Coffey v Walker
[2020] NZHC 605
•23 March 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-857
[2020] NZHC 605
BETWEEN PAUL CORNEL COFFEY and WILLIS
STREET TRUSTEE SERVICES LIMITED
as trustees of the PC COFFEY TRUST PlaintiffsAND
MARK ALAN WALKER as trustee of the WYNSFIELD FAMILY TRUST
Defendant
Hearing: On the papers Appearances:
GE Slevin for the Plaintiffs
DJ Clark & J Collett for the Defendant
Judgment:
23 March 2020
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 23 March 2020 at 2.30pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
Grant Slevin, Barrister, Christchurch Wilson McKay, Auckland
Coffey v Walker [2020] NZHC 605 [23 March 2020]
[1] On 31 October 2019 I gave judgment refusing an application by the plaintiffs for summary judgment (the judgment).1 In the judgment, I held that the plaintiffs had failed to show that the defendant’s defence based on cancellation of the relevant contract in 2009 was beyond reasonable argument.
[2] The plaintiffs now apply for leave to appeal against the judgment, under s 56(3) of the Senior Courts Act 2016 (the Act). The application for leave is opposed by the defendant.
[3] The parties were content for me to deal with the leave application on the papers, and I have received written submissions from both sides.
[4]I now give judgment on the plaintiffs’ leave application.
Applications for leave to appeal against interlocutory decisions in the High Court
– legal principles
[5]Section 56 of the Act materially provides:
56 Jurisdiction
…
(3)No appeal, except an appeal under subsection (4), lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court on application made within 20 working days after the date of that order or decision or within any further time that the High Court may allow.
…
(5)If the High Court refuses leave to appeal under subsection (3), the Court of Appeal may grant that leave on application made to the Court of Appeal within 20 working days after the date of the refusal of leave by the High Court.
(6)If leave to appeal under subsection (3) or (5) is refused in respect of an order or a decision of the High Court made on an interlocutory application, nothing in this section prevents any point raised in the application for leave to appeal from being raised in an appeal against the substantive High Court decision.
1 Coffey v Walker [2019] NZHC 2795.
[6] The principles to be applied on applications under ss 56(3) and (5) of the Act were discussed by the Court of Appeal in Ngai Te Hapu Inc v Bay of Plenty Regional Council.2 The Court of Appeal observed that s 56(3) was intended to reduce the volume of appeals to the Court of Appeal from interlocutory decisions in the High Court.3 The Court of Appeal referred in its judgment to s 24G of the Judicature Act 2008, concerning appeals in commercial list cases. While the Court did not consider the case before it to be an appropriate one to provide definitive guidance on the principles to be applied on applications under s 56(3) or (5) of the Act, it stated:4
We agree that leave to appeal should only be granted where the significance or implications of an arguable error of fact or law, either for the particular case or for the applicant or as a matter of precedent, warrants the further delay which the appeal process would involve.
[7] The Court of Appeal also considered s 56 in Fairway Holdings Ltd v McCullagh.5 The Court referred to its earlier judgment in Ngai Te Hapu Inc, and noted "the understandable objective" of s 56 of "regulating the volume of non-substantive appeals". The Court noted that s 56 does not preclude the grant of leave where it appears that the interests of justice warrant further consideration by the Court of Appeal. The Court referred, with apparent approval, to the judgment of Associate Judge Bell in Western Joinery Ltd v Commissioner of Inland Revenue, where the Associate Judge referred to decisions on leave to appeal under the former s 71A of the District Courts Act 1947.6 Associate Judge Bell referred to the following dictum of Somers J in Sandle v Stewart:7
The purpose of [leave] is to limit the cases which may go on appeal in the interests of finality of litigation and workload of the High Court, while preserving the integrity of the law and the interests of justice.
[8] The Court of Appeal in Fairway Holdings Ltd also referred to the judgment of Fitzgerald J in Finewood Upholstery Ltd v Vaughan, in which the learned Judge described the leave requirement as a "filtering mechanism" to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no
2 Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291.
3 At [15].
4 At [17].
5 Fairway Holdings Ltd v McCullagh [2018] NZCA 605.
6 Western Joinery Ltd v Commissioner of Inland Revenue [2017] NZHC 3297 at [9].
7 Sandle v Stewart [1982] 1 NZLR 708 (CA) at 715.
great significance to either of the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made.8
[9] Counsel also referred in their submissions to the judgment of Palmer J in Li v Chief Executive, Ministry of Business, Innovation and Employment, in which the learned Judge said:9
An application to appeal an interlocutory decision under s 56(3) is likely to be granted if:
(a)the appeal is not likely to be overtaken by the substantive hearing or cannot otherwise be considered as effectively in the context of an appeal of the substantive decisions; or
(b)the appellant is likely to be prejudiced by a postponement to the substantive appeal; or
(c)the appeal may be dispositive of the case in law or as a practical matter;
(d)the arguments in the appeal are capable of bona fide and serious argument; and
(e)the issue on appeal concerns a decision of sufficient significance to the parties or a question of law or general principle of sufficient importance as to outweigh the cost and delay of the appeal.
[10] The learned Judge then offered a broader formulation of the test for leave, which he said would likely be granted where:10
(a)There is a good reason to consider [the summary judgment appeal] before, or separately to, the substantive appeal; and
(b)It is sufficiently meritorious in substance and relates to a sufficiently important issue as to outweigh the costs and delay of appeal.
[11] Moore J followed the two-stage approach of Palmer J’s broader formulation of the test in Li, in Yu v Bradley. Moore J went on to say:11
8 Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].
9 Li v Chief Executive, Ministry of Business, Innovation & Employment [2018] NZHC 1171 at [21].
10 At [22].
11 Yu v Bradley [2018] NZHC 2312 at [17].
[17] … in the ordinary course of applications for leave to appeal a summary judgment, the first limb of the test will always be satisfied. This is because determination of the appeal may be dispositive of the case in law, and ordinarily postponement to the substantive appeal will be likely to prejudice the appellant.
[18] It thus follows whether leave should be granted in this case turns on the second stage considerations of merit and importance.
Submissions for the plaintiffs
[12] In his submissions in support of the application for leave to appeal, Mr Slevin submitted that cancellation was not raised in the defendant’s notice of opposition to the summary judgment application, and there was prejudice to the plaintiffs in not having sufficient notice of the argument. Cancellation was only raised in submissions for the defendant shortly before the hearing.12
[13] Mr Slevin submitted that what the evidence in fact showed was that the defendant was seeking (in mid-2009) to terminate the contract by mutual agreement. He submitted that no contractual notice terminating was given to the plaintiffs, and none of the correspondence produced in evidence made any reference to cancellation. Nor did the defendant state in his evidence that he had cancelled the agreement.
[14] While the defendant’s employment with the companies in which he had become a shareholder did cease when the defendant elected to take up employment with ASB, Mr Slevin submitted that the defendant leaving his employment could not of itself have effected a cancellation of the share purchase agreement, which was not expressed to be conditional on the defendant’s continuing employment.
[15] Mr Slevin also submitted that, as the defendant knew of the alleged misrepresentation by June 2009, he must have affirmed the contract when he failed to cancel it.
[16] Mr Slevin also submitted that the summary judgment procedure is not intended to allow hypothetical defences to be raised. He referred to the Court of Appeal decision in Haines v Carter for the proposition that the courts are entitled to expect a defendant
12 In those submissions, Mr Clark submitted that the defendant “effectively cancelled the share purchase agreement by leaving the companies” in June 2009.
who wishes to maintain that there is an arguable defence to identify that defence in accordance with the rules, and give appropriate particulars of it and a reasonable level of circumstantial detail.13 The courts are also entitled in the summary judgment context to be sceptical of defences which emerge at the last minute. As the Court said in Haines v Carter, where a defence is raised at the last minute and is unsubstantiated by the defendant except in the most general of terms, and in circumstances where an adjournment would be necessary if leave to rely on the defence were granted, protection of the integrity of the process will often require the judge to act robustly.14 A defendant to a summary judgment application must provide at least some evidential foundation for the defences which are raised.15
[17] Mr Slevin submitted that, in refusing summary judgment, I did not take a sufficiently robust approach to the evidence. He submitted that the plaintiffs should not be put to the further expense of a trial in circumstances where the defendant could and should have given evidence of having cancelled the agreement, if he had an arguable basis to raise that as a defence. He submitted that it was not open to the Court to speculate that the agreement might have been cancelled, despite the undisputed evidence of the parties’ intentions to terminate it by agreement, or to refuse summary judgment on the basis that evidence might be produced to support a defence of cancellation at trial.
[18] Mr Slevin referred in support to the defendant’s preparedness to sell the shares back to the plaintiffs, submitting that could not be unrelated to an existing obligation to pay for the shares under the contract.
[19] Adopting the test in Li, Mr Slevin submitted that leave to appeal should be granted, because the appeal may be dispositive of the case in law or, as a practical matter, the arguments in the appeal are capable of bona fide and serious argument, and the issue on appeal concerns a decision of sufficient significance to the parties, as well as a question of law or general principle of sufficient importance to outweigh the cost and delay of the appeal.
13 Haines v Carter [2001] 2 NZLR 167, at [97].
14 At [97(4)].
15 Referring to Australian Guarantee Corporation (NZ) Ltd v McBeth [1989] 3 NZLR 54.
Submissions for the defendant in opposition
[20] For the defendant, Mr Clark submitted that the defence of cancellation was sufficiently raised in the defendant’s notice of opposition. It was also supported by Mr Walker’s evidence at paragraphs [32], [35] and [36] of his affidavit, in which Mr Walker referred to there no longer being any obligations arising under the share sale agreement. Finally, the cancellation issue was addressed by counsel for the defendant in his written submissions served prior to the hearing.
[21] Mr Clark then referred to his oral submission made at the hearing that the plaintiffs arguably knew that by mid-2009 the shareholder agreement had been cancelled, and that no further obligations would arise under it. The defence of cancellation, together with the evidence supporting the defendant’s contention, were squarely put to the plaintiffs prior to and during the hearing.
[22] Mr Clark submitted that the plaintiffs have failed to meet the threshold for granting leave as established in Finewood and developed by this Court in Li. The threshold for granting leave is high, and if the issues can only be effectively considered at trial allowing leave would cause unnecessary delay and costs. To grant summary judgment, the Court must be left without doubt or uncertainty,16 and summary judgment will be denied if on hearing the application it appears that there is an issue worthy of trial.17
[23] Mr Clark distinguished Li, on the basis that that case involved a significant question of public importance, on which there was conflicting High Court authority. The issue in Li was also likely to come before the Courts again, and no further evidence on it was required.18
[24] In response to Mr Slevin’s submission that there was no sufficient foundation in the evidence for a conclusion that cancellation had arguably been communicated by the defendant to the plaintiffs, Mr Clark submitted that there can be no final
16 Krukziener v Hanover Finance Ltd [2008] NZCA 187 at [26].
17 At [27].
18 Li v Chief Executive, Ministry of Business, Innovation & Employment [2018] NZHC 1171 at [30]- [32].
determination of that question before all the evidence is in and has been examined. The defendant only needed to raise an arguable case of cancellation at the hearing, and he did that. There is nothing “exceptional” about the Court’s decision to refuse summary judgment in this case, where the evidence was contested.
[25] Mr Clark submitted that there are no general or public policy reasons that would demand that leave should be granted. Further, the Court of Appeal would likely approach the issue in the same way this Court did in reaching its conclusion to refuse summary judgment.
Discussion and conclusions
[26] I consider this is a case where leave to appeal should be granted. The “cancellation or no cancellation” issue appears to be a relatively narrow one, particularly when considered against the extent of the factual and legal issues the parties will have to address at trial on such issues as whether there were misrepresentations (and if so whether they induced the defendant to enter into the contract). And I think the issue of whether the defendant has an arguable defence based on cancellation is capable of bona fide and serious argument for the plaintiffs.
[27] If the plaintiffs are correct, the appeal may be dispositive of the case, and I do not think there is any likelihood of an appeal being overtaken by the substantive hearing. The issue on the appeal is clearly very important to both parties, as it goes to the heart of the dispute between them.
[28] The tests articulated in Li and Yu appear to be met, and in my view the overall justice of the situation favours allowing the plaintiffs to bring the appeal. The further delay occasioned by an appeal should not be a significant factor for the defendant, and I do not think this was one of those interlocutory decisions where the Court’s “filtering” role has a significant role to play. This was not an interlocutory decision relating to further particulars, or something of that sort.
[29] On the merits, Mr Clark pointed to the high threshold of proof required of a plaintiff seeking summary judgment. Mr Slevin pointed to the need for the defendant to put forward at least some substratum of fact on which the Court could find that there
is an arguable defence. The defendant did not point with precision to any specific communication of cancellation but, on the evidence produced, the plaintiffs did not (in my view) adequately explain their long delays in following up on their alleged rights. How much evidence the defendant was obliged to produce and how that might have been affected by the plaintiffs’ long delays, are in my view questions which, considered in the context of the other matters I have referred to, justify the summary judgment application being considered further on appeal.
[30] In case it may be relevant, I add that I do not accept Mr Slevin’s submission that cancellation was not sufficiently raised before the hearing. At paragraph [3.1](xv) of the notice of opposition, the defendant pleaded:
(xv) The Defendant is entitled to the remedies contained in ss 35 and 37 of the Contract and Commercial Law Act 2017 … and the normal principles relating to a breach of contract.
[31] Section 37 of the Contract and Commercial Law Act 2017 (the CCLA) is expressly concerned with a party’s right to cancel a contract for, among other things, misrepresentation. Read with Mr Walker’s affidavit, that was in my view sufficient notice to the plaintiffs that the defendant would be arguing cancellation.
[32] In his written submissions served before the hearing, Mr Clark expressly made the argument that the contract was cancelled in June 2009.
[33] At the hearing, I did not understand Mr Slevin to challenge the defendant’s right to raise a cancellation defence. And no dispute about that was mentioned in a joint memorandum counsel filed on 30 August 2019, after the plaintiffs would have seen Mr Clark’s written submissions (which included the cancellation argument).
Result
[34] The plaintiffs’ application for leave to appeal to the Court of Appeal is granted. The appeal is to be commenced within 10 working days.
[35] The plaintiffs are entitled to costs on the leave application, which I award on a 2B basis, plus disbursements as fixed by the Registrar.
Associate Judge Smith
3
6
1