IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2004-409-001025 [2015] NZHC 506

BETWEEN	CHESTERFIELDS PRESCHOOLS
LIMITED Applicant	

AND	
COMMISSIONER OF INLAND REVENUE
Respondent	

CIV-2005-409-000135

BETWEEN	THE COMMISSIONER OF INLAND REVENUE
Plaintiff

AND	CHESTERFIELDS PRESCHOOLS PARTNERSHIP
Defendant

CIV-2005-409-000136

BETWEEN	THE COMMISSIONER OF INLAND REVENUE
Plaintiff

AND	DAVID JOHN HAMPTON Defendant

CIV-2005-409-000137

BETWEEN	THE COMMISSIONER OF INLAND REVENUE
Plaintiff

AND	DAVID JOHN HAMPTON Defendant

CIV-2008-409-000722

BETWEEN	CHESTERFIELDS PRESCHOOLS

CHESTERFIELDS PRESCHOOLS LIMITED v COMMISSIONER OF INLAND REVENUE [2015] NZHC
506 [17 March 2015]

	LIMITED
Plaintiff	

AND	
THE COMMISSIONER OF INLAND REVENUE
Defendant	

CIV-2008-409-000995

BETWEEN	CHESTERFIELDS PRESCHOOLS LIMITED
Plaintiff

AND	THE COMMISSIONER OF INLAND REVENUE
Defendant

CIV-2008-409-002057

BETWEEN	CHESTERFIELDS PRESCHOOLS LIMITED
Plaintiff

AND	THE COMMISSIONER OF INLAND REVENUE
Defendant

CIV-2009-409-002550

BETWEEN	CHESTERFIELDS PRESCHOOLS LIMITED
Plaintiff

AND	THE COMMISSIONER OF INLAND REVENUE
Defendant

CIV-2015-409-000043

BETWEEN	THE COMMISSIONER OF INLAND REVENUE
Plaintiff

AND	CHESTERFIELDS PRESCHOOLS LIMITED
Defendant

Hearing:	16 March 2015	

Appearances:	
R W Maze for Chesterfields Preschools Limited
P J Shamy and S Kinsler for Commissioner of Inland Revenue	

Judgment:	
17 March 2015	

Reissued:	
24 March 2015	

JUDGMENT OF GENDALL J

NOTE:   Under the slip rule I order that this 17 March 2015 judgment be withdrawn/recalled and re-issued with the words in lines 1 and 2 of para [23] “the Official Assignee” replaced by the words “the ANZ Bank”, given that this represents a simple slip-type error in the original judgment.  This note and the judgment are to relate also to proceedings CIV-2015-409-000043.

[1]       In a minute of Associate Judge Osborne dated 23 February 2015, issued in these proceedings, it was noted that the defendant Chesterfields Preschools Limited (Chesterfields) intended to instruct counsel and anticipated an application to “release frozen funds” from a bank account where money was held on trust for Chesterfields, so that counsel could be instructed.

[2]       Effectively Mr Maze, counsel for Chesterfields, in that application quantified a figure required of $38,600.50 from the frozen bank account funds to meet these legal fees.  It was this matter which was before me yesterday, 16 March 2015.

[3]       Mr Shamy, counsel for the plaintiff Commissioner of Inland Revenue (the Commissioner), did not oppose the release of what he described as “reasonable legal expenses” from the frozen funds.  But the quantum sought by the plaintiff here was in dispute, he said on the basis that it was not reasonable in all the circumstances.

[4]       The history of freezing orders in this proceeding is somewhat convoluted. Yesterday, 16 March 2015, I issued a separate judgment in this proceeding.  In that judgment I made interim orders confirming that freezing orders were in existence over certain  monies  held with  the ANZ  Bank  on behalf  of Chesterfields,  other monies held by the Official Assignee and, in addition, with regard to a property at
864 Colombo Street, Christchurch.

[5]       Matters   involving   Chesterfields   and   its   agents,   Mr   David   Hampton (Mr Hampton) and Ms Therese Sisson (Ms Sisson) have extended over many years. They have been lengthy and complex.  Both Mr Hampton and Ms Sisson, who have acted in various capacities including as agents for Chesterfields, are undischarged bankrupts.

[6]       As I understand it, assessments of GST and income tax were made by the Commissioner against Chesterfields some considerable time ago and these have been amended  and  then  the  subject  of  much dispute and  litigation  including judicial review proceedings.  Finally, it seems following certain judicial review proceedings and disposal of an appeal before the Court of Appeal, a figure in the order of $1.2m

approximately was reached as outstanding tax claimed by the Commissioner from

Chesterfields.

[7]       On 5 December 2014, Chesterfields was served with a statutory demand from the Commissioner pursuant to s 289 Companies Act 1993 demanding payment of this total sum of $1,231,940.11 for the outstanding GST and income tax.

[8]       Chesterfields failed to comply with the statutory demand or to bring any application to set aside the statutory demand.

[9]       As a result, on 5 February 2015 the Commissioner commenced liquidation proceedings in this Court against Chesterfields.  These proceedings were met by an application   for   an   order   staying   the   liquidation   application   and   restraining advertising brought by Chesterfields.  It is to pursue that application that Mr Maze on behalf of Chesterfields now advances the present application to release from the frozen funds the $38,600.50 which is now suggested.

[10]     Turning to consider the quantum of this claim to release funds, the position advanced by Mr Maze and Chesterfields is that to pursue the application for a stay and to defend the liquidation proceedings, as Chesterfields says it intends to do:

(a)       Chesterfields must receive comprehensive advice on its application for stay; and then

(b)       If there are grounds to resist the Commissioner’s claim, an amended application  for  stay  and  to  restrain  advertising  with  supporting material will be required;

(c)       Chesterfields must consider whether any application is appropriate and, if so, prepare and file such application; and

(d)	Mr Maze will be required to prepare for a fixture.

[11]     At this point Mr Maze says in seeking funding an allocation of funds for

100 hours’ work will be required.   This is, he says, in order to give Chesterfields

comprehensive advice on what is described as a long and complex matter, spanning multiple sets of proceedings.

[12]     At Mr Maze’s hourly rate (which I calculate at $250 per hour) this would

amount to $28,750 inclusive of GST.

[13]     In addition, Mr Maze here seeks $8059.50, he says, to prepare and file an amended application for stay and to restrain advertising, which is likely to be required, and a further sum of $1,990 for his costs on the present application attempting to secure the release of the frozen funds.

[14]     In response, the Commissioner’s position is that a maximum amount for the work envisaged at this stage would be no more than $5000 which the Commissioner would accept.   Mr Shamy contends that the nature of liquidation proceedings generally are relatively simple.  He maintains too that the matter at issue here has a narrow compass, such that a requirement to trawl through all the prior litigation proceedings involving this company, Mr Hampton and Ms Sisson, is certainly not required.

[15]     Mr Shamy notes also that, as the statutory demand served on Chesterfields met with no response, a presumption of insolvency arises in this case.  He contends that the debt claimed by the Commissioner is a certain one, given that he says it relies on the decision of the Court of Appeal relating to earlier judicial review proceedings.

[16]     On all of this, it is useful in my view to note from a Memorandum filed in this Court and signed personally by Mr Hampton on behalf of Chesterfields, dated
18 February 2015, that it was stated:

1.         Updating the Court in anticipation of the telephone conference, the writer has attended a meeting with a barrister, (after taking time to read the judicial review judgments).

2.         As  the  writer  understands  matters  following  that  meeting,  the barrister estimates between 40 to 50 hours to go over the various proceedings currently before the Court, and the proposed judicial review  documents,  at  which  time Terms  of  Engagement  will  be drafted providing a detailed schedule of the costs involved.

3.         A further meeting for the barrister to meet Mr Morgan is to be scheduled for next week, and failing that meeting the barrister has indicated that he will file the application for disbursements for representation.

[17]     Notwithstanding these comments made on 18 February 2015, it seems now that Mr Maze in his present application may well have doubled his estimate of the time involved to carry out the work in question.

[18]     What does seem clear is that any dissipation of Chesterfields assets unless properly justified would have the simple effect of unnecessarily reducing the pool of available funds for creditors of the company.  That is something that could not be countenanced.

[19]   It is accepted however that Chesterfields, like any company in similar circumstances, does need the benefit of some proper legal advice as to whether it is solvent and whether it is appropriate to oppose genuine liquidation proceedings brought by a creditor against the company.  But a balance to ensure that if this is the case here, an inevitable liquidation order is simply delayed for no good reason, must also be struck.

[20]     With these matters in mind, and on the basis of all the material which has been advanced before the Court here, I have not, however, been brought to the position where I am satisfied that Mr Maze’s 100 hours estimate to properly be in a position to provide advice to Chesterfields on the liquidation, stay and advertising matters is justified.

[21]     This is more so given what I note in para [16] above as to the estimate made only a few weeks ago that something in the order of 40 to 50 hours would be needed.

[22]     I conclude that under all the circumstances here, a maximum of 40 hours should be allowed at an hourly rate of no more than $250 per hour (including GST if any).  This totals $10,000 and in my view is more than adequate for the company to be properly advised in all respects regarding these liquidation matters.

[23]     I rule therefore and direct that from the frozen funds held by the ANZ Bank (I

understand held in the name of Ms Sisson, in trust for Chesterfields) the sum of

$10,000 is to be made available to Morgan & Maze solicitors, Christchurch to meet the costs of Mr Maze in providing proper advice to Chesterfields on the liquidation and  stay matters  and  to  bring  and  prosecute  any application  for  a  stay of  that liquidation and to restrain advertising if that is deemed to be appropriate.

[24]     In order that proper progress is made with respect to this matter, I direct also that Mr Maze on behalf of Chesterfields is within 20 working days of today to file and serve a memorandum confirming the position that Chesterfields is to take on its application for a stay and to restrain advertising and generally to the Commissioner’s liquidation application.

[25]   So far as costs on the present application is concerned, under all the circumstances here I am satisfied that they should simply lie where they fall.  There is to be no order made as to costs.

...................................................
Gendall J

Solicitors:
Philip Shamy, Christchurch
Meredith Connell, Wellington Branch
Richard Maze, Christchurch