Chesterfields Preschools Limited (in liquidation) v Sisson [2016] NZHC 1286 (15 June 2016)

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BETWEEN	CHESTERFIELDS PRESCHOOLS LIMITED (In Liquidation) Plaintiff
AND	THERESE ANNE SISSON Defendant

Hearing:	19 May 2016
Counsel:	B M Russell and K M Kendrick for the Plaintiff Ms Sisson (Defendant) in person S Kinsler for the Commissioner of Inland Revenue, a non-party intervener with leave G Slevin for the Official Assignee
_Judgment:	_{15 June 2016}

[1] Ms Sisson holds in her name title to a property at 854 Colombo Street, Christchurch. The liquidator of Chesterfields Preschools Limited (in liquidation) (Chesterfields) has issued these proceedings claiming that since 21 December 2007, pursuant to a series of undertakings and Court orders, she has held the property as trustee for Chesterfields. The property is subject to freezing orders made on 28

[2] At the time of the Canterbury earthquakes, Ms Sisson had taken out insurance policies for 854 Colombo Street with IAG NZ Limited (IAG). IAG and the

_{Earthquake Commission have paid out $938,264 in respect of earthquake
damage to}

¹Chesterfields Preschools Ltd & Ors v Commissioner of Inland Revenue HC Christchurch CIV-

²Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2015] NZHC 482.

the property. These funds were first applied to clear a mortgage to ANZ. A surplus of approximately $161,000 remains in accounts in Ms Sisson’s name with ANZ Bank New Zealand Ltd (ANZ). The insurance proceeds are held by ANZ pending further direction of the Court. The liquidator, Malcolm Hollis, claims these funds are held on trust for Chesterfields.

[3] The shares in Chesterfields (in liquidation) were held by Ms Sisson’s former partner, David Hampton. Ms Sisson asserts the shares were held by him on behalf of the Anolbe Family Trust (AFT) of which she says she is a trustee. Ms Sisson says that she acquired title to 854 Colombo Street in November 2007 in connection with a mortgagee sale to allow refinancing. She claims she holds 854 Colombo Street on trust for the AFT. She also claims that the insurance in her name was also on trust for AFT.

[4] The Commissioner of Inland Revenue (the Commissioner) is the principal creditor in the company’s liquidation. The Commissioner has been given leave to be fully involved in these proceedings as a non-party intervener.³

[5] In a minute of 5 April 2016, Associate Judge Matthews ordered that the substantive proceedings over the liquidator’s claim to 854 Colombo Street and the insurance proceeds are to be heard in a fixture over three days on a date to be arranged by the Registrar on the first available dates after 1 October 2016.⁴The Associate Judge scheduled a telephone conference on 29 June 2016 after he anticipated discovery and inspection would be completed. The proceedings have now been set down for trial over three days beginning 28 November 2016.

[6] On 7 April 2016, Ms Sisson filed an application to vary the freezing orders dated 16 March 2015 to release funds held in the ANZ bank account in her name, as follows:

• $6,600 to pay security for costs on an appeal by Chesterfields to the Court of Appeal against the order placing that company in liquidation;

³Chesterfields Preschools Ltd (in liq) v Sisson HC Christchurch CIV-2016-409-000040, 5 April

• for release of funds required for the clearance of the Colombo Street property.

[8] In separate proceedings (CIV-2016-409-185), Ms Sisson has sought a declaration under the Declaratory Judgments Act 1908 that funds held by the Official Assignee in the estate in bankruptcy of David Hampton were held by Mr Hampton on behalf of the AFT. The funds resulted from a mortgagee sale of a property at 67

[9] On 12 May 2016, the Commissioner applied for consolidation of these proceedings with those in CIV-2016-409-185.

[10] Notices of opposition were filed as to all the above applications. I heard argument on all of them at a hearing on 19 May 2016.

[11] In a notice of opposition, the liquidator stated that he neither consented to nor opposed the applications for release of funds to pay security for costs and a setting down fee in the Court of Appeal. He opposed the order sought with regard to the payment of rates but instead sought an order requiring payment of the rates amount to the trust account of the liquidator for the liquidator to then pay those rates to the Christchurch City Council. He opposed the order sought for release of funds to pay for clearance of the section but instead sought an order that $30,000 be paid to the liquidator’s trust account for the liquidator to select and pay a reputable contractor to clear the site at 854 Colombo Street.

• fees should not be released to pay security for costs or other costs for the appeal to the Court of Appeal. It was an appeal being advanced by Ms Sisson personally, not on behalf of the company. The funds belong to Chesterfields not the AFT;

• she did not oppose the release of funds to the liquidator to pay for clearance of the section.

[13] Agreement was reached with regard to a variation of the freezing orders to allow payment to the Christchurch City Council of rates arrears. As a result, I make orders as follows:

(a) The freezing orders of Gendall J dated 16 March 2015 in proceedings CIV-2004-409-1043 are varied so as to allow the rates owing to the Christchurch City Council in the sum of $12,663.33 (pursuant to the rates invoice dated 9 January 2016 at annexure “A” to the affidavit of TA Sisson sworn 6 April 2016) be released by ANZ Bank New Zealand Ltd (ANZ) from the account in the name of TA Sisson 088056229-1000 and paid directly to ANZ to the Christchurch City Council reference

(b) ANZ is authorised to discuss the mechanics of payment of the rates invoice from Ms Sisson’s account for the property at 854 Colombo Street with Malcolm Hollis and Jo Hoskings, of the liquidator’s office.

[14] Ms Sisson sought the release of funds to make payments to the Court of Appeal so there could be an appeal against the order placing Chesterfields Preschools Limited in liquidation.

[15] On 27 April 2016, Harrison J, in the Court of Appeal, issued a minute confirming that on 25 February 2016 the Court had certified that, pursuant to r 43 of the Court of Appeal (Civil) Rules 2005, this appeal was abandoned and notice had been given to the parties accordingly.⁵In that minute, Harrison J recorded, for the avoidance of doubt, that the appeal was abandoned and the Registry was not to accept for filing any further documents relating to it.

[16] That being the situation, Ms Sisson does not need the funds she was seeking to make any payments to the Court of Appeal in connection with that appeal. Her application for variation of the freezing order in that regard is dismissed.

[17] Through an affidavit filed for the liquidator, I have seen photographs of 854

Colombo Street. There is clearly a good deal of rubbish and parts of, what I assume was, a damaged building on the site. The Christchurch City Council has issued an abatement notice requiring clearance of the section. A notice was sent to Ms Sisson on 16 October 2015. It required clearance of the section by 25 January 2016. Ms Sisson did not provide a copy of the abatement notice to the liquidator until 19

[18] In an affidavit in support of her application, Ms Sisson said she would agree to funds being released to the liquidator for disbursement to Right Hire Ltd to arrange clearance of the section. She asserted they were a reputable firm and had quoted $22,000 plus GST to do the work. She said their quote was cheaper than quotes supplied to the liquidator that were in the range of $23,970 plus GST (Grace Works) to $65,340 plus GST (Polcon).

[19] Correspondence between solicitors for the liquidator and Ms Sisson referred to Mr Hampton having been in telephone contact with the liquidator on 12 May 2016 saying that he now had someone who, subject to an asbestos test being satisfactory,

[20] The Court also received an affidavit on 19 May 2016 from Mr Hampton. In that affidavit, he said he was providing information regarding the abatement notice. He said, because Ms Sisson works fulltime, she had asked him to deal with the abatement notice on her behalf. He said that he had been having discussions with Mr Hollis concerning new information he had obtained and he was “confident that we can reach agreement over the next few days on the nature and conduct of the work to be carried out under the abatement notice”. He said he had earlier emailed a letter to the liquidator on 13 May 2016 setting out proposals but the letter had not reached him because the email had been addressed incorrectly. He had resent the letter on 18 May 2016 and said in his affidavit that he “anticipated finalising an agreement with Mr Hollis over the work to be carried out once Mr Hollis has had a chance to consider the written proposal”.

[21] With the affidavit was a copy of his letter in which he referred to his discussed proposals for the firm of Breens Earthmovers (Breens) to carry out asbestos tests. In the letter, Mr Hampton made proposals for himself to make arrangements with Breens to remove material and do certain other work. He suggested that invoices should be copied to the liquidator but a schedule of all of them be filed with the Registrar of the High Court for approval by consent for payment.

[22] In her submissions, Ms Sisson said the funds should not be released to the liquidator on the basis Chesterfields was entitled to the funds because there was a dispute as to that. In an affidavit of 6 April 2016, Ms Sisson had said that “without making any concession” for the sake of the site being cleared, she was willing to have funds released to the liquidator to be disbursed to Right Hire Ltd to arrange clearance of the section.

22. It is quite clear that Ms Sisson is an instrument of the Court in regards to ownership of the property.

Mr Hampton then asserted the Council should have addressed the abatement notice to Chesterfields.

[24] In submissions for the liquidator, Mr Russell referred to the fact that, as evidenced by numerous documents filed in the proceedings, there is a complete lack of trust between Ms Sisson, Mr Hampton and the IRD. The IRD and the liquidator are concerned about the risk of funds not being used for a proper purpose.

[25] Mr Russell also submitted that because Mr Hampton is currently bankrupt, he is not an appropriate person to have responsibility for the commercial arrangements which must be made to have the section cleared. On this aspect, I agree.

[26] The liquidator will ultimately be accountable to the Court as well as creditors for the decisions he makes with regard to preserving company property. If ultimately Ms Sisson is successful in establishing that 854 Colombo Street and/or the proceeds of insurance belonged to the AFT, the liquidator will be accountable for the way in which he has arranged for the necessary clearance of the section to be carried out.

[27] I accept Mr Russell’s submission that, with the liquidator taking responsibility for the decisions that have to be made in this regard, it is neither necessary or appropriate for the High Court to have to assess and approve arrangements that have to be made for clearing 854 Colombo Street.

[28] Mr Russell, in his submissions, did refer to a number of concerns which the liquidator had as to the basis on which Breens might be engaged to do the work. It is not necessary for me to determine whether those concerns are justified or will ultimately warrant the engagement of someone other than Breens to do the work. It is however apparent that, belatedly, Ms Sisson or, more accurately, Mr Hampton has been providing information to the liquidator which may be of assistance in the decision he has to make about the section. It is also apparent that the liquidator has been receptive to that information and is willing to consider it.

[29] There is no dispute that 854 Colombo Street needs to be cleared. The liquidator is the appropriate person to have responsibility for this.

[30] I accordingly make an order that the sum of $30,000 be paid from the ANZ Bank account in the name of TA Sisson 088056229-1000 to the trust account for the liquidators of the defendant in the name of PricewaterhouseCoopers Christchurch 02

0800 0502623 00, for them to select and pay a reputable contractor to clear the site at

[32] CIV-2016-409-40 is an application under the Trustee Act 1956 brought by the liquidators of Chesterfields for orders vesting 854 Colombo Street and insurance monies in the liquidator. The application is supported by the Commissioner.

[33] CIV-2016-409-185 is Ms Sisson’s application for a declaration under the Declaratory Judgments Act 1908 for declarations that funds held by the Official Assignee in the bankruptcy estate of David Hampton (her former husband, business partner and ex-director of Chesterfields Preschools Limited) were in fact held by Mr Hampton on behalf of beneficiaries of the AFT. The funds concerned were derived from the mortgagee sale of a property at 67 Augusta Street, Christchurch. The Commissioner, as principal creditor in the bankruptcy estate of David Hampton, opposes that application for such a declaration.

[34] Ms Sisson opposes the application for consolidation on the basis, in summary, that the circumstances relevant to determination of the different claims are separate and distinct. The proceedings relate to different properties and different parties.

[35] Ms Sisson said that proceeding CIV-2016-409-185 related to 67 Augusta Street. She said the contest as to beneficial ownership was between the AFT and Mr Hampton. In contract, she said in the proceedings CIV-2016-409-40 “the

determinative issue” was whether she or Chesterfields Preschool Limited owned the insurance policy before she claimed to have assigned it to the AFT. Ms Sisson did not refer to there being any issue as to whether AFT or Chesterfields Preschools Limited was beneficially entitled to 854 Colombo Street.

[36] Ms Sisson said the parties in both proceedings were not the same and there was no need for the liquidator to be involved in the proceedings over the Augusta Street proceeds. She did not accept that it would be more efficient to consolidate the proceedings but said she would have no objection to the proceedings being heard sequentially and she would have no objection to timetabling directions being made and managed together for both proceedings.

[37] Mr Russell, for the liquidator, supported the application for consolidation. He submitted there were a number of aspects in which issues or evidence in both proceedings overlapped and at the heart of both proceedings was the late emergence of AFT and its claimed beneficial ownership of property. He submitted that issues of credibility would be of importance in both proceedings and, in that regard, there were issues as to the veracity and authenticity of material that was being relied on.

[38] The discretion to direct consolidation is wide.⁶The factors that will favour consolidation include the savings in time and cost to the parties and of judicial resources and removing the risk of inconsistent decisions.⁷

[39] The Court has a discretion to order consolidation where “some common question of law or fact arises in both” proceedings or the right to the relief claimed arises out of the same series of events.⁸The Court may also order consolidation if

the Court is satisfied “for some other reason it is desirable” to make such an order.⁹

[40] I accept that both proceedings will require the Court to determine questions of fact and law relating to the existence of and purported transfer of assets to the

_{AFT in circumstances where the assets were the subject of freezing
orders obtained}

⁷_{Medlab Hamilton Ltd v Waikato District Health Board
[2007] NZHC 1780; (2007) 18 PRNZ 517 (HC) at [8].}

by the Commissioner pending the determination of tax disputes between the Commissioner, Chesterfields Preschools Limited, Mr Hampton and related parties. Statements made previously by or on behalf of Mr Hampton and the company to both the Court and the Commissioner will be relevant to both proceedings. An assessment of the credibility of Mr Hampton and Ms Sisson will be central in both proceedings and it is highly likely that evidence relevant to assessments of credibility in one proceeding will also be of relevance in the other proceeding.

[41] The evidence available to the Commissioner will thus be relevant in both proceedings. While the liquidator may not have a monetary interest in the proceedings dealing with the beneficial ownership to 67 Augusta Street, the evidence which the Commissioner produces in proceedings CIV-2016-409-185 will be relevant to the issues the Court has to determine in CIV-2016-409-40. It thus cannot be said that consolidation will lead to the liquidator being unnecessarily involved in both proceedings. It is also relevant that the liquidator supports consolidation.

[42] I accept that, hearing the matters simultaneously will save time and cost for the parties and the Court and will avoid the risk of inconsistent findings of fact or law across the two proceedings. I also accept that there will be no prejudice to the parties from consolidation. In that regard, there will be merit in coordinating timetabling directions across both proceedings.

[44] On 21 March 2016, I made directions in proceedings CIV-2008-409-000722¹⁰which required Ms Sisson to file all affidavits in support of her application in those proceedings by 5.00 pm on 27 May 2016. On that direction, the timetable was of the essence. I also directed there would be a first case management conference in those proceedings in the week of 13 June 2016. In the proceedings CIV-2016-409-40,

_{Associate Judge Matthews adjourned for a conference on 29 June 2016 at
3.00 pm.}

[45] The two proceedings are consolidated on terms that the conference scheduled on 29 June 2016 at 3.00 pm is to be for both proceedings.

[46] Mr Kinsler filed a memorandum for the Commissioner on 9 June 2016. He referred to the fact that Associate Judge Matthews had made directions for discovery to be made in these proceedings by 9 June 2016. Mr Kinsler suggested that, if an order for consolidation was made, it may be appropriate to file one affidavit for discovery as to both proceedings. He sought an extension of time accordingly. That is appropriate. The timing for discovery in relation to both proceedings can be discussed at the conference scheduled for 29 June 2016.

[47] In her application for review, Ms Sisson objected to a statement made by Associate Judge Matthews in paragraph [12] of his minute.¹¹The Associate Judge had noted the need for tailored discovery relevant to the issues in the proceedings which were concerned with beneficial ownership of 854 Colombo Street and the remaining proceeds of the insurance claim in respect of that property. The Associate Judge said he had directed that there should be tailored discovery because the proceedings were not an opportunity to mount a collateral attack on the actions of the Commissioner or to endeavour to put before the Court some sort of basis for a

review of the actions of her staff. Associate Judge Matthews said it was not appropriate in these proceedings to be raising some “equitable issue of non- disclosure conduct on the part of the Revenue”.¹²

(a) to Associate Judge Matthews criticising her for filing a second affidavit without leave;

(b) to the Associate Judge referring in his minute to a submission from counsel for the liquidator that he had proceeded by way of summary judgment on the strength of statements made by Ms Sisson; and

(c) to the way she said the Associate Judge disregarded a comment she had made that the Court had imposed a trust with a qualification as to the nature of that trust and the beneficial interest.

(a) there had been no substantive decision made, rather the minute related essentially to case management issues;

(d) the plaintiff wished to progress matters as efficiently as possible and the case management directions would assist in achieving that.

[50] Ms Sisson’s application for review was commented on by Dunningham J in a minute of 18 April 2016.¹³She invited Ms Sisson to look carefully at the application before proceeding with it. She acknowledged that she had not heard argument on it but observed that there did not appear to be any challenge to the substantive decision by Associate Judge Matthews and, on the face of it, the application could be futile.

[51] The application was first called before me on 19 May 2016 at the same time as I was dealing with the other applications. Once I had heard argument on those other matters, I indicated I was ready to proceed to hear substantive argument on this application. Ms Sisson said she was not ready to argue the matter and sought an adjournment. I tentatively indicated that, given the nature of the application and Ms Sisson’s involvement in making the application, she should not need further time to be ready. After taking the morning adjournment, I indicated I would not agree to an adjournment and I wanted submissions on the application at that time.

[52] Ms Sisson was able to make submissions to me. She submitted that the statements made by the Associate Judge which she objected to could be amenable to

¹³Chesterfields Preschools Ltd (in liq) v Sisson HC Christchurch CIV-2016-409-000040, 18 April

review even if they did not relate to a direction as to a substantive step to be taken in the proceedings.

[53] Consistent with her application for review, the issue of most concern to her was the way in which Associate Judge Matthews had indicated it would not be appropriate in these proceedings to try and pursue some claim against the Commissioner based on allegations of unconscionable conduct on her part. Her submissions in that regard were consistent with what she had set out as the grounds for her review:

3. The issues related to the allegations against the Commissioner’s officers of deceptive conduct concerning the failure to fairly respond to requests for disclosure of the evidence crucial to the defence of the penalty claims over the years from 1999 to 2006, go to the issue whether the Court imposed trust was sought in circumstances of alleged undisclosed unconscionable conduct on the part of the party seeking to impose the trust and the benefit thereunder.

4. The Commissioner considered the complaints of unconscionable conduct amount to allegations of deceptive conduct, were serious and required a response from the officers concerned by way of sworn affidavits.

5. In seeking the Court imposed trust, the Commissioner promised to provide the affidavit responses to the court in memorandum dated 26

6. The Commissioner has failed to respond to the complaints of unconscionable conduct.

7. The Commissioner seeks to obtain the benefit of the Court imposed trust despite her failure to respond to the allegations of unconscionable conduct.

[54] In his submissions for the liquidator, Mr Russell reiterated the criticisms that had been made in his notice of opposition. He said most of the criticism she had made did not relate to any specific direction. He submitted the Associate Judge’s comments, in relation to the inappropriateness of making some broad-based attack on the part of the Commissioner, was unobjectionable. In that regard, he referred me to earlier judgments of the Court of Appeal.

[55] Ms Sisson makes no criticism of the directions made by Associate Judge Matthews. For the avoidance of doubt, I confirm that those directions remain in place and are to be complied with.

[56] Associate Judge Matthews made orders, including timetabling directions, in the context of an interlocutory hearing for an application for summary judgment. Ultimately, it was agreed the application for summary judgment would not be pursued and directions were made to enable the substantive proceedings to be set down for trial later in the year. If the orders were made in Court, there was no jurisdiction to challenge the decisions which the Associate Judge made by way of an application for review. If the Judge’s comments and determinations were made in Chambers, then an application for review can be made only under r 2.3. That rule allows for an application for review “of an order or a decision made by an Associate Judge”.

[57] The parts of Associate Judge Matthews’ minute which Ms Sisson objects to do not involve an order or a decision and there is no jurisdiction for me to review them.¹⁴

[58] Associate Judge Matthews did make comments intended to limit the scope of any affidavits that might be filed by Ms Sisson. In doing so, he was making observations consistent with the objective of the High Court Rules which “is to secure the just, speedy, and inexpensive determination of any proceedings or interlocutory application”.¹⁵His comments should also be seen as potentially being of assistance to Ms Sisson by putting her on notice of risks she could run with regard to costs if, through affidavits, she sought to put other parties, including the Commissioner, to the expense of responding to claims or arguments that lacked merit or if she acts “vexatiously, frivolously, improperly, or unnecessarily” in the way she

continues with her proceedings. The Associate Judge’s comments were relevant and appropriate in that context, given the Court of Appeal’s judgment of Commissioner

¹⁴_{Radioworks Ltd v Commissioner of Inland Revenue
[201] NZCA 129, (2011) 20 PRNZ 561.}

¹⁶Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53.

[59] It is apparent from those grounds that Ms Sisson is seeking to assert in these proceedings that the Commissioner should not be able to benefit from either Mr Hampton’s beneficial interest in the sale proceeds from 67 Augusta Street or Chesterfields Preschools Ltd’s beneficial interest in 854 Colombo Street (or the insurance settlement from that property) by reason of the Inland Revenue Department’s late discovery of the “Aronsen notes”. The Court of Appeal has held the Commissioner can have no liability to a taxpayer with regard to those allegations and others. If the allegations were to be the subject of any claim, it would have to be pursued against either the officers concerned or the Attorney-General for the Crown. Such proceedings could only have been continued against such parties with leave of

[60] The application for review is dismissed. The liquidator is entitled to costs on that application. If there is no agreement, counsel for the liquidator is to file a memorandum within 14 days. Ms Sisson is to file a response within a further seven days. The memoranda are to be no longer than three pages. If necessary, I will deal with costs on the basis of those memoranda. Costs on the applications for the variation of the freezing order and consolidation are reserved.

S Kinsler, Meredith Connell, Wellington T A Sisson, 8A Kahu Road, Christchurch G Slevin, Official Assignee, Christchurch.

¹⁷Commissioner of Inland Revenue v Chesterfields Preschools Ltd, above n 16.

High Court of New Zealand Decisions

Chesterfields Preschools Limited (in liquidation) v Sisson [2016] NZHC 1286 (15 June 2016)

High Court of New Zealand

Chesterfields Preschools Limited (in liquidation) v Sisson [2016] NZHC 1286 (15 June 2016)