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High Court of New Zealand Decisions |
Last Updated: 19 October 2012
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2008-409-002057 [2012] NZHC 2629
BETWEEN CHESTERFIELDS PRESCHOOLS LIMITED
Plaintiff
AND THE COMMISSIONER OF INLAND REVENUE
Defendant
Hearing: 5 September 2012 (Heard at Christchurch)
Appearances: D J Hampton in Person in support of application (to represent
Plaintiff)
S Kinsler and J Kerr for Defendant
Judgment: 9 October 2012
JUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to representation of company]
Introduction
[1] This judgment is in relation to the application of David John Hampton to represent the plaintiff (“Chesterfields”) in this proceeding. By this proceeding, in the form it now stands (following the defendant’s largely successful strike out application), Chesterfields sues the Commissioner for pursuing malicious civil proceedings.
Background
[2] Mr Hampton is the sole shareholder and director of Chesterfields.
CHESTERFIELDS PRESCHOOLS LIMITED V THE COMMISSIONER OF INLAND REVENUE HC CHCH CIV-2008-409-002057 [9 October 2012]
[3] He has legal qualifications to post-graduate level. He was admitted to the bar in 1991. He held a practising certificate from 1991 to 1992, and had then a period of limited work experience with a Timaru law firm. He has no litigation training but refers to more general early experience in matters of taxation and business law when working in banking and accounting roles.
[4] Mr Hampton has previously, by leave, represented Chesterfields in a number of proceedings, both at interlocutory stages and at hearing. This has included proceedings in this Court and in the Court of Appeal. In this particular proceeding, he has represented Chesterfields to date. This included the strike out application1 when the Commissioner, for reasons of convenience and expediency, did not oppose the granting of leave to Mr Hampton to represent the companies (but with all issues of representation thereafter reserved). At the time of the strike out application there were five plaintiffs, including in addition to the current remaining plaintiff, Chesterfields, a partnership of which Mr Hampton was one partner, and two other
companies in which he had interests.
[5] Mr Hampton’s previous representation of Chesterfields included the appeal hearing reported as Commissioner of Inland Revenue v Chesterfields Preschools Ltd.2 In that case, the Court of Appeal granted leave to Mr Hampton to represent
related companies and partnerships (in addition to representing himself).3
[6] For that appeal the Court of Appeal appointed an amicus to assist the Court. The Commissioner was partly successful and partly unsuccessful in his substantive appeal. Mr Hampton and his related entities retained the benefits of the substantive judgments in the High Court.
[7] Mr Hampton frankly conceded, in the course of his submissions, that his lack of litigation expertise has shown in the difficulties he has had from time to time in formulating proceedings, following procedural rules, distinguishing between
evidence and submissions, and developing focused argument. He expressed
1 Chesterfields Preschools Ltd v The Commissioner of Inland Revenue [2012] NZHC 394.
2 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2010] NZCA 400, (2010) 24
NZTC 24,500.
3 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2009] NZCA 334.
acknowledgement to the Court for the fact that in previous proceedings he has
received the Court’s assistance in working through his shortcomings.
Mr Hampton’s application
[8] This is a Mannix application. It is so called because it was in Re GJ Mannix Ltd4 that the Court of Appeal affirmed the rule that corporations must be represented in Court by counsel. The Court recognised a discretion which the Judge has in a particular case to permit a company to be represented by a non-qualified person.
[9] Mr Hampton, in this case, filed an interlocutory application for leave to represent Chesterfields in this proceeding.
[10] The grounds of the application were stated as:
1. The plaintiff company is unrepresented in the proceeding;
2. The applicant has previously been granted leave to represent the company in related interlocutory and substantive proceedings in the High Court and on appeal in the Court of Appeal and, on informal application, in seeking Leave to Appeal to the Supreme Court;
3. The company considers that its interests will be best served and will not be prejudiced in being represented by the applicant.
[11] Mr Hampton did not before the hearing file any evidence in support but attached a memorandum setting out both matters of background (truly in the nature of evidence) and matters of submission.
[12] For convenience, Mr Kinsler was content at the hearing to treat Mr Hampton’s background as properly before the Court and I accordingly have considered them. Additionally, Mr Hampton stated that he had recently investigated the possibility of seeking counsel at an Auckland law firm acting for Chesterfields and related entities in other litigation. That law firm was precluded through a conflict of interest from acting and went on to indicate that it was not in a position to recommend a firm which met all Mr Hampton’s criteria for representation in relation
to claims of mal administration involving the Crown. This led Mr Hampton to
4 Re GJ Mannix Ltd [1984] 1 NZLR 309.
express the view that Chesterfields would not be significantly disadvantaged in this litigation by being represented by him given his experience on so many occasions of representing himself and the company. Nonetheless, Mr Hampton stated that the best hope for Chesterfields would be that it would be represented by a skilled practitioner with experience in litigation and negotiations involving the Crown.
The abandoned application
[13] In addition to his application to represent Chesterfields, Mr Hampton filed a notice of application for joinder of himself as a second plaintiff in this proceeding. This was done notwithstanding the Court’s judgment of 9 March 2012,5 by which the claims of all plaintiffs other than Chesterfields (that is to say including the claim of Mr Hampton itself) had been struck out. The application for joinder was plainly misconceived having regard to the strike out judgment. The Commissioner filed a
notice of opposition.
[14] On the day of the hearing, Mr Hampton advised the Court that he wished to abandon the application for joinder. Mr Kinsler did not seek an order for costs.
[15] I therefore formally strike out the application for joinder of Mr Hampton as second plaintiff. There is no order as to the costs of that application.
What is the Mannix rule?
[16] I treat the Mannix rule as comprehending both the rule as to who may represent a company and a discretion which recognises that in some circumstances it may be appropriate to grant leave to a company to be represented by a non-qualified person.
[17] The underlying rule, as acknowledged by Cooke J in Mannix, had been laid down by the Court of Appeal in 1903 in The Free Wheel Company Ltd v Inglis Bros,
where Stout CJ stated:6
5 Chesterfields Preschools Ltd v The Commissioner of Inland Revenue [2012] NZHC 394.
6 Free Wheel Company Ltd v Inglis Bros (1903) 23 NZLR 309 at 318.
Natural persons can appear in person before the Court to conduct their own case, but a company cannot appear except by solicitor or counsel.
[18] New Zealand has had the same approach as is traditional in many common law jurisdictions. For instance, Stout CJ in The Free Wheel Company case referred to the Queens Bench decision in Re The London County Council and the London Tramways Company7 in 1897 as being “decisive on the point”. Similarly, in Mannix, Cooke J referred to authorities establishing the rule from England, Ireland and Australian states.8 More recent authorities in such jurisdictions were collected in the judgment of Joseph Williams J in Churchill Group Holdings Ltd v Aral Property Holdings Ltd.9
[19] The position, as it applies in the High Court and in the Court of Appeal in New Zealand, has not been altered by legislation. The Lawyers and Conveyancers Act 2006 recognises certain “reserved areas of work”. These include the giving of legal advice in relation to the direction or management of any proceedings before any New Zealand court; appearing as an advocate for any other person in any New Zealand court; and representing any other person involved in any proceedings before
any New Zealand court.10 It is an offence for any person who is not a lawyer or an
incorporated law firm to carry on work in the reserved areas of work.11 The earlier exclusory provisions of the Act do not prevent any person from appearing as an advocate, or representing any other person before any court, if the appearance or representation is allowed or required by any Act or Regulations or by the Court or Tribunal.12
[20] In New Zealand there are, in relation to non-qualified persons, a number of examples of permissive legislation including in relation to the Employment Court13
and the District Court.14
7 Re The London County Council and the London Tramways Company (1897) 13 TLR 254.
8 Re GJ Mannix Ltd at 311.
9 Churchill Group Holdings Ltd v Aral Property Holdings Ltd HC Auckland CIV-2001-404-
002302, 17 August 2004, at [20]–[21].
10 Lawyers and Conveyancers Act 2006, s 6.
11 At s 24.
12 At s 27(1).
13 Employment Relations Act 2000, Schedule 3, cl 2.
14 District Courts Act 1947, s 57.
[21] The rights of representation in the higher courts in New Zealand have not been altered by legislation or by direction of the higher courts themselves.
Is the Mannix rule still binding authority?
[22] Mannix continues to bind this Court. The Rule has been consistently applied both in the Court of Appeal and in this Court. In this regard (in relation to the higher Courts), the New Zealand position is now different to some overseas jurisdictions such as the United Kingdom where the Rules of the Supreme Court have been somewhat relaxed.15
[23] The Court of Appeal in 2009 granted leave to Mr Hampton to represent other parties in Commissioner of Inland Revenue v Chesterfields Preschools Ltd:16
There is no doubt that the Mannix rule is still in operation. See for instance Central Equipment Company Limited v Commissioner of Inland Revenue; Black v Taylor; and Honda New Zealand Limited v New Zealand Boilermakers.17
[Citations omitted here but included in the footnote].
[24] Against this weight of authority, Mr Hampton presented written submissions in this case in support of a proposition that, in the light of the provisions of the New Zealand Bill of Rights Act 1990, a company ought to have the same right of representation as an individual in this Court. Mr Hampton noted particularly the provisions of s 24 and 25 of the New Zealand Bill of Rights Act (notwithstanding that those apply to the determination of criminal charges). Alternatively, he placed emphasis upon the natural justice provisions in s 27 of the Act.
[25] It is unnecessary for me to examine in any detail the persuasive argument to the contrary which Mr Kinsler developed in his written submissions. In the course
of those he properly drew the Court’s attention to dicta of Giles J in Guise v
16 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2009] NZCA 334 at [14].
17 Central Equipment Company Limited v Commissioner of Inland Revenue (2008) 23 NZTC
21,861 at [11]–[13] (CA); Black v Taylor [1993] 3 NZLR 403 (CA); and Honda New Zealand
Limited v New Zealand Boilermakers [1991] 1 NZLR 392 (CA).
Macrossan Resorts Ltd.18 In an oral judgment his Honour, having regard to the provisions of s 27 of the Act, expressed considerable concern about the rule in Mannix. The fundamental bar to Mr Hampton’s invitation to this Court to reconsider rights of representation in the light of the New Zealand Bill of Rights Act is the line of authority in the Court of Appeal on this issue. That led Giles J to apply the Mannix rule, notwithstanding his stated concerns with it. I am equally bound to apply it.
[26] In the course of his oral submissions, Mr Hampton conceded that at least in this Court he must satisfy me that this case is of such an exceptional nature as to justify Mr Hampton’s representing the plaintiff.
What guides or justifies the Court’s discretion under the Mannix rule?
[27] In Mannix, Cooke J put the justification of the rule thus:19
The reason for the rule, to adapt words used by Viscount Simon LC in the Tritonia case in explaining why it applies in the House of Lords, is that it secures that the Court will be served by barristers or advocates who observe the rules of their profession, who are subject to a disciplinary code, and who are familiar with the methods and scope of advocacy followed in presenting arguments to the Court.
[28] In the same case, McMullin J considered whether there might be a different approach to be taken between a small “one man” company and larger corporations. His Honour observed:20
But, apart from the impossibility of devising a formula which would allow representation in some limited cases, to afford an absolute right of audience to a company for the considerations already mentioned would ignore the fact that there is not always an unanimity of viewpoint in small companies, which along with others can be the subject of internal dissension, with the consequent difficulty of ensuring that the officer seeking to appear for the company truly represents the interests of the company and not his own. This situation is not likely to arise with larger companies where a decision to embark on litigation will be made only after a discussion of the board of directors or at a high executive level and a warrant to sue or defend evidencing the corporate view then executed. There is also the fact that litigants in person through their lack of expertise in conducting legal
18 Guise v Macrossan Resorts Ltd HC Auckland CP 403/96, 21 April 1998.
19 Re GJ Mannix Ltd, at 311.
20 At 315.
proceedings often pursue irrelevant matters ad nauseum, unduly prolong proceedings and require indulgences from the Court and from their opponents to meet their non-professional approach. That litigants in person sometimes succeed is not so much a result of their advocacy as the ability of the Judge to discern the essential facts and determine where the justice of the case lies. It is interesting to note that the report of the Royal Commission on Legal Services in England in 1979 (Cmnd 7648-1), while recognising the long established right for a litigant in person to speak on his own behalf, recommended that laymen should have no right of audience in superior Courts.
[29] Hammond J has subsequently in G B & J Z Chambers Ltd v AEL Corporation
Ltd provided a list of seven justifications:21
The Mannix rule is justified on a number of bases. First, given that no one has a right to present a case in Court unless in person or by a qualified lawyer, and that a corporation is not a natural person, it must thus be represented by counsel. Secondly, the Courts will be best served by professional advocates, who are subject to a disciplinary code, and who are familiar with the methods and scope of advocacy following in presenting arguments to the Court. Thirdly, where an officer appears for the company, he or she might represent his or her own interests and not the interests of the company. Fourthly, the increasing complexity of the law requires a professional advocate with the requisite skills to adequately present (and thus protect) the interests of the applicant company. Fifthly, there are efficiency arguments. Lay people sometimes pursue irrelevant matters, unduly prolong proceedings, and require indulgences from the Court which gives an appearance of injustice as against the other party. Sixthly, there are questions of authority. A lawyer can bind his client to a certain extent; a lay person cannot. Finally, because a company is a creature of statute, a Court cannot exercise its disciplinary powers over the company and it must therefore have a solicitor (who is an officer of the Court) on the record.
[30] These judicial justifications of the Mannix rule may be considered to have a Court administration focus. There is also a justification which lies in issues of fairness as between the parties. This may at first seem surprising in the context of what may be a cash-strapped company seeking a right of non-qualified representation. But it is well explained in the following passage in the judgment of the Court of Appeal, delivered by Sir Thomas Bingham MR in Radford v Samuel.
His Lordship, having referred to the then Rules of the Supreme Court, said:22
It is worthy of note that the provisions which I have cited from the rules which require corporations to appear through solicitors are not merely rules for the sake of having rules but rest on a basis of fairness and good sense which indeed, as I understand, Mr Corry understood and accepted. A limited
21 G B & J Z Chambers Ltd v AEL Corporation Ltd (1994) 7 PRNZ 635, at 640.
22 Radford v Samuel [1993] BCC 870 at 872.
company, by virtue of the limitation of the liabilities of those who own it, is in a very privileged position because those who are owed money by it, or obtain orders against it, must go empty away if the corporate cupboard is bare. The assets of the directors and shareholders are not at risk. That is an enormous benefit to a limited company but it is a benefit bought at a price. Part of the price is that in certain circumstances security for costs can be obtained against a limited company in cases where it could not be obtained against an individual, and another part of the price is the rule that I have already referred to that a corporation cannot act without legal advisers. The sense of these rules plainly is that limited companies, which may not be able to compensate parties who litigate with them, should be subject to certain constraints in the interests of their potential creditors.
The existence of exceptional circumstances under the Mannix rule
[31] When it comes to the granting of leave to represent a company, the first rule is that there are no rules. Cooke J in Mannix gave examples of the appropriate exercise of the discretion. Significantly, his Honour introduced those by stating that it was “without attempting to work out hard-and-fast rules”.23 This is consistent with his earlier observation that “what is involved is purely a discretionary power”,24 emphasising the breadth of discretion in the Court dealing with the proceeding.
McMullin J said that he would leave the exercise of the discretion “for the exercise of the individual Judge”,25 and Somers J said that cases in which there is to be an exercise of the discretion “can confidently be left to the good sense of the Judges”.26
[32] In Arbuthnot Leasing International Ltd v Havelet Leasing Ltd,27 Scott J
referred to the breadth of the Court’s discretion in this way:
... the courts have an inherent power to regulate their own procedure and a judge in an individual case has, as part of that inherent power, the power to permit any advocate to appear for a litigant if the exceptional circumstances of the case so warrant. No limit can be placed on what might constitute sufficient exceptional circumstances.
[33] An appropriate starting point in considering the exercise of discretion is to assess how allowing a company to be represented by an unqualified person would
impact on the considerations which justify the Mannix rule in the first place. What
23 Re GJ Mannix Ltd, at 314.
24 At 314.
25 At 316.
26 At 317.
27 Arbuthnot Leasing International Ltd v Havelet Leasing Ltd [1991] 1 All ER 591 at 597.
degree of accountability will there be to the Court in terms of the standards of civil procedure? This question applies to both the quality of claims and arguments and to the more general conduct of the case. In terms of the fairness and commonsense approach of Sir Thomas Bingham in Radford, will Chesterfields (if Mr Hampton represents it) be freed in an unfair way from the constraints which normally apply to corporations?
[34] It is well established that the circumstances of the case must be exceptional to depart from the basic rule. In Mannix itself, that was a consistent theme of the Court of Appeal, described by Cooke J as “a reserve or occasional expedient”,28 McMullin J as “the exception rather than the rule”,29 and Somers J as “their occurrence is likely to be rare, their circumstances exceptional or at least unusual, and their content modest”.30
Examples of when the discretion might be exercised
[35] The Courts have recognised circumstances in which the impact on basic standards of civil procedure may be minimised, even with lay representation. Some were highlighted by Cooke J in Mannix where his Honour said:31
In general, and without attempting to work out hard-and-fast rules, discretionary audience should be regarded, in my opinion, as a reserve or occasional expedient, for use primarily in emergency situations when counsel is not available or in straightforward matters where the assistance of counsel is not needed by the Court or where it would be unduly technical or burdensome to insist on counsel. Especially on minor matters, cost-saving could also be a relevant factor. A 'one-man' company might be allowed to be represented by its owner if the Judge saw fit in a particular case. But it could not be right, for instance, to issue some sort of tacit continuing or general licence to an unqualified agent to appear in winding up or any other class of proceedings.
[36] The cases have consistently established the following categories as something of a benchmark for later cases:
28 Re GJ Mannix at 314.
29 At 316.
30 At 317. To similar effect were observations of Hardie Boys J in Honda New Zealand Ltd v New
Zealand Boiler Makers Union [1991] 392 (CA) at 397.
31 Re GJ Mannix at 314.
(a) Emergency situations when counsel is not available;
(b) Straightforward matters where the assistance of counsel is not needed by the Court;
(c) Straightforward matters where it would be unduly technical or burdensome to insist on counsel;
(d) Minor matters where cost-saving is a relevant factor;
(e) In particular cases where the Judge sees fit, a ‘one-man’ company might be represented by its owner.
(I do not read the judgment of Cooke J in Mannix as suggesting that the one-man nature of a company is an exceptional circumstance in itself: what his Honour was indicating was that the one-man nature of a company may be a factor if combined with other “particular” (or exceptional) circumstances of the litigation.)
[37] Some of these circumstances are covered by the more narrative discussion of McMullin J in Mannix, where his Honour referred to relevant considerations including:32
(a) The nature of the litigation; (b) The complexities of the case; (c) The extent of the dispute;
(d) The points upon which audience is sought.
[38] The decision of Robertson J in Para Ltd v David Ellis Productions Ltd33
illustrates a situation in which a number of the circumstances identified by Cooke J
in Mannix were present. His Honour would still have found them, cumulatively, not
32 At 316.
33 Para Ltd v David Ellis Productions Ltd (1992) 6 NZCLC 67,867 (granting the Managing
Director of a company leave to represent the company in proceedings for breach of contract).
to have amounted to exceptional circumstances. There was urgency in the sense that an adjournment would have created witness expenses and inconvenience. The case did not involve particular legal difficulty. Robertson J was also clearly influenced by the fact that the defendant company did not have the resources to afford representation. Ultimately his Honour’s granting of leave was influenced by the plaintiff’s consent to Mr Ellis representing his company. But for that consent, it would appear that his Honour would have refused leave as he stated “I would wish to be able to have the theory and principle of Mannix applied”’ and “I do not see this case as being particularly exceptional”.
[39] The circumstances in which the Court of Appeal allowed Mr Hampton to represent companies in the judicial review appeals are also illustrative. The Court granted a right of representation “not without some hesitation”.34 The factor which appears to have been of greatest importance to the Court of Appeal was that Mr Hampton was already personally one of the five plaintiffs. He also had the right as a partner in the two plaintiff partnerships to represent himself. He was seeking to
represent two companies as well. The Court of Appeal recognised the “linkage between him and the companies” (meaning his involvement as shareholder and director of the two companies). Mr Hampton was already “in Court” as it were. The Court also took into account the fact that with the appeal in the hands of the Commissioner of Inland Revenue, the process of getting the appeal on for hearing fortunately lay in the hands of experienced Crown counsel.35 The Court appeared to accept that it was now practically impossible for the several respondents to raise finance to fund legal representation,36 and observed that there “seems now to be
absolutely no prospect of there being representation for the other respondents”.37
Are there circumstances which do not constitute “exceptional circumstances”?
[40] Observations in the judgment of Sir Thomas Bingham MR in Radford v
Samuel as to matters which are not exceptional, have subsequently been referred to with approval in this jurisdiction and elsewhere.
34 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2009] NZCA 334, at [18].
35 Ibid.
36 At [6].
37 At [18].
[41] The English Court of Appeal held that the following were not exceptional circumstances:38
(a) Lack of funds;
(b) The possibility that the company might have a good defence; (c) The conduct of the other party in the litigation;
(d) Damage to the director’s reputation caused by the litigation.
[42] This observation or at least aspects of it have been referred to, with express or implicit approval, in some New Zealand cases.39
[43] In my judgment, exclusionary lists such as this would cut across the breadth of the individual Judge’s discretion and cannot be justified in principle. They also appear to be inconsistent with authorities in England and in New Zealand, including in the latter’s Court of Appeal. I have referred to the reasoning of the Court of Appeal in granting representation leave to Mr Hampton in 2009 where the inability of other respondents to obtain representation (for financial reasons) was expressly a factor taken into account as one of a number of factors.
[44] Apart from that judgment of the Court of Appeal, the approach adopted in New Zealand courts appears to have varied. While Associate Judge Doogue in Wells v Verisure Investigations Ltd was not prepared to take into account a company’s inability to afford to retain counsel,40 Giles J in Guise v Macrossan Resorts Ltd took into account (as one of a number of factors) the corporate entity’s inability to fund legal representation.41 In GB & JZ Chambers Ltd v AEL Corporation Ltd, Hammond J found that the applicant had not established that the company was
impecunious or unable to arrange funds. His Honour determined the issue of
38 Radford v Samuel [1993] BCC 870, at 872.
39 See Business Associates Ltd v New Zealand Post Ltd (1998) 12 PRNZ 497 at 501; Churchill
Group Holdings Ltd v Aral Property Holdings Ltd HC Auckland CIV-2001-404-002302, 17
August 2004 per Williams J at [21].
40 Wells v Verisure Investigations Ltd [2012] NZHC 936 at [4].
41 Guise v Macrossan Resorts Ltd HC Auckland CP 403/96, 21 April 1998 at 4.
impecuniosity on the burden of proof (the onus being on the applicant, who had not discharged it).42 He did not determine the point on the basis that the company’s financial position was irrelevant.
[45] Accordingly, there is authority both in the Court of Appeal and elsewhere for the consideration of impecuniosity, the observations in the English Court of Appeal notwithstanding. As a matter of principle, a company’s inability to fund representation might assume particular significance if that position has come about through circumstances such as Court freezing orders where evidence cogently points to the other party’s unlawful conduct as the cause of a company’s funding difficulty. Neither Mr Hampton nor Mr Kinsler referred me to any case where an interlocutory freezing order had cut across a company’s ability to pursue or defend its substantive litigation but the facts of the Arbuthnot Leasing case are somewhat similar and are instructive.
[46] In Arbuthnot Leasing, Mr Maughan was sued as defendant along with three companies which he owned and directed. The plaintiff had obtained a large number of interlocutory orders including some of a Mareva nature. Mr Maughan applied for leave to represent one of the affected companies so that it might apply for leave to use some of its frozen assets. The application accordingly was focused on the release of frozen funds (rather than on representation in relation to a substantive proceeding). The fact that the company’s funds were frozen by a Mareva injunction was explained in detail by Scott J. It was clearly central to the judgment. The Court permitted Mr Maughan to represent the companies.
[47] To me, the Arbuthnot Leasing case illustrates the danger of isolating a single situation (such as “impecuniosity”) and suggesting that it will always be irrelevant. Impecuniosity may come about in many forms and by many causes – it is precisely because of such a reality that the Judge’s individual consideration of the particular
circumstances of the case should not be fettered by hard-and-fast rules.
42 G B & J Z Chambers Ltd v AEL Corporation Ltd (1994) 7 PRNZ 635, at 641.
Considerations in this case
Ability to fund litigation?
[48] Once I made it clear to Mr Hampton, in the course of submissions, that this Court is bound by the Mannix rule by reason of the continuing observations of the Court of Appeal, Mr Hampton then placed most emphasis upon the proposition that Chesterfields is unable to fund this litigation. That proposition had not been expressly stated as one of the grounds of the interlocutory as filed.43 Mr Hampton had also adduced no affidavit evidence in relation to impecuniosity. When Mr Hampton filed his written submissions, he asserted that if leave were not granted it had the potential to cause real injustice, particularly in cases where the company is
apparently labouring under the disadvantage of impecuniosity. He referred to Guise v Macrossan Resorts Ltd.44
[49] In his oral submissions, Mr Hampton referred to the limited financial position of the plaintiff, and made reference to two matters affecting its financial position. First, he referred to the freezing of Chesterfields’ assets which had occurred over a period of time. Secondly, he referred to the “unforeseeable destruction of assets” of Chesterfields through the Christchurch earthquakes (with a building at 854 Colombo Street having been destroyed and now the subject of an unresolved insurance claim). He indicated to the Court that financial statements had been completed up to 2009 and, past that point, the only assets were land and buildings.
[50] Mr Kinsler, for the Commissioner, put his response on two levels. His primary submission, in reliance on the observations of Sir Thomas Bingham in Radford (and some New Zealand cases to which I have referred), was that the impecuniosity of a company is not a relevant factor. Secondly, Mr Kinsler submitted that even if impecuniosity were a relevant factor, the Court was in precisely the same position as Hammond J in the GB & JZ Chambers case, where the evidence adduced
was insufficient to establish impecuniosity.
43 As to which [10] above.
44 See [45] above.
[51] In the circumstances, I reserved leave to both the Commissioner and to Mr Hampton to adduce limited further evidence immediately following the hearing. The Commissioner, as I requested, provided source documents in relation to the various freezing orders and other arrangements which had been in place affecting the property of Chesterfields and related entities. For his part, Mr Hampton provided affidavit evidence in relation to the Colombo Street building.
Freezing orders and undertakings
[52] I now summarise the position relating to Mareva injunctions and other
arrangements. The orders stem from the Commissioner’s assertion to the Court (by
2005 at the latest) that Mr Hampton and related entities were liable for GST and other payments in the order of $3,000,000. By a judgment dated 13 September
2005, Fogarty J imposed on Mr Hampton, Chesterfields, and others a Mareva injunction to restrain them until further order from disposing of, or encumbering, or otherwise dealing with their money, property, or other assets up to a value of
$3,000,000. There were exceptions to the injunctions including to enable the injunctive parties to pay and continue to pay the reasonable legal expenses in prosecuting the proceeding in question (CIV-2004-409-001596).45 The Mareva injunction affected a number of properties including the property referred to by Mr Hampton in submissions, namely 854 Colombo Street, Christchurch.
[53] Mr Hampton’s partner, Therese Sisson, also provided an undertaking to the Court in relation to not encumbering or otherwise dealing with assets to a total value of $3,000,000. Her undertaking included an exception to enable her to pay and to continue to pay the reasonable expenses of her and her associated entities “in bringing or defending all proceedings involving the defendant” (in other words a much broader exception than contained in the injunction itself). There were some subsequent difficulties over the orders and some additional orders (charging orders)
were made in 2006.46 In 2007 the orders were replaced by an acceptance of an
45 Chesterfields Preschools Ltd v The Commissioner of Inland Revenue (2005) 22 NZTC 19,500.
46 Chesterfields Preschools Ltd v The Commissioner of Inland Revenue HC Christchurch CIV-
2004-409-001596, 19 December 2006, Fogarty J.
extended undertaking from Ms Sisson.47 Ms Sisson’s undertaking continued to have the exception concerning the bringing or defending of all proceedings involving the Commissioner. After further difficulties in relation to the observation of the orders, the Court re-imposed Mareva injunctions in August 2008.48 Fogarty J reimposed the Mareva orders (by then called freezing orders) in addition to leaving Ms Sisson’s undertaking in place.
[54] The effect of this chain of events was to leave Mr Hampton and his related entities with permission (through the exception to the arrangement) to procure reasonable legal and professional support expenses including for litigation involving the Commissioner. Chesterfields obtained such permission by consent from the High Court,49 (the funding to come from a third tier lender). The finance offer lapsed, following a stay in the context of pending substantive appeals to the Court of Appeal in 2010. There was a second, similar occurrence, also in 2010.
Current state of Chesterfields’ assets
[55] I now turn to the financial position of Chesterfields and related entities. The evidence filed indicates that the Colombo Street property is owned in the name of Ms Sisson, although Mr Hampton appears to be listed as both co-owner and tenant, and the property appears to be known as the Chesterfields Preschools Limited property. The building is to be demolished as a result of the Christchurch earthquakes. There is an unresolved issue as to the extent of insurance cover (in particular whether it is replacement or indemnity). Mr Hampton deposes that those issues are being worked through by a lawyer whom he has retained upon the basis that he will be paid from the policy clause for reimbursement of legal costs, Chesterfields being otherwise unable to fund legal representation to resolve that
issue.
47 Chesterfields Preschools Ltd v The Commissioner of Inland Revenue HC Christchurch CIV-
2004-409-001596, 31 October 2007, Fogarty J.
48 Chesterfields Preschools Ltd v The Commissioner of Inland Revenue HC Christchurch CIV-
2008-409-000722, 28 August 2008, Fogarty J.
49 Chesterfields Preschools Ltd v The Commissioner of Inland Revenue HC Christchurch CIV-
2004-409-001596, 30 September 2008, Fogarty J.
[56] I am satisfied that the evidence indicates that this asset of Mr Hampton (or of Chesterfields) is for the time being unusable and will remain unavailable for an indefinite period.
Broader issues as to Chesterfields’ financial position
[57] But what of evidence not before the Court? Mr Hampton has not provided any company accounts. He has not provided any particular evidence in relation to the finances of Chesterfields (or indeed of related entities, including himself). It is not for the Court in this interlocutory application to search through the records or materials in other proceedings or indeed aspects of this proceeding to obtain some understanding of the financial affairs of Chesterfields and related entities. Indeed, the evidence relevant to impecuniosity in this application would be evidence as to how Chesterfields’ financial affairs stand today. Mr Kinsler, in a memorandum filed, has suggested 13 areas in which Mr Hampton’s evidence has been deficient including in relation to many details of income and liabilities both of Chesterfields and Mr Hampton. Mr Hampton’s personal ability to put Chesterfields in funds has not been covered in evidence other than with the most general assertions of inability.
[58] As in GB & JZ Chambers, the Court in this case cannot be satisfied that Chesterfields is unable to arrange funds. The onus was on the applicant and it has failed to discharge that onus on the civil standard.
Other considerations in this case
Urgency?
[59] The present application is not made in a situation of urgency. This litigation was commenced in September 2008. Through the Commissioner’s largely successful strike out application, Chesterfields has been left as the sole remaining plaintiff. Chesterfields’ original 232 paragraph statement of claim needs to be severely truncated and put in order for the case to be taken to trial. There is no particular urgency attaching to that.
[60] The tort on which Chesterfields sues – the tort of malicious civil proceedings
– is infrequently encountered and is not so straightforward as to be easily understood or applied. The testing of the evidence of witnesses especially in relation to malice will require focused understanding of the tort itself. For cross-examination to be effective it is likely to require the skill of experienced counsel. If Mr Hampton were to cross-examine, he would have the added difficulty of separating his role as witness of fact from his role as cross-examiner.
[61] This litigation cannot be described as simple. It has some complexity.
Appearance in another capacity?
[62] In contrast to the situation in which the Court of Appeal previously gave Mr Hampton leave to represent companies when Mr Hampton was himself a litigant, Mr Hampton in this case is no longer himself a litigant. If he is granted leave to represent Chesterfields, he would be “before the Court” in that capacity alone. This is not a case where he has a right (in a personal capacity) to appear anyway.
“One-man company”
[63] Chesterfields is a one-man company, Mr Hampton being its sole shareholder and director. Cooke J in Mannix recognises this as one situation in which, in some circumstances, leave might be granted to the “one man” to represent the company at the same time. The real question in this case is whether there are other factors which, combined with the one-man nature of Chesterfields, make leave appropriate.
[64] I recognise that to the extent that Chesterfields is a one-man company, it does not attract the complications of authorisation and the exposure of other’s assets to risk which was a concern addressed by the English Court of Appeal in Radford v Samuel. Chesterfields is entitled to have its one-man nature taken into account as a relevant circumstance.
[65] Mr Hampton holds under-graduate and post-graduate law degrees. He had, early in his career, some litigation experience. Through being involved as an advocate in the numerous strands of Chesterfields’ litigation in the past decade, he has had responsibility for much pleading and advocacy. To this extent, he may be better equipped than many unqualified persons to prepare pleadings and evidence and to present submissions. But, as he frankly and correctly conceded more than once in his submissions on this application, his legal work has frequently exhibited significant shortcomings. From my own involvement in a number of interlocutory proceedings, Mr Hampton has been unfailingly courteous and diligent, but his presentation of the legal basis of his position has often reflected a lack of formal litigation training and analysis. The standard of his legal work does ultimately cast a greater than normal responsibility on the Court, and on counsel for the opposing party, to ensure that the most relevant authorities are before the Court in the case. The Court would almost certainly, in relation to evidence during a hearing, have a greater responsibility for the control of that process than if it were in the hands of counsel.
[66] Mr Hampton’s legal degrees are relevant considerations but their relevance is limited by a distinct lack of litigation experience and discernment.
A public interest element?
[67] Mr Hampton submitted that the fact that the defendant is an entity of the Crown in a case involving allegations of gross abuse of process should be taken into account in the Mannix application.
[68] I do not rule out the possibility that in particular cases the Court may attach a special importance to what might be considered a public interest element. Mr Hampton, in the context of judicial review proceedings arising as they do in a public law setting, has already had the benefit of Mannix representation orders. This case is in a very different setting. With the issues as they now stand, Chesterfields’ case of
malicious prosecution stems from a single liquidation proceeding which was, as I
said in my strike out judgment:50
... effectively swept up in the earlier proceeding (M95/00) with the parties agreeing to the dismissal of this proceeding (M135/00) with no order for costs, on 26 June 2000.
[69] I went on to observe that the Commissioner had withdrawn the M135/00 proceeding in the light of doubt as to the nature and extent of the debt claimed, with the Commissioner paying a sum of money on account of costs. The facts of the case themselves do not point to any particular significance involving the public role of the defendant. The Commissioner, to whom Chesterfields owed tax, was pursuing a normal civil route of liquidation proceedings. The claim of malicious prosecution arises in relation to that subsequently dismissed proceeding. There is no reason to view the Commissioner’s involvement as defendant in this case as attracting different considerations to other malicious prosecution cases simply because of who the Commissioner is.
Inability to fund litigation
[70] Because of its pre-eminence in Mr Hampton’s final submissions, I have already dealt with this topic separately. For the reasons stated, Mr Hampton has not established an inability to fund the litigation.
[71] Even had Mr Hampton, in this case, adduced evidence which had satisfied me that the company cannot today obtain funds to fund this litigation, I would almost certainly have come to the same conclusion overall that I am reaching, for the same reasons I now summarise.
Bringing the considerations in this case together
[72] Mr Hampton’s related entities have had the benefit of Mannix
representational leave on numerous occasions in the past.
50 Chesterfields Preschools Ltd v The Commissioner of Inland Revenue [2012] NZHC 394 at [15].
[73] In the Court of Appeal, the leave may be explained largely for reasons relating to Mr Hampton being personally involved as a litigant. It may also be that in relation to appellate advocacy, the Courts involved may appropriately consider that they have greater scope than in a trial Court to adjust for inadequacies in non- qualified representation.
[74] Not dissimilarly, when I have previously granted leave to Mr Hampton, it has been in an interlocutory context where considerations attaching to trial process are not so significant. There has also been the practical reality that the Commissioner, in the interests of having an interlocutory matter resolved expeditiously, has either not opposed or has consented to the granting of leave. Such situations are different to the present.
[75] This proceeding has now reached a point of critical importance. Much of the original claim was struck out by the Court’s judgment of 9 March 2012. A poorly- drafted and repetitive statement of claim numbering some 232 paragraphs now stands in need of drastic alteration and repair. That is an exercise best achieved, particularly in relation to the tort of the kind alleged, by experienced counsel.
[76] Mr Hampton’s initial response to the strike out judgment was to file not only an application to represent Chesterfields, but a separate application for himself to be joined in the proceeding upon the basis that Chesterfields was his alter ego and that any damage suffered by Chesterfields was damage suffered by him as controlling shareholder and director. The misconceptions evident in such an approach should have been self-evident. They apparently became evident to Mr Hampton by the time of this hearing as he abandoned that application at the start of the hearing.
[77] Furthermore, Mr Hampton filed with this application a draft of the statement of claim which he proposes to submit as his amended statement of claim. Notwithstanding the Court order striking out all allegations other than in relation to the M135/00 liquidation proceeding, the draft amended statement of claim would continue to plead the issuing of the three other proceedings which were the subject of strike out. Again, it should have been self-evident that such an amended pleading was unacceptable.
[78] These latest events serve to reinforce the concession which Mr Hampton so frankly makes as to the shortcomings he suffers in legal analysis and presentation.
[79] The Commissioner, as with any other defendant, is entitled to the Court’s careful consideration of the protections which the Mannix rule is designed to afford. The Court, with its overriding interest in preserving the fair administration of justice, is also entitled to protection.
[80] I am satisfied that in this particular civil litigation it would be inappropriate to grant Mr Hampton leave to represent Chesterfields. The Court and the Commissioner are entitled to require Chesterfields to observe the normal rule as to representation of limited liability companies, with the protection that that rule affords.
[81] Chesterfields failed to adduce detailed evidence on its financial position. If it transpires that Chesterfields is unable to pursue this litigation, whether because of financial or other reasons, that is not such a grave outcome as in my judgment should lead to a departure from the fundamental representation rule in this case.
Order
[82] I order:
(a) The application for David John Hampton to represent Chesterfields in this litigation is refused; and
(b) The costs of the application are reserved;
[83] Of my own motion, I grant Mr Hampton on a final basis leave to appear on behalf of Chesterfields at a telephone conference to be convened at 2.30 pm on 30
October 2012 for the purpose of the Court being informed as to the intention of the
plaintiff and of the Commissioner as to the future course of the proceeding.
Solicitors:
D Hampton c/- Edgeware Law Centre, PO Box 21319, Christchurch
Crown Law, PO Box 2858, Wellington 6140
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URL: http://www.nzlii.org/nz/cases/NZHC/2012/2629.html