Sisson v Official Assignee [2017] NZHC 555 (24 March 2017)

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BETWEEN	THERESE ANNE SISSON Plaintiff
AND	THE OFFICIAL ASSIGNEE First Defendant THE COMMISSIONER OF INLAND REVENUE _{Second Defendant}

Hearing:	17 March 2017
Appearances:	Plaintiff - In Person B Russell and K Kendrick for Official Assignee S Kinsler and P J Shamy for Commissioner of Inland Revenue D J Hampton as Plaintiffʼs McKenzie Friend
_Judgment:	_{24 March 2017}

[2] The hearing of the substantive matter in this proceeding commenced before me on 13 February 2017 along with several other matters involving the plaintiff Therese Ann Sisson (Ms Sisson), the second defendant the Commissioner of Inland Revenue (the Commissioner), Chesterfields Preschools Limited (In Liquidation) (Chesterfields), and IAG New Zealand Limited (IAG).

[3] That hearing continued until 16 February 2017, the fourth day of the hearing. On that date all matters including the present proceeding were concluded with Ms Sisson first, discontinuing the present proceeding CIV-2016-409-185 along with another proceeding CIV-2016-409-304, and secondly, consenting to orders against her sought by Chesterfields as plaintiff in CIV-2016,409-40. In addition, Ms Sisson’s review of a judgment of Associate Judge Osborne striking out CIV-

[4] I turn now to the proceeding the subject of the present costs judgment, CIV-

2016-409-185. On 16 February 2017 in this proceeding I gave an oral judgment granting leave to Ms Sisson at her request to discontinue the matter. In doing so, I made orders and decisions regarding costs to this effect:

(a) Given that the first defendant in the present proceeding (the Official Assignee in Bankruptcy (in the estate of David John Hampton) (the Official Assignee)) had indicated that, as part of the arrangements resulting in Ms Sisson’s discontinuance of this matter, the Official Assignee’s position on costs was that she did not seek costs from Ms Sisson but would simply rely upon an award of costs on a 2B basis being made against the non party David John Hampton (Mr Hampton), an order to this effect was made.

(c) As the second defendant the Commissioner had sought costs on this proceeding against both Ms Sisson and Mr Hampton, in relation to those costs applications I made certain directions. These dealt with the filing of memoranda by the respective parties and a hearing of that costs application. Memoranda were filed and that hearing took place in this Court on 17 March 2017. At that hearing I reserved my decision on the Commissioner’s application for costs against both Ms Sisson and Mr Hampton. I now give that decision, and make the costs orders that follow.

[5] By way of background to this proceeding generally, Ms Sisson as plaintiff had sought declarations that a property at 67 Augusta Street, Christchurch (the property) of which she was shown as the registered proprietor was in fact settled at some point on a family trust known as the Anolbe Family Trust. Hence she said, the proceeds from a 2013 mortgagee sale of the property (held by the Official Assignee) belonged to the Trust and did not form part of the estate of Mr Hampton in bankruptcy. Mr Hampton (her husband/partner or ex husband/partner) was and still is an undischarged bankrupt. At the time of this sale, Mr Hampton had informed the Official Assignee and the Commissioner that the mortgagee sale funds for

67 Augusta Street belonged to him as beneficial owner and should be made available for payment of his debts. Ms Sisson had concurred in this.

[6] Ms Sisson, as I have noted, at the operative time was and now remains the registered proprietor of the property. She acquired it in 2007 pursuant to orders of this Court, as trustee for its previous beneficial owner. This was in the context of preserving assets that could be used to satisfy a judgment in litigation between Mr Hampton, Chesterfields, another company Anolbe Enterprises Limited, and partnerships known as the Chesterfields partnership and Chesterfields Preschools partnership and the Commissioner. The Anolbe Family Trust was not at any time party to that litigation. If the property at 67 Augusta Street had belonged to the Anolbe Family Trust as beneficial owner, it would never have been available to satisfy a judgment in this litigation.

[7] The Anolbe Family Trust, it is said, was a Trust settled by Mr Hampton and Ms Sisson in March 1993. The initial trustees appointed were John Clifford Hampton and Ms Sisson. The beneficiaries were the children of Mr Hampton and Ms Sisson.

[8] For a variety of reasons, including specific prohibitions in the trust deed, the Commissioner’s position was that Mr Hampton was never a trustee of that trust and documents which Ms Sisson and he have now endeavoured to put before the Court to the contrary are of doubtful authenticity. The position which Ms Sisson and Mr Hampton tried for the first time to advance to the Court at the commencement of the hearing of this proceeding on 13 February 2017 that the property sale proceeds were held upon trust for the Anolbe Family Trust and not for Mr Hampton, was also quite different from the position they both had adopted in the past. The Commissioner states this shifted position had occurred simply to suit the convenience of Mr Hampton and Ms Sisson.

[9] On all of this the Commissioner suggests that the fundamental claim in the present proceeding that the property at 67 Augusta Street was held by Ms Sisson as registered proprietor and Mr Hampton effectively as trustees for the Anolbe Family Trust was entirely flawed. Nothing in the evidence and submissions, it was said, could possibly save the conclusion acknowledged by these parties earlier that the property was in fact held for Mr Hampton personally as the beneficial owner, and thus was subject to his bankruptcy.

[10] The Commissioner’s position is that Ms Sisson acted unreasonably in bringing or continuing this claim in the face of warnings to her that to do so would sound in costs. As a result the Commissioner seeks costs here on a category 2B basis with a 50 per cent increase against both Ms Sisson and the non-party Mr Hampton.

[11] So far as the costs claim against Mr Hampton is concerned, the Commissioner states this is to reflect what she says is Mr Hampton’s driving role in this entire proceeding, a role which was entirely inconsistent with his own assertions to the High Court earlier that he was the beneficial owner of the property, resulting in its sale proceeds being vested in the Official Assignee in the first place.

[12] As to costs generally, the Commissioner suggests that any costs award should be apportioned equally between Ms Sisson as plaintiff and Mr Hampton as non-party in accordance with the decision in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2).¹

[13] Turning now to what happened on 16 February 2017 at the substantive hearing in this matter, as I have noted, Ms Sisson after three and a half days of hearing time relating to this and the other proceedings referred to at para [3] above, sought to discontinue this proceeding.

[14] In doing so, her “Notice of Discontinuance” included a handwritten and signed acknowledgement and agreement from Mr Hampton which stated specifically:

I, David John Hampton, consent to an award of costs against me as a non- party to CIV-2016-409-185 on a 2B basis.

[15] Given the matters I have noted at para [4] above, the order already made in my oral judgment of 16 February 2017 for category 2B costs to be awarded in favour of the Official Assignee but only against the non-party Mr Hampton is to stand. A confirming order to this effect is to follow.

[16] The only outstanding costs issue here therefore relates to the claim by the Commissioner against both Ms Sisson and Mr Hampton. I will now turn to deal with this claim, but against each of the parties in turn. In doing so, I confirm that I have taken into account and considered the detailed written and oral submissions I received on this issue from Mr Shamy for the Commissioner and from Ms Sisson and Mr Hampton personally.

[17] The starting point in the Commissioner’s costs claim against Ms Sisson must

_{be the fact that after three and a half days of hearing on 16 February
2017 Ms Sisson}

¹Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2) [2004] UKPC 39, [2005] 1 NZLR

as plaintiff discontinued this proceeding. Rule 15.23 High Court addresses this situation and provides:

Unless the defendant otherwise agrees or the court otherwise orders, a plaintiff who discontinues a proceeding against a defendant must pay costs to the defendant of and incidental to the proceeding up to and including the discontinuance.

The following emerge from Kroma Colour Prints Ltd v Tridonicatco NZ Ltd [2008] NZCA 150, (2008) 18 PRNZ 973, FM Custodians Ltd v Pati [2012] NZHC 1902 at [10]–[12] and Opus International Consultants Ltd v Colac Bay Vision Ltd [2015] NZHC 1782 at [20]–[24]:

(a) The r 15.23 presumption obviates any requirement for the defendant to demonstrate that the plaintiff acted unreasonably in commencing and then discontinuing the proceeding. The defendant has the advantage of the presumption even where there has not been such unreasonableness.

(b) Although the r 15.23 presumption is designed to give a certain and predictable outcome upon discontinuance, it may be displaced if the court finds there are circumstances which make it just and equitable that it should not apply.

(c) Although the court is not limited in the factors it may take into account when considering whether the presumption is displaced, generally:

(i) The court will not consider the merits of the respective cases, unless they are so obvious that they should influence the costs outcome.

(ii) The court will consider the reasonableness of the stance of both parties up to the point of discontinuance: whether it was reasonable for the plaintiff to bring and continue the proceeding; and for the defendant to oppose the proceeding. The plaintiff will not be able to avoid the presumption by showing that at one point it had reasonable grounds for believing it would be successful in the proceeding.

(iii) Conduct prior to the commencement of the proceeding may be relevant, for example, conduct by the defendant that precipitated the litigation.

(iv) The reason for discontinuing may be relevant, for example a change of circumstances rendering the proceeding unnecessary. However, it must be clear that the plaintiff would have succeeded had the circumstances (in this case new legislation) not changed: The Star Trust v Hamilton City Council [2016] NZHC 821 at [10].

[19] It is true too that whilst there is no implication from “the presumption of unreasonableness following a discontinuance” that an award of increased or indemnity costs will necessarily follow (Arnold v Fairfax New Zealand Ltd)²in the circumstances prevailing in the present case, as I outline more fully below, I have no doubt that this is an appropriate case for an award of increased costs to be made.

[20] First, there can be no doubt in my view that r 15.23 applies in this case and that there are no circumstances here which make it just and equitable for the r 15.23 presumption not to apply.

[21] Although in terms of r 15.23 the Court generally does not consider the merits of the respective cases which it has not fully heard, here in my view Ms Sisson’s claim entirely lacked merit. The proceeding was discontinued at the time without explanation immediately prior to Ms Sisson and Mr Hampton giving evidence. Lengthy written submissions on costs have been provided to the Court by both Ms Sisson and Mr Hampton which enter into considerable detail questioning the validity of general claims against Ms Sisson. I have considered these and oral submissions made by Ms Sisson and Mr Hampton. However, in large measure these submissions are generally irrelevant. This is particularly the case so far as the costs claim against Mr Hampton is concerned, because he has already consented to costs being awarded against him here. Further, I am of the view that in none of these written or oral submissions was any convincing reason advanced as to why this proceeding had been properly discontinued. And, whilst Ms Sisson has filed an application in other proceedings CIV-2016-409-40, where she had consented to judgment, to set aside that judgment and consent order, she has taken no steps to re-

[22] The r 15.23 presumption clearly applies here. There are simply no grounds for Ms Sisson to argue that the position should be otherwise. As the discontinuing plaintiff, she must pay costs to the Commissioner as a successful defendant here relating to this proceeding up to and including the discontinuance.

[23] Secondly, and turning now to the issue in the High Court Rules of increased costs, these are provided for in r 14.6(3) which states:

(a) the nature of the proceeding or the step in it is such that the time required by the party claiming costs would substantially exceed the time allocated under band C; or

(b) the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by—

(iii) failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument; or

(iv) failing, without reasonable justification, to comply with an order for discovery, a notice for further particulars, a notice for interrogatories, or other similar requirement under these rules; or

(v) failing, without reasonable justification, to accept an offer of settlement whether in the form of an offer under rule 14.10 or some other offer to settle or dispose of the proceeding; or

(c) the proceeding is of general importance to persons other than just the parties and it was reasonably necessary for the party claiming costs to bring it or participate in it in the interests of those affected; or

(d) some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.

[24] On this question, there can be no doubt in my mind that in bringing and pursuing this proceeding, Ms Sisson (and Mr Hampton too as a prime mover in this

litigation) acted unreasonably, and should be subject to an award of increased costs here. Her entire claim lacked any merit. Thus, her failure to act reasonably unquestionably contributed to the time and expense of this proceeding, in the sense that the Commissioner as defendant was subject to litigation the hearing of which lasted in total (with other matters) for some three and a half days, a proceeding which it seems had no chance of success and ultimately was discontinued by Ms Sisson. In addition, Ms Sisson, as I see it throughout, first, took unnecessary steps in this and other proceedings bringing and, in spite of warnings, pursuing interlocutory applications (such as the stay application here) that had no chance of success and secondly, failed to abide timetable directions of the Court. The 50 per cent uplift from scale which the Commissioner seeks here, in my view, is reasonable in all the circumstances of this case. The fact too that Ms Sisson (assisted no doubt by Mr Hampton) took and pursued a claim in this proceeding that entirely lacked merit was obvious and incontrovertible from the outset, and as I understand it, they were warned of this throughout.

[25] I conclude therefore that the Commissioner is entitled to an award of costs against Ms Sisson on the category 2B basis sought together with an uplift of

[26] Turning now to the quantum of those costs and disbursements to be awarded, the Commissioner in Schedule 2 of the submissions from her counsel, outlines details of these charges. From these details the following matters are apparent:

(a) The total category 2B costs outlined for this proceeding are shown at a figure of $41,255. This includes preparation for the three day hearing due to commence on 28 November 2016 which was adjourned as a result of the plaintiff's last minute request to do so on medical grounds, plus three days’ preparation for the hearing from

28 November 2016 hearing was the subject of a reluctant last minute adjournment on that date at Ms Sisson’s request for medical reasons, secondly, that further work was required subsequently and, thirdly, that renewed preparation to a similar degree was need for the

February hearing as Ms Sisson continued to insist on pursuing this meritless claim along with the other related matters. In addition and in any event, as I understand it, the basic category 2B costs claimed here by the Commissioner were less than two thirds of the Commissioner’s actual costs incurred in the proceeding and therefore well within the two thirds costs-recovery principle outlined in the High Court Rules. On another aspect, there is no claim for attendance at the final three day hearing. This is claimed by the Commissioner in her major costs claim on proceeding CIV-2016-409-40 noted at [3] above. It is omitted from the claim for this proceeding -185 so that it is claimed only once to avoid any double recovery issues.

[27] In the lengthy submissions on costs advanced by Ms Sisson (and Mr Hampton) before me (much of which, as I have noted above, were irrelevant to costs issues), nowhere was the question of quantum addressed.

[28] In any event, I am satisfied that the category 2B basic claim (of $41,255), as itemised in Schedule 2 of counsel for the Commissioner’s costs submission, together with the 50 per cent uplift (giving a total costs figure of $61,882.50) is appropriate and reasonable under all the circumstances that prevailed in this proceeding.

[29] And, before me, counsel for the Commissioner sought an order that the total costs and disbursements be apportioned equally between Ms Sisson as plaintiff and Mr Hampton as non-party. This, it was said, was to reflect Mr Hampton’s driving role in this whole proceeding, a role which it seems was quite inconsistent with his own assertion to the High Court earlier which had resulted in the funds in question being vested in the Official Assignee in the first place.

[30] I agree that it is appropriate here for the costs and disbursements award to be shared equally between Ms Sisson and Mr Hampton as the Commissioner suggests, to reflect their respective roles and responsibility in this particular proceeding. (I address that aspect further at [34] – [38] below.)

[31] An order that Ms Sisson is to pay 50 per cent of the Commissioner’s total costs in this proceeding amounting to $30,941.25 together with 50 per cent of the Commissioner’s filing fee disbursement totalling $46.75 is to follow.

[33] The starting point on this issue must be the acknowledgment and agreement from Mr Hampton noted at [14] above. This was attached to Ms Sisson’s Notice of Discontinuance filed in this proceeding on 16 February 2017. That acknowledgment, in his own handwriting and signed by Mr Hampton, said that he consented to an award of costs “against me as a non-party to CIV-2016-409-185 on a

[34] This proceeding -185 was brought by Ms Sisson as plaintiff against the Official Assignee as first defendant and the Commissioner as second defendant. Both defendants were required to take an active part in defending the proceeding and did so. Both were represented throughout the three and a half days’ hearing time before Ms Sisson chose to discontinue. As such, both defendants clearly were entitled to costs on the proceeding and indeed Mr Hampton in his acknowledgment consented to costs being awarded against him as a non-party. He did not distinguish between the costs of the Official Assignee and the costs of the Commissioner.

[35] Clearly, the only proper conclusion that can be reached is that Mr Hampton has consented to awards of costs being made against him in favour of both the Official Assignee and the Commissioner and, in doing so, he has acknowledged his major role and responsibility in this proceeding in particular. This also flies in the face of Mr Hampton’s attempt, in his submissions before me, to assert that, as a non-

party, he was acting here purely in the role as a “McKenzie Friend” to assist

[36] I need not therefore explore further issues over whether the Commissioner is entitled to an award of costs here against Mr Hampton as a non-party. He has effectively consented to such an order being made.

[37] Notwithstanding this, some further comments on this aspect are appropriate here. From the decisions in Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No.

2)³, Mana Property Trustee Ltd v James Developments Ltd⁴and S H Lock (NZ) Ltd v

New Zealand Bloodstock Leasing Ltd⁵it is clear a costs order against a non-party should be made only in exceptional circumstances. In my view, the present proceeding is a clear case where those exceptional circumstances are established. The authorities acknowledge that liability on non-parties for costs will attach to those who not only fund a proceeding but also to those who substantially control it or are to benefit from it. In all the circumstances here I find quite clearly that Mr Hampton played a major part as a prime mover in controlling the litigation represented by this proceeding -185, a proceeding which was significantly flawed from the outset.

[38] Even leaving aside his acknowledgment noted at para [33] above I would have little difficulty in concluding that given his role in this proceeding, an order for non-party costs should lie against Mr Hampton in favour of the Commissioner.

[39] That initially left in issue a question as to the quantum of costs which should be awarded against Mr Hampton.

[40] Mr Hampton in his acknowledgment agreed to accept liability for costs on a category 2B basis.

[41] The Commissioner, however, seeks category 2B costs with a 50 per cent uplift. Does this in some way impact upon Mr Hampton’s acknowledgment that costs should lie against him “on a 2B basis” in favour of the Commissioner?

[42] In my view, this makes little difference here. Mr Hampton, in accepting a liability for category 2B costs, acknowledged his role in this proceeding and that he should be responsible to some extent for costs.

[43] Whether the quantum of this liability is simply on a 2B basis or is uplifted by the 50 per cent sought by the Commissioner is another matter however.

[44] For all the reasons I outline at paras [23] to [25] above, and also given Mr Hampton’s major role in “driving” this entirely unmeritorious proceeding, I am of the clear view that the 50 per cent uplift on these category 2B costs is also appropriate in the award which will follow against Mr Hampton.

[45] And, on issues of the actual quantum of the costs and disbursements sought here by the Commissioner, again in the lengthy costs submissions Mr Hampton has provided to the Court, most of which had little relevance to the costs matters which were before me, nowhere has he addressed these quantum questions.

[46] Again I find, for the same reasons as I have outlined at paras [26] – [28]

[47] Further, for the reasons I outline at para [30] and [34] – [38] above, I find the Commissioner’s request that her total costs and disbursements in this matter should be apportioned equally between Ms Sisson and Mr Hampton is an appropriate one.

[48] An order is to follow therefore that Mr Hampton personally is to pay 50 per cent of both the Commissioner’s costs in this matter amounting to a payment of

[49] In my 16 February 2017 judgment in this proceeding at para [6] I made the following orders relating to costs sought by the first defendant the Official Assignee:

(a) An order is made that the non-party David John Hampton is to pay costs on a category 2B basis together with disbursements approved by the Registrar to the first defendant the Official Assignee with regard to all matters concerning this proceeding CIV-2016-409-185.

(b) There is to be no order made as to costs against the plaintiff Therese Anne Sisson in favour of the first defendant the Official Assignee.

[50] Those orders are confirmed. Details of the amount of the Official Assignee’s category 2B costs and disbursements claim in this proceeding are not before me. These amounts are to be as approved by the Registrar of this Court.

[51] So far as the second defendant Commissioner’s claim for costs and disbursements on this proceeding is concerned, her claim has succeeded in its entirety.

(a) The plaintiff Ms Sisson is to pay to the Commissioner 50 per cent of the Commissioner’s category 2B costs (with a 50 per cent uplift) amounting to the sum of $30,941.25 together with 50 per cent of the Commissioner’s disbursements $46.75.

(b) The non-party Mr Hampton is to pay to the Commissioner 50 per cent of the Commissioner’s category 2B costs (with a 50 per cent uplift) amounting to the sum of $30,941.25 together with 50 per cent of the Commissioner’s disbursements amounting to the sum of $46.75.

High Court of New Zealand Decisions

Sisson v Official Assignee [2017] NZHC 555 (24 March 2017)