THE COMMISSIONER OF INLAND REVENUE v LIVINGSPACE PROPERTIES LIMITED (in liquidation and in receivership) [2019] NZHC 711

THE COMMISSIONER OF INLAND REVENUE v LIVINGSPACE PROPERTIES LIMITED (in liquidationand in receivership) [2019] NZHC 711 [5 April 2019]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2010-409-2323[2019] NZHC 711UNDER Sections 261 and 266(2) of the CompaniesAct 1993IN THE MATTERANDof the liquidation of LIVINGSPACEPROPERTIES LIMITED (in liquidation andin receivership)IN THE MATTER of an application by Ms Kristina LouiseBuxton & Ors pursuant to s 284 of theCompanies Act 1993BETWEEN THE COMMISSIONER OF INLANDREVENUEPlaintiffAND LIVINGSPACE PROPERTIES LIMITED(in liquidation and in receivership)DefendantHearing: 27 February 2019 and 3 April 2019 (by telephone conference)Appearances: G Neil and H Jones for Mr Robert Walker, liquidator ofLivingspace Properties Ltd (in liq and in rec) on 27 February2019, and K Francis for Mr Robert Walker, liquidator ofLivingspace Properties Ltd (in liq and in rec) on 3 April 2019J Moss and H Weston for K L Buxton, D Henderson, RFDFinance Ltd, FTG Securities Ltd, Castle Operations Ltd and TayOperations Ltd, the Applicants (in the s 284 application)Judgment: 5 April 2019JUDGMENT OF ASSOCIATE JUDGE P J ANDREWThis judgment was delivered by me on 5 April 2019 at 12:30 p.m.pursuant to r 11.5 of the High Court Rules 2016.Registrar/Deputy RegistrarIntroduction[1] This judgment addresses the challenge by Mr Robert Walker, the liquidator, tothe admissibility of the affidavit evidence of Mr Kerryn Downey, charteredaccountant, filed by the applicants, Ms K L Buxton, Mr D Henderson, RFD FinanceLtd and associated parties.[2] The background to the proceedings is set out in my earlier judgment of 7 March2019.1 The affidavit of Mr Downey is filed in support of the applications for leaveand for orders removing Mr Walker as liquidator under s 284 of the Companies Act1993.[3] The liquidator, Mr Walker, objects to the admissibility of Mr Downey'saffidavit on the basis that a trial Judge is unlikely to obtain substantial help fromMr Downey's opinion in understanding other evidence in the proceeding or inascertaining any fact that is of consequence to the determination of the proceeding.2Counsel for the plaintiff referred to an earlier and related decision of this Court inWalker v Gibbston Water Services Ltd where Mander J held that evidence tendered byMr Downey was inadmissible because it amounted to legal opinion.3 Mr Downeypurported to give an interpretation or construction of legislation and legal principlewhich was the subject of adjudication in the case.[4] The liquidator further contends that parts of Mr Downey's affidavit evidenceare less than partial.[5] At the conclusion of this judgment, at [16] below, I make further casemanagement directions (by consent) for the disposition of this proceeding.1 The Commissioner of Inland Revenue v Livingspace Properties Ltd (in liquidation andreceivership) [2019] NZHC 366.2 Evidence Act 2006, s 25.3 Walker v Gibbston Water Services Ltd [2014] NZHC 1638 at [119]-[123].Analysis and decision[6] There may be some merit to the submission of Mr Moss, on behalf ofMs Buxton and others, that the objections taken by Mr Walker to the affidavit shouldbe determined by the trial Judge. However, in the circumstances here, where I findthat parts of Mr Downey's affidavit are inadmissible because they do not meet therequirements of s 25 of the Evidence Act 2006 (i.e. are not substantially helpful), thepreferable and correct approach is to require that Mr Downey file an amendedaffidavit. That was the approach taken by the Supreme Court in Penny vCommissioner of Inland Revenue which I adopt here.4[7] I accept that an opinion by an expert is not inadmissible simply because it isabout an ultimate issue to be determined in a proceeding.5 However, it is essential thatthe opinion expressed falls within the expertise of the witness and is not simply anassertion unconnected to any expertise, based on the untested evidence of otherwitnesses. The expert can, of course, express a view based on certain assumptionsabout the facts, but it is important that the opinion evidence proffered makes clear andidentifies the factual assumptions upon which it is based.[8] I accept that it was legitimate for Mr Downey to address the question of self-funding by liquidators (a topic addressed at paragraph 25 of the affidavit) and, to alimited extent, the question of recovery against RFD (addressed at paragraph 16 of theaffidavit). However, the intemperate language, clearly less than partial, used inparagraphs 19 and 20 (i.e. "vendetta" and "abuse of power"), particularly where theassumptions of fact upon which they are based are not identified, do not meet therequirements of s 25 of the Evidence Act. If those comments were allowed to stand,it is unlikely that a trial Judge could place much weight at all on Mr Downey'sevidence. An expert witness who is perceived as less than independent is unlikely tobe recognised as providing substantial help to the Court.[9] The conclusion reached by Mr Downey at paragraph 27 is also unlikely tosubstantially help the trial Judge. The question of whether Mr Walker is fit to continue4 Penny v Commissioner of Inland Revenue [2011] NZSC 95, [2012] 1 NZLR 433 at [32].5 Evidence Act 2006, s 25(2)(a).to act as the liquidator is not only the ultimate issue for the trial Judge to determine,but Mr Downey does not make it clear (apart from simply accepting and endorsing thecontested evidence of other witnesses) which particular acts or omissions support hisview. In its current form, paragraph 27 reads as if Mr Downey were the trial Judgereaching a conclusion based on his own findings of fact.[10] As to the issue of recovery against RFD, addressed at paragraph 16 of theaffidavit, I accept, as Mr Francis submitted, that s 266 orders have already been madeby Associate Judge Osborne and that any view expressed by Mr Downey as to themerits of making such orders, cannot be relevant.6 The s 266 orders remain in forceand Ms Buxton's compliance or otherwise with them, remains a live issue. I do accept,however, that it may be legitimate for Mr Downey to address from a liquidator'sperspective, difficulties in pursuing a recovery because, for example, there may bedifficulties in determining the actual amount overpaid.[11] At paragraphs 17 and 23 Mr Downey refers to legal advice having been givento Mr Walker, the liquidator, and notes that he, Mr Downey, would be interested to seethat legal advice. Those comments are, in my view, irrelevant. They tend to conveythe impression that Mr Downey doubts the legal advice that has been given toMr Walker. Mr Downey's views about that legal advice are irrelevant; it is not forMr Downey to express advice about legal issues.[12] For all these reasons, I conclude that the affidavit of Mr Downey should beredrafted and filed in admissible form. The amended affidavit needs to address theissues I have dealt with in relation to paragraphs 16, 17, 19, 20, 23 and 27 of the currentaffidavit.[13] This proceeding appears to be part of a longstanding dispute betweenMr Henderson and Mr Walker about decisions taken by Mr Walker in his capacity asliquidator of a number of companies. In 2014 Mander J referred to the "obvious6 Commissioner of Inland Revenue v Livingspace Properties Ltd (in liq) [2018] NZHC 1232. At[37] Osborne AJ expressly recognised that through the process of production and examination ofrecords the liquidator (i.e. Mr Walker) might not obtain any further information relevant to theissues he identifies in his affidavit evidence.animosity" which marks the relationship between the two of them.7 In thesecircumstances, it is of particular importance that the evidence of professional expertwitnesses not be drafted in such a way that they are perceived as acting as an advocatefor a particular party.Result[14] I grant, on the terms set out in this judgment, Mr Walker's application objectingto the admissibility of the affidavit evidence of Mr Downey. I direct that Mr Downey'saffidavit be redrafted and refiled to address the concerns I have analysed above.[15] As to the question of costs, I am of the preliminary view that costs should beawarded to Mr Walker, the liquidator, namely 2B costs, on the basis that he wassuccessful in relation to both his strike out application (dealt with in my earlierjudgment of 7 March 2019) and in relation to the challenge to the admissibility ofMr Downey's affidavit. However, I incline to the view that Mr Walker's interlocutoryapplications should be treated as one application only and the allocated hearing dayslimited to one day. If the parties cannot agree on costs, then memoranda are to besubmitted within 14 days.Timetable directions[16] By consent, I make the following further timetabling directions:(a) Ms Buxton is to refile the affidavits of Mr Henderson, dated 21December 2018, and Mr Hide, dated 20 December 2018, removing theparagraphs that the parties have agreed upon by 25 March 2019. If theparties are unable to reach an agreement, leave can be sought to filememoranda on this matter.(b) Ms Buxton is to refile an amended interlocutory application forstay/removal and other orders, removing any applications in relation tocompanies other than Livingspace by 5 April 2019.7 Walker v Gibbston Water Services Ltd [2014] NZHC 1638 at [131].(c) The liquidator is to file an amended notice of opposition to theapplication above by 15 April 2019.(d) The parties are to file a further joint memorandum as soon aspracticable after a response is received from Andru Isac QC in respectof the collateral use issue.(e) Ms Buxton is to refile any further amended affidavit by 29 April 2019(this is to include that of Mr Downey).(f) The liquidator is to file and serve any evidence in reply by 13 May2019.(g) A one-and-a-half day hearing of the applications for joinder, leave andstay is to be set down for the first available date after 27 May 2019._____________________________Associate Judge P J AndrewSolicitors:Mr G Neil, Ms H F Jones and Mr K Francis, Meredith Connell, Office of the Crown Solicitor,AucklandMr J Moss, Barrister, ChristchurchMs H M Weston and Mr G Smith (applicants' instructing solicitor), Canterbury Legal, Christchurch