Vexatious litigant: Attorney-General v. Siemer

The High Court has declared Vincent Ross Siemer a vexatious litigant.  Without first getting court approval, he is barred from taking legal action against judges, members of the legal profession, accounting firm Ferrier Hodgson or chartered accountant Michael Stiassny.

Soured by the outcome of a legal dispute in 2000, Mr Siemer sued a remarkably wide range of people: parties to the original litigation, lawyers who acted for him, lawyers who opposed him, the Solicitor-General, the Attorney-General, the Law Society and the Judicial Complaints Commissioner in respect of complaints about judges who heard a number of the cases.

Citizens have a fundamental constitutional right to a hearing before the courts.  It is very rare for a person to be declared a vexatious litigant and barred from the courts.  This exceptional step is taken when the tempo and tone of litigation is viewed as harassment.   Judicial resources are barely sufficient to provide justice without unreasonable delay to those who have genuine grievances.  The courts will not permit these resources to be squandered on those who do not.

The High Court was told Mr Siemer’s 2000 dispute arose from the breakdown of a joint venture arrangement centred on a company called Paragon Oil Systems Ltd.  Mr Stiassny became involved as a temporary caretaker receiver appointed by the High Court.  Mr Siemer’s actions in expressing dissatisfaction with the operation of this receivership saw him sued for defamation and briefly imprisoned for contempt of court.  A plethora of litigation followed.   The High Court ruled that fifteen of these subsequent cases were vexatious.  They were not supported by any reasonable grounds.  They were seen as collateral attacks designed to challenge decisions of judges where Mr Siemer disagreed with their conclusions.  They dealt with the same issues that had been previously decided by the courts.

Attorney-General v. Siemer – High Court (30.4.14)

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Feltex: Credit Suisse v. Houghton

Lack of rules governing class actions has left Feltex shareholders wandering through a maze as they attempt to recover compensation for alleged wrongdoing in 2004 at the time of the $250 million Feltex public offer.   Credit Suisse tried to argue that shareholder delays mean some investors are out of time, having lost any right to sue.

Shareholders who in 2004 bought into Feltex at $1.70 per share allege they were misled about the company’s prospects when taking up the offer.  The share price dropped two-thirds in the subsequent two years.  By December 2006, Feltex was in liquidation.  Legal action has been taken against the then directors of Feltex, the promoters of the offer (Credit Suisse) and brokers managing the public offer (First NZ Capital and Forsyth Barr).  Legal action is underway in the name of a Mr Houghton from Upper Moutere and a Mr Jones from Dunedin, acting on their own behalf and as representatives of similarly affected shareholders.

Unlike Australia and the United States, there are no explicit rules in New Zealand for class actions, allowing one individual to take legal action on behalf of a number of people all affected in a similar manner.   The Feltex litigation is attempting to piggyback a class action into the New Zealand courts on the back of High Court procedural rules which allow one person to bring a claim on behalf of others where they have “the same interest in the subject matter”.   This procedure requires prior court approval.

The court was told the process has been in some disarray.   Court proceedings were filed back in February 2008.  There were then delays over finding funding for the litigation and then questions about the suitability and legality of any claim being funded by a commercial litigation funder.   Investors were contacted and invited to join the litigation before the High Court had approved forms they were asked to sign.  Lawyers initially acting for the investors withdrew from the case in March 2009 and there was a three month delay before new lawyers took up the case.

With little progress made, investors were running up against time limits.  The court was told part of their case would possibly become statute-barred by early June 2010.  The exact date was not known.  Because Feltex investors are taking a novel approach to create a class action, it was not known at which stage individual investors were considered to have commenced legal action such that the clock stopped ticking and time stopped running.

Time limits are imposed to prevent endless litigation and protect defendants from dormant claims being commenced long after contemporary evidence is no longer available.

Feltex investors are suing for negligence (which has a six year time limit running from the date of the alleged negligence) and for breaches of the Fair Trading Act (which has a three year time limit running from the date any loss was discovered or should have been discovered).

The Supreme Court ruled that the critical date for Feltex investors was the date Mr Houghton filed his action in the High Court and the court nominated him as a representative of all those who bought shares in the Feltex public float.  This date is 26 February 2008.  From this date, all the investors Mr Houghton represents are considered to have commenced legal action, even though they signed forms at a later date to “opt-in”.  The court was told that as at February 2012 a total of 2,852 shareholders have opted to join the representative action.   Investors have yet to have their day in court arguing the merits of their claim.

Credit Suisse v. Houghton – Supreme Court (9.04.14)

 14.016

Matrimonial property: Thompson v. Thompson

Eight million dollars paid in return for a promise not to compete could be retained as separate property when selling a health food business as part of a matrimonial property settlement.  Business goodwill was included in the $72 million price paid for the business.  The restraint of trade agreed by the husband curtailed his future business activity and payment for this restraint was to be treated as his personal property.

When the 31 year marriage of Mr & Mrs Thompson ended in 2002 their most valuable asset was the Nutra-Life health food business established nearly twenty years previously.  They owned the business through a family trust: the MLT Trust.  It was agreed the business would be sold and initial valuations gave an indicative value of $40.7 million.  In December 2006 the business was sold for $72.3 million to Next Capital Health Ltd.  The sale came with conditions.

The court was told Mr Thompson was required as part of the sale to take a 19.9% holding in Next at a price of $12 million and to become a director of Next.  He was also required to sign a “non-compete” contract prohibiting him from working in opposition to Next for the longer of five years from the sale or two years from the date he stopped being a director of Next.  The restraint operated worldwide (excluding Africa and the Americas).  He was paid eight million dollars in return for this restriction on his future business activities.

Evidence was given that the $72.3 million paid to MLT Trust by Next amounted to $22.9 million for Nutra-Life’s tangible business assets and the remainder of $49.4 million for its business goodwill and brands.  MLT Trust paid Mr Thompson $1.39 million as a bonus on negotiating the sale.  The net worth of the MLT Trust was divided 50/50 between two trusts, one each in the names of Mr & Mrs Thompson.

Mrs Thompson argued the eight million dollars paid separately for the restraint of trade was matrimonial property.  It was derived from their health food business which was a matrimonial asset.

The Court of Appeal said the $72.3 million paid by Next and treated as matrimonial property included payment for business goodwill attached to Nutra-Life.   The eight million paid to Mr Thompson was to secure his agreement not to use his personal skills and industry experience in the future in any way that would prejudice Next’s business interests.  By agreeing to this restraint, Mr Thompson increased the value of Nutra-Life and the price paid for the business.

Thompson v. Thompson – High Court (30.8.13) & Court of Appeal (8.04.14)

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