Cares Appliances Limited v Smiths City (Southern) Limited - [2013] NZHC 1210

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2012-409-002451 [2013] NZHC 1210

BETWEEN CARES APPLIANCES LIMITED Plaintiff

AND

SMITHS CITY (SOUTHERN) LIMITED Defendant

Hearing: 23 May 2013

Appearances:

A M Dollimore for Plaintiff
W J Hamilton for Defendant

Judgment:

28 May 2013

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1] Cares Appliances Limited (“Cares”) retails used household appliances. Smiths City (Southern) Limited (“Smiths”) sells new appliances. In the course of doing so it receives trade-ins. On 14 April 2008 the companies entered a contract whereby Smiths would sell to Cares all its trade-ins and items repossessed from defaulting purchasers, on certain terms. The supply contract was for four years and five months, and Cares had an option to renew it for a further two periods of three years each.

[2] On 8 May 2012 Smiths wrote to Cares, cancelling the agreement with immediate effect. Smiths alleged breaches by Cares of its obligations to pay for appliances uplifted from Smiths within the terms of the contract.

[3] In this proceeding Cares says this was a breach of contract and it does not accept the cancellation. It alleges this has caused Cares damage, and initially it sought an order by way of specific performance requiring Smiths to perform its
obligations under the agreement, together with damages.

CARES APPLIANCES LIMITED v SMITHS CITY (SOUTHERN) LIMITED [2013] NZHC 1210 [28 May
2013]

[4] Subsequently the solicitors for Cares have withdrawn the application for an order by way of specific performance. In this application Smiths seeks an order under r 5.45 High Court Rules directing Cares to give security for costs.

[5] Rule 5.45 provides that if a judge is satisfied that there is reason to believe that a plaintiff will be unable to pay the defendant’s costs if the plaintiff is unsuccessful in a proceeding, the Court may order it to give security against the prospect of an adverse costs award. In this case, Cares accepts that this threshold test is met but says that the Court should exercise its discretion against directing it to give security for costs, saying that if the plaintiff is unable to pay an adverse award of costs this has occurred because of the actions of Smiths.

[6] In A S McLachlan Ltd v MEL Network Ltd1 the Court of Appeal described the discretion given to the Court by this rule as “unfettered”, and as Kós J said in Highgate on Broadway Ltd v Devine:2

The applicant for security for costs may have crossed the threshold; it is another question as to whether it is invited to stay.

Principles on which the discretion is to be exercised are not to be constructed from the facts of previous cases3 and the task of the Court is to make a broad overall assessment of the position.4 In Highgate on Broadway Ltd Kós J identified a number of factors which courts find it helpful to consider when exercising the discretion on a principled basis. It is common ground between counsel in…

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.

Continue reading Cares Appliances Limited v Smiths City (Southern) Limited

Details

AGLC: Cares Appliances Limited v Smiths City (Southern) Limited [2013] NZHC 1210
Case: [2013] NZHC 1210
Decision Date: 28 May 2013

CaseChat Overview and Summary

Cares Appliances Limited, a retailer of used household appliances, entered into a contract with Smiths City (Southern) Limited, a seller of new appliances, for the sale of trade-ins and repossessed items. Smiths terminated the contract, alleging breaches by Cares of its payment obligations. Cares denies the breaches and claims damages for the termination. Smiths seeks an order for Cares to provide security for costs, arguing that Cares is likely to be unable to pay the costs if it loses the case. The court must decide whether Cares' financial situation is such that it would be unable to pay the defendant's costs if unsuccessful, and whether the court should exercise its discretion to order security for costs.

The court considered the merits of Cares' claim and whether its financial position resulted from Smiths' actions. While Cares had fallen into arrears with payments, the court found that Smiths had not made time of the essence of the contract, and that the letter of 28 May 2010 did not satisfy the requirements of such a notice. The court also found that Cares' financial difficulties were significantly contributed to by Smiths' termination of the contract, which deprived Cares of a major source of stock. Given the evidence presented, the court found that Cares' case appeared to have merit and that ordering security for costs would likely prevent Cares from advancing its claim.

The court declined to direct Cares to give security for costs, but reserved leave for Smiths to reapply when the case is ready for trial. The application was dismissed, and Cares was entitled to costs on a 2B basis plus disbursements fixed by the Registrar.

Orders