Bell v BDO Spicers Manawatu Limited
[2013] NZHC 1287
•31 May 2013
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2012-485-166 [2013] NZHC 1287
BETWEEN ROBERT ARTHUR BELL Applicant AND
BDO SPICERS MANAWATU LIMITED Respondent
Hearing: On papers Counsel:
P Chisnall for Applicant
A Darroch for RespondentJudgment:
31 May 2013
JUDGMENT OF WILLIAMS J (APPLICATION FOR RECALL AND LEAVE TO APPEAL)
In accordance with r 11.5, I direct the Registrar to endorse this judgment with the delivery time of 3.30pm on the 31st May 2013.
Introduction
[1] On 11 July 2012, I issued a judgment dismissing (except to a minor extent) Mr Bell’s appeal against a decision in the District Court finding him liable to pay two invoices issued by BDO, interest at 2 per cent per month and solicitor client costs. Mr Bell now applies for my judgment to be recalled or alternatively for leave to appeal to the Court of Appeal. BDO also seeks costs on the appeal. I will deal with the application for recall first.
The application for recall
Applicant’s submissions
[2] Mr Bell submits the judgment of 11 July 2012 should be recalled.
BELL v BDO SPICERS MANAWATU LIMITED [2013] NZHC 1287 [31 May 2013]
[3] He relies on the third category for recall set out in Horowhenua County v Nash (No 2): that “for very special reason[s] justice requires” the judgment be recalled. He submits this basis is made out, for three reasons as follows:
(a) First, in dismissing Mr Bell’s appeal on liability on the basis of mutual waiver of the existing agreement and formation of a subsequent oral agreement, I breached Mr Bell’s right to natural justice, because that ground had not been pleaded [by BDO]. The lack of any reference to this ground in BDO’s statement of claim meant Mr Bell did not have a fair opportunity to address the case against him.
The proper course would have been for BDO to have applied for leave to amend its pleadings and for Mr Bell to respond to the application (by opposing it, or if his opposition were unsuccessful, to apply for an adjournment to amend his own pleadings, file evidence in response, etc).
Mr Bell submits that any application would likely have been unsuccessful, because if granted, it would have caused Mr Bell prejudice by requiring him to meet an entirely different type of case (one requiring evidence for or against oral waiver, rather than one focussed narrowly on statutory interpretation).
Even if leave to amend were granted, the [amended] claim would have been unsuccessful. Mr Bell would have given evidence, and would also have pointed to the NZ Institute of Chartered Accountants Code of Ethics (which directs arrangements generally be reduced to writing).
(b)Second, Mr Bell argues that new evidence has come to light that materially undermines the finding of mutual waiver. The evidence is letters of engagement (one original, one copy) dated 17 September
2008, sent by BDO to Mr Bell, signed by Mr Hopping for BDO but unsigned by Mr Bell and not returned to BDO (i.e. not executed).
BDO time print-outs show Mr Hopping charged Mr Bell for these letters. In the applicant’s view, this evidence clearly shows that contrary to my key finding on the question of Mr Bell’s liability to pay the invoices, neither BDO or Mr Bell intended to waive orally the requirement that future extension of BDO’s brief be reduced to writing, and more affirmatively, that Mr Bell never intended to agree to pay BDO for the subsequent post-settlement work.
On the sufficiency of the new evidence, the applicant says:
(i)The letters were not reasonably obtainable prior to the trial, or the appeal. While they were simply not found or discovered by BDO (for an unknown reason) and were “overlooked” by Mr Bell, this is explainable given that the existence of a subsequent letter of engagement was not in issue at that time.
(ii) The letters are capable of belief. They are original, printed on
BDO letterhead and are signed by Mr Hopping.
(iii)The letters are cogent, in that they would clearly lead to a different result (for the reasons explained above).
(c) Third, Mr Bell challenged my finding1 that a meeting had occurred between Mr Bell and Mr Hopping shortly after the settlement of Mr Bell’s matrimonial property litigation. He said such a finding was not supportable on the evidence. There was no evidence before the District Court from which to infer this meeting occurred. BDO’s submissions dated 11 April 2012 are, it was submitted, wrong in this respect. This finding also creates natural justice concerns, as the applicant did not have an opportunity to give evidence on the point.
It is also unlikely there was a discussion between the parties to the same contended effect (that is, that BDO/Mr Bell agreed orally that
1 Bell v BDO Spicers Manawatu Ltd [2012] NZHC 1598 at [12].
BDO would perform further work). The later letter referring to plans for work done “as discussed” is inconclusive. It was plain from the settlement agreement that there was no need for more work to be done.
[4] Mr Bell has filed two affidavits in support. The first focuses on the evidence (or lack thereof) before the District Court and this court deeming that there was a post-settlement meeting between Mr Hopping and Mr Bell. In the affidavit, Mr Bell says the disputed invoices and BDO’s timesheets were in evidence in the District Court, and do not record or suggest any meetings between Mr Hopping and Mr Bell between 15–30 September 2008. Copies are attached as exhibits. Mr Bell also says he did not give evidence in the District Court, or on appeal, principally because BDO had never argued or pleaded there was any oral element to the agreement.
[5] The second affidavit explains how Mr Bell discovered the new letter of engagement from BDO. In it, Mr Bell states he was just “looking through a box of [mixed up and disorganised] papers” and found the original and a copy.
Respondent’s submissions
[6] BDO oppose the application.
[7] BDO submits first that the power to recall is one that should be exercised sparingly. This has been recently confirmed by the Court of Appeal on several occasions. The respondent relies principally on Erwood v Maxted (set out below) and Ngahuia Reihana Whanau Trust v Flight.2 In Flight, Anderson P for a strong Court of Appeal bench held:3
It is becoming a matter of concern not just to this Court but to others in the western common law system that disaffected litigants, usually appearing in person, repeatedly make application for recall of judgments which they steadfastly refuse to accept. It is timely to characterise plainly unmeritorious applications of that sort as an abuse of the Court’s process and to reaffirm the rarity of legal justification for recalling judgments.
2 Ngahuia Reihana Whanau Trust v Flight CA 23/03, 26 July 2004.
3 At [2].
[8] The respondent also submits that the third ground for recall set out in Horowhenua County should be applied circumspectly. BDO point to Faloon v Commissioner of Inland Revenue,4 in which Asher J said:
While the third category is not defined with particularity in the judgments, it is quite clear that the discretion to recall must be exercised with circumspection, and it must not in any way be seen as a substitute for appeal. In particular there are some things that it can be said the power to recall does not extend to. It does not extend to a challenge of any substantive findings of fact and law in the judgment. It does not extend to a party recasting arguments previously given, and re-presenting them in a new form. It does not extend to putting forward further arguments, that could have been raised at the earlier hearing but were not.
[9] In response to the applicant’s submissions, the respondent says:
(a) The claim that the oral waiver argument was not properly signalled to the applicant in the respondent’s statement of claim is overly technical and should fail. By the time the parties were arguing the case on appeal, they were well aware that Mr Bell’s potential liability could be characterised in many different ways. That was express in the District Court Judge’s judgment. That judgment was premised on there having been an oral variation to the original agreement.
Additionally, if the respondent had applied to amend its statement of claim to base its claim (alternatively) on a separate oral agreement, this would plainly have been granted, given the District Court Judge considered the applicant was liable in substance, and the form of the claim made little difference.
(b)There was evidence of a meeting between the parties before the District Court. It was part of Mr Hopping’s evidence. It is not BDO’s fault Mr Bell failed to provide a transcript of the evidence on appeal.
Regardless, there is also clear evidence of communications between the parties after the matrimonial property settlement (cf the letter
dated 29 October 2008). This is sufficient evidence to found the
4 Faloon v Commissioner of Inland Revenue (2006) NZTC 19,832 (HC) at [13].
mutual waiver ground. The High Court is entitled to form its own impression of the evidence before it (per Austin, Nicholls).
[10] Consequently, the recall application is, Mr Darroch argues, really an attempt to re-litigate matters already considered on appeal. It is clear that only rare cases will fall within Category Three of Horowhenua County. This is definitely not one of those cases.
Principles
[11] The power to recall a judgment is expressly set out in r 11.9 of the High
Court Rules, which provides:
11.9 Recalling judgment
A Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed.
[12] The same power also subsists as part of this Court’s inherent jurisdiction.
[13] The seminal guidance on recall is that of Wild CJ in Horowhenua County v Nash (No 2).5 In that case, the Judge described the categories of case in which a Judge may exercise his or her discretion to recall a judgment as follows:6
Generally speaking, a judgment once delivered must stand for better or worse subject, of course, to appeal. Were it otherwise there would be great inconvenience and uncertainty. There are, I think, three categories of cases in which a judgment not perfected may be recalled – first, where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the Court’s attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled.
[14] I would note also Erwood v Maxted (reversed, but for reasons that do not affect the validity of the guidelines), in which the Court of Appeal provided the
following guidelines for judges determining recall applications in that court:7
5 Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC).
6 At 633.
7 Erwood v Maxted [2010] NZCA 93, (2010) 20 PRNZ 466 at [23], overturned in [2011] NZSC 23.
This Court is concerned with the proliferation of unjustified applications to recall judgments and has agreed upon the following guidelines to deal with such applications.
(a) Accidental slips or omissions
(i) Any accidental slip or omission may be corrected under r 8 of the Court of Appeal (Civil) Rules 2005.
(ii) Where the parties are agreed that an error or omission which falls within r 8 should be remedied, a joint memorandum may be filed for consideration by the Court.
(iii) Where there is no agreement, or where the Court directs, a formal application is required in accordance with the process set out in (c) below.
(b) Applications to recall judgments not falling within r 8
(i) Where a party seeks to recall a judgment not falling within r 8, the criteria set out in Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633 (as confirmed by this Court in Unison Networks Ltd v Commerce Commission [2007] NZCA 49) are to be followed and will be strictly applied.
(ii) Applications which merely seek to relitigate matters already considered, or to challenge substantive findings of fact and law, will not be entertained. Reference may usefully be made to Ngahuia Reihana Whanau Trust v Flight CA23/03,
26 July 2004; and Faloon v Commissioner of Inland
Revenue (2006) 22 NZTC 19,832 (HC).
(c) Process
(i) Where a formal application is required in terms of these guidelines:
(a) it must be made on notice to all other parties;
(b) any party served with an application need not respond unless directed to do so by the Court;
(c) the Court will deal with the application on the papers or by oral hearing in terms of r 51(6);
(d) the Court will usually give only brief reasons for its decision on any application;
(e) any further application seeking to recall a decision refusing an application to recall will usually be dealt with summarily; and
(f) the Court will consider ordering increased or indemnity costs against parties and/or counsel bringing unmeritorious applications.
[15] In the above excerpts the equivalent to r 8 of the Court of Appeal (Civil) Rules 2005 is r 11.10 of the High Court Rules.
[16] Returning to the grounds set out in the Horowhenua County extract above, as already set out, the applicant relies on the third category. On the scope of that category, McGechan lists accepted examples as follows:8
(a) The Judge failed to determine an issue that was properly put to him: Brake v Boote (1991) 4 PRNZ 86 (HC), or misapprehended counsel’s submissions: Cynotech Securities Ltd v People Ltd (No 2) HC Auckland CIV-2008-404-1559, 4 March 2009.
(b) The Judge overlooked a matter, for example, that a party had applied to amend the orders it sought: Matua Finance Ltd v Bank of New Zealand HC Auckland CP490/04, 4 August 1995; or that a party had applied for the Judge’s recusal but the application had not reached the Judge before he delivered his judgment: Greymouth Petroleum Ltd v Solicitor-General HC Wellington CIV-2009-485-
1425, 3 February 2010.
(c) The Judge’s orders do not reflect the Judge’s findings: Works Civil Construction Ltd v Does Not Compute Corporation Ltd HC Wellington CP46/92, 19 November 1992.
(d) Matters have changed subsequent to delivery of the judgment, affecting the outcome: Pine Tree Park Ltd v North Shore CC (No 2) HC Auckland HC26/96, 12 August 1996.
(e) Judgment has been given without consideration of the interests of an affected person: McDonald v Simmonds (1994) 8 PRNZ 12 (HC) (attorney sued in both trustee and beneficiary capacities, defending unsuccessfully without consideration of the beneficiary’s position).
(f) In a summary judgment application circumstances material to quantum had not been disclosed in the plaintiff’s affidavits: Goh v BNZ (1991) 4 PRNZ 92 (HC).
(g) A judgment placing a company in liquidation was recalled to allow a director of the company to join the liquidation proceedings in order to give him standing to challenge the liquidation decision on appeal: Kiwifruit Export Ltd v ANZ National Bank HC Tauranga CIV-2011-
470-697, 3 February 2012.
[17] On the scope of the third category, in cases where the applicant has been taken by surprise by an application and adverse findings in a judgment, reference
8 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at
[HR11.9.01].
may be had to the English decision of Re Blenheim Leisure (Restaurants) Ltd
(No.3):9
Another good reason [to recall a judgment is] if the applicant could argue that he was taken by surprise by a particular application from which the court ruled adversely to him and that he did not have a fair opportunity to consider.
[18] The discovery of fresh evidence can in some circumstances found a recall application. The existence of relevant considerations sufficient to found an application to admit further evidence are a starting point, although there is authority for the proposition that in some circumstances the bar in recall applications may be set lower. See generally Proprietors of Hiruharama Ponui Block Inc v A-G (No 2).10
Discussion
[19] I do not consider that the argument that Mr Bell was taken by surprise by my finding as to oral waiver is tenable. Notwithstanding the pleadings, the learned Judge in the District Court found that oral variation of the written contract was an inference available to be drawn on the facts. The Judge ultimately accepted that the words of the original terms of appointment were wide enough to cover the additional work (a point upon which we disagree). The possibility that the extra work was agreed to orally was made clear in the judgment in the District Court.
[20] While oral variation and waiver are conceptually very different, on these facts, they were simply different ways of perceiving a single set of facts. There is, in my view, a fine shade of distinction between Mr Bell and Mr Hopper agreeing orally that extra work would be done, and the same two parties agreeing orally or by action that they would not enforce the requirement that any extension or addition to the contract be written.
[21] Nor do I consider there is anything in the argument about whether a meeting had occurred between the two parties after the settlement. Mr Hopper said there was
such a meeting and that this is referred to in the notes of evidence. They had not
9 Re Blenheim Leisure (Restaurants) Ltd (No 3) The Times, 9 November 1999, cited with approval in Unison Networks Ltd v Commerce Commission [2007] NZCA 49 at [32].
10 Proprietors of Hiruharama Ponui Block Inc v A-G (No 2) [2004] 1 NZLR 394 at [9].
been included in the case on appeal. Mr Bell says there was no such evidence and Mr Hopper’s time records demonstrate this because they contain no reference to a meeting. It may be that there was no direct evidence before me that a meeting took place and I relied upon counsel submissions that had transposed evidence from the hearing in the District Court that had not found its way onto the appeal record (though it should have).
[22] Correspondence from Mr Hopper provides a basis to draw such an inference
– it refers after all to discussions between the two – but in any event the meeting was not the point. It was the discussion that took place that was crucial. Whether that was in a meeting, over a telephone or by some other means is immaterial. The fact is when Mr Hopper undertook his work he confirmed that it was pursuant to discussions between himself and Mr Bell. The work related to a crucial element in the relationship property settlement with potentially significant ramifications for Mr Bell. The simple fact is that Mr Hopper’s version of the basis upon which he did that additional work rang true and Mr Bell’s did not. The meeting point stands no chance of dislodging that conclusion.
[23] The letters cannot be so easily discounted. The 17 September 2008 letter set out the scope of engagement in some detail. It said:
You have asked us to provide accounting and taxation services. We anticipate this will involve:
a)Compiling the annual financial statements and the income tax returns from the information and records you provide.
b) Advise you of due dates to pay income tax and the amounts payable. c) Maintain records of tax calculations and payments and check income
tax assessments and statements when they are received. Liaise with
the Inland Revenue Department to correct errors.
d) Respond to any queries directed to us by the Inland Revenue
Department regarding the affairs of those entities listed above.
e) Maintain our files for the statutory period determined by law. f) Prepare Statistics New Zealand returns as required.
g) Provide assistance with the following periodic returns and forwarding them to the Inland Revenue Department as required.
i) Goods and services tax returns. ii) PAYE returns
h)Linking you to our Inland Revenue agency list. This will allow you an extension of time to file your income Tax Returns. It also allows us to obtain information from and discuss your affairs with the Inland Revenue Department. This authority extends to obtaining information for all tax types. By signing this engagement letter you confirm that we have approval to place all taxpayers listed above on our agency list.
i) Provide advice and assistance on special financial and taxation matters, which may from time to time arise.
j) Prepare detailed budgets and cashflow projections as and when requested by you.
[24] For Mr Bell, Mr Chisnall argued that this was a clear reference to the draft financial statements that were prepared and billed.
[25] Mr Hopper takes a different view. In his affidavit he says:
This is our standard engagement letter for clients to deal with their annual tax compliance work including income tax returns and their supporting financial statements. I do not know why it was not provided earlier [by BDO] but in any event it is not relevant in relation to the work in dispute.
[26] Mr Hopper referred to his letter of 29 October 2008 in which, he says, that proposition is confirmed. The letter provided in part:
Enclosed for your consideration are draft financial statements for the [2007 and 2008] years that as discussed have been prepared using bailed stock and also ownership of the stock passing to you as at April 2006.
While for both scenarios the outcome has been a taxable loss for the farming
operation the amount of the losses is quite significantly different …
[27] The difference referred to in the letter is of the order of $200,000 of tax losses.
[28] Mr Hopper says (in effect) this letter proves that in fact the financial
statements “were covered under the scope of our original letter of engagement dated
22 June 2008 not the engagement letter dated 17 September 2008.”
[29] I note, that on that point, I found against BDO in my original judgment.
[30] The essence of Mr Hopper’s evidence on this point is that the 17 September
2008 engagement letter related to income tax compliance and tax returns and had nothing to do with the bailment/ownership issue that was the focus of his 29 October letter.
[31] Mr Hopper’s October letter comes more than a month after the new engagement letter. I do not think that the new engagement letter can be so easily discounted as unrelated to the ownership/bailment analysis and a separate work stream. It is to be remembered that the original engagement letter referred to the compiling of “detailed accounting records”. The District Court Judge rejected the proposition that ‘detailed accounting records’ could include ‘financial accounts’. The September letter on the other hand referred explicitly to “financial accounts”. The draft financial accounts are then provided after that letter, identifying the potential impact of the terms of the relationship property settlement on tax liability. I find it difficult to accept that the draft financial statements provided in October and the new engagement letter in September are unrelated.
[32] The likelihood is that there is a gray area between the two letters, an overlap that would not have been particularly problematic at the time, but may well be now. The standard form letter must have been sent in part to reflect the additional work that Mr Hopper knew he was about to do, covering both the relationship property settlement and tax liability more generally. It was necessary because the original engagement letter did not cover the production of financial accounts.
[33] However viewed, this new letter of engagement is inconsistent with a waiver theory. The financial accounts referred to in the new engagement letter must have been intended to relate to the 2007–2008 year because that was the only year for which tax returns would be required at that point. The financial accounts therefore had a dual purpose. I will come back to that.
[34] Are these letters now admissible? Mr Bell says he found them amongst other unrelated material. Interestingly, BDO has not produced copies of them, even though they are BDO sourced documents. In my view these letters do have an important influence on the result: they are clearly credible and cogent. I accept
Mr Bell’s explanation and therefore I am prepared to find that they were not reasonably available at trial. They must therefore be admissible now on application for recall.
[35] I therefore grant the applicant’s application to recall my judgment and, on the basis of the new evidence adduced, find that the waiver argument that I accepted as decisive in that judgment can now have no application.
[36] As I have said, the draft accounts provided seem now to have had a dual purpose. To the extent that they related to the creation of accounts for general taxation purposes, there was no proper instruction for the work to be done because Mr Bell did not countersign the engagement letter for that work before Mr Hopping did it.
[37] What of the letters’ relationship property purpose? It is clear that a discussion took place on the issue. From it Mr Hopper developed an expectation that he would be required to provide advice on the ownership/bailment question but in my view it is too difficult to apportion that part of the work Mr Hopper did for taxation purposes and that part for ownership/bailment purposes. The two aspects probably cannot be unravelled. That means that the failure (or refusal) of Mr Bell to affirm in writing the extension of the work by countersigning the 17 September letter means there was no agreement to do it in accordance with the procedural requirements of either the first engagement letter or the second one.
[38] The effect of this is that the work done on the draft financial statements is not properly due and owing because it was not work undertaken on Mr Bell’s instruction as required by the terms of engagement. However, the work done for the purpose of preparing the rebuttal affidavit of 5 September (75 per cent of the sum due under Invoice 12721 – $5,980.50) is.
[39] Recalculations are therefore required as follows:
Proportion of Invoice 12721 attributable to rebuttal affidavit $5,980.50
Less overcharged fees on 75% of Invoice 12721 (27.9hr at $30/hr) ($ 837.00) Less overcharged fees paid on Invoice 12845 ($ 910.80)
Subtotal before interest: $4,232.70
Interest on sum for one year at 15% per annum $ 634.91
Interest (Pro rata over 1350 days non-compounding) $2,348.28
Total sum owing to BDO $6,580.98
[40] Mr Bell must pay $6580.98 to the respondents.
[41] As for costs, the letter of engagement only entitles BDO to “reasonable solicitor-client costs” in relation to remedying breach of the agreement. The original debt claimed by BDO was $13,653.01. So BDO has succeeded in its claim in respect of a little under half that sum. It seems fair to allow half of the respondent’s claimed $14,021.38 costs accordingly. Mr Bell would therefore pay half of the respondent’s legal costs which amount, on my calculation, to $7010.69. If counsel consider that costs under the letter of engagement should be dealt with on some other basis than my proposal here, they may file memoranda within 21 days hereof.
[42] I apprehend that there may be no need to address Mr Chisnall’s application for leave to appeal, but if I am wrong in that, the basis for appeal may well now change. Mr Chisnall should file a memorandum clarifying the point before I decide what should be done with that application.
[43] Costs on this application are reserved.
Williams J
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