Bernard v Space 2000 Ltd - [2001] NZCA 214

IN THE COURT OF APPEAL OF NEW ZEALAND

CA 232/00

BETWEEN	GREGORY BERNARD
Appellant

AND	SPACE 2000 LIMITED AND KNOBS & KNOCKERS LIMITED
First Respondents
AND	RODNEY JAMES ROBERTS AND PAMELA MARY ROBERTS
Second Respondents

AND	AFFILIATED BUSINESS CONSULTANTS LIMITED
Third Respondent

AND	HARI GANGISETTI
Fourth Respondent

AND	JOHN COLIN MCINTOSH
Fifth Respondent

Hearing:	11 June 2001
Coram:	Thomas J Heron J John Hansen J
Appearances:	G A Keene for Appellant M A Gilbert for Respondents
Judgment:	5 July 2001

JUDGMENT OF THE COURT DELIVERED BY THOMAS J

The question in issue

The question in issue in this case is whether the Master was correct in the circumstances of this case to enter judgment for the fifth defendant against the plaintiff under r 136(2) of the High Court Rules.

The background facts

On 4 May 1988, the appellant, Mr Bernard, entered into a contract with Space 2000 Ltd and Knobs and Knockers Ltd, the proprietors of a coin-operated video arcade business situated in Waitakere City, to purchase that business. The purchase price was $290,000. A deposit of $24,000 was paid. The sum of $121,000 was due in cash in one sum on the date of possession, and the balance of $145,000 was to be made up by way of vendor finance. The date of possession was fixed at 8 June 1988.
Nine days later, on 13 May, Mr Bernard delivered a copy of the contract to his solicitor, Mr McIntosh, the fifth defendant in the proceeding. Mr McIntosh carries on practice in Henderson. It is accepted that Mr Bernard’s instruction to Mr McIntosh created a contract of retainer and that it was an implied term of the contract that Mr McIntosh would exercise reasonable skill and care in carrying out Mr Bernard’s instructions.
In terms of the agreement Mr Bernard was to receive an assignment of the lease of the business premises and various items of plant which were set out in the agreement. The agreement contained an express warranty by Space 2000 Ltd and Knobs and Knockers Ltd that the turnover for the period from 15 April 1997 to 31 March 1998 was $300,000, including GST. The agreement was also conditional upon Mr Bernard or his nominated accountant perusing and approving the books of accounts of the business by 28 May 1998. Mr Bernard duly instructed an accountant to carry out due diligence in terms of this clause and the condition was satisfied.
On 5 June 1998, Mr McIntosh received a letter from the vendor’s solicitors attaching a copy of a letter from the landlord’s solicitors dated 4 June 1996. The letter indicated that the landlord, Hayes Securities Ltd, consented to the assignment of the lease to Mr Bernard subject, among other things, to “arrears of rent (currently totalling $10,305) to be paid to the landlord on settlement”.
Mr McIntosh prepared an assignment of lease and wrote to Mr Bernard asking that he call at his office and sign the document as soon as possible so that he could…

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: [2001] NZCA 214
Decision Date: 5 July 2001

CaseChat Overview and Summary

In Bernard v Space 2000 Ltd, the defendant, Space 2000 Ltd, applied for summary judgment under Rule 136(2) of the High Court Rules, arguing that the plaintiff's claim had no merit and could not succeed. The plaintiff, Bernard, contested the application, arguing that the defendant had not satisfied the criteria for summary judgment. The case centred around the interpretation and application of Rule 136(2) of the High Court Rules, particularly in the context of a defendant's application for summary judgment when the plaintiff's claim appeared untenable on the pleadings. The court was required to determine whether the defendant had met the stringent requirements for summary judgment under Rule 136(2), and whether the application could be allowed despite the potential for an alternative application to strike out the claim under Rule 186 or Rule 477.

The court noted that Rule 136(2) of the High Court Rules allows for summary judgment against a plaintiff if the defendant can demonstrate that none of the causes of action in the statement of claim can succeed. However, the court emphasised that Rule 136(2) should not be used to circumvent the more stringent requirements and restrictions applicable to an application to strike out a cause of action under Rule 186 or Rule 477. The court held that Rule 136(2) is only appropriate where the defendant has a "clear answer to the plaintiff which cannot be contradicted" and can offer evidence that constitutes a complete defence to the plaintiff's claim. The court observed that the subrule contemplates an answer that is clear-cut, often referred to in legal parlance as a "king hit." The court concluded that the defendant's application for summary judgment was not suitable as it did not meet the stringent requirements for summary judgment under Rule 136(2), and the alternative application to strike out the claim under Rule 186 or Rule 477 was more appropriate.

The court dismissed the defendant's application for summary judgment, finding that the defendant had not satisfied the criteria for summary judgment under Rule 136(2). The court held that the defendant's application should have been made by way of an application to strike out the plaintiff's cause of action. The court did not make any orders regarding the application to strike out, as it was not the subject of the present proceedings.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

Rule 136 of the High Court Rules reads as follows:136. Judgment where there is no defence or where no cause of action can succeed – (1) The Court may give judgment against a defendant if the plaintiff satisfies the Court that the defendant has no defence to a claim in the statement of claim or to a particular party of any such claim. (2) The Court may give judgment against a plaintiff if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed. It is not surprising that most of the case law relating to r 136 relates to subrule (1). This case law either does not apply, or is to be applied with considerable caution, to applications for summary judgment by a defendant under subrule (2). As the commentary in McGechan on Procedure, HR 136.09A, points out, the position is different when it is the defendant who applies for summary judgment. Most significantly, the procedure under subrule (2) must be reconciled with the procedure available to a defendant to apply to strike out the plaintiff’s cause of action pursuant to r 186 or r 477. This Court examined this point in Westpac Banking Corp v M M Kembla New Zealand Ltd, supra, and confirmed (at 313) that the procedure under subrule (2) is not directly equivalent to the plaintiff’s summary judgment procedure in subrule (1). Where a claim is untenable on the pleadings as a matter of law, it will not usually be necessary to have recourse to the summary judgment procedure at all. The defendant can apply to strike out the claim. Consequently, it was held (at 313), the Courts should not permit r 136(2) to be used to circumvent the restrictions on adducing evidence in support of an application to strike out a cause of action. Nor should the Courts allow an application to proceed under r 136(2) where the effect would be to unfairly create an issue estoppel against the plaintiff. If a pleading is struck out on an application to strike out, the plaintiff is not precluded from bringing a further properly constituted claim. Entering judgment under r 136(2) is discretionary, and the Courts should not hesitate to exercise that discretion against a defendant if the application could more appropriately have been made by way of an application to strike out the plaintiff’s cause of action. Rule 136(2), as indicated in Kembla (at 313), is only appropriate where the defendant has a “clear answer to the plaintiff which cannot be contradicted”. Summary judgment for a defendant “will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim”. (Emphasis added). The requirement that there be a clear answer which cannot be contradicted and a complete defence before judgment is entered for a defendant under r 136(2) is not to be disregarded. Examples which are given of appropriate cases for summary judgment under the subrule are where the wrong plaintiff has proceeded (Coastal Tankers Ltd v Southport NZ Ltd 17/5/99, Master Venning, HC Invercargill, CPI4/96) or where the situation is clearly one of qualified privilege (Ferrymead Tavern Ltd v Christchurch Press Ltd 11/8/99, Master Venning, HC Christchurch, CPI84/98). Thus, the subrule contemplates an answer which is clear-cut; what in colloquial language would be described by counsel as a “king hit”.

Ratio Decidendi

Legal Principle Established

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