Sisson v Chesterfields Preschools Limited (in liquidation)
[2020] NZCA 687
•22 December 2020 at 2.00 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA285/2017 [2020] NZCA 687 |
| BETWEEN | THERESE ANNE SISSON |
| AND | CHESTERFIELDS PRESCHOOLS LIMITED (IN LIQUIDATION) |
| CA683/2017 | ||
| BETWEEN | THERESE ANNE SISSON Appellant | |
| AND | CHESTERFIELDS PRESCHOOLS LIMITED (IN LIQUIDATION) Intervener | |
| CA684/2017 | ||
| BETWEEN | THERESE ANNE SISSON Appellant | |
| AND | CHESTERFIELDS PRESCHOOLS LIMITED (IN LIQUIDATION) | |
| CA685/2017 | ||
| BETWEEN | THERESE ANNE SISSON | |
| AND | CHESTERFIELDS PRESCHOOLS LIMITED (IN LIQUIDATION) | |
| Hearing: | 5-6 October 2020 |
Court: | Miller, Venning and Katz JJ |
Counsel: | Appellant in person |
Judgment: | 22 December 2020 at 2.00 pm |
JUDGMENT OF THE COURT
A The appeals in CA285/2017, CA683/2017, CA684/2017 and CA685/2017 are dismissed.
B In respect of CA285/2017, Ms Sisson must pay to the Commissioner costs for a standard appeal on a band A basis, with certification for second counsel, plus usual disbursements. Ms Sisson must pay to CPL costs for a standard appeal on a band A basis, with certification for second counsel, plus usual disbursements.
CIn respect of CA683/2017, CA684/2017 and CA685/2017 Ms Sisson must pay to CPL usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Katz J)
Ms Sisson appeals a decision of Gendall J in which he refused to recall a previous decision vesting certain property in Chesterfields Preschools Ltd (CPL), by consent (CA285/2017).[1] Ms Sisson also appeals three costs decisions that were made in the course of the vesting order proceeding, namely:
(a)CA684/2017 — an appeal of a costs decision of Nation J following the consolidation of the vesting order proceeding with other proceedings in June 2016.[2]
(b)CA685/2017 — an appeal of the costs decision of Gendall J of 16 February 2017 following the hearing of the vesting orders application.[3]
(c)CA683/2017 — an appeal of costs awards made by Gendall J on 24 March 2017 quantifying the costs order made on 16 February 2017. The costs were quantified at $92,013 to CPL and $87,555.38 together with disbursements of $4,114.15 to the Commissioner of Inland Revenue.[4]
[1]Chesterfields Preschools Ltd (in liq) v Sisson [2017] NZHC 859 [Refusal to recall].
[2]Chesterfields Preschools Ltd (in liq) v Sisson [2016] NZHC 1286 [Consolidation costs].
[3]Chesterfields Preschools Ltd (in liq) v Sisson [2017] NZHC 181 [Vesting costs order].
[4]Chesterfields Preschools Ltd (in liq) v Sisson [2017] NZHC 553 [Vesting costs award].
This judgment is one of three judgments being delivered contemporaneously, which together determine 11 appeals relating to the affairs of Ms Sisson and CPL. The other two judgments deal with the liquidation of CPL ([2020] NZCA 686 — the liquidation judgment) and the bankruptcy of Ms Sisson ([2020] NZCA 689 — the bankruptcy judgment). The liquidation judgment is the principal judgment. It sets out the background to the appeals and deals with issues common to all appeals.
Background to vesting order
CPL was incorporated on 27 July 1993. Ms Sisson was appointed a director on 23 January 2015. Her former partner Mr Hampton was, and still is, the sole shareholder of the company.
On 16 August 2001, a property at 854 Colombo Street, Christchurch (the Property) was transferred from CPL to Mr Hampton for no consideration, to enable refinancing of a mortgage on the title. The Property was then held by Mr Hampton on trust for CPL until 2007.
On 31 October 2007, Fogarty J made a court order permitting the Property to be transferred from Mr Hampton to Ms Sisson at a mortgagee sale auction. The purpose of the transfer was to prevent the Property from being sold at under-value.
On 9 November 2007, Fogarty J issued a minute clarifying that the Property was to be held by Ms Sisson as trustee, for the benefit of the beneficial owner of the Property (CPL), pursuant to undertakings given by Ms Sisson. The transfer took place on 21 December 2007.
Although Ms Sisson argued at the vesting order hearing in the High Court that she held the Property on trust for the Anolbe Family Trust, rather than CPL, she did not pursue that argument before us on appeal. Rather, she accepted (for present purposes at least) that at all material times she held the Property on trust for CPL, pursuant to the Court-imposed order to that effect (the trust order).
In early 2016, the liquidator of CPL commenced the vesting order proceeding. He applied under the Trustee Act 1956 for orders vesting the Property and associated insurance monies in CPL. Ms Sisson opposed the application.
On 13 February 2017, the first day of the vesting order hearing in the High Court, an application by Ms Sisson to file a counterclaim was dismissed. The proposed counterclaim raised allegations of misfeasance in public office against various Inland Revenue Department officers and others.
On 17 February 2017, Gendall J delivered his reasons for declining leave to Ms Sisson to file the counterclaim.[5] The Judge noted that leave was only sought to file the counterclaim after the proceeding had already been set down for many months. He accepted the liquidator’s submissions that by raising misfeasance issues Ms Sisson was endeavouring to broaden the proper scope of the proceeding, which was confined to an issue about ownership of CPL’s assets. Further, the counterclaim involved issues already canvassed to a significant extent in earlier litigation between the parties.
[5]Chesterfields Preschools Ltd (in liq) v Sisson [2017] NZHC 192 [Refusal of counterclaim].
Also on 16 February 2017 (the fourth day of the vesting order hearing) Ms Sisson signed a consent memorandum agreeing to the vesting orders. Gendall J then delivered a judgment making the vesting orders by consent.[6]
[6]Vesting costs order, above n 3.
The consent orders vested the Colombo Street property and associated insurance proceeds and entitlements in the liquidator. Gendall J ordered costs against Ms Sisson, with the quantum to be determined at a later date.[7] On 24 March 2017, Gendall J set the quantum of costs.[8] In his costs decision his Honour found that Ms Sisson’s opposition to the vesting order was entirely without merit from the outset:[9]
… Ms Sisson acted unreasonably in that her entire claim here lacked merit… [t]he fact too that Ms Sisson pursued a defence in this proceeding that entirely lacked merit was obvious and incontrovertible from the outset.
[7]At [3(f)].
[8]Vesting costs award, above n 4.
[9]At [24].
The defence referred to by his Honour was that Ms Sisson did not hold the Property and insurance proceeds on trust for CPL, but rather for the Anolbe Family Trust. As noted above, Ms Sisson has not pursued that argument on appeal.
On 17 March 2017, Ms Sisson filed an application to set aside the (now sealed) consent orders. The liquidators opposed that application. On 2 May 2017, Gendall J delivered a judgment refusing to set aside the vesting orders (the recall judgment).[10]
Jurisdiction
[10]Refusal to recall, above n 1.
A preliminary issue addressed at the hearing before us was whether the Judicature Act 1908 or Senior Courts Act 2016 applies to the appeals. If the Senior Courts Act applies, we will not have jurisdiction to determine the vesting appeal, as the Senior Courts Act introduced a leave requirement for interlocutory appeals and the vesting appeal is an interlocutory appeal.[11] Ms Sisson has not obtained the required leave. If the Judicature Act 1908 applies, however, then Ms Sisson does not require leave to appeal.[12]
[11]This appeal relates to a matter falling within the scope of the definition of “interlocutory application” in s 4 of the Senior Courts Act 2016.
[12]Judicature Act 1908, s 66; and Siemer v Heron [2011] NZSC 133, [2012] 1 NZLR 309.
The Senior Courts Act came into effect on 1 March 2017. The vesting order judgment was delivered prior to that date (on 16 February 2017) but Ms Sisson’s appeal was lodged after it. Clause 10(1) of sch 5 of the Senior Courts Act relevantly provides, however, that:
All proceedings pending or in progress in a court operating under the relevant Act immediately before the commencement of this clause may be continued, completed, and enforced only under the relevant Act (including the relevant rules of court) as if that Act had not been repealed by this Act.
The “relevant Act” is defined as the Judicature Act or the Supreme Court Act 2003. Here, the relevant Act is the Judicature Act.
This Court has previously determined that a High Court “proceeding” for the purposes of cl 10(1) encompasses all stages of that proceeding, including appeals.[13] Accordingly, a proceeding commenced in the High Court prior to 1 March 2017 will continue under the provisions of the Judicature Act through all High Court stages of the proceeding and through any appeals to the Court of Appeal or Supreme Court to final disposition and enforcement.[14] We therefore have jurisdiction to consider the merits of Ms Sisson’s appeal.
Consent judgments — relevant legal principles
[13]Sutcliffe v Tarr [2017] NZCA 360, [2018] 2 NZLR 92.
[14]At [22].
A judge may recall a judgment at any time before a formal record of it is drawn up and sealed.[15] The Rules do not, however, provide jurisdiction for recall after a judgment is sealed. The Court does however have an inherent jurisdiction to recall a sealed judgment, for example when the underlying agreement is tainted by duress, undue influence, unconscionability or mistake.[16] Although consent orders “are not easily disturbed”, the ultimate test will always be where the interests of justice lie.[17] A relevant factor in determining where the interests of justice lie will be whether setting aside the consent orders will materially prejudice the rights of others.
[15]High Court Rules 2016, r 11.9.
[16]Herron v Wallace [2016] NZHC 2426, (2016) 23 PRNZ 620.
[17]Kain v Hutton [2007] NZCA 199, [2007] 3 NZLR 349 at [230].
Ms Sisson advanced three key arguments as to why the consent orders should be set aside, namely:
(a)It is in the interests of justice that the consent orders be set aside until after Ms Sisson’s misfeasance allegations against the Commissioner have been finally determined.
(b)Ms Sisson’s consent to the consent orders was compromised due to ill health and the fact that Ms Sisson did not fully understand what she was consenting to.
(c)The consent orders should have been stayed or set aside until the liquidation appeal was determined because, if that appeal succeeded, the liquidator would not have standing to seek vesting orders.
The liquidation appeal is dismissed in a judgment delivered contemporaneously with this judgment. It is therefore not necessary to address Ms Sisson’s third argument. We will focus on her first two arguments.
Should the consent orders have been set aside pending determination of the misfeasance claims against the Commissioner?
In 2008, CPL issued proceedings alleging misfeasance in public office by the Commissioner, Mr Shamy (counsel for the Commissioner), the Attorney-General and various Inland Revenue Department officers. That proceeding was stayed by this Court in 2013 and requires an order of the High Court to lift the stay.[18] Ms Sisson submitted that the consent orders should nevertheless be set aside and the vesting proceeding stayed until after determination of the misfeasance proceeding.
[18]Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [119].
Specifically, Ms Sisson submitted that the vesting order was made on the assumption that the trust order is valid. She argued that this is a flawed assumption, because the trust order was only obtained as a result of misfeasance on the part of various officials. She submitted that if she is able to succeed in establishing “overriding illegality” as a result of this misfeasance, then the vesting orders and any associated costs orders will be “vitiated by that fraud”. It is therefore in the interests of justice, she submitted, for the consent orders to be set aside and the vesting order proceeding stayed until the misfeasance claims have been heard and determined.
We do not accept that submission. First, it is not arguable that the trust order, requiring Ms Sisson to hold the Property on trust for CPL, is invalid or in some way qualified or conditional. It has been in force for 13 years, since 2007. The trust order is valid unless and until it is overturned on appeal. No appeal has ever been filed against the making of the trust order.
Further, it would clearly not be in the interests of justice to set aside or recall the consent orders pending resolution of Ms Sisson’s misfeasance claims given the formidable obstacles Ms Sisson will face in progressing such claims, including:
(a)Ms Sisson’s application to raise the misfeasance allegations by way of counterclaim in the vesting proceeding was dismissed by Gendall J on 13 February 2017, the first day of the vesting order hearing. On 17 February 2017 Gendall J issued his reasons for that decision.[19] He found that the misfeasance allegations were not relevant to the vesting proceeding. Ms Sisson has not appealed that decision. Rather, she seeks (in essence) to collaterally attack that finding in her appeal of the recall judgment.
(b)Ms Sisson was previously adjudicated bankrupt on 29 November 2011. At that time any interest she had in the 2008 misfeasance proceeding vested in the Official Assignee, in accordance with s 101 of the Insolvency Act 2006. The right to pursue the proceeding did not re‑vest in Ms Sisson on her automatic discharge from bankruptcy on 4 January 2015.
(c)Because the misfeasance proceeding has been stayed, it cannot be progressed unless an order is first obtained from the High Court to lift the stay. Given that we have dismissed Ms Sisson’s appeal against the liquidation of CPL,[20] it is for Mr Hollis, the liquidator of CPL (CPL is a plaintiff in the misfeasance proceeding) to decide whether to pursue that proceeding. The liquidator’s present view is that the misfeasance proceeding does not have a reasonable prospect of success. He does not therefore intend to pursue it.
[19]Refusal of counterclaim, above n 5.
[20]Chesterfields Preschools Ltd (in liq) v Commissioner of Inland Revenue [2020] NZCA 686 delivered together with this judgment.
In any event, in our view Gendall J was correct to hold that issues of alleged misfeasance are not relevant to the vesting order proceeding, which is confined to the issues of ownership of the company’s assets.
At all material times Ms Sisson has held the Property on trust for CPL, pursuant to the trust order. As Fogarty J noted:[21]
[t]he important point is that the Court allowed her to take legal ownership of these properties for the purpose of affecting an arm’s length sale to avoid a sale at under-value in a forced sale transaction, but on terms that left in place the existing beneficial interests in the properties.
[21]Chesterfields Preschools Ltd HC Christchurch CIV-2008-409-0722, 31 October 2012 (Minute of Fogarty J).
The trust no longer serves any purpose. There is no good reason why the Property should not now vest in CPL, which has been the beneficial owner of the Property throughout Ms Sisson’s ownership (and Mr Hampton’s before that).
Finally, we accept the Commissioner’s submission that setting aside or staying the vesting orders would materially prejudice the Commissioner as the main creditor of CPL.
Taking all of these matters into account, we reject Ms Sisson’s submission that the consent orders should be set aside, and the vesting proceeding stayed, pending final determination of the misfeasance proceeding.
Was Ms Sisson’s consent to the vesting orders compromised?
Ms Sisson submitted that her consent to the vesting orders was compromised, as she became unwell during the hearing and was not therefore able to function at the level required. She further asserted that she did not fully understand what she was consenting to.
In the vesting order judgment Gendall J recorded that:[22]
Having received this consent memorandum I then checked with counsel for the plaintiff, and counsel for the intervener, and Ms Sisson the defendant, that indeed a consent judgment in terms of the second amended statement of claim was sought by all parties. This was confirmed.
[22]Vesting costs order, above n 3, at [2].
Subsequently, in the recall judgment, Gendall J did not accept that a medical certificate adduced by Ms Sisson established that she was mentally incapable of giving proper consent to the vesting order. Nor did it establish a cognitive impairment or a condition rendering Ms Sisson vulnerable to undue influence.[23] In any event, even if Ms Sisson had been able to establish that she had been suffering from a disability or real cognitive impairment at the time the consent memorandum was signed, the Judge indicated that he would not have exercised his discretion to recall the vesting orders judgment because:[24]
I found that her litigation in this case was entirely without merit and, that said, it is simply not in the interests of justice to reopen the judgment in question.
[23]Refusal to recall, above n 1, at [22].
[24]At [25].
Gendall J’s assessment of the total lack of merit of Ms Sisson’s defence is borne out by the fact that she abandoned the argument that she held the property for the Anolbe Trust rather than CPL on appeal. This was her primary defence in the High Court.
Gendall J further noted that Ms Sisson herself acknowledged that she understood what she was agreeing to, having stated in her affidavit in support of the recall application that:[25]
I believed that I was agreeing to the vesting orders in favour of the Liquidator.
[25]At [26].
Gendall J observed that Ms Sisson was a barrister and solicitor and an experienced litigant.[26] There was no evidence her consent resulted from undue influence or mutual mistake.[27] Taking all of these matters into account, the Judge concluded that there had been no injustice or inequity in this case which would warrant the Court exercising its inherent jurisdiction to recall.[28]
[26]At [28].
[27]At [33].
[28]At [36].
We find no error in Gendall J’s careful analysis of this issue. We conclude that there is no merit to this ground of appeal. It follows that the vesting appeal (CA285/2017) must be dismissed.
Costs appeals
Ms Sisson also appeals three costs decisions that were made during the course of the vesting order proceeding, as summarised at [1] above. Extensions of time to file these appeals were granted in a minute issued by Miller J on 6 November 2019.
We accept Ms Courtney’s submission on behalf of the Official Assignee that upon adjudication a bankrupt no longer has standing to bring proceedings or to appeal against any judgment that relates to a debt provable in the bankruptcy.[29]
[29]Re Wilson HC Christchurch B348/89, 5 December 1989; and Zhang v Westpac New Zealand Ltd [2019] NZHC 2797 at [5].
In the bankruptcy judgment (being delivered contemporaneously with this judgment) we have dismissed Ms Sisson’s appeal against adjudication.[30] The costs awards all predate the order adjudicating Ms Sisson bankrupt on 23 June 2017. Ms Sisson therefore has no standing to bring or pursue the costs appeals. If there are any grounds to contest the costs judgments, only the Official Assignee can now do so. The Official Assignee does not consider, however, that there is any basis for disputing the costs awards. It follows that the costs appeals must also be dismissed.
Result
[30]Sisson v Chesterfields Preschools Ltd (in liq) [2020] NZCA 689.
The appeals in CA285/2017, CA683/2017, CA684/2017 and CA685/2017 are all dismissed.
We order Ms Sisson to pay the following costs:
(a)In respect of CA285/2017, Ms Sisson must pay to the Commissioner costs for a standard appeal on a band A basis, with certification for second counsel, plus usual disbursements. Ms Sisson must pay to CPL costs for a standard appeal on a band A basis, with certification for second counsel, plus usual disbursements.
(b)In respect of CA683/2017, CA684/2017 and CA685/2017 Ms Sisson must pay to CPL costs for a standard appeal on a band A basis, with certification for second counsel, plus usual disbursements.
Solicitors:
Crown Law Office, Wellington for Official Assignee
Lane Neave, Christchurch for Chesterfields Preschools Ltd
Crown Law Office, Wellington for Commissioner of Inland Revenue
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