The Official Assignee v Norris Hc Nel

• Jurisdiction: New Zealand
• Judge: Mallon J
• Judgment Date: 08 May 2012
• Neutral Citation: [2012] NZHC 961
• Docket Number: CIV 2011-442-80
• Court: High Court
• Date: 08 May 2012

BETWEEN

The Official Assignee

Plaintiff

and

Patrick Dean Norris

Defendant

[2012] NZHC 961

CIV 2011-442-80

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

Application for review of judgments of Associate Judge relating to discovery and striking out certain prayers for relief — defendant was liquidator of eight companies — Registrar of Companies received complaints about conduct and investigated defendant — alleged breach of duties owed as liquidator — Official Assignee (“OA”) sought certain orders as a consequence — whether the OA had standing to apply under s284 Companies Act 1993 (“CA”) (Court supervision of liquidation) — whether proper notice given under s286(2) CA (order'to enforce liquidators duties).

Counsel:

W Fortherby for the plaintiff

Defendant in person

JUDGMENT OF Mallon J

Table of contents

Introduction	[1]
The background and the pleadings	[5]
Power to review	[14]
Strike out application	[16]
Issues	[16]
Standing under s 284	[17]
Notice under s 286	[35]
Continuing failure to comply under s 286(2): Companies now struck off	[62]
Prohibition order under s 286(5)	[68]
Further issue: order for removal	[76]
Summary of review of strike out application	[81]
Discovery	[84]
Publication judgment	[97]
Costs	[104]
Result	[108]

Introduction

1 The Official Assignee has brought proceedings against Mr Norris in respect of his actions as a liquidator of eight companies. The Official Assignee contends that Mr Norris breached duties he owed as a liquidator and seeks orders under ss 284 and 286 of the Companies Act 1993. These include orders that Mr Norris refund fees, and that he be removed as liquidator and be prohibited from acting as a liquidator for an indefinite period. Mr Norris denies any breach of his duties and contends that the proceedings have not been brought in accordance with the requirement of ss 284 and 286.

2 The proceeding is at the interlocutory stage. Before me is Mr Norris' application for review of three judgments of the Associate Judge, namely:

• (a) A judgment dated 3 August 2011 directing Mr Norris to provide general discovery (“the discovery judgment”);

• (b) A judgment dated 10 February 2012 striking out two prayers for relief in seven of the nine causes of action and declining to strike out the other prayers for relief (“the strike out judgment”);

• (c) A judgment dated 24 February 2012 declining Mr Norris' application to restrain publication of the strike out judgment (“the publication judgment”).

3 Mr Norris contends that general discovery is oppressive, particularly in light of the investigatory powers of the Registrar of Companies. He contends that the claim is defective and should be struck out because the Official Assignee does not have standing under s 284, failed to give proper notice as required by s 286 and seeks relief under s 286 that is not available. He contends that publication of the strike out judgment ought to be restrained because of its prejudicial impact on his business. The Official Assignee contends that Mr Norris cannot establish any error by the Associate Judge.

4 Mr Norris' review applications in respect of the discovery judgment and the strike out application are out-of-time. Mr Norris therefore applies for leave to bring those review applications out-of-time. Leave is opposed by the Official Assignee.

The background and the pleadings

5 In June and July 2010 the Registrar of Companies received complaints about Mr Norris. As a result of those complaints the Registrar commenced an investigation into Mr Norris. For this purpose Mr McPherson (an investigating accountant) and Mr Ramsay (a solicitor) were authorised, under s 365 of the Companies Act, to inspect all the companies in liquidation that were being managed by Mr Norris' liquidation company. The information obtained from that investigation was referred to the Official Assignee under s 366 of the Companies Act.

6 As a result of the information received, on 1 December 2010 the Official Assignee advised Mr Norris (via their respective solicitors) that it intended to commence proceedings against him. The letter was said to be notice, pursuant to s 286(2) of the Companies Act, of Mr Norris' “failures to comply with his duties as liquidator under the Companies Act”. The letter said that the notice and intended proceedings related to seven companies, which were listed. 1 The letter referred to an attached draft statement of claim “which contains details of the failures by [Mr Norris] and the remedies sought”. It concluded that if “after five working days there is a continuing failure to comply” by Mr Norris, the Official Assignee would finalise, file and serve the statement of claim.

7 By letter dated 7 December 2010 Mr Norris responded (again via solicitors) that the draft statement of claim lacked particulars. Particulars in respect of a number of the allegations were sought. It was said that Mr Norris would respond to the allegations within five working days of receiving the requested particulars.

8 On 23 December 2010, the Official Assignee provided a further draft statement of claim (dated 22 December 2010) to Mr Norris. It is this draft claim that is now said to be the notice required by s 286(2) of the Companies Act and which is challenged by Mr Norris on this application (see below). As with the earlier draft claim, it related to the liquidation of seven companies. It contained one cause of action which set out the date that each liquidation commenced, and the amounts received from the realisation of assets and the total costs and expenses of each liquidation. There were particular matters also set out in respect of some of the liquidations:

• (a) In relation to Murchison Buses Ltd (in liquidation): it was said that Mr Norris did not advise the shareholders of what the liquidation would involve; disposed of the company'assets without proper valuations, at undervalue and to parties associated with Mr Norris; and failed to pay GST to the Inland Revenue.

• (b) In relation to Frost Steel Compactors Ltd (in liquidation): it was said that Mr Norris “seized goods that were possibly not owned by Frost Steel and sold those goods as liquidator despite the protestations of the alleged owner of the goods”.

• (c) In relation to Just Tees Ltd (previously in liquidation, now struck off): it was said that Mr Norris reported that he was independent when a director and shareholder of the company was his daughter'former partner; and that Mr Norris did not charge any fees, did not pay any dividend and did not pay tax in relation to the sale of the business or the liquidation.

• (d) In relation to Trafalgar Top Ltd (in liquidation): it was said that Mr Norris failed to keep accurate records, because his July 2009 and 2010 reports recorded the same total figure for distributions but the amounts were differently constituted.

9 The draft claim alleges that in respect of the liquidations of the seven companies, Mr Norris:

• (a) Failed to comply with his principal duty as a liquidator under s 253 of the Companies Act;

• (b) Failed to act in good faith and for a proper purpose;

• (c) When disposing of the vehicles, failed to obtain the best price reasonably obtainable at the time of the sale;

• (d) Failed to ensure the liquidation was completed in a reasonable time;

• (e) Failed to keep full and accurate records;

• (f) Failed to deposit funds of each company into a bank account to the credit of the company or a trust account at a registered bank (and to produce records as to the funds held for each entity on any given date or other reconciliation of the funds);

• (g) Failed to hold sufficient credit funds for the companies;

• (h) Combined the funds of the companies and his own business;

• (i) Combined the GST affairs of the companies and his own business;

• (j) Charged unreasonable and excessive fees, accepted benefits beyond his entitlement, paid the accounts of others that should have been performed by him as part of his ordinary duties, charged additional fees, and became involved and benefited as a purchaser of assets;

• (k) Gave up his fees in respect of Just Tees, and failed to act independently; and

• (l) Failed to comply with the Financial Reporting Act 1993 and ss 189,194 and 196 of the Companies Act in respect of his liquidation company.

10 For these alleged breaches the draft claim sought the following remedies:

• (a) A declaration that Mr Norris failed to comply with his duties arising under the Companies Act 1993 in respect of these companies;

• (b) An order pursuant to ss 284 and/or 286 of the Companies Act removing Mr Norris as liquidator from these companies;

• (c) An order that the Official Assignee be appointed as the liquidator in respect of each company;

• (d) An order pursuant to s 284 of the Companies Act requiring Mr Norris to repay such sum charged as fees as the Court considers just in respect of each of these companies;

• (e) An enquiry into the sums charged as expenses in relation to each of the companies;

• (f) An order that any sums improperly charged as expenses be refunded;

• (g) A prohibition order prohibiting Mr Norris from acting as liquidator for an indefinite period or such other period as the Court considers just;

• (h) An order setting aside the transfer of one of Murchison Buses Ltd'vehicles; and

• (i) Costs.

11 Mr Norris' response was by letter dated 21 January 2011. The letter said that it could not be discerned in respect of a number of the liquidations how the pleaded facts could constitute a breach of Mr Norris' duties as a liquidator. It was said that, in those circumstances, “the claim does not constitute a proper Notice of Failure to Comply under section 286(2) of the Act”. “Without prejudice to that position” the letter went on to provide detailed comments on the...