEITH VINCENT HARRIS AND IAIN ANDREW NELLIS RECEIVERS OF CIT HOLDINGS LTD (IN LIQUIDATION AND IN RECEIVERSHIP)

Applicants

AND

BANK OF NEW ZEALAND

First Respondent cont: …2/

Hearing:

8 August 2017

Appearances:

D M Hughes for Plaintiffs

A Cunninghame for First Respondent M J Tingey for Ninth Respondent
S Sparks Tenth Respondent in person

Judgment:

14 August 2017

JUDGMENT OF JAGOSE J

[On second respondentʼs application to appear and act through its director]

This judgment was delivered by me on 14 August 2017 at 4.30 pm, pursuant to

r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

Solicitors:Anthony Harper, Auckland Anderson Lloyd, Dunedin Bell Gully, Auckland

Copy To:                S Sparks, Auckland

Murray Tingey, Barrister, Auckland Minter Ellison, Auckland

Ignite Architects

Inland Revenue Department Urban Living Limited

CIT HOLDINGS LTD (IN LIQ AND IN RECEIVERSHIP) v BANK OF NEW ZEALAND [2017] NZHC 1931

[14 August 2017]

Bankhouse Trust KPMG

THE BANKHOUSE TRUST LIMITED
Second Respondent

COMMISSIONER OF INLAND REVENUE

Third Respondent

GLOVER NO 2 LTD
Fourth Respondent

IGNITE ARCHITECTS LTD
Fifth Respondent

URBAN LIVING LTD
Sixth Respondent

MINTER ELLISON RUDD WATTS
Seventh Respondent

BBG HOLDINGS LTD
Eighth Respondent

VIVIAN FATUPAITO and ANDREW

HAWKES, liquidators of CIT HOLDINGS LTD

Ninth Respondents

SARAH SPARKS
Tenth Respondent

Introduction

[1]                  By application of 8 August 2017, the second respondent (“Bankhouse”) sought leave to appear and act in this proceeding through its sole director and shareholder, Gregory Martin Olliver, and (if leave was granted) an extension of time to file a notice of opposition to the ninth respondents’ (the “liquidators”) application for orders in respect of the plaintiffs (the “receivers”). The liquidators oppose Bankhouse’s application.

Background

[2]                  A brief and incomplete background is necessary to put Bankhouse’s application in context. On 23 January 2014, Bankhouse entered into a General Security Deed with CIT Holdings Limited (the “Company”), entitling Bankhouse to appoint receivers of the Company’s assets in relevant circumstances. Mr Olliver is also the Company’s sole director.

[3]                  The Company’s assets are a portfolio of properties in Waimarie Street at St Heliers in Auckland. It appears common ground the Company held those assets as bare trustee for trusts associated with Mr Olliver and the tenth respondent, his former wife (“Ms Sparks”). Ms Sparks has caveats protecting her interest in the properties, sustained on subsequent Court orders.

[4]                  On the Commissioner of Inland Revenue’s application, the Company was put into liquidation on 4 March 2016. Bankhouse registered its security interest against the Company on 10 May 2016, and appointed the receivers on 31 March 2017. On 11 May 2017, the receivers entered into an agreement to sell the Company’s properties to GMO Trust Limited (“GMO Trust”), of which Mr Olliver is also sole director, ultimately at a purchase price of $20.1m (inclusive of GST).

[5]                  In the present proceeding, the receivers seek orders approving and facilitating the properties’ sale to GMO Trust. The liquidators oppose, and apply also for orders invalidating or terminating the receivers’ appointment. The competing applications were set down for hearing on 10 and 11 August 2017, following a timetable relevantly requiring any opposition to the liquidators’ application to be filed and

served by 30 June 2017.1 The timetable was established at a case management conference at which Mr Olliver was present for Bankhouse.

[6]                  I became aware of Bankhouse’s application on 8 August 2017, when I convened a telephone conference to address the liquidators’ filing of an amended application, and directed Bankhouse’s application was to be addressed at the outset of the hearing on 10 August 2017.2 In addition to seeking leave to appear and act through Mr Olliver, if leave was granted, Bankhouse also sought an extension of time to file opposition to the liquidators’ application.

Decision

[7]                  At the commencement of the hearing – after considering both Bankhouse’s application and Mr Olliver’s supporting affidavit, and the liquidators’ opposition – I declined the application, with reasons to follow. These are those reasons.

[8]                  It is a well-established rule a company has no right to be represented in court by other than a practising lawyer. The rule’s rationale is to ensure proceedings are appropriately pleaded and managed, including by counsel with primary obligations to the Court. The Court retains discretion nonetheless to allow non-lawyers to appear on behalf of companies in exceptional circumstances.3 But those exceptional circumstances are generally to be regarded:4

… as a reserve or occasional expedient, for use primarily in emergency situations when counsel is not available or in straightforward matters where the assistance of counsel is not needed by the court or where it would be unduly technical or burdensome to insist on counsel.

[9]                  Bankhouse’s application primarily relied on its contended financial inability to retain counsel, “given the substantial funds advanced to [the Company]” and its claim Bankhouse had good grounds to oppose the liquidators’ application. Bankhouse also

1 1st face-to-face case management conference minute of Associate Judge R M Bell dated 9 June 2017 at [6].

2 Telephone conference minute of Jagose J dated 8 August 2017 at [9].

3      Re G J Mannix Ltd [1984] 1 NZLR 309 (CA) at 311. See also Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [25]-[34]; Kai Iwi Tavern Ltd v New Zealand Guardian Trust Company Ltd [2013] NZCA 199 at [6]-[8]; and Dreamtech Designs & Productions Pty Ltd v Clownfish Entertainment Ltd [2015] NZCA 491 at [8]-[10].

4      Re G J Mannix, above n 3, at 314.

contended, given the pendency of the substantive hearing, granting the application was “a matter of urgency” warranting exercise of the Court’s discretion. Mr Olliver confirmed Bankhouse’s opposition to the liquidators’ application, for which Bankhouse sought an extension of time to file, was set out at paragraphs 8-15 of its application.

[10]               None of that establishes the exceptional circumstances threshold, or otherwise justifies exercise of the Court’s discretion, in the present circumstances:

(a)the “substantial funds” said to have been advanced by Bankhouse to the Company amount to some $2.25m. But they are relatively insignificant, compared to the $20.1m offered by GMO Trust to acquire the Company’s properties. The receivers were appointed when the Company was already in liquidation, and after Mr Olliver had been in unsuccessful negotiations directly with the liquidators to acquire the properties. It should have become obvious to Mr Olliver the liquidators would scrutinise the receivers’ sale to GMO Trust, particularly as they had challenged the validity of the receivers’ appointment by Bankhouse. Given Mr Olliver’s commonality as sole director of all three entities, the expense of counsel to assert Bankhouse’s claimed “good grounds” to secure the sale seems an ordinary and unavoidable cost of doing business in these circumstances, and justified by the size of GMO Trust’s proposed investment. If those grounds are ‘good’, even third party funding to retain counsel should have been achievable by Mr Olliver, wearing one or another hat;

(b)in reliance on ss 293 and 296(3) of the Companies Act 1993, those grounds were the Company was solvent at the time Bankhouse was granted its security; Bankhouse, through Mr Olliver, acted in good faith in providing the advances; Mr Olliver had no reasonable grounds for suspecting the Company would become insolvent; and Bankhouse gave value for its security, which was accepted in good faith. But Mr Olliver’s supporting affidavit essentially recited those grounds, rather than providing any new evidence to substantiate them. As Mr Tingey

for the liquidators said, the affidavit was largely conclusionary. Mr Olliver does not draw anything ‘exceptional’ to the Court’s attention by which its discretion might be exercised;

(c)the “urgency” claimed by Mr Olliver is of his own making, rather than from any extraneous emergency necessitating his stepping in to the breach. He has known since 9 June 2017 opposition to the liquidators’ application was due at the end of that month, and had since that former date opportunity to raise the difficulties he now claims, on the eve of the substantive hearing; and

(d)Mr Olliver’s multiple and conflicting roles central to each corporate entity involved in these transactions very significantly undermine a primary rationale for the Mannix rule, being the need for professional objectivity in court representation of bodies corporate. There are complex and difficult matters for determination on the receivers’ and liquidators’ principal applications, on which the Court is entitled to expect counsel’s assistance and which Mr Olliver’s divided loyalties and lack of desirable objectivity would only complicate.

[11]For those reasons, I declined Bankhouse’s application.

[12]               After I declined Bankhouse’s application, the receivers made oral application to adduce Mr Olliver’s affidavit as evidence on their application. The liquidators opposed, unless they had opportunity to cross-examine Mr Olliver, which Mr Tingey indicated he expected could not also be concluded within the time allocated for the fixture. I also declined that application, with reasons to follow in my forthcoming judgment on the principal applications in this proceeding. Costs are reserved.

Jagose J