Sisson v Commissioner of Inland Revenue
[2016] NZHC 2367
•5 October 2016
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2016-409-000637 [2016] NZHC 2367
BETWEEN THERESE ANNE SISSON
Plaintiff
AND
COMMISSIONER OF INLAND REVENUE
Defendant
Hearing: 3 October 2016 Representation:
T A Sisson in person with D J Hampton as McKenzie Friend
S Kinsler and C L Russell for Commissioner of Inland Revenue
G E Slevin for Official AssigneeJudgment:
5 October 2016
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to strike out application
(Reasons Judgment)
Introduction
[1] The history of litigation over the tax affairs of Chesterfields Preschools Ltd (in liq) and of entities associated with David Hampton and Therese Sisson is one of remarkable perseverance on the part of both Mr Hampton and Ms Sisson. Unfortunately, the history includes (alongside some significant success through judicial review) some substantial financial failure, including both Ms Sisson’s and Mr Hampton’s bankruptcies and the liquidation of Chesterfields.
Chesterfields is put into liquidation
[2] In the last of several appeals to be pursued by Chesterfields in the Court of
Appeal, Chesterfields’ core tax liability was not put into dispute by the taxpayers.1
1 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010)
SISSON v COMMISSIONER OF INLAND REVENUE [2016] NZHC 2367 [5 October 2016]
[3] In giving judgment, the Court of Appeal (in 2010) expressly recognised that the Commissioner of Inland Revenue was to be able to collect immediately at least the core tax owing and some portion of associated penalties. The majority (Glazebook and Chambers JJ) observed that, in their view, a reduction of 15 per cent in penalties would more than fulfil the requirements upon the Commissioner to consider remission.
[4] The Commissioner subsequently reassessed penalties upon the basis of a full
15 per cent reduction. She served a statutory demand upon Chesterfields. Chesterfields failed to make any payment in response.
[5] The Commissioner in February 2015 applied for an order in CIV-2015-409-
43 (the liquidation proceeding) that Chesterfields be put into liquidation. Chesterfields filed a defence. It deployed a number of arguments in its defence.
[6] Following a defended hearing, I made an order putting Chesterfields into liquidation.2
[7] Ms Sisson, as a director of Chesterfields, wished to pursue an appeal from the liquidation judgment. As the liquidators were not intending to appeal, it was necessary to recall the liquidation judgment and to join Ms Sisson as a second defendant so that she could pursue the appeal.
[8] I made an order joining Ms Sisson as a second defendant in the liquidation proceeding.3 Ms Sisson filed an appeal but the appeal was subsequently deemed abandoned for failing to provide security and to pay the scheduling fee. She has given evidence of subsequent endeavours to resurrect the appeal, which have yet to
succeed.
24NZTC 24,500 [Court of Appeal decision].
2 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2015] NZHC 2440, (2015) 27
NZTC 22,029.
3 Commissioner of Inland Revenue v Chesterfields Preschools Ltd (in liq) [2015] NZHC 2667.
Ms Sisson commences the new proceeding
[9] In this proceeding (the new proceeding), Ms Sisson names the Commissioner as defendant. She seeks an order setting aside the liquidation judgment. She asserts that the Commissioner made false representations to the Court in the liquidation proceeding and that there had been deceptive conduct by officers of the Inland Revenue Department in relation to Chesterfields’ tax affairs between 1997 and 2006. The pleading asserts also that Chesterfields’ defence of the liquidation proceeding was unable to be adequately presented through counsel because of difficulties Chesterfields had in sourcing funds which had been made subject of a freezing order several years earlier.
The Commissioner seeks an order striking out the new proceeding
[10] The Commissioner has applied for an order striking out the proceeding. The grounds may be summarised under three heads:
(a) Ms Sisson has no standing in relation to the orders she seeks;
(b)the proceeding is based on concerns which have been considered and determined by the Courts;
(c) appeal rights as they relate to the liquidation judgment have been exhausted.
[11] Ms Sisson did not file a notice of opposition until the morning of the hearing. She had, however, earlier filed written submissions which take the points which I now explore.
Standing
Ms Sisson’s submission
[12] In her written submission, Ms Sisson stated simply:
The question of standing is a moot point, as defendant joined to the liquidation proceeding, in the interests of justice the plaintiff has standing in all matters relevant to the proceeding (sic).
The late-filed Opposition contains a similar assertion.
Discussion
[13] The joinder of Ms Sisson as a party (second defendant) was in relation to the liquidation proceeding only. She had pursued such joinder expressly for the purpose of enabling an appeal to be pursued in relation to Chesterfields’ liquidation. There was no suggestion of a broader ambition (whether to pursue the new proceeding or other matters). The Court’s joinder order did not purport to give Ms Sisson an (unrequested) standing to pursue other matters on behalf of Chesterfields. Such a concept would plainly have been irreconcilable with the appointment of liquidators to Chesterfields and the responsibilities which the liquidators hold.
[14] The regime under s 248 Companies Act 1993 vests in the liquidators in relation to the commencement or continuation of legal proceedings concerning the company (subject only to Court order).4 Section 248 also provides for the cessation of the powers and functions of the company’s directors.5 The Court, when ordering the joinder of Ms Sisson for the narrow purpose of an appeal from the order of
liquidation, would not have contemplated (against the background of litigation in which Ms Sisson and her interests had been involved) a departure from the default regime under s 248.
[15] The new proceeding accordingly fell to be struck out on this ground alone.
[16] I made an oral order to that effect at the hearing and indicated that my reasons would follow (which they now do by this judgment).
4 Companies Act 1993, s 248(1)(c).
5 Companies Act 1993, s 248(1)(b).
Other grounds of application
[17] In the circumstances, there was no need to explore the other grounds of the Commissioner’s application which were the subject of submission. The strike out application succeeds by reference to the standing issue alone.
Costs
[18] Having struck out Ms Sisson’s proceeding, I heard from Mr Kinsler and Ms Sisson as to costs. Ms Sisson did not accept that costs should follow the event. Her opposition to a costs order was twofold. First, she made an emotional plea in relation to her personal circumstances referring to a lack of assets and income and very modest living circumstances. Secondly, she referred to the history of the taxpayers’ dealings with the Commissioner of Inland Revenue which she maintains involved serious wrongs on the part of the Commissioner and departmental staff and more recently the obtaining of the liquidation judgment by false representation and deception conduct.
[19] For the Commissioner, Mr Kinsler submitted that costs should follow the event and that this was an appropriate case in which to order increased costs under r
14.6(3) High Court Rules.
Discussion
[20] This is clearly a case in which to apply the primary principle under r 14.2(a) High Court Rules whereby costs follow the event.
[21] Those involved with Chesterfields were unsuccessful in their defence of the liquidation proceeding. The new proceeding is essentially an alternative path to appealing the liquidation judgment. Costs should follow Ms Sisson’s lack of success.
[22] That leaves for consideration the amount of costs and disbursements.
[23] The Commissioner had signalled the fundamental issue as to the Ms Sisson’s
lack of standing at the outset. The proceeding lacked merit because Ms Sisson had
no entitlement to commence it. The situation falls squarely within r 14.6(3)(b)(ii) High Court Rules (as a proceeding lacking merit).
[24] I consider the just outcome is that the Commissioner have costs on a 2B
basis6 together with an uplift of 50 per cent. I will not certify for junior counsel.
Costs order
[25] I order:
(a) The plaintiff is to pay to the defendant the costs of the proceeding (including the interlocutory application) on the basis of a 2B calculation with an uplift of 50 per cent;
(b)I certify the hearing of the interlocutory application at three-quarters of one day;
(c) The plaintiff is to pay to the defendant the defendant’s reasonable disbursements in relation to the proceeding, to be fixed by the Registrar;
(d)I certify, as a disbursement, the reasonable disbursements of one counsel for the defendants in relation to travel and accommodation for the interlocutory hearing.
Associate Judge Osborne
Solicitors:
Meredith Connell, Wellington
Official Assignee, Christchurch
Copy to: T A Sisson, Christchurch
6 High Court Rule, Category 2 under r 14.3(1) and band B under r 14.5(2).
4
2
0