Thompson v Madsen-Ries - [2016] NZCA 516

IN THE COURT OF APPEAL OF NEW ZEALAND

CA38/2016
[2016] NZCA 516

BETWEEN

JOLYON BRENDAN GEORDIE THOMPSON
Appellant

AND

VIVIEN JUDITH MADSEN-RIES AND HENRY DAVID LEVIN
First Respondents

PHILIP IAN D'ATH
Second Respondent

Hearing:	20 September 2016
Court:	Wild, French and Miller JJ
Counsel:	D G Hurd for Appellant N H Malarao and W C Shin for First Respondents
Judgment:	27 October 2016 at 11.30 am

JUDGMENT OF THE COURT

A The appeal is dismissed.
BThe appellant must pay the first respondents costs for a standard appeal on a band A basis and usual disbursements.

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REASONS OF THE COURT

(Given by Miller J)

Introduction

On 6 June 2012 Asher J entered judgment on formal proof in favour of the liquidators of Kiwi House Ltd against its director and shareholder, Jolyon Thompson, avoiding the 2008 transfer of a residential property at Northcote, Auckland to a trust controlled by Mr Thompson called the Swamp Lake Trust.[1]
[1]Madsen-Ries v Thompson (No 3) [2012] NZHC 1260.
Subsequently, on 17 December 2015, the Judge dismissed an application under r 15.10 of the High Court Rules to set aside the formal proof judgment, holding not only that the transfer was made without adequate value but also that it was done to defeat creditors.[2]
[2]Madsen-Ries v Thompson [2015] NZHC 3270.
Mr Thompson now appeals the judgment of 17 December 2015. The first respondents are the current liquidators. The second respondent was Mr Thompson’s co-trustee but long ago consented to judgment and has been replaced as trustee by BAN Trustee Co Ltd.

Narrative

For our purposes a relatively brief outline of the narrative will suffice. On 14 October 2005 Mr Thompson sold the property, which is situated at 194 Lake Road, Northcote and is his residence, to Kiwi House Ltd for $483,000, paid by an advance of $335,000 from the Bank of New Zealand and an unsecured advance from Mr Thompson as vendor of $149,326.20. The company then claimed and got a GST refund of $56,045.53 from the Inland Revenue Department (IRD).
The IRD then realised that the refund should not have been paid as the company had purchased the property from an unregistered associate, Mr Thompson.[3] The core GST debt was repaid, but penalties and interest remained outstanding. On 12 December 2007 the IRD issued a statement of position insisting on payment, whereupon Mr Thompson made arrangements to get the property out of the company and into the Swamp Lake Trust. The transfer was completed on 19 June 2008, Mr Thompson assuming responsibility for the BNZ loan and the trustees, Mr Thompson and Mr D’Ath, granting a mortgage to BNZ.
[3]Goods and Services Tax Act 1985, s 3A(3)(a).
On 4 July 2008 the IRD served a statutory demand on the company, and it was placed into liquidation on 6 March 2009.
The liquidators brought proceedings in October 2010 in relation to the disposition and the papers were served on Mr Thompson in due course, with affidavits of service being filed. Mr D’Ath…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Thompson v Madsen-Ries

Details

AGLC: Thompson v Madsen-Ries [2016] NZCA 516
Case: [2016] NZCA 516
Decision Date: 27 October 2016 at 11.30 am

CaseChat Overview and Summary

The appeal involves Mr. Thompson's attempt to set aside a judgment against him, granted by default under r 15.9, on the grounds that a miscarriage of justice may have occurred. The lower court judge denied the application under r 15.10, which allows a court to set aside or vary a default judgment if a miscarriage of justice has occurred or may occur. The case has been contentious, with detailed submissions from both sides. However, the court found that the trial judge's decision to dismiss the appeal was correct, primarily due to the unreliability of Mr. Thompson's account and the substantial delay in bringing the application.

The key legal issues in the case were whether Mr. Thompson had a substantial defence, if there was a reasonable explanation for the delay in setting aside the judgment, and whether the plaintiffs would suffer irreparable injury if the judgment was set aside. The trial judge found that Mr. Thompson's account was not credible and there was no reasonable explanation for the delay, and that there was no substantial ground of defence. The court of appeal upheld the trial judge's findings, finding that the appeal depended on the credibility of Mr. Thompson's account, which the trial judge had rightly found to be lacking.

The court of appeal reasoned that the trial judge correctly applied the test for setting aside a judgment under r 15.10, and found no miscarriage of justice. The court found that Mr. Thompson had no substantial ground of defence and that the delay in bringing the application was extraordinary. The court also found that the liquidators' reliance on the argument that a 2008 transfer was made with intent to prejudice creditors was valid, despite the liquidators not initially relying on this ground. The court found that there was no prejudice to Mr. Thompson and that the transfer to the Trust was genuine, but subsequently cancelled by the parties' conduct.

The court of appeal dismissed the appeal and affirmed the lower court's decision to deny the application to set aside the judgment. The court found that the trial judge's decision was correct and that there was no miscarriage of justice. The court also found that the delay in bringing the application was extraordinary and that there was no substantial ground of defence. The appeal was dismissed with costs.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The appeal addresses the Judge’s decision to refuse to set aside the judgment of 6 June 2012 under r 15.10, which provides that:15.10 Judgment may be set aside or variedAny judgment obtained by default under [r 15.9 — formal proof for unliquidated claims] may be set aside or varied by the court on such terms as it thinks just, if it appears to the court that there has been, or may have been, a miscarriage of justice. Lengthy submissions were filed on both sides. In our view, however, the matter can be dealt with quite shortly, because it is plain that the Judge did not err in the exercise of discretion. The grounds of appeal all depend one way or another on the proposition that Mr Thompson’s account is credible. The Judge found that it was not, and he was correct to do so. Further, the extraordinary delay is sufficient reason in itself to dismiss the appeal. We expand briefly on these points. Mr Hurd accepted that the Judge correctly stated the test under r 15.10. Asher J inquired whether Mr Thompson had a substantial ground of defence, whether there was any reasonable explanation for delay, and whether the plaintiffs would suffer irreparable injury if the judgment was set aside. We do not accept that having correctly stated the test the Judge went on to make a mistake in paraphrasing it as requiring that an actual rather than possible miscarriage of justice had occurred. On the contrary, he concluded that a miscarriage was positively excluded. Mr Hurd also argued that the Judge was wrong to allow the liquidators to rely on the argument that the 2008 transfer was made with intent to prejudice creditors. He complained that the liquidators had failed to make out this ground in the first instance and elected not to rely upon it. We do not agree. The ground was argued, and, as the Judge said, it was not dealt with merely because he found it unnecessary to do so.[16] He found no prejudice to Mr Thompson,[17] and nothing specific is identified now. Mr Hurd established that the documents entered into in 1999 evidence a genuine sale to the Trust at that time; the Trust was created, resolutions were completed and a deed of sale was executed. Evidence from a solicitor, Mr Patterson, confirmed that the transaction was genuine. Mr Patterson could not recall a memorandum of transfer being signed, but there is evidence from a legal executive that one was. Asher J gave compelling reasons for finding that the transfer of the property to the Trust, if effected at all, was cancelled by the parties’ subsequent conduct.[18] The evidence of Mr Patterson confirms that the transfer was deliberately not registered. The reason may be that it would have meant reorganising finances, or that Mr D’Ath refused to become party to a mortgage. Nothing done subsequently was consistent with a change of ownership: the mortgagee at the time was not told, and Mr Thompson continued to meet outgoings on the property and to occupy it. Mr Thompson then took steps in 2005 that were wholly incompatible with the transfer to the Trust and which can only evidence an intention on his part, as the controlling influence behind the Trust and the company, to abandon the transfer to the Trust. Asher J’s conclusion that it was done for Mr Thompson’s personal financial advantage was plainly correct. Mr Thompson’s explanation — memory loss — was dismissed as implausible by the Judge, and that conclusion is not challenged on appeal.[18]At [43]–[50].

Ratio Decidendi

Legal Principle Established

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