Alusi Limited v Creative Dentistry Limited - [2017] NZHC 3154

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE

CIV 2017-485-728 [2017] NZHC 3154

BETWEEN
ALUSI LIMITED

Plaintiff

AND

CREATIVE DENTISTRY LIMITED Defendant

Hearing: On Papers

Counsel:

J O Upton QC for Plaintiff
J A L Langford for Defendant
R C Laurenson for Joinder Applicant

Judgment:

15 December 2017

JUDGMENT OF SIMON FRANCE J (costs on discontinuance)

[1] The parties (“Alusi” and “Creative”) are dental practices. Along with a third, G J Lawrence Dental Ltd (“Lawrence”), they operate out of a single business premise. The arrangements between them were governed by a Deed of Association, and by the constitution of a company they jointly formed to hold the lease on the building (“the foundation documents”).

[2] The two key facts behind the proceedings appear to be that relations between the three deteriorated and Lawrence indicated an intention to retire, raising the spectre of sale. Exactly what the sequence of these two events was does not matter. Suffice to say the foundation documents contain rules concerning sales, and what
opportunities must be given to the other two practices if one of the three wishes to sell.

ALUSI LTD v CREATIVE DENTISTRY LTD [2017] NZHC 3154 [15 December 2017]

[3] Initially Lawrence was going to sell to Alusi, and it seemed Creative might sell to a third party. Both arrangements would engage the rights under the foundation documents. No doubt not assisted by the collapse of the underlying relationships, issues arose concerning these possible steps. Eventually the three entities went to mediation, out of which a new agreement between them emerged. The new agreement appears directed at these two possible sale arrangements, and sets rules around how they might happen, and who has to agree to what by when.

[4] Alusi and Lawrence immediately confirmed the agreement for sale and purchase between them. Creative, however, did not successfully sell to a third party and accordingly did not agree to the Lawrence sale to Alusi. Whether Creative’s consent was needed went to arbitration and the arbitrator ruled against the Alusi/Lawrence sale being enforceable over Creative’s objections. Subsequent to this, and important to the joinder application, Lawrence decided it did not want to go ahead with a sale to Alusi.

[5] The next event is Creative agreeing a sale to a third party. This led Alusi to file these proceedings seeking an injunction to stop the sale because the post-mediation agreement had not been complied with. The injunction proceeding was allocated callovers to set a timetable, but they were constantly adjourned because of the prospects of settlement. Settlement has indeed happened but unhelpfully without agreement as to costs.

[6] The other strand to the matter is that Lawrence was not named as a party to the injunction proceedings. Seemingly, it was taking no steps as regards the Creative sale and Alusi maintains it therefore had no interest in the proceeding. However, Lawrence was concerned that the basis of Alusi’s pleading was that the post-mediation agreement…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2017] NZHC 3154
Decision Date: 15 December 2017

CaseChat Overview and Summary

The case of Alusi Limited v Creative Dentistry Limited involved a dispute between dental practices Alusi Limited and Creative Dentistry Limited, which were part of a joint business arrangement governed by a Deed of Association and the constitution of a company holding the lease on their business premises. The dispute arose out of deteriorating relations between the practices and the intention of one practice, G J Lawrence Dental Ltd, to retire, which led to potential sales of business interests. Alusi and Lawrence agreed to a sale, but Creative objected and the matter went to arbitration. Alusi subsequently sought an injunction to prevent Creative from selling to a third party, claiming breach of a post-mediation agreement. Lawrence, not being a party to the injunction proceedings, sought to join the case.

The court had to decide two issues: the allocation of costs between Alusi and Creative, and the costs associated with Lawrence's application to join the proceedings. The court found that the dispute over which contract governed the sale was legitimate, and both parties were acting reasonably in their respective positions. The court could not determine the merits of the case nor was it confident in basing conclusions on conduct prior to the commencement of the proceedings. The court concluded that the standard rule that the discontinuing plaintiff pays costs should apply, and awarded costs to Creative. The court also found Lawrence's application to join the proceedings was valid and awarded Lawrence its claimed costs of $3,791. The final order of the court was that Creative was entitled to an award of costs of $5,352 and Lawrence was entitled to its claimed costs of $3,791.

Orders