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Court of Appeal of New Zealand |
Last Updated: 14 October 2014
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IN THE COURT OF APPEAL OF NEW ZEALAND
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BETWEEN
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Appellant |
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AND
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Respondents |
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Hearing: |
8 September 2014 |
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Court: |
French, Winkelmann and Asher JJ |
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Counsel: |
Appellant in person
G K Riach for Respondents |
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Judgment: |
JUDGMENT OF THE COURT
A The application to adduce further evidence is dismissed.
B The appeal is dismissed.
___________________________________________________________________
REASONS OF THE COURT
(Given by Asher J)
Introduction
[1] On 16 October 2012 the appellant, Patrick Dean Norris, was the liquidator of four companies: Frost Steel Compactors Ltd, Murchison Buses Ltd, Trafalgar Top Ltd and Astra Enterprises Ltd (the four companies). At 3.58 pm that day a decision of Judge Behrens QC was delivered convicting Mr Norris of theft by a person in a special relationship under s 220 of the Crimes Act 1961.[1] The offending related to the sum of $80,960.51 that Mr Norris had received as the liquidator of Astra Enterprises Ltd. The Judge held that he had fraudulently failed to account for that money.
[2] The fact of that conviction meant Mr Norris could no longer act as liquidator by operation of law.[2] The Official Assignee proceeded on the basis that there was a vacancy in the office and on 23 October 2012 exercised his power under s 283(6) of the Companies Act 1993 to appoint two insolvency practitioners as liquidators, the respondents, Mr Bruce Gemmell and Mr Rhys Cain. He did so subject to an order being made that they were not disqualified. Such an order was made on 25 October 2012.
[3] Four days later, Messrs Gemmell and Cain applied on a without notice basis for a search order against Mr Norris and a company he controlled, Norris Management Services Ltd. The next day, on 30 October 2012, Kós J made the order authorising entry on two premises to secure and preserve evidence relating to the liquidations of the four companies. The search order was executed and documents taken.
[4] Mr Norris then filed an application to set aside the search order and for an order that the material seized be returned. In a judgment delivered on 3 December 2012, Simon France J dismissed the application.[3] Mr Norris appeals that decision.
[5] It is not necessary to traverse the background facts in detail. They are set out in the decision of Simon France J and other decisions.[4] Mr Norris argued in the High Court that the search order should never have been granted and should be quashed. He submitted that the respondents had not been validly appointed as liquidators, and that the liquidator at the time the search order was made was in fact Jackson Alexander Churchill, an associate of Mr Norris, whom Mr Norris had appointed as liquidator of the companies prior to his conviction. Mr Norris submitted that he made that appointment whilst he still had power to do so. There was accordingly no vacancy for the Official Assignee to fill. Messrs Gemmell and Cain therefore had no standing to apply for or obtain the search order. He also argued that the orders were obtained in bad faith and that there was material nondisclosure.
Search orders
[6] Search orders that authorise entry onto the premises of another and the search, seizure and inspection of documents are highly intrusive. The purpose of such orders is to preserve and protect evidence relevant to an issue in a proceeding or anticipated proceeding. Applications may be made on a without notice basis because if the requirements for granting an order are met, this will indicate a real possibility that the respondent, if given notice of an application, might destroy the material or cause it to be unavailable for the proceeding.
[7] The requirements for grant of a search order are set out in r 33.3 of the High Court Rules. The applicant must have a “strong prima facie case on an accrued cause of action”, the potential or actual loss or damage to the applicant if the search order is not made must be serious, there must be sufficient evidence to show that the respondent possesses relevant evidentiary material, and there must be a real possibility that the respondent might destroy such material or cause it to be unavailable for use in evidence. These requirements are similar (although not identical) to the requirements set out originally in Anton Piller KG v Manufacturing Processes Ltd.[5]
[8] In addition to the exacting requirements that must be met for an order to be made, there are various other safeguards in the Rules, including the imposition of a duty of disclosure on the applicant,[6] the obligation for the applicant to give appropriate undertakings,[7] the appointment of independent solicitors to supervise the execution of the search order,[8] and the requirement for the order to fix a date on which the court will consider a report on the search from the independent solicitors.[9]
[9] There is no express provision in the High Court Rules for a party to apply to set aside or discharge a search order. Given the nature of the search order process, generally a search order will have been executed by entry onto the premises and the securing and preserving of evidence before there is an opportunity for a respondent to apply to set aside the order. The observations of Donaldson MR in WEA Records Ltd v Visions Channel 4 Ltd in relation to later applications to dismiss a search order have been often quoted in New Zealand courts:[10]
In the instant case the Anton Piller order is spent in the sense that it has been executed. However the defendants seek to go back to the beginning of the action saying that regardless of whether the fruits of the order are such as to show that it was abundantly justified, the judge had insufficient material to justify his action at the ex parte stage. They therefore invite us to set the ex parte order aside and to order the return of the affidavits to the two personal defendants and the seized material to the defendants' solicitors.
I regard this as wholly absurd. The courts are concerned with the administration of justice, not with playing a game of snakes and ladders. If it were now clear that the defendants had suffered any injustice by the making of the order, taking account of all relevant evidence including the affidavits of the personal defendants and the fruits of the search, the defendants would have their remedy in the counter undertaking as to damages. But this is a matter to be investigated by the High Court judge who is seized of the matter, and only when he has reached a decision can this court be concerned.
[10] In exceptional circumstances intervention may be warranted. The position in New Zealand was concisely stated by Henry J in D B Baverstock Ltd v Haycock:[11]
In my view the principle to be applied in respect of an application to discharge an executed Anton Piller order is that it should only be entertained prior to trial if the order has been obtained mala fide, or on material nondisclosure, or if there are other special circumstances which clearly demonstrate the need for immediate relief.
[11] We are informed that in this case although the seizure has taken place and the documents are held, they have not yet been inspected because of ongoing procedural issues between the parties that are still unresolved.[12]
The contest as to who the liquidators are
[12] If Messrs Gemmell and Cain were not the liquidators of the four companies then they did not have standing to obtain the search order and the order was wrongly obtained. This would be a special circumstance that would demonstrate the need for immediate relief. There would have been no strong prima facie case, indeed no case at all, as required by r 33.3(a).
[13] Following the delivery of Judge Behrens’ decision at 3.58 pm on 16 October 2012 Mr Norris could not act as liquidator of the companies due to s 280(1)(k) of the Companies Act, which provides:[13]
280 Qualifications of liquidators
(1) Unless the Court orders otherwise, none of the following persons may be appointed or act as a liquidator of a company:
...
(k) a person who is prohibited from being a director or promoter of or being concerned or taking part in the management of a company under section 382 or section 383 or section 385:
[14] As a result of Judge Behrens’ judgment, Mr Norris became a person prohibited from managing companies under s 382(1)(b) of the Companies Act because he had been convicted of a crime involving dishonesty as defined in s 2(1) of the Crimes Act.[14] He was prohibited from that time from being a liquidator by virtue of s 280(1)(k).
[15] Section 283(1) provides:
283 Vacancies in office of liquidator
(1) The office of liquidator becomes vacant if the person holding office resigns, dies, or becomes disqualified under section 280.
The Official Assignee proceeded on the basis that from the moment of conviction there was no one acting as liquidator.
[16] Section 283(6) provides:
283 Vacancies in office of liquidator
...
(6) If, as the result of the vacation of office by a liquidator, other than an Official Assignee, no person is acting as liquidator, the Official Assignee for New Zealand may appoint a person to act as liquidator until a successor is appointed under this section.
[17] On 23 October 2012 the Official Assignee, Mr Neville Harris, appointed Messrs Gemmell and Cain as liquidators subject to an order being made that they were not disqualified. Such an order was made on 25 October 2012. Four days later, on 29 October 2012, they applied for the search order.
[18] Mr Norris does not contest this sequence of events. He relies on s 283(2) of the Companies Act:
283 Vacancies in office of liquidator
...
(2) A person, other than an Official Assignee, may resign from the office of liquidator by appointing another such person as his or her successor and sending or delivering notice in writing of the appointment of his or her successor to the Registrar for registration.
He claims that he had, prior to the appointment of the respondents, validly appointed a different liquidator. He asserts that on the morning of 16 October 2012, prior to the Official Assignee’s appointment of Messrs Gemmell and Cain as liquidators and prior to the entry of the conviction, he appointed Mr Churchill of Norris Management Services Ltd, a company he controlled, as liquidator in his stead. He relies on a letter signed by him in which he purports to resign and make the appointment, a consent to being appointed as liquidator signed by Mr Churchill of the same date, and a notice to the Registrar of Companies (the Registrar) of the appointment dated 18 October 2012.
[19] The evidence is that the completed forms, being the resignation, appointment and consent to appointment, were not provided to the Registrar until 18 October 2012. Despite this, Mr Norris submits there was no vacancy, so the Official Assignee could not have validly appointed Messrs Gemmell and Cain. Mr Norris claims that the actions on 16 October 2012 prior to the issue of the judgment were sufficient to appoint Mr Churchill.
[20] Simon France J concluded that there had been no valid appointment of a new liquidator by Mr Norris until after the conviction was entered on 16 October 2012.[15] He considered that under s 283(2) the appointment of a new liquidator requires the resignation of the existing liquidator, the appointment of another person and the sending or delivery of written notice of the appointment of the successor to the Registrar for registration.[16] Since the notice of appointment was only given by Mr Norris to the Registrar on 18 October 2012, after the convictions, when he had ceased to act as liquidator, there was no valid appointment of Mr Churchill.[17] The Judge also held that the saving provision of s 281 of the Companies Act could not assist in the circumstances, and that there was no material non-disclosure. Mr Norris challenges these findings.
Was Mr Churchill appointed liquidator?
[21] If Mr Churchill was validly appointed as liquidator prior to the judgment of Judge Behrens then there was no vacancy under s 283, and Messrs Gemmell and Cain were not validly appointed as liquidators by the Official Assignee.
[22] In considering the circumstances of a liquidator appointing a replacement, it is necessary to look first at the words of s 283(2).[18] On a natural reading there are two requirements for a resignation: first, an appointment of another person as that liquidator’s successor, and second, the sending or delivery of written notice of the appointment to the Registrar. The word used is “and” in relation to the sending or delivery of the notice to the Registrar. The plain words therefore appear to require a two-stage process, where each stage must take place before the vacancy is filled.
[23] This wording can be compared with other methods of approving a liquidator that do not require the sending or delivery of notice to the Registrar, such as the appointment of another Official Assignee under s 283(3), court-appointed liquidators under s 283(4) and indeed, as later happened here, an appointment by the Official Assignee for a person to act as liquidator under s 283(6). In respect of these methods of appointment there is no requirement of notice to the Registrar.
[24] Another contrasting section is s 283(8), which provides that a liquidator appointed by the court under subs (7) must, within 10 working days of being appointed or being notified of appointment, deliver a notice to the Registrar for registration. As Simon France J noted, in s 283(8) “lodgement does not control when the appointment takes effect”.[19] In comparison to s 283(2), the words in s 283(8) state plainly that the notification is “of” the liquidator’s appointment. It is an act that follows such an appointment, which must be done within 10 days.
[25] An interpretation that requires both requirements in s 283(2) to be fulfilled before there is an appointment is supported by consideration of the practical consequences of there being able to be an effective appointment without notice to the Registrar. If that were the case there could be private appointments and the public could be left in the dark indefinitely because there would be no record of appointment accessible by the public. Given that s 283(2) provides for a private appointment, it would be expected that the appointment could not be valid until notice of it was sent to the holder of the public register.
[26] We conclude that under s 283(2) the process of resignation and appointment requires appointment and the sending or delivery of notice. Each act under s 283(2) must be carried out by the “person” who was liquidator. If the “person” who wishes to resign is not currently the liquidator, there is no resignation and no new appointment. If the person ceases to be the liquidator before the notice is sent or delivered, no valid appointment can occur.
[27] In one respect we respectfully disagree with Simon France J. He considered that “service” on the Registrar was a requirement.[20] The words in s 283(2) are not of service, but “sending or delivering”. The critical time is when the liquidator sends or delivers the notice, not when it is received by the Registrar. Mr Norris deposed that he faxed the notification to the Registrar at 12.33 pm on 18 October 2012. By then he had ceased to be a liquidator and could not complete the appointment.
Section 281 of the Companies Act
[28] Mr Norris submitted further that even if his appointment of Mr Churchill had been ineffective, s 281 made the appointment valid. Section 281 provides:
281 Validity of acts of liquidators
The acts of a person as a liquidator are valid even though that person is not qualified to act as a liquidator.
[29] The effect of Mr Norris’ submission is that any action by a person “as a liquidator” is valid, even if that person is not a liquidator, providing he or she purports to be a liquidator. That cannot have been the intention of Parliament. From the moment of conviction Mr Norris could not act as liquidator. For him to do so would be an offence with a fine of up to $10,000 upon conviction.[21] Like Simon France J, we do not think that s 281 can be used by a party of no apparent standing to give effect to that person’s own actions or wishes. It would provide a licence to any person making an unlawful claim to be a liquidator to act as liquidator in the knowledge that action would be treated as valid by the court despite s 280(1) expressly prohibiting that person from acting as a liquidator. It would enable a party, as is proposed by Mr Norris, to defeat the structures set in place to disqualify liquidators who are convicted of serious crimes of dishonesty.
[30] In our view, s 281 was enacted for the purpose of protecting third parties who have acted in reliance on the actions of a person who is purporting to be a liquidator. Similarly, reg 36 of the Liquidation Regulations 1994 provides that no defect or irregularity in the appointment of a liquidator shall invalidate any act done by him or her in good faith.
[31] Giving s 281 a purposive interpretation, it does not apply to a person who has ceased to be liquidator purporting to act to give effect to his or her own wishes. This applies to both acts of appointment in s 283(2), including the provision of notification. In this case the provision of notification was after the vacancy arose as a matter of law, and s 281 cannot validate it. The office of liquidator became vacant under s 283(1), and Mr Norris’ subsequent acts could have no effect. It was not a question of Mr Norris only being disqualified. The office by operation of s 283(1) was vacant.
[32] We conclude that there was a vacancy when Messrs Gemmell and Cain were appointed, and that Simon France J was right to dismiss this aspect of the application.
Non-disclosure
[33] Rule 33.5(4) of the High Court Rules provides:
33.5 Applicant’s undertaking and duty
...
(4) An applicant for a search order without notice to a respondent must fully and frankly disclose to the court all material facts, including—
(a) any possible defences known to the applicant; and
(b) information casting doubt on the applicant's ability to discharge the obligation created by the undertaking as to damages.
[34] Prior to the issue of these proceedings and Mr Norris’ conviction, the Registrar had undertaken an investigation of Mr Norris under s 365 of the Companies Act. Following this investigation, the Official Assignee issued proceedings alleging various failures by Mr Norris to comply with his duties as liquidator in relation to the four companies. The statement of claim in those proceedings was annexed to Mr Cain’s affidavit in support of the search order.
[35] In those proceedings, issues arose relating to general discovery, a strike-out application, and an application to restrain publication of any strike-out judgment. Mr Norris had failed on these points before an Associate Judge,[22] but then had been largely successful in an application to review those judgments.[23] Mallon J in Official Assignee v Norris granted him relief including an order that the proceeding was stayed until a notice under s 286(2) of the Companies Act had been provided and an amended pleading had been filed subsequent to that notice.[24] In the memorandum in support of the application for the search order, counsel had disclosed the fact of that stay. However, the judgment of Mallon J was not exhibited or in any particular way brought to the attention of the Court.
[36] Simon France J saw some merit in this non-disclosure point, as the decision of Mallon J arguably undermined the impact of the reference to the Official Assignee’s proceedings. However, in our view the failure to exhibit the judgment was of no moment. Given that the fact of the stay had been disclosed to the Judge, the provision of the actual judgment would have added little. It did not go to the merits of the claim, but rather technical and interlocutory issues. There was nothing in the judgment that undermined the basis for the application for the search order.
[37] The fact was that in relation to one of the four companies in respect of which Mr Norris was a liquidator, he had been found guilty of criminal fraud. It was seriously arguable that he had acted unlawfully as liquidator in respect of all four companies, and the weight of the allegations was supported by proof of misconduct being established to the criminal standard. The provision to the Court of an interlocutory judgment on issues not related to the substantive problems arising in the liquidations would have made no difference. The case for misconduct by Mr Norris was strong.
[38] We do not therefore consider there was any material non-disclosure.
Other issues
[39] Mr Norris raised a number of other detailed issues of fact, referring to matters that could have shown that the appointment of Messrs Gemmell and Cain was flawed. However, none of them would in our view have been of significance in weighing the merits of the application. He argued that there should have been Court approval for the liquidators’ appointment before the application. However, s 283(6) of the Companies Act contains no such requirement. There had been a potential conflict in relation to the liquidators, but a direction was obtained from the Court that they were not disqualified.
[40] Also, Mr Norris’ detailed arguments that Mr Churchill as a validly appointed liquidator could not be removed by the actions of the Official Assignee in appointing another liquidator must fail, given our conclusion that Mr Churchill was never validly appointed.
The application for leave to adduce further evidence
[41] Mr Norris sought leave to adduce further evidence in an affidavit prepared and executed on 30 July 2014. The approach to the admission of new evidence in a civil appeal under r 45 of the Court of Appeal (Civil) Rules 2005 is now well settled. The evidence must be fresh, credible and cogent.[25]
[42] The material Mr Norris seeks to adduce is not cogent. He seeks to update the Court on what has happened to him since the search order was made. This is irrelevant. He refers to Mallon J’s decision and email communications between the Registrar of Companies and others that he asserts are relevant. However, these were not communications involving Messrs Gemmell and Cain, and there is nothing to indicate they knew of them. They were not relevant to the issues that arose in relation to the search order, which turned on the broader picture. After all, the liquidators started from the very strong position that Mr Norris had just been convicted of fraud in relation to one of the four companies of which he was liquidator.
[43] Mr Norris’ claim that there was non-disclosure of lost or stolen documents and files that he now wishes to produce must fail. He is seeking to go back to the beginning and re-argue the search order. He also argued that procedural events after the search order was made were relevant and should be taken into account. However, given the high threshold that must be crossed in relation to setting aside search orders, and the limited grounds available, these are irrelevant. So are Mr Norris’ claims that, since their appointment as liquidators, Messrs Gemmell and Cain have failed to carry out their duties properly.
[44] It is significant that Mr Norris made a similar application to adduce new evidence when he appealed his conviction to this Court in Norris v R.[26] He sought to rely on statements of the same people (Messrs Raharuhi and Rowland). He sought to introduce the same email trails involving Messrs Ramsay, McPherson, Arnold and Webber and Ms Ruth. The Court considered his application for the admission of new evidence, and went through the documents in question in detail.[27] It concluded that none of the evidence might reasonably have made a difference to the verdict. Like that Court, we cannot see how any of the similar material that Mr Norris now seeks to adduce would have made any difference to the decision to grant a search order.
[45] A defendant has various remedies available in relation to a search order, given the presence of an applicant’s undertaking as to damages, and the defendant’s ability to apply to vary or limit the order. But a party cannot on appeal seek to adduce new evidence and re-argue the search order without crossing the high threshold set out in D B Baverstock Ltd v Haycock.[28] Mr Norris has not crossed that threshold.
Conclusion
[46] Thus we conclude that Mr Norris’ points on appeal fail and that the appeal must be dismissed. We also do not uphold his related challenge to Simon France J’s order of costs. Given Mr Norris’ failure to obtain an order dismissing the search order, it was appropriate to order costs against him as the unsuccessful party.
Result
[47] The application to adduce further evidence is dismissed.
[48] The appeal is dismissed.
Costs
[49] The appellant must pay the respondents costs for a standard appeal on a band B basis and usual disbursements.
Solicitors:
Harmans
Lawyers, Christchurch for Respondents
[1] R v Norris DC Nelson CRI-2011-042-1272, 16 October 2012.
[2] Companies Act 1993, ss 280(1)(k), 382(1)(b) and 283(1).
[3] Gemmell v Norris [2012] NZHC 3339.
[4] Gemmell v Norris, above n 3; R v Norris, above n 1; Official Assignee v Norris [2012] NZHC 961, [2012] NZCCLR 10; and Norris v R [2013] NZCA 526, [2014] 2 NZLR 391.
[5] Anton Piller KG v Manufacturing Processes Ltd [1976] Ch 55 (CA) at 63.
[6] High Court Rules, r 33.5(4).
[7] Rule 33.5(1)–(3).
[8] Rule 33.7(1)–(2).
[9] Rule 33.7(4).
[10] WEA Records Ltd v Visions Channel 4 Ltd [1983] 1 WLR 721 (CA) at 727–728. Cited in, for example, Fujitsu General New Zealand Ltd v Melco New Zealand Ltd [2002] NZCA 91; (2002) 16 PRNZ 395 (CA) at [8].
[11] D B Baverstock Ltd v Haycock [1986] 1 NZLR 342 (HC) at 345 quoted in Fujitsu General New Zealand Ltd v Melco New Zealand Ltd, above n 10, at [7].
[12] There has been a recent judgment on 20 May 2014 making directions: Gemmell v Norris [2014] NZHC 1071.
[13] Emphasis added.
[14] See R v Bradley [1961] 1 WLR 398 (Crim App) at 400 cited in Anderson v District Registrar of Companies HC Auckland AP108/94, 21 November 1994.
[15] Gemmell v Norris, above n 3.
[16] At [21]–[22].
[17] At [28].
[18] Set out at [18] above.
[19] At [23].
[20] At [24].
[21] Companies Act, ss 280(3) and 373(2)(n).
[22] Official Assignee v Norris HC Nelson CIV-2011-442-80, 3 August 2011; Official Assignee v Norris HC Nelson CIV-2011-442-80, 10 February 2012; and Official Assignee v Norris HC Nelson CIV-2011-442-80, 24 February 2012.
[23] Official Assignee v Norris, above n 4.
[24] Official Assignee v Norris, above n 4.
[25] Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at 192; Paper Reclaim Ltd v Aotearoa International Ltd [2006] NZSC 59, [2007] 2 NZLR 1 at [6]; and Erceg v Balenia [2008] NZCA 535 at [15].
[26] Norris v R, above n 4.
[27] At [71]–[89].
[28] D B Baverstock Ltd v Haycock, above n 11.
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