GOLLAN & ANOR v OFFICIAL ASSIGNEE AT HAMILTON CA694/2013 [2014] NZCA 596 [5 December 2014]

GOLLAN & ANOR v OFFICIAL ASSIGNEE AT HAMILTON CA694/2013 [2014] NZCA 596 [5 December 2014]IN THE COURT OF APPEAL OF NEW ZEALANDCA694/2013[2014] NZCA 596BETWEEN JAMES PATRICK GOLLAN ANDVERONICA PATRICIA LYN GOLLANApplicantsAND THE OFFICIAL ASSIGNEE ATHAMILTONRespondentHearing: 24 November 2014Court: French, Miller and Cooper JJCounsel: J P Gollan in personG S Caro for RespondentJudgment: 5 December 2014 at 11.30 amJUDGMENT OF THE COURTThe application for an extension of time to appeal is dismissed.____________________________________________________________________REASONS OF THE COURT(Given by Cooper J)[1] Mr and Mrs Gollan seek to appeal from a decision of the High Court at Hamilton dismissing an application under s 226 of the Insolvency Act 2006 (the Act). They had applied to review a decision of the Official Assignee (the Assignee) refusing to assign to them causes of action under the Law Reform (Testamentary Promises) Act 1949 and the Family Protection Act 1955.11 Gollan v Official Assignee [2013] NZHC 2094.[2] Those claims would be advanced against the trustees and executors of the estate of Mrs Gollan's mother, Mrs Luders, who died on 28 July 2008. Mrs Gollan is one of five adult children of Mrs Luders, all aged in their sixties and seventies. In her will, Mrs Luders left four elevenths of her estate to Mrs Gollan, four elevenths to another daughter, Mrs Managh and one eleventh to her three other children. However, the gift to Mrs Gollan was made conditional on repayment by her of a debt of $57,000 that she allegedly owed to Mrs Luders.[3] Mrs Gollan was adjudicated bankrupt on 5 May 2008 and discharged in May 2011. Mr Gollan was adjudicated bankrupt on 19 March 2012. As a result, their causes of action against the estate of Mrs Luders vested in the Assignee.[4] When filed, their appeal was out of time, and on 30 October 2013, Harrison J granted an extension of time to appeal. But the Gollans took no further steps. Following a telephone conference on 10 September 2014, French J directed the applicants to file and serve a new application for an extension of time under r 29A of the Court of Appeal (Civil) Rules 2005. The application was filed on 15 September.The High Court judgment[5] Associate Judge Christiansen recorded that the Gollans wished to claim Mrs Luders had promised to leave them her home because they had looked after her. Mrs Gollan also advanced a Family Protection Act claim based on care for Mrs Luders, in particular since the Gollans moved to live with Mrs Luders in her home in August 2002.[6] The Judge noted that having investigated the position the Assignee considered the claims were unlikely to succeed. Further, Associate Judge Faire had previously dismissed an appeal by Mr Gollan against a decision by the Assignee not to take over and continue a claim against the estate, while leaving open the question of whether or not Mr Gollan could assign the cause of action.2[7] Section 226 of the Act provides:2 Gollan v Official Assignee [2012] NZHC 1869 at [30].(1) A person (including the bankrupt or a creditor) whose interests, monetary or otherwise, are detrimentally affected by an act or decision to which this section applies may apply to the Court to reverse or modify the act or decision.(2) This section applies to—(a) an act or decision of the Assignee; [8] Accordingly, Associate Judge Christiansen proceeded on the basis that the Gollans needed to establish that, in the event their claims were successful, therewould be a surplus available for distribution to them after payment of the Assignee'scosts and satisfaction of the debts of creditors. Otherwise their interests would notbe "detrimentally affected" by the Assignee's decision.3 It has not been argued that this approach was wrong.[9] The Judge concluded they could not establish that available surplus becauseon the evidence before the Court the deceased's estate had net assets worth only$24,000. That figure took account of the fact that the major asset in the estate, the house owned by Mrs Luders when she died, was valued at $270,000, run down and encumbered by a mortgage that was in arrears.[10] The only evidence about the value of the house was that of a real estate agent, attached to an affidavit by the estate's solicitor. However, if the Gollans sought todispute the valuation they should have called appropriate evidence. The Judge concluded that even if the claims were completely successful, pursuing them would not be economic, and it was unlikely there would be any dividend for the creditors.[11] The Judge noted that the Gollans had lived rent-free in Mrs Luders' house forfive years, a benefit that would need to be taken into account in any distribution of the estate. He also referred to credibility issues that would affect the prosecution of any claim against the estate, including the lack of any independent corroboration of the claimed promise by Mrs Luders, issues about her mental capacity at the time of the alleged promise, the Gollans' history of multiple bankruptcies and Mr Gollan'scriminal record.43 Gollan v Official Assignee, above n 1, at [40].4 At [64].[12] In the result, he dismissed the applications.The application[13] Mr and Mrs Gollan have filed submissions in support of the application for an extension of time, and also apparently in support of the substantive appeal. In addition, Mr Gollan appeared in person at the hearing in this Court. In summary, the application is advanced on the basis that:(a) Notice that an extension of time for appealing had been granted by Harrison J was sent to the lawyer then acting for them, Mr Greg Keene. However, Mr Keene either did not receive it, or did not advise them that the extension had been granted. In the circumstances, they were unaware that they could advance their appeal.(b) Somewhat inconsistently with the first argument, they contend that they were mistakenly of the view that all that was necessary was to file the application for an extension of time. Thereafter, it would be for the Assignee to advance matters.(c) They allege that no prejudice would arise to the respondent or any third party if a further extension were granted. An affidavit sworn bycounsel acting for the executors of Mrs Luders' estate should carry noweight because there has been no opportunity to challenge its veracity.(d) The applicants will suffer prejudice if the extension is not granted and prejudice has already occurred because of incorrect material about the value of the estate being placed before the High Court.(e) Various allegations are made about the conduct of the trustees submitting that they have breached their duty to act honestly and in good faith for the benefit of the beneficiaries, and to avoid conflicts of interest.(f) The Assignee's refusal to assign the causes of action for the Gollans was activated by malice.[14] The respondent opposes the extension sought. Mr Caro notes that there is no evidence from Mr Keene to the effect that he did not pass on the email to Mr and Mrs Gollan. He relies on an affidavit sworn by Mr David O'Neill, counselfor the executors and Mrs Managh. Mr O'Neill attached a memorandum that he hadfiled in the High Court on a related matter, and which was served on Mr Gollan on 3 July 2014. In that memorandum Mr O'Neill referred to the fact that an extensionof the time for appealing had been granted. In any event, Mr Caro submits that, having made an application to extend the time for appealing on 10 October 2013, the Gollans should not have then remained inactive, effectively allowing a period of approximately 10 months to pass without taking any steps to advance the appeal.[15] Mr Caro relies on prejudice to the Assignee as well as the executors and beneficiaries of the deceased's estate. As to the former, he notes there are no funds in either Mr or Mrs Gollan's estate, but the Assignee is unable to complete the administration of the bankruptcies whilst there is outstanding litigation. As to the executors and beneficiaries of the deceased's estate, Mr Caro again relies on Mr O'Neill's affidavit which establishes that the house is the only realisable asset inthe deceased's estate. That property is subject to a mortgage to Mr and Mrs Managh under which repayments have not been made and interest continues to accrue. Mr and Mrs Managh have met the legal and accounting costs of the executors and will need to be reimbursed. Legal costs continue to be incurred in relation to the current litigation.[16] Given the net value of the estate is already small, increased costs of ongoinglitigation would be significant. Mr O'Neill deposed that it is "entirely possible thatif the litigation continues the deceased estate will be insolvent".[17] In the circumstances, Mr Caro submitted that the proposed appeal lacks merit, and there was no realistic prospect that the High Court judgment would be overturned on appeal.Approach[18] The approach to whether an extension of time to appeal should be grantedwas succinctly summarised in this Court's decision in Robertson v Gilbert where it was said:5[24] As confirmed recently by this Court in My Noodle Ltd v Queenstown-Lakes District Council and in Barber v Cottle the overarching consideration in determining whether to grant an extension is where the interests of justice lie. This is a long-standing and settled principle. Relevant considerations assisting in that inquiry are the length of delay, thereasons for the delay, the parties' conduct, the extent of prejudice caused bythe delay, and the prospective merits of the appeal. Leave will be declined where the appeal has no legs. But the interests of justice may require that leave be granted, not necessarily simply because the merits appear strong, but where there is insufficient material before the Court to exclude the possibility that there is merit.Evaluation[19] We are not satisfied that the extension of time should be granted. First, whileit appears that notice of Harrison J's decision may have been sent to Mr Keene and not the Gollans, we are not prepared to accept, without evidence, that Mr Keene took no steps to advise the Gollans that had occurred. In fact, the affidavit sworn by the Gollans in support of the present application effectively claims that no advice of the decision was received by Mr Keene. If correct, that would explain why he would not have drawn it to their attention. But the assertion is based on hearsay, and is one that would need to come in the form of direct evidence from Mr Keene himself. He has not sworn an affidavit.[20] In any event, the delay since Harrison J's decision is significant. We do notaccept the Gollans' explanation that they mistakenly thought that all that was required was for them to make the initial extension application and then rely on the respondent to take any further steps that might be necessary. It was their appeal, and it was for them to progress it.[21] We reject as misconceived Mr Gollan's claim that there was some deceptioninvolved in the Assignee and/or counsel for the executors and trustees not5 Robertson v Gilbert [2010] NZCA 429 (footnotes omitted).themselves taking steps to ensure that the appeal was progressed. The suggestion that the Assignee has been activated by malice is without foundation.[22] We are also satisfied that a further extension would result in prejudice to both the Assignee and to the executors and other beneficiaries of the deceased's estate. Litigation by the Gollans against the executors has been ongoing since August 2009. In the meantime what is a small estate has been subject to the attrition caused by ongoing costs associated with it. The Assignee has not been able to conclude administration of the bankruptcy which in the case of Mrs Gollan dates from May 2008. As noted earlier, Mrs Managh and her husband have had to meet the legal and accounting costs of the administration of the estate out of their own resources.[23] No issues of any significance have been raised in relation to the merits of theHigh Court judgment. The Judge's conclusions that the proposed claims againstMrs Luder's estate would be uneconomic, and even assuming success, not such as could produce a surplus in the hands of the Gollans once the Assignee's costs weremet and creditors paid, were amply justified on the evidence. Although Mr Gollan asserts that the valuation on which the Judge relied was wrong, his claims are not supported by any valuation evidence.[24] In all the circumstances we have concluded that the further application for extension of time should not be granted.Result[25] The application is dismissed.Solicitors:Ministry of Business, Innovation and Employment for Respondent