Bay Cities Real Estate Limited v Re/Max New Zealand Limited HC Napier CIV 2010-441-134

[2011] NZHC 1159

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV 2010-441-134

BETWEEN  BAY CITIES REAL ESTATE LIMITED Plaintiff

ANDRE/MAX NEW ZEALAND LIMITED Defendant

ANDELANOR MACDONALD AND DAVID SANDERSON GAUNT

Second Counterclaim Defendants

Hearing:         25 August 2011

Appearances: J L Bates for Defendant in support of application for leave to appeal P S J Withnall for Plaintiff and Second Counterclaim Defendants to oppose

Judgment:      29 September 2011 at 4:15 PM

JUDGMENT (NO 2) OF WHITE J

This judgment was delivered by me on 29 September 2011 at 4.15 pm pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar

Date: ………………….

Solicitors:           Michael Chung Law Office, PO Box 85, Wellington

Quigg Partners, PO Box 3035, Wellington

Gresson Grayson, PO Box 1045, Hastings

BAY CITIES REAL ESTATE LTD V RE/MAX NEW ZEALAND LTD HC NAP CIV 2010-441-134 29

September 2011

[1]      Re/Max New Zealand Limited (Re/Max) seeks leave to appeal to the Court of

Appeal under s 26P(1AA) of the Judicature Act 1908 against my judgment of 8 June

2011 dismissing an application for review of the order made by Associate Judge D I Gendall  on  7  December  2010  staying  enforcement  of  the  summary  judgment obtained  by  Re/Max   against  Bay  Cities  Real  Estate  Limited  (Bay  Cities), Ms MacDonald and Mr Gaunt.

[2]      It is common ground that in order to obtain leave Re/Max must show that the proposed appeal raises some question of law or fact capable of bona fide and serious argument  in  a  case  involving  some  interest,  public  or  private,  of  sufficient importance to outweigh the cost and delay of further appeal: Waller v Hider and Gregory v Gollan & Ors.[1]    Not every alleged error of law is of such importance, either generally or to the parties, to justify further pursuit of litigation which has already been twice considered and ruled upon by a court.  In general, leave will be less readily granted where a proposed  second  appeal  relates  to  an interlocutory

[1] Waller v Hider [1998] 1 NZLR 412 (CA); and Gregory v Gollan & Ors HC Auckland CIV-2005-404-3485, 4 July 2007, at [4]-[9]. 

matter which does not determine the rights and liabilities of the parties.

[3]      For Re/Max, Mr Bates identified the following two questions of law which he claimed were of sufficient importance to justify the grant of leave:

(a)      whether the reference to “likely” in rule 17.29 of the High Court Rules meant “more likely than not” rather than “a real and substantial risk”: cf my judgment of 8 June 2011 at [24]-[29]; and

(b)whether it was implicit in Browns Real Estate Ltd v Grand Lakes Properties Ltd[2] that in terms of rule 17.29 no “miscarriage of justice” can conceivably arise when the parties had agreed to a “pay now argue later” style clause: cf my judgment of 8 June 2011 at [31]-[36].

[2] Browns Real Estate Ltd v Grand Lakes Properties Ltd [2010] NZCA 425, (2010) 20 PRNZ 141.

[4]      In respect of the first question of law, Mr Bates submitted that:

(a)      The Court of Appeal could clarify the test for “likely” in the context of a stay application.  Re/Max would submit that the test for “likely” is “more probable than not” and that this question is capable of bona fide and serious argument because a distinction has been drawn in the cases between the applicable test for setting aside judgments regularly obtained as opposed to judgments irregularly obtained: Enright v Gold

Metal Exports Ltd.[3]  When a judgment has been regularly obtained the

[3] Enright v Gold Metal Exports Ltd (1989) 3 PRNZ 243 (HC) at 246.

interpretation of the word “likely” is referring to a probability rather than a possibility.  In contradistinction cases where the judgment has been irregularly obtained (including where fraud is alleged) the test for “likely” carried the connotation of “significant or material risk” which must be a lower standard.

(b)As the summary judgment in the present proceeding was regularly obtained, the Associate Judge’s reference to “real risk” and the reference in my judgment at [28] to “a real and substantial risk” merged the test for regularly and irregularly obtained judgments. Clarification of the test by the Court of Appeal would have ongoing significance for a test frequently in use.

[5]      As Mr Withnall submitted for Bay Cities in response, however, the Court of Appeal has already decided that in the context of rule 17.29 “likely” means “probable”: Crawford & Yelcich v Odin Enterprises Pty Ltd.[4]     It is true that in Enright v Gold Metal Exports Ltd the High Court preferred a lower threshold for a judgment irregularly obtained, but that does not derogate from the Court of Appeal’s later decision as to the “probable” test.   For the reasons given in my judgment of

[4] Crawford & Yelcich v Odin Enterprises Pty Ltd [2009] NZCA 199 at [29].

8 June 2011 at [27]-[29], I accepted that “probable” included “a real and substantial risk” and that therefore the Associate Judge, who had used the expression “real risk”, had not erred.  As both the Associate Judge and I applied the test required by the

Court of Appeal, no further question of law is raised.

[6]      The  first  question  of  law  identified  by  Mr  Bates  for  Re/Max  does  not therefore constitute a question of law capable of bona fide and serious argument involving some interest of sufficient importance to justify a further appeal.

[7]      In respect of the second question of law, Mr Bates submitted that:

(a)      It would be illogical to leave the law in a state where a company could stay enforcement of a summary judgment application by simply claiming inability to pay and that it had an arguable counterclaim when it could not legitimately do so if a statutory demand had been originally served.  Why was Grand Lakes Properties allowed through the enforcement gate and not Re/Max?

(b)The judgments of the Associate Judge and the High Court mischaracterised the issue as arising from a very broad discretion. The discretion attaches only once a threshold test has been met.  Court of Appeal clarification of the proper application of the test will give much guidance to practitioners as to which enforcement mechanism one should advise clients to take.   The existence of the no set-off provisions in the franchise agreements meant that the “miscarriage of justice” threshold test was not met and there was no discretion to exercise: cf Browns Real Estate Ltd v Grand Lakes Properties Ltd.

(c)      A “pay now argue later” provision should have the same effect in construction contracts and in cases involving statutory demands and summary judgments: cf Laywood v Holmes Construction Wellington Ltd,  Browns  Real  Estate  Ltd  v  Grand  Lakes  Properties  Ltd  and

Bromley Industries Ltd v Martin & Judith Fitzsimons Ltd.[5]

[5] Laywood v Holmes Construction Wellington Ltd [2009] 2 NZLR 243 (CA) at [61]-[65]; Browns Real Estate Ltd v Grand Lakes Properties Ltd at [17]; and Bromley Industries Ltd v Martin & Judith Fitzsimons Ltd [2009] NZCA 382, (2009) 19 PRNZ 850 at [66].

[8]      Mr Withnall submitted for Bay Cities in response that the decision in Browns

Real Estate Ltd v Grand Lakes Properties Ltd did not require any clarification and no question of law capable of bona fide and serious argument and of sufficient

importance arose.  This was not a statutory demand case and the Court did have a discretion to exercise under rule 17.29: Bromley Industries Ltd v Martin & Judith Fitzsimons Ltd.[6]

[6] Bromley Industries Ltd v Martin & Judith Fitzsimons Ltd at [66]-[67].

[9]      In reply for Re/Max, Mr Bates accepted that enforcement of the summary judgment was not the end of the road, but submitted that additional grounds were required for a miscarriage of justice to arise: Commissioner of Inland Revenue v Chester Trustee Services Ltd.[7]   In the present case, as there were no grounds beyond the counterclaim and the inability to pay, there was no miscarriage of justice.

[7] Commissioner of Inland Revenue v Chester Trustee Services Ltd [2003] 1 NZLR 395 (CA) at [4].

[10]     For the following reasons I do not accept that the second question of law identified by Mr Bates is capable of bona fide and serious argument involving some interest of sufficient importance to justify a further appeal.

[11]     First, under rule 17.29 the Court clearly has a discretion whether to grant relief if satisfied that a substantial miscarriage of justice “would be likely to result” if the judgment were enforced.

[12]     Second, in Bromley Industries Ltd v Martin & Judith Fitzsimons Ltd[8]  the Court of Appeal recognised that there was a difference between whether the entry of a summary judgment was “unjust” and whether the subsequent execution of the judgment may lead to “a miscarriage of justice” in terms of rule 17.29.

[8] Bromley Industries Ltd v Martin and Judith Fitzsimmons Ltd at [67].

[13]     Third, in  Browns  Real Estate Ltd v Grand  Lakes  Properties  Ltd,  a case involving an  application  to  set  aside  a statutory demand  under s  290(4) of the Companies Act 1993, in the judgment of the Court of Appeal delivered by Glazebrook J it was said:

[12]     ... Grand Lakes points out that this Court has said in the summary judgment context that, in circumstances where set-off is excluded by an express contractual provision in an agreement between commercial parties, there is no injustice in giving effect to the bargain the parties have made [see Bromley Industries Ltd v Martin and Judith Fitzsimons Ltd].

.....

[17]      ... In our view a contractual no set-off provision of the type at issue in this case would normally result in the Court’s discretion being exercised against an applicant if the sole grounds for an application to set aside a statutory demand was the existence of a set-off, counterclaim or cross demand  which  a  party  had  expressly  agreed  could  not  be  raised.    We consider that commercial parties should be required to honour the bargain they have made, absent other grounds that tell against the recognition of a statutory demand. ...

(emphasis added)

[14]     Not  only  does  the  decision  in  Browns  Real  Estate  Ltd  v  Grand  Lakes Properties Ltd apply to a different situation but it also does not adopt, expressly or implicitly, a prescriptive rule that “a pay now argue later” style clause will invariably result  in  a  decision  not  to  set  aside  a  statutory  demand.    Such  a  clause  may “normally”  have  this  result,  but  it  will  not  necessarily be  inevitable:  cf  Simply

Logistics v Real Foods Ltd.[9]

[9] Simply Logistics v Real Foods Ltd HC Auckland CIV-2011-404-3497, 14 September 2011, at [41]- [44].

[15]     Fourth, there is nothing in the decision in Commissioner of Inland Revenue v Chester Trustee Services Ltd to suggest that the court’s discretion under rule 17.29 should be subject to a prescriptive rule.

[16]     Fifth, for the reasons given in my judgment of 8 June 2011 at [32]-[36], it was open to the Associate Judge to exercise the discretion under rule 17.29 as he did. The exercise of a discretion of this nature does not give rise to a question of law justifying the grant of leave to appeal.

[17]     My decision not to grant leave to appeal is also reinforced by the fact that the judgment  in  respect  of  which  leave  is  sought  is  an  interlocutory  judgment:  cf Gregory v Gollan at [8].

[18]     The  application  for  leave  to  appeal  to  the  Court  of Appeal  is  therefore declined.

[19]     As the parties were in agreement that if the application were declined, Bay

Cities, Ms MacDonald and Mr Gaunt would be entitled to an order for costs on a 2B

basis, with counsel’s reasonable travelling expenses as a disbursement under rule

14.12(2)(c),  there  will  be  an  order  for  costs  in  respect  of  this  hearing  against

Re/Max, with disbursements to be fixed by the Registrar.

D J White J