Pearson v Official Assignee [2022] NZCA 158 (4 May 2022)

Last Updated: 10 May 2022

IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA

CA511/2021 [2022] NZCA 158

	BETWEEN	ANDREA REBECCA PEARSON Appellant
	AND	THE OFFICIAL ASSIGNEE Respondent

Court:	Courtney and Dobson JJ
Counsel:	R Marsich for Appellant GAD Neil and S P Farnell for Respondent
Judgment: (On the papers)	4 May 2022 at 2.30 pm

JUDGMENT OF THE COURT

The application for strike out is granted.
____________________________________________________________________

REASONS OF THE COURT

(Given by Dobson J)

• [1] The Official Assignee, who is the respondent in this appeal, has applied for it to be struck out under r 44A of the Court of Appeal (Civil) Rules 2005. The appeal has been brought by the appellant, Ms Pearson, from a decision of the High Court that confirmed the jurisdiction of the District Court to issue a warrant for the recovery of land in order to enforce a possession order,^[1] in circumstances where the value of the land exceeds $500,000.^[2] The strike out is sought on the basis that the appeal is frivolous, vexatious, or otherwise an abuse of the process of the Court.^[3]

The background

• [2] Ms Pearson was adjudicated bankrupt in November 2016. She owned a residential property in Auckland that vested in the Official Assignee (the Assignee). The Assignee gave notice to Ms Pearson in March 2018 to vacate the property, but she refused to comply then and has consistently maintained her refusal since that time.
• [3] The Assignee obtained an order from the District Court under s 152(2) of the Insolvency Act 2006 granting the Assignee possession of the property.^[4] An agreement was then reached that the Assignee would defer enforcing the District Court order, in reliance on an undertaking from Ms Pearson that she would deliver up vacant possession of the property by 4 September 2019. The undertaking completed by Ms Pearson on 30 May 2019 included the following:

... if I fail to deliver up vacant possession of the Property in accordance with my undertaking at 1 above, I will not bring any proceeding, application, complaint or take any step or initiate any other process for the purpose of (or that may have the effect of) delaying, hindering or abrogating the right of the Official Assignee to possession of the Property pursuant to the possession order of the District Court ...

• [4] In breach of the agreement, Ms Pearson continued in residence at the property after the deadline of 4 September 2019. The Assignee therefore applied to the District Court for a warrant to enforce recovery of the land. At the hearing of that application on 15 October 2020, the question arose as to whether the District Court had jurisdiction to grant an application for a warrant when the value of the land exceeded $500,000. Judge Sinclair stated a case for the High Court to answer that jurisdictional question.
• [5] On 26 July 2021 Harland J confirmed the jurisdiction of the District Court to enforce the possession order by the issue of a warrant.^[5] Ms Pearson did not participate in the argument on the case stated and the Court appointed counsel to assist it. Ms Pearson has now commenced the present appeal against that High Court decision, seeking to argue that the jurisdictional limit in s 79(1) of the District Court Act 2016 prevents the District Court from issuing a warrant to enforce a judgment in respect of an order for possession of a property that is valued at more than $500,000.
• [6] The Assignee seeks the strike out on four grounds. First, that the commencement of the appeal is in breach of Ms Pearson’s undertaking, which renders it an abuse of process. Secondly, the Assignee contends that Ms Pearson has lost her right to pursue an appeal as a result of her conduct. Authorities are relied on for the proposition that relevant disentitling conduct can be held to deprive a litigant of what would otherwise be a right to pursue an appeal.^[6] A third ground is that Ms Pearson’s conduct gives rise to an estoppel precluding her pursuit of the appeal. It is argued that Ms Pearson has encouraged a belief on the part of the Assignee that she would not bring further proceedings and that she would leave the property within the agreed time limit. The Assignee’s reasonable reliance on those representations is said to have caused detriment, such that it would now be unconscionable for Ms Pearson to depart from the agreement.
• [7] Separately, the Assignee submits a fourth ground: that pursuit of the appeal and continued refusal to provide possession of the property constitute serious failures by Ms Pearson to comply with her duties as a bankrupt,^[7] to the extent that the present appeal is an abuse of process.
• [8] Mr Marsich’s response on Ms Pearson’s behalf denies that commencement of the appeal is in breach of Ms Pearson’s undertaking, based on his characterisation of the appeal as a continuation of the District Court Judge’s initiative in seeking a case stated. Mr Marsich submits that the matter of the District Court’s jurisdiction to issue a warrant is by no means clear and that the High Court reasoning confirming that jurisdiction is vulnerable to challenge.
• [9] Mr Marsich’s submissions opposing the application included the contention that the District Court did not have jurisdiction to issue the possession order in the first place, and that accordingly the Assignee had no right to possession in reliance on it. In a later reply submission, he disavowed that argument, stating that the possession order itself was not challenged. That acknowledgement is inevitable, given that Ms Pearson abandoned her appeal from the original District Court decision granting a possession order.
• [10] Further, Mr Marsich submits that Ms Pearson has serious medical conditions, is in her early seventies and is without any reasonable alternative accommodation. Thus, the personal imperative for Ms Pearson to have to stay in the property absolves her from criticism for remaining and any other conduct that might otherwise be treated as a breach of her prior undertaking.

Analysis

• [11] Commencement of the appeal is clearly in breach of Ms Pearson’s undertaking. It is unnecessary for the Assignee to make out motive, given that the terms of the undertaking extend to taking steps that have the effect of delaying the Assignee’s dealing with the property. The Assignee has been entitled to possession since Ms Pearson was declared bankrupt nearly six years ago, and the protracted delays are prejudicial to the creditors who have proved in the bankruptcy.
• [12] Ms Pearson cannot avoid responsibility for commencement of the appeal by treating it as a mere continuation of a process begun by the District Court Judge’s initiative in stating a case for the High Court. That court sought and received an answer from the High Court, and would act on it but for the present appeal.
• [13] In some circumstances a promise not to pursue an appeal would not be sufficient to have an appeal brought contrary to such a promise struck out. However, in the present circumstances it is an abuse of this Court’s process for the appeal to remain on foot. The Supreme Court has confirmed the courts’ independent duty to prevent abuse, which is not limited to fixed categories.^[8]
• [14] There is also a relevant concern that the appeal constitutes a collateral attack on the original District Court decision granting the Assignee a possession order in respect of the property. Submissions for Ms Pearson accept that the Assignee is entitled to possession of the property. Ultimately, they also do not challenge the District Court’s jurisdiction to issue a possession order. Notwithstanding that concession, the apparently intended effect of challenging the High Court decision would be to so delay the process as to deprive the Assignee of the benefit of the original District Court judgment, in circumstances where further resort to the courts is only required because of Ms Pearson’s refusal to comply with the possession order. This consideration adds weight to the justification for a strike out.
• [15] We accept that if there was merit evident in the grounds for the current appeal, then that could justify what is otherwise an abuse of process. The issue on the appeal is the extent of one aspect of the jurisdiction of the District Court, and if there was a realistic prospect that the High Court had wrongly confirmed the existence of that jurisdiction, then this Court ought to address the issue. However, we are satisfied that is not the case.
• [16] The Assignee’s original application for a possession order in respect of Ms Pearson’s property depended on s 152(2) of the Insolvency Act, which provides that the Assignee may apply to the District Court for an order for possession of property that has vested in the Assignee under a bankruptcy. That provision is without limit as to the value of any property involved. Section 152 operates as an exception to the District Court’s jurisdictional limit in s 79 of the District Court Act, which otherwise restricts actions for recovery of land to situations where the land is valued at no more than $500,000.
• [17] It was in respect of that application where issues of the Assignee’s entitlement to possession, and the merits of making an order, were determined by the District Court Judge.^[9] The Judge considered the jurisdictional preconditions for an order under s 152 of the Insolvency Act, being satisfied that they were met, and considered the circumstances of Ms Pearson’s case, before deciding that it was in the interests of justice that the process be allowed to proceed.^[10]
• [18] The primary ground for the High Court decision, in which the jurisdiction of the District Court to issue a warrant subsequent to an occupier’s noncompliance with an order for possession was upheld, was that the request for an issue of a warrant was not “a proceeding” for the purposes of the jurisdictional limits in ss 78 and 79 of the District Court Act.^[11] Rather, it was a procedural step in execution of the court’s existing order for possession and, as such, ss 78 and 79 were not engaged.^[12] That characterisation is consistent with authority in other contexts and appears to be uncontroversial.^[13] The notice of appeal does not specify any challenge to it.
• [19] Instead, the notice of appeal seeks to reargue the issues of statutory interpretation that were involved in the alternative rationale for the High Court finding of jurisdiction. That reasoning was obiter and included in the High Court judgment against the contingency that the first basis for upholding jurisdiction, being the finding that the request for a warrant was merely a procedural step in existing proceedings, was not correct.^[14]
• [20] In discerning Parliament’s intention as to the scope of s 152 of the Insolvency Act, we are mindful of the objectives of the Insolvency Law Reform Bill of 2005, from which the Insolvency Act arose. The Bill sought a regime for dealing with financial failure which could be administered quickly and efficiently, and which maximised returns to creditors by providing flexible and effective methods of insolvency administration and enforcement.^[15] Harland J’s approach to the interpretation of s 152 is consistent with these objectives and, realistically, we see no basis on which the reasoning could be impugned. The Judge interpreted the various provisions involved so as to treat both applications by the Assignee in bankruptcy for a possession order, and subsequent steps needed to enforce execution of the order, as being within the District Court’s jurisdiction irrespective of the value of the property.^[16]
• [21] It follows that we see no credible basis for arguments that the High Court erred in confirming the District Court’s jurisdiction.

Result

• [22] The appeal is struck out. There is no issue as to costs.

Solicitors:
Dyer Whitechurch, Auckland for Appellant
Meredith Connell, Auckland for Respondent

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^[1] Made by the District Court pursuant to s 152(2) of the Insolvency Act 2006.

^[2] Official Assignee v Pearson [2021] NZHC 1892 [High Court judgment].

^[3] Court of Appeal (Civil) Rules 2005, r 44A(1)(c).

^[4] Official Assignee v Pearson [2018] NZDC 23932 [District Court judgment].

^[5] High Court judgment, above n 2.

^[6] Lissenden v C A V Bosch Ltd [1940] AC 412, [1940] 1 All ER 425 (HL) at 430 and 437; Hitchcock v Cameron [1977] 1 NZLR 85 (SC) at 88; and Sterling Realty Ltd v Manning [1964] NZLR 1017 (SC) at 1019–1020.

^[7] See Insolvency Act 2006, ss 138 and 140–141. Although Ms Pearson was discharged from bankruptcy in November 2019, she continues to be subject to a duty to assist the Assignee: per s 307.

^[8] Chamberlains v Lai [2006] NZSC 70, [2007] 2 NZLR 7 at [63], in the context of an appeal against the striking out of a defence pleaded in High Court proceedings.

^[9] District Court judgment, above n 4.

^[10] At [30]–[33].

^[11] Section 79 of the District Court Act 2016 limits the District Court’s jurisdiction to “hear and determine a proceeding for the recovery of land”.

^[12] High Court judgment, above n 2, at [37].

^[13] See Lay v Commissioner of Inland Revenue [2015] NZHC 2962, [2016] NZFLR 603; Re Riddiford, ex parte The New Zealand Law Society and the Wellington District Law Society HC Wellington CIV-2005-485-879, 15 December 2005; National Westminster Bank plc v Powney [1991] Ch 339 (CA); and WT Lamb & Sons v Rider [1948] 2 KB 331.

^[14] High Court judgment, above n 2, at [38].

^[15] These objectives were listed in the explanatory note introducing the Bill.

^[16] High Court judgment, above n 2, at [43]–[49].