Reynolds v Glaister Ennor [2011] NZCA 641 (13 December 2011)

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Reynolds v Glaister Ennor [2011] NZCA 641 (13 December 2011)

Last Updated: 22 December 2011

IN THE COURT OF APPEAL OF NEW ZEALAND

CA524/2011 [2011] NZCA 641

BETWEEN GRANT BRUCE REYNOLDS Appellant

AND GLAISTER ENNOR Respondent

Hearing: 29 November 2011

Court: Ellen France, Harrison and Wild JJ

Counsel: S W Greer and B Pamatatau for Appellant H M McKee for Respondent

Judgment: 13 December 2011 at 10 a.m.

JUDGMENT OF THE COURT

1. The application for leave to admit the appellant’s affidavit of 28 September 2011 is dismissed.
2. The appellant must pay the respondent costs as for a standard application for leave to appeal on a band A basis and usual disbursements.
   

REASONS OF THE COURT
(Given by Ellen France J)

Introduction

[1] On 1 August 2011 Associate Judge Christiansen dismissed an application by the appellant, Grant Reynolds, for orders that transactions be set aside under s 292 of the Companies Act 1993 and for payment under s 295(a) of the Act.[1] Mr Reynolds has appealed to this Court against that decision. We deal now with his application under r 45 of the Court of Appeal (Civil) Rules 2005 for leave to file further evidence on the appeal.

Background

[2] The relevant events date back to 2008 and 2009. The respondent law firm, Glaister Ennor, had rendered invoices to two companies for work done for them. The two companies are Chaffers Properties Ltd (Chaffers) and Warkworth Grange Property Investments Ltd (Warkworth) (together called the Companies). By late November 2009, the respondent’s invoices remained unpaid. The respondent filed liquidation proceedings.
[3] The next event occurred at the end of February 2010. Peter Chamberlain, then the director of a company called Pigeon Bay Barrier Ltd (the Trustee), authorised the respondent to act as solicitor in relation to the sale of a property. The written authorisation also allowed the respondent to retain from the net proceeds of sale (after repayment of monies owing to the bank) sufficient funds to cover the respondent’s fees in relation to the sale and also to retain and pay the outstanding fees owed to the respondent by the Companies. The property in issue was owned by two trusts, the Pigeon Bay Trust and the Barrier Trust. Pigeon Bay Barrier Ltd is the trustee of these two trusts. Robert Vincent, the director of both Chaffers and Warkworth, is a beneficiary of the Pigeon Bay Trust.
[4] The settlement funds from the sale of the trusts’ property were received on 9 March 2010. From there, the outstanding invoices of the respondent were paid. Payments were made by journal entries through the respondent’s trust account. The funds were transferred from the accounts of the Pigeon Bay Trust and the Barrier Trust to the accounts of the Companies. The journal entries show a total of $27,817.16 transferred on 11 and 25 March 2010 to Warkworth to settle the invoices due by it to the respondent.
[5] On 10 March 2010, the respondent withdrew both liquidation applications and in each case supporting creditors were substituted as plaintiffs.
[6] The next step was the appointment, on 1 September 2010, of Mr Reynolds as liquidator of the Companies. The next month, he filed notices to set aside payments totalling $53,976.98 (the respondent’s fees), as voidable transactions. Mr Reynolds took the position that the payments in question were “transactions by a company” because the deduction of the outstanding fees from the proceeds of sale were loan advances by the Trustee to the Companies. The payments from the Companies to the respondent were therefore voidable under s 292 of the Act. The application was opposed by the respondent who denied that the payments were made by the Companies.
[7] Associate Judge Christiansen held that there was no evidence from which to conclude that the payment of the respondent’s invoices was made on behalf of the Companies. The Associate Judge appears to have accepted Mr Chamberlain’s evidence that the payments were a gift from Mr Vincent. Associate Judge Christiansen noted that the authority signed by Mr Chamberlain as the director of the Trustee did not refer to the Companies or to any deductions from the sale proceeds being loan advances to the Companies. Rather, the document simply recorded the arrangement between the Trustee and the respondent. The application to set aside was dismissed.

The new evidence

[8] The evidence sought to be adduced is an affidavit by the appellant exhibiting three documents. These documents include a GST return and accompanying GST worksheet by Warkworth for the period 1 February to 31 March 2010. On their face, the return and worksheet show that Warkworth claimed GST input credits in respect of $27,616.97 in legal fees paid to the respondent.

Should leave be granted to adduce the affidavit?

[9] The appellant says this evidence is fresh. Mr Greer in support makes two points. First, the notice of opposition filed in relation to Mr Reynolds’ application in the High Court did not suggest that the payment was a gift. Secondly, Mr Reynolds requested documents including GST returns prior to the bringing of the proceedings but Mr Vincent’s response was to prevaricate.
[10] Even if not fresh, Mr Greer submits that the affidavit is compelling evidence that Warkworth (and by association Chaffers) could not have regarded the payments to the respondent as a gift from Mr Vincent to the company. That is because Warkworth was not entitled to claim a GST input credit for payments made to the respondent unless it saw those payments as payments made on its behalf.
[11] The respondent opposes the application on the basis the new evidence is neither fresh nor cogent.

Discussion

[12] We have concluded that the new evidence does not meet the threshold for granting leave under r 45 of the Court of Appeal (Civil) Rules. This Court described the relevant principles in Erceg v Balenia as follows:[2]

... The Supreme Court has confirmed that the well understood and firmly established principles developed under previous rules remain: Paper Reclaim Ltd v Aotearoa International Ltd [2007] 2 NZLR 1. Those requirements are that the evidence be fresh, credible and cogent. It will not be regarded as fresh if it could, with reasonable diligence, have been produced at the trial: Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1988] 3 NZLR 190 at 192.

[13] The evidence is not fresh. The GST return is dated 6 May 2010 so it was in existence well before the proceedings were issued in early 2011.
[14] Mr Reynolds essentially accepts that he could have obtained the evidence before the proceeding. We are prepared to accept his evidence that he made several requests to Mr Vincent prior to the hearing for the Companies’ financial records, including their GST records. He explains that he did not persist with these requests because he did not realise the relevance of the GST records, in particular because he had not anticipated that his application would be opposed on the ground that the payments were a gift from Mr Vincent. That ground of opposition was not in the respondent’s notice, but was introduced at the hearing. Mr Reynolds deposes:

After the Judgment was issued, having realised the potential significance of the missing GST records, I made further requests for the Warkworth and Chaffers GST returns from Mr & Mrs Vincent. Mrs Vincent handled the day to day financial affairs for both Warkworth and Chaffers including the preparation and filing of GST returns for the periods in question.

[15] It is beside the point that proper notice may not have been given of the “gift” ground of opposition. Throughout, the central issue was whether the payments were made on behalf of the Companies. If the evidence now sought to be adduced is relevant, its relevance should have been apparent to Mr Reynolds from the outset. If his requests for the Companies’ GST returns were not met, he should have exercised his liquidator’s powers under s 261(1) and (3) of the Act to require Mr Vincent to provide the returns to him.
[16] Neither has the cogency of the evidence been established. The GST return is signed “P A Vincent”. It can perhaps be inferred from Mr Reynolds’ affidavit that Mr Reynolds thinks this is the signature of Mrs Patricia Vincent, the wife of Mr Robert Vincent. But that is not established on the evidence now sought to be adduced. Nor does that evidence establish whether or not Warkworth filed this GST return or provide any explanation for the basis on which Warkworth claimed the GST input credit for the payments.
[17] A related concern, if this evidence were admitted, is that the respondent would have to have the opportunity to file evidence in response, for example, as to whether it was Mrs Vincent who signed the form. There are difficulties with this Court on appeal making factual findings on such matters without the benefit of findings on those issues in the Court below.
[18] For these reasons, we consider the new evidence is neither fresh nor sufficiently cogent. The application to adduce the appellant’s affidavit is dismissed.

Costs

[19] The appellant asked that costs be reserved pending the appeal. No reason is advanced as to why we should adopt that course. Absent any good reason, costs should follow the event. The appellant is ordered to pay the respondent costs as for a standard application for leave to appeal on a band A basis and usual disbursements.

Solicitors:
Malcolm Whitlock, Auckland, for Appellant
Glaister Ennor, Auckland, for Respondent

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[1] Reynolds v Glaister Ennor HC Auckland CIV-2011-404-1380, 1 August 2011.
[2] Erceg v Balenia [2008] NZCA 535 at [15].