Williams v Cameron

[2016] NZHC 264

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV 2014-442-088 [2016] NZHC 264

BETWEEN

PETER ANTHONY WILLIAMS

Appellant

AND

TREVOR NELSON CAMERON First Respondent

ROBIN WHALLEY Second Respondent

RICHARDS WOODHOUSE Third Respondent

CIV 2015-442-58

BETWEEN  PETER ANTHONY WILLIAMS Applicant

ANDTHE OFFICIAL ASSIGNEE First Respondent

TREVOR NELSON CAMERON, ROBIN WHALLEY, RICHARDS WOODHOUSE CHARTERED ACCOUNTANTS

Second Respondents

Hearing:	2 February 2016
Appearances:	S J Zindel for the appellant S Galbreath for the respondents
Judgment:	24 February 2016

JUDGMENT OF MALLON J

Introduction

[1]      Mr  Williams  and  an  associated  company,  Williams  Turbochargers  Ltd, brought a damages claim against their former accountants arising out of the sale of

WILLIAMS v CAMERON [2016] NZHC 264 [24 February 2016]

his business.  An issue arose as to whether the claim had been settled.  The District Court held that a settlement had been reached with the consequence that his claim could not proceed.1   A costs order was made against Mr Williams.  Mr Williams did not pay the costs order.  As a result he was made bankrupt and the company was put into liquidation.

[2]      Mr Williams now wishes to appeal the District Court judgment.  There are three applications for my consideration:

(a)       an application for a vesting order of disclaimed property;2

(b)an application for leave to appeal a District Court judgment out of time;3 and

(c)       an application for leave to adduce evidence in support of the appeal.

Background

[3]      In  2004  the  respondents  acted  for  Mr  Williams  and  his  company  (the vendors) and for another client (the purchaser) on the sale of the company’s marine business for $800,000.   Mr Williams takes the view that the respondents failed to disclose a valuation which valued the business at $957,000.   He learned of this valuation in 2006.

[4]      In February 2007 the respondents issued an invoice to Mr Williams’ company for $8597.06 in relation to the preparation of its accounts.  In mid-2007 Mr Williams sent the respondents a backdated invoice for $226,534.83 said to be for losses in the sale  of  the  business  arising  from  the  undisclosed  valuation.    Mr Williams  also complained to the NZ Institute of Chartered Accountants (NZICA).  In October 2007

the complaint was dismissed on the basis of evidence from the respondents.

1      As explained further at [8] some particulars of his claim were not covered by the settlement.

2      Pursuant to s 119(2) of the Insolvency Act 2006.

3      Williams v Cameron DC Nelson CIV-2009-042-544, 26 October 2012 [District Court Judge

Tuohy].

[5]      In  December 2007  a meeting took  place between  Mr Williams, his  new accountant (Mr French) and representatives of the respondents.  At the meeting it was proposed that the respondents write off their invoice and Mr Williams would drop  his  claim.     Mr  Williams  did  not  agree  to  the  proposal  at  this  stage. Subsequently a discussion between Mr Williams and Mr French took place, and Mr French then made a telephone call to Mr Cameron on 19 December 2007.   The respondents contended that a settlement was reached in that telephone conversation.

[6]      In 2009 Mr Williams succeeded in having his complaint to the NZICA re- opened for investigation on the ground that he had not been heard.   In November

2009 Mr Cameron (one of the respondents involved in the sale) pleaded guilty to charges concerning breaches of the Code of Ethics.  No charge was brought against Mr  Whalley  (another  of  the  respondents  involved  in  the  sale)  because  he  had resigned as an accountant and a partner of the respondents’ firm.

[7]      On   2   December   2009   Mr   Williams   commenced   his   District   Court proceedings  against  the  respondents.    He  claimed  breaches  of  fiduciary  duties, breach  of  contract,  negligence  and  negligent  misstatement/mistake  of  fact.    He sought compensation for the sale of the business at a price lower than the valuation which he considered had not been disclosed and reimbursement of costs for the NZICA disciplinary proceedings he pursued.  The respondents applied to strike out the proceeding on the ground that the claims had been settled.  This application was

granted in the District Court4 but overturned on appeal.5   An order was subsequently

made that the issue of whether these claims had been settled was to be determined as a separate question.

[8]      On 26 October 2012 the District Court (Judge Tuohy) gave its decision on that question.   It held that a contractually binding settlement was reached in the telephone call between Mr French and Mr Cameron on 19 December 2007.   This settlement was of the claim for compensation for the sale of the business for a price

lower than the value in the undisclosed valuation.   The settlement covered all the

4      Williams  v  Cameron  DC  Nelson  CIV-2009-042-544, 26  May  2010  [District  Court  Judge

Zohrab].

5      Williams v Cameron HC Nelson CIV-2010-422-222, 22 September 2010, [High Court Mallon J].

causes of actions with the exception of some of the particulars of the fiduciary duty and breach of contract claims.6   Costs were ordered against Mr Williams.

[9]      The time for appealing the District Court decision expired on 23 November

2012.7   No appeal was lodged by that date. An application for recall was made on 14

January  2013.    The  basis  for  the  recall  application  was  an  allegation  that  Mr Cameron and his solicitors had knowingly made false statements to the Court and had fabricated documents.  The District Court dismissed the recall application on 15

April 2013.8   The dismissal was upheld by the High Court on 16 July 2013.9   On 6

November 2013 Mr Williams was adjudicated bankrupt and his company was placed into liquidation. The application for leave to appeal was made on 3 December 2014.

[10]     Mr Williams applied for legal aid to pursue his appeal.  Interim legal aid was granted on 19 March 2015 to enable Mr Williams’ lawyer to report on the prospects of success of an appeal.  On 23 July 2015 the Commissioner declined legal aid.  That decision was upheld by the legal aid tribunal on 2 November 2015.

My assessment of the applications

[11]     On 18 September 2015 the Official Assignee gave Mr Williams notice that it was disclaiming the following property:10

Right to bring a proceeding to challenge the decision of DCJ Tuohy in

Williams v Cameron, DC, Nelson CIV 2009-042-000544 & 071, 26 October

2012, on the grounds it was obtained by fraud.

[12]     On that same date Mr Williams applied for an order that the disclaimed property vest in him.  The disclaimed property was described in the application more broadly than that which was disclaimed.  The application described the disclaimed property as being:

[Mr Williams’] cause of action in the appeal proceedings under CIV-2014-

442-088 and the substantive District Court proceedings before the Nelson

District Court under CIV-2009-042-000544 and 071.

6      Williams District Court Judge Tuohy, above n 3, at [47].

7      High Court Rules, rule 20.4.

8      Williams v Cameron DC Nelson CIV-2009-042-544, 15 April 2013, at [5].

9      Williams v Cameron [2013] NZHC 1794.

10     The disclaimer was given under s 117 of the Insolvency Act 2006.

[13]     The Court “may make [a vesting order] if it is satisfied that it is fair that the property  should  be  delivered  to,  or  vested  in,  the  applicant”.11    Counsel  for Mr Williams submits that it is fair to grant the order.   The only creditors in the bankruptcy are the respondents.  The claim Mr Williams seeks to pursue is against the respondents.  His bankruptcy and the liquidation of his company arise from the costs order against him as a result of the District Court claim.

[14]     The respondents neither consent to nor oppose the vesting order because they do not wish to incur further legal costs in opposing the order.   That said, they consider that the appeal is unmeritorious and a vesting order should not be made as they will then need to incur further legal costs in opposing the application for leave. As matters have transpired the respondents have had to incur legal costs on the leave application as that application and the vesting order application have been heard together.

[15]     I consider the merits of an appeal are relevant to whether a vesting order should be made.  One of the purposes of removing litigation rights from a bankrupt person is that “defendants/respondents should not be put at further or new risk of action and irrecoverable cost”.12     The Court therefore should not exercise its discretion to make a vesting order which may facilitate the pursuit of unmeritorious proceedings and lead to irrecoverable costs for the defendant/respondent.

[16]     Mr Williams needs special leave of this Court to appeal the District Court judgment because his appeal was filed out of time.13    An extension of time is an indulgence.14   It should be granted where it is in the overall interests of justice to do so.  In the present case the relevant matters are:15

(a)       delay: the length of the delay, the reasons for it, and any prejudice caused by the delay; and

11     Insolvency Act 2006, s 119(3).

12     Meriton Apartments Pty Ltd v Industrial Court of New South Wales [2008] FCAFC 172 at [143]

cited in Goodwin v Copland [2015] NZHC 213 at [22] and Official Assignee v Henshaw [2015] NZHC 1856 at [15].

13     High Court Rules, rule 20.4(3)(b).

14     A R Joseph (ed) McGechan on Procedure (online looseleaf ed, Brookers) at [HR20.4.02].

15     My Noodle Ltd v Queenstown Lakes District Council [2009] NZCA 224 at [19] sets out a list of discretionary factors. The present appeal does not raise a matter of public importance.

(b)      the prospects of success on an appeal.

[17]     The delay in this case is lengthy.  The application for special leave was made two years after the time for lodging an appeal had expired.   I accept that matters were complicated in the second of those years by Mr Williams’ bankruptcy.  But Mr Williams had not been adjudicated bankrupt and had legal representation during the

20 working days he had to appeal the decision as of right in 2012.  There was no particular reason why Mr Williams could not have lodged an appeal in that time period.

[18]     In the following year Mr Williams brought a misguided application for recall of Judge Tuohy’s decision.   He also appealed against the decision dismissing this recall.  For part of that time Mr Williams was represented by counsel.  In September

2013, in a hearing of his company’s application to set aside a statutory demand, it was pointed out that the time for bringing an appeal had long passed.16   No particular reason  has  been  advanced  as  to  why,  in  2013,  Mr Williams  could  not  file  an application to extend the time to appeal Judge Tuohy’s decision.

[19]     The  respondents  say  they  are  prejudiced  by  the  delay.    Following  the conclusion   of   the   bankruptcy   and   liquidation   proceedings,   the   respondents considered the long running dispute with Mr Williams was at an end.  They entered into  an  agreement  with  their  insurers  settling,  on  a  full  and  final  basis,  their insurance claim in respect of the dispute with Mr Williams.  As the settlement was on a full and final basis, they have to bear all future costs in relation to this dispute.  I accept that this change of position is relevant to the discretionary assessment of whether to grant special leave to Mr Williams.

[20]    The prospects of success of an appeal are very low.   In a careful and comprehensive judgment Judge Tuohy explained why he found that a settlement was

reached in an oral conversation between Mr Cameron and Mr French.

16     Williams  Turbochargers  Limited  v  Cameron  &  Ors  HC  Nelson  CIV  2013-442-284,  19

September 2013 at [3].

[21]     Mr Williams  relies  on  my  decision  which  allowed  the  appeal  from  the District Court’s decision striking out the claim.17     However he succeeded on that application  because  of  the  nature  of  the  strike  out  jurisdiction  and  the  limited evidence before me in light of that jurisdiction.   The evidence on the substantive hearing before Judge Tuohy was more comprehensive and the witnesses were able to be cross-examined.

[22]     Mr Williams has concerns about Mr Cameron’s evidence about whether he received an email from Mr French on either 20 December 2007 or 8 January 2008. This email referred to the telephone conversation on 19 December 2007.  He also has concerns  that  Mr Cameron was  not  fully cross-examined  about  this  because  of allegedly improper pressure his lawyer was under from Mr Cameron’s lawyer.  As explored at the hearing before me I was unable to follow how any conversation between his lawyer and Mr Cameron’s lawyer could have had that effect.   In any event the District Court Judge found that both parties (Mr Cameron and Mr French) believed they had reached an agreement on the telephone.   The email (whether received on 20 December 2007 or 8 January 2008) required no response.  It was an acknowledgement of the settlement that had already been reached.

[23]     The application for leave to adduce evidence can be put to one side.  It relates to Mr Williams concerns that the key emails were fabricated.   This relates to his concern that the District Court judgment was obtained by fraud.  It is accepted on his behalf that, if he wished to pursue this, he would have to issue separate proceedings. However, as the District Court judgment centred on the agreement reached in the telephone conversation, and it was not in dispute that Mr French sent an email acknowledging the settlement, I am unable to see how such a proceeding could assist Mr Williams.

[24]     Mr Williams’ new argument, that there was a mistake in an essential term of the settlement, is also without merit.  The District Court Judge carefully explained his conclusions on what was agreed and why the way in which the credit of the respondents’ invoice was implemented was not material.

[25]     Accordingly, in light of the substantial unexplained delay, the prejudice to the respondents and the very low prospects of success, it is not in the interests of justice to grant special leave for Mr Williams to bring his appeal.  The application for leave to adduce evidence relates to a possible separate proceeding which also appears to have no merit.   It is also not fair to divest any appeal right (whether the right as

described in the disclaimer or as described in the vesting order application)18  given

the substantial period of time the dispute has spanned, the costs already incurred by the respondents, and the very low prospects of a successful appeal.

[26]     In reaching these conclusions I acknowledge that Mr Williams continues, it appears, to feel deeply aggrieved by the conduct of his accountants in handling the sale of his business in 2004.   It is likely he also feels deeply aggrieved that the respondents proceeded to bankrupt him for non-payment of the costs order from the unsuccessful District Court litigation arising out of that sale.  He now believes the respondents acted fraudulently in the conduct of that litigation and so he wishes to continue to bring more litigation against them.

[27]     I also note, however, that as at 19 December 2007 Mr Williams was aware of the facts (and in particular the second valuation) which founded his claim against the respondents.  On that day he was prepared to put the matters behind him and settle his claim (albeit that he believes the settlement was not concluded by the respondents).  Later Mr Williams no longer wished to settle the matter in the way he was previously willing, and believed he was not bound to do so.  The District Court found against him.   Mr Williams does not accept that decision but the time for further challenges has long since passed.  Over 11 years have passed since the sale of the business.  Eight years have passed since a settlement was reached.  Over three years have passed since the District Court decision he wishes to appeal.   The respondents are now entitled to finality.

Result

[28]     The applications for a vesting order, for leave to adduce evidence, and for special leave to extend the time to bring an appeal are dismissed.   Costs would

ordinarily follow the event.   In the interests of bringing this matter to an end, the respondents may wish not to seek costs.  That is a matter for them to decide.   If, however, costs are sought and an agreement as to amount is not able to be reached, the parties may submit brief memoranda (no more than three pages) within two weeks of this decision.

Mallon J