Carey's Bay Marine Services Limited v Elwing Discoveries Limited
[2022] NZHC 1930
•9 August 2022
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2021-412-112
[2022] NZHC 1930
BETWEEN CAREY’S BAY MARINE SERVICES LIMITED AND ANOTHER
Appellants
AND
ELWING DISCOVERIES LIMITED
First Respondent
AND
ARTHUR EDWARD WHITE
Second Respondent
Hearing: 13 May 2022 (further submissions received 18 July 2022) Appearances:
L A Andersen QC for Appellants R M Reeve for Respondents
Judgment:
9 August 2022
JUDGMENT OF OSBORNE J
This judgment was delivered by me on 9 August 2022 at 4.15 pm pursuant to Rule 11.5
of the High Court Rules
Registrar/Deputy Registrar Date:
CAREY’S BAY MARINE SERVICES LIMITED v ELWING DISCOVERIES LIMITED [2022] NZHC 1930 [9
August 2022]
A claim transferred to the Disputes Tribunal
[1] The District Court has a civil jurisdiction over claims not exceeding $350,000.1 The Disputes Tribunal has a civil jurisdiction over identified claims not exceeding
$30,000.2 The respondents’ claim filed in the District Court was transferred to the Tribunal. The central issue in this appeal is whether the requirements for such transfer were met.
[2] The salient facts of the somewhat aged proceeding (commenced in October 2020), now the subject of this appeal, can be summarised:
(a)The first respondent, Elwing Discoveries Ltd (Elwing) filed a Court claim against the appellants, Carey’s Bay Marine Services Ltd (Carey’s Bay) and Eldon Donaldson in October 2020.
(b)Elwing made claims under four causes of action:
(i)for breach of contract for $145,103.25 (more or less) plus interest;
(ii)in the tort of negligence for $72,903.25 (more or less) plus interest;
(iii)for breach of bailment for $72,903.25 (more or less) plus interest; and
(iv)under ss 9–11 Fair Trading Act 1986 for $72,903.25 (more or less) plus interest.
(c)The appellants sought and obtained (opposed) an order for security for costs against Elwing, fixed at $12,000.
1 District Court Act 2016, s 74(1).
2 Disputes Tribunal Act 1988, s 10(3).
(d)Arthur White was subsequently joined as a second plaintiff (here, second respondent) and the respondents amended their claims down on the four causes of action to $117,806.70 on the contract claim and
$45,606.70 on each of the remaining three claims (the “ASOC”).
(e)In August 2021, counsel requested allocation of a trial.
(f)In September 2021, the respondents by memorandum invited the Court to transfer the proceeding to the Tribunal under s 37(1) Disputes Tribunal Act 1988 (the Act), stating they were willing to abandon two aspects of their claims:
(i)that part of the claim in contract for “expectation losses” (stated in the memorandum to be “presently unquantified” but the ASOC in fact quantifying the contract claim at $117,806.70 (more or less) plus interest); and
that part of the “reliance-based claim” beyond $30,000.
(g)The appellants opposed the respondents’ request on the basis (inter alia) the respondents needed to abandon those parts of their claims which exceeded $30,000 before the claims could be transferred.
(h)By reply, the respondents accepted they would have to reduce their claim to $30,000 for the Tribunal to have jurisdiction (“addressed in the [earlier] memorandum”).
On 4 November 2021, Judge Robinson minuted the Court file:
1. Transferred to Disputes Tribunal.
2. Plaintiff to file amended claim reflecting Disputes Tribunal jurisdiction within 10 working days.
(“the Transfer Direction”)
[3] It is common ground that the meaning of the Transfer Direction was that the proceeding was being transferred to the Tribunal with immediate effect but that the respondents were required to file an “amended” claim in that Tribunal for a maximum of $30,000 within 10 working days. The respondents filed such an amended claim in the Tribunal within the 10 day period.
The defendant’s intended appeal
[4] The defendants filed a notice of appeal on 24 November 2021 against the Transfer Direction. The notice contained a number of grounds, not all of which were pursued by counsel for the appellants, Mr Andersen QC, at this hearing. In this judgment I deal only with issues raised by the grounds that have been pursued and by the matters raised by the opposition.
The timing of this judgment
[5] Following the appeal hearing, I reserved my judgment with the decision to follow shortly. It transpired that the second respondent died soon after the appeal hearing. Counsel requested that delivery of this decision be deferred while steps were taken in relation to the second respondent’s estate. When, after some time, it became apparent that probate had yet to be obtained in relation to the second respondent’s will, I advised counsel that a judgment would be delivered as between the named parties. Hence the delivery of this judgment now. It will be for the parties, if necessary, to later arrange for the substitution of the party under r 4.50 High Court Rules 2016 (or its equivalent).
Transfer — the statutory regime under the Disputes Tribunal Act 1988
[6] The Act empowers a District Court Judge or Registrar to transfer proceedings that have been commenced in the District Court to the Tribunal in certain circumstances. The transfer may occur both when proceedings as filed are already within the jurisdiction of the Tribunal and where the claimant abandons so much of the claim that exceeds $30,000.
[7]The relevant provisions are ss 37(1) and 14:
37 Transfer of proceedings from District Court, etc
(1) Where proceedings within the jurisdiction of the Tribunal have been commenced in the District Court before a claim in respect of the same issues between the same parties has been lodged in the Tribunal, or transferred to the Tribunal under this section, a District Court Judge or Registrar may, on the application of either party or of that Judge’s or that Registrar’s own motion, order that the proceedings be transferred to the Tribunal.
…
14 Abandonment to bring claim within jurisdiction
A person may abandon so much of a claim as exceeds $30,000 in order to bring the claim within the jurisdiction of the Tribunal; and in that event … an order of the Tribunal under this Act or any other enactment, in relation to the claim, shall operate to discharge from liability in respect of the amount so abandoned any other person—
(a)…
(b)against whom the claim and the subsequent order are made.
The issues
Preliminary issue — the entitlement to appeal
[8] The preliminary issue, raised by Mr Reeve for the respondents, is whether the appellants were required to obtain the leave of the Court to appeal the Transfer Direction. The appellants did not seek or obtain such leave.
Issue 1 — the Court’s power to transfer proceedings in the Tribunal
[9] The first substantive issue (this and the following issues having been raised on the substantive appeal) is whether the Court had power to transfer the proceeding before the respondents had either expressly abandoned so much of their claim as exceeded $30,000 or filed a statement of claim whereby the claim was amended to a sum of no more than $30,000.
Issue 2 — the Court’s power to make directions as to the filing of documents in the Tribunal
[10] The second substantive issue is whether, when the Court transfers a proceeding to the Tribunal, it has power to direct a claimant to file an amended (reduced) claim in the Tribunal.
Issue 3 — the Court’s power to require an amended (reduced) claim at all
[11] The third issue (related to the second) is whether the Court has power to order a party to reduce its claim, as against making case management directions as to how and/or when an amended claim or abandonment of claim is to be filed.
Issue 4 — the observance of the rules of natural justice
[12] The fourth issue is whether the Court breached the principles of natural justice by failing to give the appellants an opportunity to be heard once the Court decided to consider a transfer and/or by providing no reasons for the transfer decision.
Issue 5 — disregard of relevant considerations
[13] The fifth issue is whether the Court failed to take into account relevant considerations.
Issues subsidiary to Issues 4 and/or 5
[14] The following subsidiary issues arise in relation to issues 4 and 5, namely whether the Court erred in failing to have regard to:
(a)the extent to which the respondents were proposing to reduce their claim after exposing the appellants to extended costs through having to defend much higher claims in the Court from October 2020;
(b)the complexity of the proceeding;
(c)the lack of comparative information as to the time likely taken in the Tribunal compared with the estimated two and a half day hearing in the Court;
(d)the non-resolution of costs incurred in the Court before the Transfer Direction but not the subject of a costs award to date, including the costs reserved in relation to the appellants’ successful application for security for costs. By the transfer, the respondents would insulate themselves from the costs that would have been awarded through an unsuccessful hearing in the Court;
(e)whether, upon transfer to the Tribunal, it would be beyond the Court’s power to deal with the deposit ($12,000) provided by the respondents as security for costs; and
(f)whether a transfer to the Tribunal ought to have been conditional on the fixing and payment of costs and disbursements.
Preliminary issue — leave required to appeal?
[15]Mr Reeve submitted that the appeal could not proceed without a grant of leave.
[16] For the reasons that follow, I find that is incorrect. That said, if there had been a requirement of leave it would have been appropriate to grant leave in this case given the significance to the parties of the abandonment of a significant part of the claim and the lack of authority relating to the prerequisites for transfer of a claim to the Tribunal.
[17] Mr Reeve correctly identified s 124 District Court Act 2016 as the provision that allows an appellant to bring an appeal as of right. Section 124 provides:
124 General right of appeal
(1)This Part applies to a decision of the court, other than a decision of a kind in respect of which an enactment other than this Act—
(a)expressly confers a right of appeal; or
(b)expressly provides that there is no right of appeal.
(2)A party to a proceeding in the District Court may appeal to the High Court against the whole or a part of a decision made by the District Court in or in relation to the proceeding.
(emphasis added)
[18] The term “proceeding” under s 4 District Court Act means “any application to the court for the exercise of the civil jurisdiction of the court other than an interlocutory application” (emphasis added).
[19] Mr Reeve submitted, having regard to the exclusion of interlocutory applications from the definition of “proceeding” under s 4, that s 124 cannot be read as creating a general right of appeal in relation to “case management directions” or interlocutory orders.
[20] Mr Andersen submitted that the restricted definition of “proceeding” under s 4 (excluding “an interlocutory application”) is not applicable to the Transfer Direction as no interlocutory application was filed in relation to it.
[21] While it is the case that a formal interlocutory application was not made, the respondents in fact sought a direction that was interlocutory in nature. The respondents sought procedural relief in relation to the proceeding. As such the application was required to be made in accordance with the provisions of either rr 7.12 or 7.34 District Court Rules 2014.3 Given that the conditions of r 7.34 did not apply, the application had to be made by filing in Court a document in form 17 or 18.4 Accordingly, had the respondents followed the correct procedure they would have filed an interlocutory application and the Transfer Direction, if made, would have been made on that application. The fact that it was not made in that way resulted from the respondents’ own procedural shortcut. As a result, there was no “interlocutory application” in the strict sense that term is used in the District Court Rules. It does not lie in the mouth of the respondents, in these circumstances, in response to an appeal, to assert there was such an interlocutory application.
3 In terms of the definition of “interlocutory application” under r 1.4 District Court Rules 2014.
4 District Court Rules, r 7.12(3), (4).
[22] In the unusual circumstances of this case, the appellants therefore did not require leave to appeal the Transfer Direction.
[23] In the event I am wrong in that determination, I would have granted the appellants leave to bring this appeal for the reasons referred to at [16] above.
Approach on appeal
[24] This appeal is by way of rehearing.5 This Court must reach its own view of the merits without deferring to the assessment of the District Court Judge.6 The appellants bear the onus of satisfying this Court that its assessment of the merits should differ from that of the District Court. It is only if this Court considers that the appealed decision is wrong that the Court is justified in interfering with the decision.7
Issue 1 — the Court’s power to transfer proceedings to the Tribunal
[25] The appellants assert that the Judge erred in purporting to transfer the proceeding to the Tribunal before the respondents had either expressly abandoned so much of their claim as exceeded $30,000 or filed a statement of claim whereby the claim was amended to a sum of no more than $30,000.
[26] As the ASOC stood at the time transfer was requested, the respondents were claiming approximately $117,806.70. By Mr Reeve’s memorandum requesting transfer, the respondents indicated they were willing to reduce their claim to $30,000 so that the matter could be resolved in the Tribunal but they did not express an immediate abandonment of the claim.
[27]The term “abandon” as used in s 14 of the Act — whereby “a person may
abandon so much of a claim as exceeds $30,000” — is not defined.
[28] The lack of a definition is unsurprising. This concept of abandonment — such as in relation to abandoning an excess claim or abandoning a cause of action or right of appeal — is frequently found in legislation. Section 80 District Court Act has a
5 High Court Rules 2016, r 20.18.
6 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4]–[5].
7 At [4].
parallel provision to s 14 of the Act. Numerous other instances exist in relation to the first instance and appellate courts. Sometimes a formal procedure is stipulated.8 In other instances, there is no formal procedure stipulated.9
[29] The term “abandonment” in s 14 of the Act (and in s 80 District Court Act) should be given the meaning the context requires, namely:
(a)the claimant gives up once and for all that part of the claim or the cause of action they are “abandoning”;
(b)the “abandonment” is clear; and
(c)the “abandonment” must be communicated to the court or tribunal in which the claim is being pursued; and
(d)there is no particular requirement of formality.
[30] Assessed against those features, the statements made on behalf of the respondents when requesting the transfer of the proceeding did not constitute an “abandonment” in the sense used in s 14 of the Act. The respondents (through counsel) were speaking of something they were willing to do. And that is implicitly how the Judge understood the request for transfer because the Transfer Direction expressly provided for the plaintiffs’ amended claim to be filed (in the Tribunal) within 10 working days.
[31]The respondents therefore did not abandon so much of their claim as exceeded
$30,000 before the Transfer Direction was made. At the point the Transfer Direction was made the proceedings were not “within the jurisdiction of the Tribunal” as that expression is used in s 37(1) of the Act.
[32] The District Court therefore had no power to transfer the proceeding to the Tribunal as the ASOC stood.
8 For example, Court of Appeal (Civil) Rules 2005, r 26A(2), requiring the filing of a signed notice.
9 For example, District Court Act, s 80(2); Disputes Tribunal Act, s 14.
[33] Accordingly, this first, central issue on the appeal is decided in favour of the appellants. That leaves for consideration how this Court, on a rehearing, should determine the appeal.
Issue 2 — the Court’s power to make directions as to the filing of documents in the Tribunal
[34] I have found that there could not be a transfer of the proceeding without abandonment first occurring. Mr Andersen as a secondary proposition submitted that it was beyond the District Court’s power to make directions as to the filing of documents in the Tribunal. Had the transfer otherwise been within the power of the Court, the Court would have had power (as a matter of inherent power) to impose conditions upon the transfer. If the respondents had failed to comply with the conditions, the Transfer Direction would not have taken effect.
Issue 3 — the Court’s power to require an amended (reduced) claim
[35] Mr Andersen alternatively submitted that the second limb of the Transfer Direction (requiring the respondents file an amended claim in the Tribunal within 10 working days) was in effect a direction to the respondents to reduce their claim. Mr Andersen submitted that the Court had no power to require such abandonment — under s 14 of the Act the election to abandon is that of the claimant, not something that can be directed by the Court. The claimant has either taken the step to abandon the excess claim or has not.
[36] In the way the Transfer Direction was framed, I accept Mr Andersen’s submissions. On its face, the Court through the Transfer Direction was directing the respondents to file an amended claim (implicitly at a maximum of $30,000). That said, as with the filing of documents (Issue 2 above), the Court could have imposed a condition so that failure to file an amended claim would have resulted in the Transfer Direction not taking effect.
Issue 4 — the observance of the rules of natural justice
[37] Mr Andersen submitted that the Court had breached the principles of natural justice by failing to give the appellants an opportunity to be heard once the Court
decided to consider a transfer and/or by providing no reasons for the Transfer Decision.
[38] The procedure adopted by the Judge in fact followed a common procedural route, with counsel having the opportunity to make submissions by memoranda in response to one another. It was clear that the issue for consideration was whether there should be a transfer. Submissions were directed to that issue. Mr Andersen chose to focus his submissions on what I have termed “Issue 1” — the Court’s power to transfer proceedings to the Tribunal. It was open to the appellants to cover all such matters as they considered relevant, including those raised on this appeal. The fact they did not make those submissions does not raise natural justice considerations.
[39] The absence of reasons expressed by the Judge on such a narrow issue would not have been fatal to the decision — had the power existed to make the transfer, the Judge was entitled to conclude that none of the matters raised for the appellants as relevant to a residual discretion carried any significant weight. It is nonetheless appropriate on this rehearing that I consider the matters raised by Mr Andersen as matters which ought to have affected the exercise of the discretion.
Issue 5 — disregard of relevant consideration
AExtent of reduction in respondents’ claim
[40] Mr Andersen identified as a relevant consideration that the respondents had exposed the appellants to extended costs through having to defend much higher claims from October 2020. Mr Andersen refers to the default rule under s 43 of the Act — the Tribunal does not award costs in proceedings before the Tribunal except in very limited circumstances. For the reasons I develop at [45] below, the costs incurred while the proceeding was before the District Court could have been covered by a reservation of such costs.
BThe complexity of the proceeding
[41] Mr Andersen submitted the pleadings clearly indicate that the proceeding is of some complexity. The ASOC ran to 58 paragraphs and asserted four causes of action
(breach of contract, negligence, breach of bailment and breach of the Fair Trading Act). Mr Andersen submitted the Court needed to consider that degree of complexity. There was no additional information put before the Judge (or before the Court on appeal) to establish that the respondents’ claim was of such complexity as to render adjudication by the Tribunal inappropriate. The claim at its heart is about negligent servicing of a vessel. Such claims, which have to be for $30,000 or less, are appropriately made in the Tribunal.
CLack of information on time saving
[42] The District Court had allocated two and a half days for the hearing in that Court. Mr Andersen submitted that the Court on the transfer request needed to consider whether time would be saved on the reduced claim if it were heard in the Tribunal. Given the way the Tribunal operates, there would clearly have been a significant reduction in the time likely to be allocated to the hearing of this proceeding if transferred to the Tribunal.
DThe non-resolution of costs incurred in the District Court
[43]Mr Andersen raised two concerns in relation to the appellants’ costs.
[44] First he submitted that, although the Court had reserved costs relating to the security for costs application, the absence of a final costs order made in relation to that matter meant the Court no longer had jurisdiction to finalise those costs. That submission incorrectly states the position. The District Court expressly reserved the costs of that application and retains its power to finalise those costs.
[45] Secondly, Mr Andersen submitted that the appellants’ other costs incurred in the District Court were very unlikely to be recoverable because of the costs regime in the Tribunal. I accept that is a concern the Judge could properly have taken into account in making the Transfer Direction. If raised, it could have been dealt with in the same manner as the costs already recovered — by an express reservation of all costs incurred in the District Court up to the date of transfer.
[46] Similarly, Mr Andersen submitted the transfer meant that, in the event of an unsuccessful hearing, the respondents would face no adverse costs award for that hearing. But that is simply the consequence under the statutory regime of a matter being appropriately before the Tribunal rather than a Court.
EThe fate of the ($12,000) security for costs
[47] Mr Andersen submitted that the Court, in considering transfer to the Tribunal, also needed to address the resolution of the sum of $12,000 held as security for costs. He submitted the Court lost jurisdiction over the security once the proceeding was transferred to the Tribunal.
[48] The basis of that concern would have been addressed had the Judge, before transferring the proceeding to the Tribunal, reserved the costs incurred to date in the District Court (along with the costs already reserved in relation to the security for costs application). The Court, whether or not there was a transfer, retained the power to make orders to deal with the ultimate disposition of that security.
FFailure to consider conditions on transfer
[49] Mr Andersen submitted that, assuming the Judge had jurisdiction to transfer the proceedings to the Tribunal, he then erred in not considering and imposing conditions on the transfer. Mr Andersen submitted, in the event of transfer, there should have been conditions in relation to the payment of the appellants’ costs incurred in the Court and in relation to the security sum.
[50] Mr Reeve did not take issue with the underlying proposition that it was within the Judge’s power to impose conditions upon the Transfer Direction. His submissions were focussed instead on whether there had been an “abandonment” of excess claims and the (unconditional) Transfer Direction was appropriate as it stood.
Conclusion — the exercise of the discretion
[51] Before the discretion to transfer could be exercised, the Court had to have before it an abandonment of the respondents’ excess claim. For the reasons I have
stated, the respondents did not abandon the excess claim before the Transfer Direction was made.
[52] That situation could have been dealt with by a direction that the respondents file in the Court a form of notice of abandonment or an amended pleading before the Court considered its decision on the transfer.
[53] As it is, the nature of this appeal is by way of rehearing, and I have heard full submissions in relation to all matters that are relevant to the exercise of the discretion. This Court on appeal has the power to make any further orders or other orders it thinks fit (under s 128(1)(c) District Court Act).
[54]Assuming an abandonment is effected, the claim would now be a claim for
$30,000 (as in fact filed in the Tribunal). The proceeding, with a previously estimated two-and-a-half day hearing in the District Court, was not of such complexity as renders it inappropriate for determination in the Tribunal. Most of the remaining concerns raised by Mr Andersen relate to the ultimate outcome on costs and disbursements. The appellants’ legitimate concerns in that regard can be met by an order reserving the costs and disbursements of the proceeding in the District Court incurred up to 4 November 2021. For the avoidance of doubt, the Court’s power to determine the ultimate distribution of the security sum would also be specifically reserved. I am satisfied that, subject to all matters of costs incurred in the District Court being reserved to that Court, the appropriate outcome in this case was that the proceeding should be transferred to the Tribunal. That reservation of costs of course cuts both ways — if the respondents are ultimately successful in the Tribunal, they will be entitled to pursue their costs incurred in the Court.
Outcome
[55] Having regard to the above findings, the appellants have been successful on this appeal. Although (subject to the respondents abandoning their excess claim) there will be a transfer to the Tribunal, the appellants have succeeded inasmuch as there will now be additional directions to preserve the position in relation to costs — should the appellants’ substantive position in response to the claim be vindicated by the Tribunal, they will be able to pursue their District Court costs.
Costs
[56]Costs should follow the event on a 2B basis, together with disbursements.
Orders
[57]I order:
(a)the Transfer Direction (made in the District Court on 4 November 2021) is quashed;
(b)the respondents are directed, if they still wish to abandon so much of their claim as exceeds $30,000, to file in this Court within five working days a notice of such abandonment;
(c)in the event the respondents do not so file a notice of abandonment, the proceeding is remitted to the District Court for hearing of the respondents’ claims;
(d)in the event the respondents so file a notice of abandonment, the following orders will apply at the date of the filing of the notice of abandonment:
(i)the respondents’ proceeding forthwith upon the filing of the notice of abandonment is transferred from the District Court to the Disputes Tribunal;
(ii)the costs of the appellants’ security for costs application previously reserved by the District Court remain reserved to that Court;
(iii)the costs and disbursements of the proceeding to date in the District Court (in addition to the costs on the security for costs application) are reserved to the District Court; and
(iv)all matters of costs and disbursements incurred in the District Court are remitted to that Court to be determined once the outcome of the proceedings in the Disputes Tribunal is known;
(e)the respondents are to pay to the appellants the costs of this appeal fixed on a 2B basis10 together with costs to be fixed by the Registrar; and
(f)the sum paid by the appellants as security for costs in this Court is to be released to the appellants forthwith.
Osborne J
Solicitors:
Westgate Harris Lawyers, Dunedin Counsel: L A Andersen QC, Dunedin
Wilkinson Rodgers Lawyers, Dunedin
Counsel: R M Reeve, Barrister, Dunedin
10 High Court Rules 2016, Category 2 under r 14.3(1) and band B under r 14.5(2)(b).
2
1
0