Chesterfields Preschools Ltd v Commissioner of Inland Revenue [2012] NZHC 394; (2012) 25 NZTC 20-112 (9 March 2012)

Last Updated: 19 March 2012

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV 2008 409 002057 [2012] NZHC 394

BETWEEN CHESTERFIELDS PRESCHOOLS LIMITED

First Plaintiff

AND DAVID JOHN HAMPTON Second Plaintiff

AND CHESTERFIELDS PARTNERSHIP Third Plaintiff

AND CHESTERFIELDS PRESCHOOLS PARTNERSHIP

Fourth Plaintiff

AND ANOLBE ENTERPRISES LIMITED Fifth Plaintiff

AND THE COMMISSIONER OF INLAND REVENUE

Defendant

Hearing: 27 January 2010 (with

further telephone conference on 22 February 2012) (Heard at Christchurch)

Appearances: D J Hampton in Person

J Pike for Defendant

(S Kinsler and J Kerr on 22 February 2012) Judgment: 9 March 2012

_{JUDGMENT OF ASSOCIATE JUDGE OSBORNE}

[1] This judgment was to have been delivered on the same date (5 August 2011)

as that in a related proceeding, CIV-2008-409-000995. Its delivery was overlooked and the matter was apparently not pursued subsequently by the parties until Mr

CHESTERFIELDS PRESCHOOLS LIMITED V THE COMMISSIONER OF INLAND REVENUE HC CHCH CIV 2008 409 002057 [9 March 2012]

Kinsler recently brought the matter to my attention. The judgment is now released with my apology to the parties for its delay.

[2] The Commissioner applies to strike out the plaintiffs’ claims for damages for malicious prosecution of civil proceedings. At the same time as hearing this application I heard a similar application by the Commissioner in the related proceeding.

Background

[3] The plaintiffs have variously been property-holding companies or entities, or owners and operators of pre-schools. They all involve or are associated with David John Hampton who appeared for them in this interlocutory application by leave. The Hampton family home was transferred to the third plaintiff (a partnership) in 1990. A chronology of the various plaintiffs’ dealings both between themselves and with the Inland Revenue Department from 1990 to date would occupy many, many pages. Some of the history is captured in the judgment of this Court in judicial review proceedings on 15 December 2006 (reported at (2007) 23 NZTC 21,125) and on 25

November 2008 (reported at (2009) 24 NZTC 23,148).

[4] The intertwined dealings of the plaintiffs are reflected in the first five paragraphs of their statement of claim which read:

1. The first plaintiff is a duly incorporated company (“CPL”) set up by the trustees of the Anolbe Family Trust and incorporated in 1993, having its registered office at Christchurch and carrying on business there as a property holding company. From 1993 until 2001 CPL also owned and operated preschools previously owned by the third plaintiff.

2. The second plaintiff at all material times was a director of CPL and the fifth plaintiff, Anolbe Enterprises Limited.

3. The third plaintiff is a partnership formed in 1990 (“OCP”) trading

briefly as an owner of preschools in Christchurch. OCP dissolved in

1993 and sold its assets to CPL. OCP ceased trading in 1993.

4. The fourth plaintiff is the trading name of Mr Hampton (“NCP”) who from 2002 to 2004 owned and operated the preschools previously owned by CPL.

5. The fifth plaintiff is a duly incorporated company (“AEL”) set up by the trustees of the Anolbe Family Trust and incorporated in 1993, having its registered office at Christchurch and carrying on business there as a property holding company.

[5] Many of the issues which arose between Mr Hampton and the Inland Revenue Department related to GST. The first issue related to a GST refund claim on the family home transfer in 1990. GST claims were lodged. The Department made numerous assessments and took enforcement action. Discussions and negotiations occurred. Settlements were negotiated. In more recent years proceedings have been pursued by one or more of the plaintiffs.

The immediate focus of this proceeding

[6] The plaintiffs assert that they have been subject to malicious prosecution of civil proceedings at the hands of the Commissioner.

[7] In particular, the plaintiffs assert that the Commissioner was responsible for malicious prosecution of civil proceedings in relation to the following:

a) Commissioner of Inland Revenue v Chesterfields Preschools Ltd HC Christchurch Registry M23/99 (CIV-1999-409-1110) (paragraph 41 statement of claim).

b) Commissioner of Inland Revenue v Chesterfields Preschools Ltd HC Christchurch Registry M388/99 (CIV-1999-409-1285) (paragraph 79 statement of claim).

c) Daveron Scaffolding v Chesterfields Preschools Ltd HC Christchurch Registry M95/00 (CIV-2000-409-1347) (paragraph 79 statement of claim).

d) Commissioner of Inland Revenue v Chesterfields Preschools Ltd HC Christchurch Registry M135/00 (CIV-2000-409-893) (paragraph 79 statement of claim).

e) Summary judgment proceeding Commissioner of Inland Revenue v

Chesterfields Preschools Ltd (CIV-2004-409-1025.

f) Summary judgment proceeding Commissioner of Inland Revenue v

David John Hampton and Therese Ann Sisson (CIV-2004-009-1614)

– District Court proceeding transferred to High Court 24.1.2005.

g) Summary judgment proceeding Commissioner of Inland Revenue v David John Hampton and Therese Ann Sisson (CIV-2004-009-1615) - District Court proceeding transferred to High Court 24.1.2005.

h) Summary judgment proceeding Commissioner of Inland Revenue v

David John Hampton (CIV-2004-009-1616).

Focus on outcome of Commissioner’s proceedings

[8] The plaintiffs plead as centrally relevant to their claims against the Commissioner a judicial review proceeding which they took against the Commissioner, CIV-2004-409-1596. The plaintiffs sought judicial review of numerous past decisions of the Commissioner. The Court gave judgment on

15 December 2006 (reported as Chesterfields Preschools Ltd v Commissioner of Inland Revenue (2007) 23 NZTC 21,125. By that judgment the Court set aside the Commissioner’s decision of December 2004 in relation to Anolbe Enterprises Limited (the fifth plaintiff in this proceeding) and made a number of other directions (see pages 21,149 – 21,150).

[9] In reaching that decision, Fogarty J reviewed “voluminous affidavit evidence” relating to arrangements discussed and entered into between the parties. These included a September 1994 discussion between Mr Hampton and a Mr Aronsen of the Department. Mr Hampton has consistently thereafter maintained that an arrangement was entered into during that discussion. Through notes of Mr Aronsen which were disclosed after lengthy, repeated efforts by Mr Hampton to obtain disclosure, it was found by Fogarty J that a note which Mr Aronsen took and gave to Mr Hampton “was very capable of leaving Mr Hampton with the impression

that the Chesterfields Partnership account with the Inland Revenue Department was under control and pending audit decisions”. This finding was in contrast to the evidence of Mr Aronsen who disputed that he had reached any agreement or arrangement with Mr Hampton as to any of the plaintiffs’ tax arrears. For Mr Hampton, including in his pleading of the plaintiffs’ claims, the difficulties which he experienced in obtaining disclosure of the Aronsen notes and the evidence which they and other records give of arrangements with the Commissioner provide the background against which this Court’s judicial review judgment was given. Headings in the statement of claim summarise allegations that the Commissioner or his officers have been involved from the early 1990s in “abuse of civil process”, “fraudulent misrepresentation”, “falsity”, and “unfair advantage”.

[10] Mr Hampton, in the statement of claim, draws the significance of the findings in the judicial review proceeding together in this way:

[227] The first judicial review proceedings reviewed all tax matters of the claimants from 1993 to 2004, including all proceedings initiated by the defendant that were based on the defendant’s breach of the Aronsen arrangements.

[228] The summary judgment proceedings (CIV 2004-409-1025, CIV 2004-009-1614, CIV 2004-009-1615 and CIV 2004-009-1616), were thereby permanently set aside.

[229] The four liquidation proceedings initiated over the period from 1999 to 2000, (proceedings M23/99; M388/99; M135/00 and M95/00), were also thereby set implicitly aside because the underlying statements of claim in respect of those proceedings were no longer valid.

The application to strike out the claim

The grounds of application – essential ingredient missing

[11] The Commissioner’s application for striking out first relies on the ingredients of the cause of action of malicious institution of civil proceedings. The Commissioner says that the liquidation proceedings were not resolved in favour of the plaintiffs and that the allegation in [229] of the statement of claim (above at [10]) is therefore unsustainable.

M23/99

[12] The Commissioner applied to put Chesterfields Preschools Limited into liquidation upon the basis that Chesterfields Preschools Limited owed the Commissioner $133,278.12 in relation to GST and other liabilities. The judgment of Master Venning dated 3 March 1999 shows that Chesterfields Preschools Limited paid some $75,000.00 shortly before 3 March 1999. The judgment of Master Venning as to costs dated 14 April 1999 shows that the Commissioner’s application was dismissed on 29 March 1999 because the debt claimed by the Commissioner in the proceeding had been paid in full. The Master’s decision records:

The Plaintiff has effectively succeeded in its proceedings to the extent that the amount sought in the proceedings has now been paid in full.

M388/99

[13] The Commissioner applied for an order winding up Chesterfields Preschools

Limited in relation to an alleged debt for GST and other liabilities in the sum of

$100,823.59. No defence was ever filed. The proceeding was adjourned three times upon the basis that discussions were occurring. On 23 January 2000 the proceeding was struck out as having been “settled” with no order for costs.

M95/00

[14] A company named Daveron Scaffoldings Limited applied for an order putting Chesterfields Preschools Limited into liquidation. The High Court granted the application, in the absence of any appearance by the company, on 1 May 2000. Chesterfields Preschools Limited then applied for an order terminating the liquidation, which application was ordered to be served on the Commissioner as he had before the Court a separate liquidation application which had yet to be called. Subsequently, the application for termination of liquidation was heard by Master Venning on 18 July 2000. The Master recorded this in relation to the position of the Commissioner:

Immediately prior to the hearing the Applicant company paid the sum of

$33,333.33 on account of income tax it says was due for the March 1999 year. Mr Hampton, the director of the Applicant company, also deposed to

paying the sum of $116,666.67 into trust to be held for any liability that the

company may have in relation to taxation matters.

His Honour went on to make an order by consent terminating the liquidation of Chesterfields Preschools Limited on terms that required the sum of $116,666.67 held in trust to be paid to the Commissioner on account of outstanding taxes by

21 July 2000 and requiring Chesterfields Preschools Limited to file its March 1998 tax return by 28 July 2000 if it had not been filed. His Honour ordered Chesterfields Preschools Limited to pay a modest sum of costs to the Commissioner.

M135/00

[15] This was the Commissioner’s application for an order winding up Chesterfields Preschools Limited which was referred to during the proceedings in M95/00. This proceeding (M135/00) was 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. The Commissioner conceded, through Mr Pike’s submissions, that the Commissioner had withdrawn this 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 contention of Chesterfields Preschools Limited in relation to the liquidation proceedings

[16] At no point in its statement of claim does Chesterfields Preschools Limited assert that there was a determination in any of the liquidation proceedings in its favour. Rather, in paragraph 229 of the statement of claim (above at [10]) it refers to the outcome of the judicial review proceedings and alleges that the Court’s decision implicitly set aside the four liquidation proceedings.

[17] High Court Rule 15.1 makes provision for orders striking out all or part of a pleading. In this case the defendants/applicants invoke r 15.1(1)(a) (No reasonably arguable cause of action) and r 15.1(1)(d) (Abuse of the process of the court).

[18] I adopt the following as principles applicable to the consideration of this application:

(a) The Court is to assume that the facts pleaded are true (unless they are entirely speculative and without foundation).

(b) The cause of action must be clearly untenable in the sense that the

Court can be certain that it cannot succeed.

(c) The jurisdiction is to be exercised sparingly and only in clear cases.

(d) The jurisdiction is not excluded by the need to decide difficult questions of law, even if requiring extensive argument.

(e) The Court should be slow to rule on novel categories of duty of care at the strike out stage. (See Attorney General v Prince [1998] 1

NZLR 262).

[19] The last principle is of relevance in relation to the tort I am about to consider.

A tort of malicious civil proceedings – the legal concept

[20] In the context of this strike out application, the discussion needed in relation to the concept of malicious civil proceedings is relatively straight forward.

[21] The concept was explored by Hammond J in Rawlinson v Purnell, Jenkison

& Roscoe, twice (see (1997) 15 FRNZ 681 and [1999] 1 NZLR 479). In the first of

those hearings, Hammond J while striking out aspects of a plaintiff’s claim, refused

to strike out those aspects which alleged malicious institution and malicious prosecution of civil proceedings. While noting the authority of Jones v Foreman [1917] NZHC 70; [1917] NZLR 798, a decision of the full court of the Supreme Court which is against the existence of such a tort, his Honour also noted the doubt expressed in relation to Jones v Foreman by Cooke J in New Zealand Social Credit Political League v O’Brien [1984] 1 NZLR 84, 88 – 89. A discussion of the difficult questions of principle and policy then led his Honour to conclude that he could not say that there was no prospect of success, in law, for the plaintiff. It was therefore inappropriate to strike out the two causes of action in question.

[22] The Rawlinson action came for hearing before Hammond J and a jury (leading to the report at [1999] 1 NZLR 479. His Honour set out his reasons for rulings which he had made in the course of the civil jury trial. In particular, he found at 484 - 485 that the elements of the tort would be that:

(a) the defendant must have advanced a civil cause (here the proceeding for a non-molestation order) against the plaintiff;

(b) the application must have been ultimately resolved in the plaintiff's favour;

(c) the defendant must have had no reasonable and probable cause for bringing the civil proceeding;

(d) the defendant must have acted maliciously in instituting or continuing the civil proceeding; and

(e) damage of a kind for which the law will allow recompense must have been caused to the plaintiff.

[23] Academic writing tends in favour of the existence of the tort. See for instance The Law of Torts in New Zealand (5th ed, 2009) S Todd at [18.3], pages 907

– 909, where Professor Todd, as the author of that chapter, notes without criticism the five point test enunciated by Hammond J in Rawlinson v Purnell, Jenkison & Roscoe.

[24] In submitting that this was an appropriate case for striking out the plaintiffs’ proceeding, Mr Pike for the Commissioner focussed on one element only, namely that for a plaintiff to succeed the case must have been resolved in the plaintiff’s

favour. Mr Hampton in presenting his submissions for the plaintiffs accepted, by reference to the test in relation to malicious prosecution, that this was a necessary element.

Discussion – was each proceeding determined in favour of the plaintiffs?

[25] I have summarised above at [12] to [15] the outcome of each of the liquidation proceedings.

[26] Mr Pike, for the Commissioner, noted the absence of any outcome in favour of Chesterfields Preschools Limited in the nature of a certificate of judgment or consent order. He noted that in each case (other than the proceeding M135/00) the outcome was that the proceeding was withdrawn (or discontinued or struck out depending on the terminology) but in the context that the company had either accepted a liability and paid money or would do so.

[27] There is the further difficulty for the plaintiffs in relation to M95/00 – the proceeding in that case was brought by Daveron Scaffolding Limited and not by the Commissioner with the consequence that there is a dual difficulty in terms of the elements of the tort, specifically because it was Daveron (not the Commissioner) who brought the proceeding and in the event Daveron was paid the money it claimed to be due.

[28] In his submissions Mr Pike noted the means by which the pleading of the statement of claim sought to overcome the absence of any substantive finding in favour of Chesterfields Preschools Limited in the liquidation proceedings. Mr Hampton was suggesting that the judgment of Fogarty J on 15 December 2006 had “by implication” set aside the liquidation proceedings. As the pleading does not identify a particular passage in the 15 December 2006 judgment, Mr Pike reviewed the 15 December 2006 judgment to identify precisely what Fogarty J had said. His Honour said this at [141]:

There are a number of proceedings initiated for the liquidation of

Chesterfields Preschools Limited. The Commissioner either initiated or

supported some of them but the company has never been wound up, as the proceedings were resolved by debt payments.

[29] Mr Pike submitted that that summary (which is accurate) is not an outcome favourable to the plaintiffs. The outcome indicates implicitly an acceptance of liability and expressly a resolution by payment of debts.

[30] Mr Hampton’s analysis of the elements of the tort proceeded from the authorities in relation to criminal prosecutions. He submitted that a prosecution is determined in favour of the plaintiff when the proceedings are –

a) adjourned sine die and cannot be revived without leave of the Court;

and

b) where proceedings fail and the claimant is acquitted.

In a sense, at this point the respective submissions were passing each other as ships in the night. Mr Pike did not take issue with Mr Hampton’s formulation, by inference because it was focussed on the outcome of criminal prosecutions where the focus is on the non-incriminating termination of the criminal proceeding: see The

Law of Torts in New Zealand (5th ed, 2009) S Todd at [18.2.04].

[31] The formulation appropriate to criminal proceedings does not lend itself to a case where the allegation is that civil proceedings have been malicious. Given the many ways in which civil proceedings may come to an end, there must in relation to the tort of malicious civil proceedings be a requirement that the substance of the outcome be examined. This is particularly so in relation to a civil proceeding for the liquidation of a company. It is an artifice to suggest that the ultimate dismissal of the liquidation proceeding always amounts to a resolution in the company’s favour. The substance of the outcomes for the proceedings identified by Mr Hampton is that the Commissioner obtained either all or part of the debt asserted. While the absence of an award or an agreed payment of costs is not definitive, the fact that in some cases costs were ordered reinforces the substance of the outcome. Costs awards will generally reflect the primary principle that costs follow the event (expressed in r

14.2(a) High Court Rules by the principle that “the party who fails with respect to a

proceeding or an interlocutory application should pay costs to the party who

succeeds”).

[32] In his oral submissions Mr Hampton emphasised the fact that the winding up proceedings had been “discontinued” as he put it. The implication of the submission remained that if the Commissioner discontinued the proceeding or (as the terminology was used in one case) had the proceeding “struck out”, then Chesterfields Preschools Limited was the party who had been successful in the application.

[33] Nothing in the statement of claim as pleaded nor in Mr Hampton’s additional submissions involves a sustainable allegation that Chesterfields Preschools Limited was successful (other than arguably in the M135/00 proceeding, which was the subject of Mr Pike’s appropriate concession).

[34] The Commissioner by those civil proceedings (other than M135/00) asserted that a debt was due and owing and sought the winding up of the company. Consistently with usual practice when debts are paid or satisfactory arrangements are made for the payment of debts, the winding up proceedings were discontinued. Those events do not in any substantive sense in relation to the debt which was the subject of the Commissioner’s concern amount to a resolution in favour of the company. Certainly, the company survives and is not wound up but in relation to the civil issue at the core of the relationship between the Commissioner and the company the substantive outcome was in favour of the Commissioner.

Malicious liquidation proceedings – outcome

[35] The orders which will be made in relation to the allegations concerning the liquidation proceedings will therefore be that (save in relation to M135/00) the claims and the relevant part of the statement of claim is to be struck out.

Summary judgment proceedings

[36] In their statement of claim the plaintiffs allege under a heading “Summary

Judgment Proceedings 2004” that:

201. In May and June 2004 the defendant issued further malicious prosecutions against the claimants various tax entities: CIV 2004-409-1025, CIV-2004-009-1614, 2004-009-1615, 2004-009-1616, (“the summary judgment proceedings”) while continuing the fraudulent concealment of the Aronsen file notes.

[37] The statement of claim later goes on to allege that the “summary judgment proceedings” were permanently set aside by the judicial review proceeding which culminated in the 15 December 2006 judgment.

[38] The four proceedings which are referred to in the plaintiffs’ statement of

claim were not all summary judgment proceedings. I summarise them:

a) CIV-2004-409-1025 – Chesterfields Preschools Limited v Commissioner of Inland Revenue – in this proceeding Chesterfields Preschools Limited made application under s 290 Companies Act

1993 for an order setting aside a statutory demand which the

Commissioner had issued for $620,545.94.

b) CIV-2004-009-1614 – Commissioner of Inland Revenue v D J Hampton and T/A Sisson the Chesterfields Preschools Partnership – the Commissioner sued these individuals for $146,549.66 and sought summary judgment. The proceeding was transferred to the High Court, becoming CIV-2005-409-135.

c) CIV-2004-009-1615 – Commissioner of Inland Revenue v D J Hampton and T. Sisson, trading as the Chesterfields Partnership – the Commissioner sued the individuals for $753,861.19 and sought summary judgment. The proceeding was transferred to the High Court and became CIV-2005-409-136.

d) CIV-2004-009-1616 – Commissioner of Inland Revenue v D J Hampton – the Commissioner sued Mr Hampton for $411,130.12 and sought summary judgment. The proceeding was transferred to the High Court and became CIV-2005-409-137.

[39] Following the commencement of these four proceedings and the transfer of the latter three to this Court, each of the proceedings was on 9 September 2008 adjourned with the intention that a further date would be fixed beyond the judgment to be issued in the judicial review proceeding.

[40] As a matter of record none of the four proceedings was subsequently restored for hearing. Each remains adjourned.

[41] The 15 December 2006 judgment in the judicial review proceeding does not purport to deal with any of these four proceedings.

Discussion

[42] The allegation in the statement of claim (above at [36]) is that “the summary judgment proceedings” were permanently set aside by 15 December 2006 judgment. The terminology of “setting aside” adopted by the plaintiff in their pleading is not strictly apt. “Setting aside” has meaning in relation to a judgment or order of the Court. There has been no relevant judgment or order coming out of any of the four proceedings. Equally, none of the four proceedings has been struck out or otherwise dismissed. Rather, the record shows that each stands adjourned.

[43] Apparently to meet this reality, and notwithstanding the allegation in the statement of claim that the four proceedings had been “permanently set aside” (by the 15 December 2006 judgment), Mr Hampton submitted that the proceedings had been determined in favour of the plaintiffs because they had been adjourned sine die and cannot be revived without leave of the Court. He submitted that this situation amounted in terms of the elements of the tort of malicious civil proceedings to a determination in favour of the plaintiffs. I find that the adjournment of the four proceedings could not arguably amount to a determination in favour of the plaintiffs.

By its very nature an adjournment of the proceeding (whether to a fixed or unfixed date) involves leaving the determination (if any) to a later date. The fact that under the rules of Court as they might operate from time to time there might be a difficulty for one or both of the parties in later reviving the proceeding does not alter the fact there has not to that date been a determination. As it is, the High Court Rule which Mr Hampton may have had in mind – r 426A, which dealt with the consequences of failing to set down a proceeding within 12 months after the last step was taken - was revoked with effect from 24 November 2003. Contrary to Mr Hampton’s submission, leave is not required under the High Court Rules as they stand at present for either party to have the proceeding brought on for determination. In practice either party is in a position to take a further formal step or to request the Registrar to arrange a case management conference.

Summary judgment proceedings – conclusion

[44] For these reasons, and particularly having regard to the record in each of the four proceedings which are central to the allegations concerning the “summary judgment proceedings”, this is a case where the 15 December 2006 judgment itself and the record in the four proceedings firmly establishes that the central allegation (namely that the summary judgment proceedings were permanently set aside by the

15 December 2006 judgment) is without foundation.

[45] It is not for this Court to speculate what might be the outcome of each of those four proceedings if and when they are brought on for determination. The plaintiffs chose to issue this present proceeding without having achieved a determination in those proceedings. Contrary to the plaintiffs’ assertions, the

15 December 2006 judgment does not purport to deal with the “summary judgment proceedings” in the sense of determining them.

Overall conclusions

[46] The plaintiffs had pursued a set of closely related causes of action (presented in their statement of claim as a single cause of action) for what they refer to as “the

malicious prosecutions”. I have dealt with those matters in this judgment as a cause of action based on the arguable tort of malicious civil proceedings. Mr Pike and Mr Hampton have a large measure of agreement on the elements of that tort as I have summarised them above.

[47] The jurisdiction to strike out all or part of a pleading is to be exercised sparingly and only in clear cases. This is a clear case. The plaintiffs are entitled to the benefit of an assumption that a tort may exist in relation to malicious civil proceedings. But on a faithful reading of the 15 December 2006 judgment of this Court in Chesterfields Preschools Limited v Commissioner of Inland Revenue, and upon the basis of the record in the seven sets of proceedings in question, the only aspect of this proceeding which is tenable on the pleadings is that of Chesterfields Preschools Limited in relation to the liquidation proceeding M135/00. On the concession properly made by Mr Pike in relation to that part of the proceeding, it is the case that Chesterfields Preschools Limited has a tenable claim to say that it was the successful party in M135/00.

The correct content of an order

[48] In this judgment I have not dwelt on the generally unsatisfactory nature of the statement of claim filed by the plaintiffs. Mr Pike described the pleading as “impossibly prolix”. That description is fair. The statement of claim extends over

48 pages, and is in a format which contained a much narrower margin than permitted by the rules. The pleading contains 232 paragraphs, some of which contain in themselves 10 or more sub-paragraphs. There are paragraphs which contain matters of evidence rather than matters required to be pleaded. There are paragraphs which by their nature do not lend themselves to a clear response by way of defence because separate and distinct facts are not stated separately and clearly as required by r

5.17(1). Many examples could be given but one will suffice (taken from paragraph

232(v):

In May 2004 and continuously from May 2004 to December 2006, by the defendant’s abusive exercise of the ex parte legal process setting in train execution of enforcement against the property of the claimants without reasonable cause and maliciously, based on the continuing fraudulent

misrepresentation of officers Barry, Doubleday and Kettley, the defendant issued enormous section 157 Notices to the Ministry of Education and various banks associated with the claimants, causing the loss of the claimants preschools businesses, and making it extremely costly to raise finance from third tier lenders. This made it very difficult to secure and maintain legal representation to bring on the first judicial proceedings to overcome the summary judgment proceedings maliciously initiated by the defendant in 2004.

[49] This “particular” is given in relation to a pleading (paragraph 232) in which the plaintiffs assert they “have suffered loss of their businesses, damage and destruction to their property, income and reputations, humiliation and distress”. The Commissioner has not sought to strike out the statement of claim generally in relation to its prolixity and other breaches of pleading requirements. Nevertheless, the state of the pleading is such that if it were carried into the amended statement of claim which will be required as a result of the order the Court is about to make it would remain an unsatisfactory basis for the identification of issues in the proceeding and for the case management of the proceeding generally.

[50] The plaintiffs chose to issue this proceeding through Mr Hampton and to be represented at the interlocutory hearing by Mr Hampton. As one of the plaintiffs, Mr Hampton was entitled as of right to represent himself. That did not apply in relation to his representation of the companies and of his partner. By Minutes dated

29 July 2009 and 1 September 2009 I considered issues of representation in the light of the Mannix rule (Re G J Mannix Limited [1984] 1 NZLR 309). In the event, by reason of the helpful position adopted by both Mr Pike and Mr Hampton at that time, I did not have to rule on the Mannix issue. I authorised Mr Hampton to represent the plaintiffs generally for the purposes of preparation for and submissions at the interlocutory hearing. I reserved all issues of representation thereafter.

[51] In his submissions in relation to the pleadings in this case, Mr Pike at the hearing noted that while Mr Hampton is not a practising lawyer, he does have legal qualifications. Mr Pike referred to allegations of fraud in the statement of claim. Mr Pike referred to the obligations upon counsel in relation to such allegations, and made specific reference to Clyne v New South Wales Bar Association (1960) 104

CLR 186.

[52] Given that the order which is to be made preserves that part of the proceeding which is the claim of Chesterfields Preschools Limited in relation to the proceeding in M135/00, the Court must now re-examine whether Mr Hampton is permitted to represent Chesterfields Preschools Limited in relation to amended pleadings and the conduct of the proceeding for the remaining plaintiff from this point. The order below addresses that issue in a way that preserves the right of both parties to make further submissions.

Application by plaintiffs for discovery

[53] Mr Hampton on behalf of the plaintiffs filed an application which he described as an “application for discovery”. It is not a straightforward application for discovery. This is exemplified by the very first order sought, namely:

That the defendants (sic) give discovery of the following documents in a list verified by affidavit:

1. The name and positions of relevant IRD officers who accessed the

Aronsen file notes.

[54] In a notice of opposition, the Commissioner opposed each of the orders sought. The notice of opposition observed (correctly) that aspects of the application were more in the nature of interrogatories rather than the appropriate subject matter of an order for discovery of documents.

[55] More importantly for present purposes the notice of opposition took the point that the application for discovery was premature given the striking out application which was before the Court. The appropriateness of that objection has been borne out by the above analysis of the pleadings and the striking out order that has been made. The appropriate scope of discovery will now be determined in the light of the amended pleading of Chesterfields Preschools Limited if it proceeds with its cause of action.

[56] In the circumstances, neither Mr Pike nor Mr Hampton addressed any detailed submissions to the Court in relation to the discovery issue.

[57] Accordingly, I adjourn the plaintiffs’ application for discovery to the next case management conference at 3.00 pm, 8 May 2012 (by telephone) (Associate Judge Osborne).

Order

[58] I order:

a) Save to the extent that Chesterfields Preschools Limited as plaintiff sues the Commissioner of Inland Revenue as defendant in relation to an allegation that the Commissioner in Commissioner of Inland Revenue v Chesterfields Preschools Limited Christchurch HC M135/00 pursued malicious civil proceedings, the statement of claim in this proceeding is struck out in its entirety.

b) Chesterfields Preschools Limited shall within 20 working days either -

i. file and serve through a practising solicitor an amended statement of claim by Chesterfields Preschools Limited in which the preserved cause of action is pleaded; or

ii. if it wishes to continue to be represented by Mr Hampton, to cause Mr Hampton to file and serve a memorandum setting out any request Chesterfields Preschools Limited wishes to make in relation to representation and setting out the legal basis and the factual justification for such representation, with a draft of the amended pleading of Chesterfields Preschools Limited attached.

c) In the event that Chesterfields Preschools Limited files an amended statement of claim through a practising solicitor, the Commissioner shall file and serve his statement of defence within 20 working days after service.

d) In the event that a memorandum is filed and served requesting that Mr Hampton represent Chesterfields Preschools Limited, the subject matter of that memorandum is to be dealt with at the case management conference at 3.00 pm, 8 May 2012 (by telephone) (Associate Judge Osborne).

e) Costs are reserved. It is the Court’s tentative view that there ought to be a collective order for costs against the plaintiffs upon the basis that costs follow the event but with allowance for the measure of success which Chesterfields Preschools Limited has had. An alternative approach would be that there be costs orders against the second to fifth plaintiffs individually (costs following the event) with the position as between Chesterfields Preschools Limited and the Commissioner being determined on a stand-alone basis. The Court looks to Mr Pike and Mr Hampton to seek to resolve the costs issues between them. In the event no agreement is possible then the Commissioner is to file and serve submissions (limited to five pages) first with Mr Hampton to respond within five working days thereafter (maximum five pages also). The Court will then determine costs.

[59] For the purposes of case management, I adjourn the proceeding to a telephone conference at 3.00 pm, 8 May 2012 (by telephone) (Associate Judge Osborne). That conference will be vacated if the Registrar has in the meantime

_{allocated an earlier telephone conference.}

Associate Judge Osborne

_Solicitors:

D Hampton c/- Edgeware Law Centre, PO Box 21319, Christchurch [e-mail] Crown Law, PO Box 2858, Wellington 6140 – [e-mail] [e-mail] [e-mail]