Harrison v Keogh
[2016] NZCA 545
•21 November 2016 at 2.30 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA392/2016 [2016] NZCA 545 |
| BETWEEN | AIDAN JOSEPH HARRISON |
| WELLINGTON CITY HELICOPTERS LIMITED Second Applicant | |
| AND | JOHN PATRICK JOSEPH KEOGH |
| Court: | Wild, French and Winkelmann JJ |
Counsel: | M B Beech and D M Fraundorfer for Applicants |
Judgment: (On the papers) | 21 November 2016 at 2.30 pm |
JUDGMENT OF THE COURT
The application for leave to appeal under s 67 of the Judicature Act 1908 is declined.
____________________________________________________________________
REASONS OF THE COURT
(Given by French J)
Introduction
Mr Harrison and Wellington City Helicopters Ltd (Wellington Helicopters) wish to appeal two decisions of Nation J in the High Court at Auckland.[1] Leave is required because it will be a second appeal.[2] Justice Nation’s decisions were themselves decisions on an appeal from the Manukau District Court.[3]
[1]Harrison v Keogh [2015] NZHC 2791 [Judgment No 1]; Harrison v Keogh [2015] NZHC 3323 [Judgment No 2].
[2]Judicature Act 1908, s 67.
[3]Keogh v Harrison [2015] NZDC 11226.
Leave to appeal to this Court was declined by Nation J.[4] Accordingly, Mr Harrison and Wellington Helicopters must now seek leave directly from this Court.
Background
[4]Harrison v Keogh [2016] NZHC 1555.
The proceeding concerns a dispute over company accounts.
Mr Harrison and Mr Keogh are cousins who were shareholders and directors in Wellington Helicopters. The relationship between the two men broke down and Mr Keogh was removed as a director. In August 2011 Mr Harrison and Mr Keogh signed a settlement agreement settling all issues between them. Under the settlement agreement a helicopter belonging to Wellington Helicopters was to be sold and final accounts prepared for the company with a distribution to the shareholders in accordance with their agreed shareholding.
The helicopter was duly sold and in 2012 accounts were prepared by the company’s accountant. On the basis of the accounts Mr Keogh was entitled to payment of US$52,312.26. In October 2012, having received an email from Mr Keogh inquiring when the funds would be paid, the accountant responded by asking Mr Keogh to sign a number of resolutions relating to the winding up of Wellington Helicopters. The accountant advised Mr Keogh that once “we get these signed, I understand we will be looking to releasing the cash on hand”.
In December 2012 Mr Harrison[5] was paid out his shareholding. However, although Mr Keogh had been pressing for his payment, it was not forthcoming. He issued proceedings against Mr Harrison and Wellington Helicopters in the District Court in December 2012. On 31 January 2013 Mr Harrison instructed the accountant to recalculate the shareholder accounts by making adjustments for Mr Keogh’s private use of the helicopter and other alleged expenses.
[5]Mr Harrison’s shareholding was held by another company owned by him.
The adjustment — finalised in November 2013 — resulted in a dramatic reversal of Mr Keogh’s position. He was now shown as owing money to Wellington Helicopters in the sum of $63,037. Wellington Helicopters then filed a counter-claim in the District Court seeking recovery of that sum.
In the District Court Judge Andrée Wiltens found in favour of Mr Keogh and entered judgment for US$52,312.26 against Wellington Helicopters. The Judge held it was an implied term of the settlement agreement that both men were to be paid their respective remaining Wellington Helicopters shareholding at about the same time.[6] The calculations should have been completed before Mr Harrison received his payment and the fact of that payment prevented Mr Harrison from later attempting to reinvent the respective positions of the two men.[7] The Judge also said he did not accept the recalculations bore any relation to what actually occurred.[8]
[6]Keogh v Harrison, above n 3, at [48].
[7]At [53].
[8]At [52].
Mr Harrison and Wellington Helicopters then appealed to the High Court. Justice Nation dismissed the appeal but upheld Mr Keogh’s claim on a different basis than that found in the District Court.[9]
[9]Judgment No 1, above n 1.
Justice Nation held that, although the implication of a term about time of payment was justified on the evidence, that of itself did not resolve the issue between the parties as to Mr Keogh’s entitlement.[10] In Nation J’s view, the settlement agreement should be interpreted as meaning that any final adjustment to the shareholders’ current accounts would be based on future debits and credits rather than an adjustment to accounts that had already been signed off by the directors.[11]
[10]At [88].
[11]At [90].
The Judge further held that, through the accountant and with the authority and knowledge of Mr Harrison, Wellington Helicopters had represented to Mr Keogh that following the sale of the helicopter the amount that would be paid to him would be US$52,312.26.[12] Mr Keogh had relied on that representation and it was unconscionable in terms of the doctrine of estoppel for Wellington Helicopters to now attempt to resile from it. That finding was sufficient to dispose of both the claim against Wellington Helicopters and the counter-claim.
[12]Judgment No 1, above n 1, at [92].
After giving the parties another opportunity to be heard, Nation J held in a second decision that Mr Harrison was also personally liable under the doctrine of estoppel for the amount of Mr Keogh’s claim.[13] The Judge held that Mr Harrison had assumed obligations to Mr Keogh personally through the settlement agreement and his subsequent conduct and that in the circumstances it was unconscionable for him to resile from those obligations.[14] The claim against Mr Harrison in his personal capacity had not been addressed in the District Court.
Should leave to appeal to this Court be granted?
[13]Judgment No 2, above n 1.
[14]At [29]–[31].
This Court will only grant leave to bring a second appeal if the proposed appeal raises a question of law or fact capable of bona fide and serious argument involving some interest, public or private, of sufficient importance to outweigh the cost of a further appeal.[15]
[15]Snee v Snee [2000] NZFLR 120 (CA) at 125–126; Waller v Hider [1998] 1 NZLR 412 (CA) at 413.
In support of the application, the applicants’ counsel, Mr Beech, identified two key questions for determination on the proposed appeal.
The first question is said to be “what nexus is required in estoppel between a party’s reliance and the detriment which they suffer?”.
In order to raise an estoppel based on a representation, a claimant is generally required to show that he or she relied on the representation to their detriment. In this case, according to Mr Beech, the detriment identified by Nation J was that Mr Keogh did not obtain the benefit of the representation — that is, that his expectation was disappointed. Mr Beech says the Judge has in effect held that the “loss of the representation itself” is sufficient to amount to detriment for the purposes of estoppel. Mr Beech submits that was “exceptional” and wrong but the law is “unsettled”. Thus, the proposed appeal would involve a question of general and public importance warranting the attention of this Court.
We do not accept that contention, which we consider is based on an incorrect analysis of Nation J’s decision. In his decision Nation J identified four acts of reliance by Mr Keogh.[16] They included his signing company resolutions relating to the accounts and the liquidation, as well as refraining from taking any action he might have taken to ensure funds belonging to Wellington Helicopters were not distributed to one shareholder in advance of the other.
[16]Judgment No 1, above n 1, at [93].
Correctly analysed, these were all acts to Mr Keogh’s detriment. The loss of the opportunity to stop the payment to Mr Harrison and avoid being presented with a fait accompli was obviously to his detriment. Similarly, the signing of the various company documents also meant he lost any leverage he might have had in relation to securing payment of his own entitlement.
Viewed in that light, the decision was a perfectly orthodox application of the doctrine of estoppel. Further, the law of estoppel has recently been comprehensively reviewed by this Court in Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd.[17]
[17]Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567. The Supreme Court declined leave to appeal in Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZSC 173, (2014) 15 NZCPR 867.
The second question identified by Mr Beech is “whether a director of a company should be personally liable for the company’s decision to revise its accounts and to alter the entitlements of its shareholders”. The leading authority on the personal liability of directors is Trevor Ivory Ltd v Anderson.[18] Mr Beech acknowledged this but contended the present case raised the novel issue of whether the principles in Trevor Ivory can apply to representations in equity.
[18]Trevor Ivory Ltd v Anderson [1992] 2 NZLR 517 (CA).
In our view, the issue of whether the principles of Trevor Ivory apply to estoppel by representation is not seriously arguable.[19] The real issue is whether Nation J correctly applied those principles to the facts of this case. That is very much case specific.
[19]See Eil Brigade Road Ltd v Brown HC Christchurch CIV-2001-409-733, 5 August 2004 at [155].
We acknowledge the issue of personal liability has only been addressed once in the proceeding. We also acknowledge the importance of the case to the applicants, including Mr Harrison, whose reputation is said to be at stake because the decisions of the Courts below call into question the propriety of his conduct. However, those considerations are outweighed, in our assessment, by the fact the sum at stake is modest and no question of general or public importance is involved.
We conclude that the proposed appeal does not satisfy the threshold test for granting leave to appeal. The application for leave is accordingly declined.
Outcome
The application for leave to appeal under s 67 of the Judicature Act 1908 is declined.
Mr Keogh is self-represented. There will therefore be no order as to costs.
Solicitors:
Holland Beckett Lawyers, Tauranga for Applicants
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