The Official Assignee in Bankruptcy of the property of Noel Richard Johnson v Johnson

[2006] NZCA 181

IN THE COURT OF APPEAL OF NEW ZEALAND

CA240/05

BETWEENTHE OFFICIAL ASSIGNEE IN

BANKRUPTCY OF THE PROPERTY OF

NOEL RICHARD JOHNSON

Respondent

ANDANNETTE FRANCES JOHNSON

Respondent

Hearing:17 July 2006

Court:Chambers, O’Regan and Ellen France JJ

Counsel:G S Caro for Applicant

D G Hurd for Respondent

Judgment:27 July 2006

JUDGMENT OF THE COURT

A.The application for leave to appeal out of time is granted.

B.The appeal must be brought on or before 24 August 2006.

REASONS OF THE COURT

(Given by Ellen France J)

Introduction

[1]       This is an application under r 29(4) of the Court of Appeal (Civil) Rules 2005 for leave to appeal out of time from a decision of Venning J delivered on 8 October 2003.

Background

[2]       The matter has a lengthy history.  The respondent, Annette Johnson, and her husband, Noel Johnson, entered into a matrimonial property agreement in October 1993.  At that time Mr Johnson, through a company, entered into contracts with a number of franchisees for the distribution of a window product.

[3]       In 1997, the franchisees commenced litigation against Mr Johnson.  They sought damages against Mr Johnson and, as against both Mr and Mrs Johnson, to have the matrimonial property agreement set aside under s 47(1) of the Property (Relationships) Act 1976.  That section makes such an agreement void if it intended to defeat creditors.

[4]       Damages of more than $800,000 were awarded against Mr Johnson who was adjudicated bankrupt on 31 October 2001.  The Official Assignee was subsequently joined as a co-plaintiff in the proceedings relating to the matrimonial property agreement.

[5]       The Official Assignee’s claim was dealt with first.  In the judgment delivered on 8 October 2003, Venning J held that the agreement had the effect of defeating creditors but rejected a claim under s 47(1) that the agreement had been entered into with the intention of defeating Mr Johnson’s creditors.

[6]       In a second judgment delivered on 12 February 2004, now reported in (2004) 24 FRNZ 83, dealing with the claim by the franchisee creditors under s 47(2), Venning J said s 47(2) did not fix the time within which creditors or the Official Assignee had to take proceedings.  Instead, the Judge saw s 47(2) as defining the parties who may challenge the agreement.  The creditors therefore had to show they were creditors during the two years after the agreement.  They did that and judgment was entered for them against Mrs Johnson in the sum of $552,250 plus interest and costs.

[7] That decision was set aside by a majority decision of this Court delivered on 12 September 2005 and now reported at [2006] NZFLR 49. The Supreme Court dismissed an appeal from that decision in a judgment delivered on 27 April 2006 ([2006] NZSC 31). In this Court’s decision, William Young J (as he then was), dissenting in part, identified three features of the case, at [33]-[37], which “might be thought to throw some doubt on the conclusion reached by Venning J” about the validity of the matrimonial property agreement. The majority, McGrath and Glazebrook JJ, said they agreed with those observations.

[8]       These comments had been preceded by two Minutes of the Court.  The first minute dated 3 December 2004 discussed the possibility that the findings of Venning  J in his first judgment effected an estoppel for the purposes of the issues to be determined in the second judgment.  The Minute concluded by stating that if:

… Mr Hurd wishes to challenge the findings made in the first judgment which are adverse to Mrs Johnson, it may be fair to permit the Official Assignee and/or the present respondents to challenge his conclusions on s 47(1).

[9]       The second minute dated 20 April 2005, recorded the appeal was to be re‑listed for hearing in May 2005.  Importantly, the Minute continued:

We are also prepared to entertain either or both an application for leave to appeal by the Official Assignee against the same judgment and/or a challenge by the present respondents to any of the conclusions reached by Venning J in that judgment.

[10]     The Official Assignee was not a party to the appeal.  Mr David Smith was representing the franchisees but had also represented the Official Assignee before Venning J at the hearing prior to the first judgment.  It was presumably expected that Mr Smith would inform the Official Assignee of the developments.  However, Mr Smith’s evidence is that he told the Official Assignee there was an opportunity to challenge the decision of Venning J as to s 47(2).  But he said nothing about the opportunity to appeal against the s 47(1) issue.

[11]     It is from Venning J’s first decision about s 47(1) that the Official Assignee wishes to appeal.

Application for special leave

[12]     The respondent’s opposition to leave emphasises the lengthy delays in relation to these proceedings and the need for finality.  The respondent also submits that the Official Assignee made a clear election as to his remedies.  The Official Assignee should not now be able to resile from that especially as the respondent has suffered the detriment of a course of litigation which would not have been necessary if the appeal had been pursued.  The effect of the litigation on Mrs Johnson’s health is also highlighted.

[13]     The delay is such as would normally count against the grant of leave.  The Official Assignee accepts that.  However, the end result is a highly unusual combination of circumstances; that is, this Court’s indication an application for leave would be viewed favourably combined with the fact that Official Assignee was not told of this opportunity.

[14]     Once the Official Assignee was aware of the opportunity, he has sought to appeal fairly promptly.  We assume he would have done so much earlier if aware the Court would have countenanced an appeal.

[15]     In this set of circumstances, leave to appeal should be granted.

Result

[16]     The appeal for leave to appeal out of time is granted.  We make no order for costs.  In accordance with the Rules, the appeal must be brought on or before 24 August 2006.

Solicitors:

Patterson Hopkins, Auckland for Respondent