MCCOLLUM v THOMPSON [2018] NZHC 173

THURSTON v ANZ BANK NEW ZEALAND LIMITED [2017] NZHC 3269 [22 December 2017]IN THE HIGH COURT OF NEW ZEALANDPALMERSTON NORTH REGISTRYI TE KŌTI MATUA O AOTEAROATE PAPAIŌEA ROHECIV-2017-454-44[2017] NZHC 3269BETWEEN KENNETH WILLIAM THURSTONPlaintiffAND ANZ BANK NEW ZEALAND LIMITEDDefendantHearing: 27 November 2017Appearances: Plaintiff in PersonR L Pinny for DefendantJudgment: 22 December 2017JUDGMENT OF CLARK J[1] In this proceeding the plaintiff, Kenneth Thurston, sues ANZ BankNew Zealand Ltd for $78.3 million. Mr Thurston claims ANZ sold various propertieswithout serving the requisite notices pursuant to the Property Law Act 2007.[2] ANZ applies to strike out Mr Thurston's claim on the basis Mr Thurston hasno standing to bring the claim. As well, it is said the statement of claim isunintelligible, pleads no cause of action and the pleading is likely to cause prejudiceand delay.[3] In the alternative, ANZ seeks security for costs.Background[4] Kenneth Thurston was director and sole shareholder of the Thurston Group ofcompanies. Two of the Group's operating companies were Aotearoa Coolstores Ltd(Aotearoa) and Tawera Land Company Ltd (Tawera).[5] As at March 2010 the Thurston Group was indebted to ANZ in the order of$30 to $40 million. The indebtedness of Aotearoa and Tawera to ANZ was secured by(amongst other securities) mortgages over various properties owned by Aotearoa andTawera. In accordance with its powers of mortgagee sale ANZ sold 17 propertiesowned by Aotearoa and Tawera. Pursuant to the terms of General SecurityAgreements provided by the companies ANZ also appointed receivers to Tawera andAotearoa. Aotearoa was already in receivership and liquidation. Tawera had alsoalready been placed into liquidation. Both companies have since been removed fromthe Register of Companies as have all other companies in the Thurston Group.[6] After ANZ realised its securities, and following the receivership andliquidation of the Thurston Group, approximately $4 million was due and owing bythe Thurston Group to ANZ. That has not been repaid.[7] Mr Thurston was adjudicated bankrupt on 15 October 2010. He wasdischarged from bankruptcy on 8 November 2013. As at 31 July 2017 theOfficial Assignee had not applied to the Court for an order under s 408 of theInsolvency Act 2006 releasing the Assignee from the administration of the estate.Strike-out principles[8] The principles applying to a strike-out application are settled. The principlesrelevant to this proceeding are the following:(a) Except for pleaded allegations which are entirely speculative andwithout foundation pleaded facts, whether or not admitted, are assumedto be true.(b) The jurisdiction is not excluded by the need to decide difficult questionsof law, requiring extensive argument.[9] In Carter Holt Harvey Ltd v Minister of Education1 the Supreme Courtconfirmed the principles as conveniently summarised by the Court of Appeal inAttorney-General v Prince and Gardner.2 A strike-out on the basis of prejudice ordelay requires an element of impropriety and abuse of the court's processes.3Examples include unnecessarily prolix pleadings, scandalous or irrelevant pleadings,pleading of purely evidential material, and unintelligible proceedings.4[10] Where a defect in a pleading may be cured by amendment which the party iswilling to make the Court may permit amendment rather than striking out thepleading.5Parties' argumentsANZ's position[11] Ms Pinny, counsel for ANZ, submitted the statement of claim discloses noreasonably arguable cause of action and cannot succeed as Mr Thurston lacks standingto bring a claim in respect of any of the matters identified in his statement of claim.The properties which ANZ sold, allegedly in breach of the Property Law Actrequirement for service of notices, were not owned by Mr Thurston but by thecompanies. Both companies have been removed from the register and have ceased toexist. Prior to removal, Aotearoa and Tawera were in receivership and liquidation andas the receivers' and liquidators' reports indicate significant debts remained unpaid atthe conclusion of the respective liquidations. Any tenable claim against ANZ fordamages could have been expected to have been investigated by the liquidators and,if viable, pursued.1 Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [10].2 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267–268.3 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013]2 NZLR 679 at [89].4 At [89].5 In Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 (HC) Tipping J distinguished between apleading "which is a total write-off and one which is deficient but is capable of effective repair".[12] Mr Thurston has no standing to bring the claim in any other capacity.Mr Thurston was made bankrupt on 15 October 2010 at which date any rights hepossessed in any property, including any rights he may have had to bring a claimagainst ANZ, vested in the Official Assignee. Ms Pinny submitted Mr Thurston'ssubsequent discharge from bankruptcy does not alter that position.[13] As to prejudice or delay, the second ground of strike-out, ANZ's position isthat Mr Thurston's pleading falls squarely within the categories which the Court ofAppeal in Commissioner of Inland Revenue v Chesterfields Preschools Ltd held wererequired for a strike-out under this ground.6 The only cause of action comprised afactual pleading. No legal cause of action has been identified. Other extensivepleadings are irrelevant, concern evidential matters, or are vague and imprecise. Thestatement of claim is otherwise unintelligible. As a consequence, ANZ cannotunderstand the legal basis for the allegations made against it. Nor is it fairly informedof the case against it and it is unable to provide a meaningful response. The statementof claim is so fundamentally defective, ANZ submits, that an opportunity to re-pleadwill serve no useful purpose.Mr Thurston's position[14] Unsurprisingly, as an unrepresented litigant, Mr Thurston's statement of claimlacks the finesse which might be expected of a claim drafted by an experiencedsolicitor. The background to the cause of action refers to:(a) the collapse of the Manawatu based Thurston Group;(b) irregularities that emerged subsequently primarily concerning oneindividual in ANZ appointed apparently to manage the Thurston Group;(c) allegations that the ANZ employee issued instructions concerning theGroup when he was motivated by self-interest.6 Commissioner of Inland Revenue v Chesterfields Preschools Ltd, above n 3, at [89].[15] Mr Thurston pleads irregularities in terms of compliance with the PropertyLaw Act and that ANZ has continually refused to supply the notices in question.Mr Thurston specifically pleads:Please note, should the ANZ Bank (2017) supply ANZ Bankand National Bank Property Law Act Notices, Affidavit ofService that comply with the Property Law Act 2007 when theANZ National Banks and their appointed Receivers dealt with$67 million Thurston Group assets, the following will beaccepted: This Statement of Claim is Misleading. All currentand future proceedings against the ANZ Bank (all parties) willbe at an end.[16] Then follows a heading "Corruption Funding" under which Mr Thurstonmakes serious allegations against a bank employee who had a senior managerial role.I shall refer to him as Mr L. It is alleged Mr L used different bank accounts to makepayments for activities he did not want viewed.[17] Under a heading "What went wrong" the statement of claim elaborates onMr L's alleged defaults including that Mr L "took $141,000 from Thurston Group bankaccounts in favour of Bell Gully".[18] The cause of action is then set out at page 5 of the statement of claim:Between 15 February 2010 and 13 May 2013 (the day the National BankReceivers McDonald Vague retired) the ANZ Bank, National Bank tookcontrol, sold down $67 million Aotearoa Coolstores Ltd and Tawera LandCompany Ltd commercial and rural property assets (bank valuations) withoutvalid Property Law Act 2007 notice.The undertaking not a mistake or oversight, but a planned action. Substantialevidence is held to support.[19] I questioned Mr Thurston closely about the capacity in which he brings hisclaim and the relationship between his claim and the monetary relief sought.Mr Thurston courteously responded to my questions. It is not necessary that I recordall that he said but the essential points bearing on his standing are these:(a) Mr Thurston brings this claim as a past shareholder of companies thatare no longer on the Register of Companies.(b) Only two Property Law Act notices had to be served. ANZ has notproduced evidence of service of the notices.(c) Mr Thurston was a guarantor of the lendings to both Aotearoa andTawera.(d) When asked how the alleged failures to serve notices under the PropertyLaw Act caused Mr Thurston loss he said ANZ did not have the rightto deal with the properties without service of notices in respect of theproperties.(e) The sums sought by way of relief represent ANZ's valuations of theThurston Group at the time they were sold. Essentially Mr Thurston'sclaim is in respect of the values of the properties that were dealt with inthe allegedly unauthorised way.(f) When asked why he should have the full value of the properties thesubject of the allegedly unauthorised dealings Mr Thurston was candid.He said he had to pick a figure so he took the total value of theproperties that the Property Law Act notices, had they been served,would have covered.[20] The crux of the matter, Mr Thurston submitted, was that properties werestripped from him without the requisite notices and before either company was putinto receivership or liquidation. The basis of the claim is that he was the soleshareholder of both companies, his loss was caused by the sale and the sales wereunauthorised.AssessmentDoes Mr Thurston have standing?[21] The starting point is s 101 of the Insolvency Act 2006:101 Status of bankrupt's property on adjudication(1) On adjudication,—(a) all property (whether in or outside New Zealand) belongingto the bankrupt or vested in the bankrupt vests in the Assigneewithout the Assignee having to intervene or take any otherstep in relation to the property, and any rights of the bankruptin the property are extinguished; and(b) the powers that the bankrupt could have exercised in, over, orin respect of any property (whether in or outsideNew Zealand) for the bankrupt's own benefit vest in theAssignee.(2) This section is subsection to section 104.[22] "Property" is defined to mean "rights, interests, and claims of every kind inrelation to property however they arise".7 Thus, any entitlement, or interest,Mr Thurston had in suing ANZ is caught by s 101. Mr Thurston brings this action asa former shareholder and thus, presumably, in pursuance of the rights he once had asowner of his shareholding.[23] Mr Thurston is now a discharged bankrupt. The question is whether thischanged status affects his ability to bring this proceeding. The authorities, such asthey are in this area, establish that Mr Thurston's right to bring his claim which vestedin the Official Assignee at bankruptcy, remains with the Assignee notwithstandingMr Thurston's discharge from bankruptcy.[24] As Master Williams QC observed in Official Assignee v Probert whether theOfficial Assignee had power to bring proceedings in view of Mr Probert's dischargefrom bankruptcy some 16 months earlier is a matter of some substance on which, atthat point, there was no authority in New Zealand:8[discharge from bankruptcy under the Insolvency Act 1967] does notterminate both the right and the obligation of the Official Assignee to continueto administer the bankrupt's estate. Those rights and obligations, by statute,continue until the granting of the application to the Court which the OfficialAssignee is required to make for an order releasing him from theadministration of the estate pursuant to s 133(1) [now s 408 of the InsolvencyAct 2006].7 Insolvency Act 2006, s 3 definition of "property".8 Official Assignee v Probert [2001] 2 NZLR (HC) at 506.There is no section divesting the Official Assignee of [property vested in theAssignee] at any stage, certainly not on the bankrupt's discharge, whetherautomatic or following application.Such also accords with the common sense of the matter. Although in mostcases no doubt the whole of the bankrupt's estate has been fully administeredprior to discharge, such is clearly not invariably the case – theOfficial Assignee claims that such is not the case here – and it is not to besupposed that the legislature would have intended to terminate, automatically,all the Official Assignee's rights in respect of the bankrupt's property on thebankrupt's discharge. Such an interpretation would run the risk of cuttingacross all contracts or other legal obligations which may be extant at the dateof discharge.[25] On appeal, the Court of Appeal held that Mr Probert's right to be indemnifiedpassed to the Official Assignee on Mr Probert's bankruptcy and it made no differencein principle, in that case, that he had been discharged from bankruptcy.9[26] Counsel for ANZ submitted there are sound policy reasons underpinning theprinciple established in Official Assignee v Probert. In a proceeding such as this therationale is rather obvious. The final reports of the receivers and liquidators showsignificant debts remained unpaid at the conclusion of the respective liquidations. YetMr Thurston seeks to bring an $80 million claim without any undertaking to pay tothe company or the company's creditors or his own creditors. But for the Probertprinciple a bankrupt with significant unpaid creditors could, post discharge, obtain afinancial windfall yet avoid applying any of the windfall to his or her unpaid creditorsin the bankruptcy.[27] In conclusion, any claim the plaintiff had in respect of the sale of the propertiesvested and remains vested in the Official Assignee until the Official Assignee hasobtained a court order pursuant to s 408 of the Insolvency Act. As at 31 July 2017 theOfficial Assignee had not applied to the Court for an order releasing her from theadministration of the bankruptcy estate. The statement of claim must be struck out asMr Thurston lacks standing to bring the claim.9 Probert v Official Assignee CA328/90, 19 June 1991 at 4.[28] This conclusion is sufficient to dispose of the strike-out application. Forcompletion I turn to ANZ's second ground.Is the pleading likely to cause prejudice or delay?[29] Even allowing for the fact the statement of claim is prepared by anunrepresented litigant, by a long measure, it falls short of the requirements of a properpleading:(a) A large number of the "pleadings" are in fact questions. For example:• Why did Mr L refuse to supply invoicing after taking $141,000 fromThurston Group bank accounts?• Why was Mr L so aggressive towards the Thurston Group Directors?• Why did he drive from Wellington to Feilding, walk unannouncedinto Thurston Group Head Office and loudly demandKenneth Thurston stand down as director ?• Why did Mr L want to put Aotearoa into receivership?(b) There is no relationship between the relief sought and the would because of action, that is, the $78.3 million claimed as a result of thealleged failure to serve Property Law Act notices.(c) Some of the pleadings border on being scandalous for example, theclaim that Mr L used three different bank accounts to make paymentsfor activities he did not want viewed and that he instructed receivers "tomake substantial payments and not record the fact of those payments".[30] It is clear the pleadings, because of their prolix nature, evidential content andin many respects unintelligible nature, will cause prejudice and delay. On this groundas well the claim must be stuck out. The fundamental deficiencies in the statement ofclaim are not remediable. The statement of claim is not clear or intelligible. There isno cause of action. Nor is it clear even what facts are relied on as amounting to theproposed cause of action.[31] Having reached this conclusion, it is unnecessary to address the application forsecurity for costs.Result[32] For the foregoing reasons an order is made striking out the statement of claim.[33] ANZ is entitled to costs which are awarded on a 2B basis._____________________________Karen Clark JSolicitors:Bell Gully, Wellington for Defendant