East Quip Limited (in liquidation) v Galvanising (HB) Limited
[2013] NZHC 1503
•5 July 2013
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
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Hearing: 31 May 2013 Appearances:
D. Chan - Counsel for Plaintiff
R. Harley - Counsel for DefendantJudgment:
5 July 2013
JUDGMENT OF JUSTICE D.I. GENDALL
This judgment was delivered by me on 5 July 2013 at 3.30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ..................................................................
EAST QUIP LIMITED (IN LIQUIDATION) v GALVANISING (HB) LIMITED [2013] NZHC 1503 [5 July 2013]
CIV-2013-441-124
UNDER the Companies Act 1993 BETWEEN
JOHN HOWARD ROSS FISK and TONY WAYNE PATTISON as liquidators of East Quip Limited (in liquidation)
Applicants
AND
GALVANISING (H.B.) LIMITED First Respondent
STUARD DAVID EASTON and ROBERT ELVIDGE as trustees of the EASTON PROPERTY TRUST Second Respondents
HOOKED ON TRANSPORT LIMITED Third Respondent
STUARD DAVID EASTON and VIVIENNE JANE EASTON Fourth Respondents
Solicitors: Carlile Dowling, Lawyers, Napier
Lawson Robinson, Solicitors, Napier
Introduction
[1] Before the Court is an application by respective plaintiffs seeking consolidation of two proceedings.
[2] The first proceeding being Proceeding 2013-441-123 relates to an application by East Quip Limited (in liquidation) (“East Quip”) for summary judgment against the first three defendants, Galvanising (H.B.) Limited, the trustees of the Easton Property Trust, and Hooked on Transport Limited (“the three defendants”) first for unpaid debts for goods and services supplied to them by East Quip and secondly against the Easton Property Trust alone for payments made to the Trust by East Quip by way of loan advance. I refer to this proceeding as the “summary judgment proceeding”.
[3] The second proceeding being Proceeding 2013-441-124 is an application by the liquidators of East Quip to set aside voidable transactions first, between East Quip and the three defendants, and secondly, between East Quip and Stuart David Easton and Vivienne Jane Easton (Mr and Mrs Easton). I refer to this second proceeding as the “voidable transactions proceeding”.
[4] This consolidation application is opposed by the three defendants and by Mr and Mrs Easton.
Background
[5] The proceedings concern the Easton Group of businesses, which were connected with Mr and Mrs Easton. This group included East Quip and the three defendants. East Quip was incorporated on 12 May 2000 and was put into liquidation on 10 July 2009. Mr and Mrs Easton were each 50% shareholders of East Quip and Mr Easton was its director. They have similar roles in relation to Galvanising (H.B.) Limited and Hooked on Transport Limited. And, Mr Easton is a trustee of the Easton Property Trust.
[6] East Quip says the three defendants owe them sums of $7748.33, $6029.98, and $200,685.74 respectively as payment due for goods and services supplied by East Quip. In addition, it says the Easton Property Trust also owes outstanding loans advanced to it by East Quip. These are the amounts for which summary judgment is sought.
[7] In the voidable transactions proceeding, the liquidators of East Quip also apply to set aside transactions between East Quip, and the three defendants where East Quip it is said advanced cash to repay loans, set off invoices owed to East Quip to pay for goods and services supplied to the three defendants, and paid cash to the three defendants for goods and services.
[8] In response, the three defendants say that all the transactions noted in paras [6] and [7] above were actually between East Quip and Mr and Mrs Easton. Thus, if the Court accepts that proposition, the liquidators’ position is that they claim all the transactions are voidable against Mr and Mrs Easton.
[9] The liquidators also maintain that certain loan repayments to Mr and Mrs
Easton were voidable transactions and should be set aside.
General Principles
[10] The present application by the plaintiff to consolidate these proceedings is brought pursuant to r 10.12 High Court Rules which states:
10.12 When order may be made
The court may order that 2 or more proceedings be consolidated on terms it thinks just, or may order them to be tried at the same time or one immediately after
another, or may order any of them to be stayed until after the determination of any
other of them, if the court is satisfied—
(a) that some common question of law or fact arises in both or all of them; or(b) that the rights to relief claimed therein are in respect of or arise out of—
(i) the same event; or
(ii) the same transaction; or(iii) the same event and the same transaction; or
(iv) the same series of events; or
(v) the same series of transactions; or(vi) the same series of events and the same series of transactions; or
(c) that for some other reason it is desirable to make an order under this rule. ”
[11] Rule 10.13 provides:
Rule 10.12 applies even though—
(a) the relief claimed in the proceedings is not the same; or
(b) 1 or more of the proceedings—
(i) is pending in the court in the exercise of its admiralty jurisdiction; or
(ii) is brought under the provisions of an Act conferring special jurisdiction on the court.
[12] The guiding principles here are usefully summarised by the High Court in Medlab Hamilton Ltd v Waikato District Health Board (2007) 18 PRNZ 517 at [8] where the Court states:
The discretion to make orders under r 382 is a wide one, to be exercised broadly in the interests of justice. Among the factors which will favour an order (if grounds are made out) are the savings that will be achieved in time and cost to the parties (and, I would add, in judicial resources) and removing the risk of inconsistent decisions — see CallPlus v Telecom New Zealand Ltd (2000) 15 PRNZ 14 (HC) and Amalgamated Finance Ltd v Wyness 19/02/87, McGechan J, HC Wellington CP156/86 where McGechan J made orders that four proceedings be heard concurrently for reasons of, convenience, expedition and to reduce the risk of inconsistent decisions.
[13] It is important to note, however, the comments of McGechan J in
Amalgamated Finance Limited v Wyness where he cautioned:
… however, as with all short cuts, the Court must take care to see that consolidation in this way will not in the end result in confusion through multiplicity of parties and issues, and will not in the end cause injustice by comparison with separate proceedings.
Counsels’ submissions
[14] The plaintiffs submit that the three defendants and Mr and Mrs Easton have two common defences in both proceedings – first, that the transactions in question were between East Quip and Mr and Mrs Easton and there was a running account, and secondly, that all or most of the amounts claimed have been repaid or should be deducted from amounts owed by East Quip. These common defences it is said involve common issues of fact and law and relate to the same events and transactions. There is an overlap of the transactions in question which arise out of the same arrangements. The affidavits filed for the substantive proceedings are claimed to be either identical or interlinked. Although the parties in the proceedings are not identical, they are very similar. They have instructed the same lawyers.
Hearing the proceedings separately would mean the same evidence would necessarily be heard twice.
[15] The plaintiffs contend also that if the proceedings are heard separately, there is a risk of having two different decisions on the common defences. For example, a court in the summary judgment proceeding might determine that the transactions there were with the three defendants, but a court in the originating application could determine that the transactions were with Mr and Mrs Easton. Although the proceedings here involve an originating application and an interlocutory application, and the relief sought is different, the plaintiffs say this should not prevent consolidation. Finally the plaintiffs suggest consolidation would avoid cost for them.
[16] In response, the three defendants and Mr and Mrs Easton as respondents to this application note at the outset that the parties are different. Mr and Mrs Easton could not be a party to the application for summary judgment, and if an application was made to join them, it is said the proceeding necessarily would be taken out of the summary judgment regime and proceed as a conventional claim. And, the plaintiff would not meet the test to add Mr and Mrs Easton as a third party.
[17] They argue that r 10.12 does not apply here as the summary judgment and originating applications are not “proceedings.” “Proceedings” are defined as excluding interlocutory applications.
[18] They also submit their defences raise issues of fact. The procedure for summary judgment does not allow the Court to attempt to resolve genuine disputes of fact. There is a different standard to be applied than that of an originating application. Furthermore, the summary judgment procedure does not apply to an originating application. And finally, they contend there are different ways to take evidence in the two types of proceedings which will be relevant here.
[19] Furthermore the respondents say there is no common question of law or fact arising in the two proceedings, and they do not arise out of the same event or the same transaction. The defences to the claims may be similar, but the claims are not
– they are against different parties for different amounts. In the summary judgment proceeding approximately $350,000 is claimed. In contrast, in the voidable transactions proceeding, the amount claimed is about $2.5 million.
[20] The respondents also submit there will not be a risk of inconsistent decisions. When the interlocutory application for summary judgment is dealt with, and presuming it dismissed, the matter would then proceed as an ordinary proceeding. Unpaid supplies and loan repayments (the summary judgment proceeding) and voidable payments (the voidable transactions proceeding) it is claimed are mutually exclusive.
[21] In addition the plaintiffs will not save time or costs as when the summary judgment is dismissed, the proceeding will in any event be complex and expensive.
[22] Finally the respondents argue consolidation is not in the interests of justice – they claim the plaintiff knew the three defendants had a defence to the summary judgment application, but filed that proceeding anyway. This current application it is contended is just an attempt to fix this “mistake”.
[23] The plaintiffs have endeavoured to respond to these arguments. They say that, although the parties are not the same, Mr and Mrs Easton are common parties to both proceedings, just in different capacities – either personally, as a Trustee or as directors and shareholders. Furthermore, they contend that overall, both sets of proceedings come within the definition of “a proceeding”. The summary judgment proceeding is a normal proceeding commenced by a statement of claim, and the voidable transactions proceeding is a proceeding because final orders will be made in it. The High Court Rules according to the plaintiffs describe all such proceedings as “proceedings”.
My decision
[24] The argument that r 10.12 does not apply here must first be addressed. A “proceeding” is defined in r 1.3 High Court Rules as “any application to the court for the exercise of the civil jurisdiction of the court other than an interlocutory
application”. Interlocutory application means an application made in accordance with rule 7.19 or 7.41. Rule 12.4 requires an application for summary judgment to be made by interlocutory application.
[25] And, McGechan on Procedure at HR 7.36.01 states in part:
Applications for summary judgment are to be regarded as interlocutory applications
even if not strictly within the r 1.3 definition of “interlocutory application”.
[26] A summary judgment application seeks “relief that is ancillary to that claimed in a proceeding” and therefore is an interlocutory application: Re Fidow, Ex Parte Registered Securities Ltd (in liq) (1990) 1 NZPC 398; (1990) 3 PRNZ 66. And this was also confirmed recently by the Court of Appeal in Zurich Australian Insurance Ltd v Cognition Education Limited [2013] NZCA 180 at [20] when the Court said “Applications for summary judgment are also interlocutory applications”.
[27] Rule 15.2, allows dismissal or stay of a “proceeding or any part thereof” for want of prosecution. And, an interlocutory application for summary judgment has been regarded as “part” of a proceeding which may be dismissed under this rule: Smethurst v Manawatu Vehicle Tender & Storage Ltd (1992) 1 NZPC 1006; (1992)
5 PRNZ 655.
[28] In that case at 658:
The first question is whether there is power for this Court to dismiss a summary judgment application on the grounds of want of prosecution. Rule 478 relevantly reads:
Where the plaintiff fails to prosecute his proceeding or any part thereof … to trial and judgment, any opposite party may apply to have the proceeding or counterclaim, or such part thereof as aforesaid, dismissed, and the Court may, on such application, make such order as may be just. ”
The question is, therefore, whether an interlocutory application for summary judgment is “any part” of a proceeding which may be dismissed, leaving the balance of the proceeding for ultimate determination in the usual way. Counsel on this application were unable to refer the Court to any precedent in which a “part” of a case such as an interlocutory application for summary judgment had been dismissed in the way sought by Mr Lockwood. Neither of the texts on the subject refer to any case to that effect, but the reference to “any part” must have been intended by the draftsman to empower the Court to make “such order as may be just” in respect of some portion of the proceeding which is less than the whole, and it does not seem unduly to strain the words to take the view that the Court has jurisdiction pursuant to r 478 to dismiss an interlocutory application for summary judgment under that rule.
The principles on which the Court acts in considering applications for striking out pursuant to r 478 are now well settled. There seems no reason to suppose that, mutatis mutandis, such principles would not also apply to an application to strike out an interlocutory application for summary judgment.
[29] This suggests that as there is no similar wording in r 10.12 (“any part of a proceeding”), an application for summary judgment does not lie within the ambit of r 10.12.
[30] I conclude that, whilst the summary judgment application in proceeding CIV-2013-441-123 (the summary judgment proceeding) at this stage remains alive, consolidation is not available. The substantive proceeding is available for consolidation, but not whilst that interlocutory application is still being pursued. The plaintiffs have chosen to use the summary judgment procedure here, and as such they must deal with the consequences. Once the summary judgment is dealt with, and if the application fails, then the plaintiffs can apply for consolidation of the substantive CIV-2013-441-123 proceeding and the voidable transactions proceeding. East Quip also has a possible option of abandoning its summary judgment application and applying for consolidation now. However, the current application before me is flawed, and must be dismissed. A consideration of the merits of consolidation is thus not necessary.
Conclusion
[31] For all the reasons I have outlined above, the application for consolidation fails at this stage.
[32] As to costs, neither counsel made submissions to me regarding the issue of costs on the application before me. If counsel are unable to agree on the issue of costs, then they may file memoranda sequentially which are to be referred to me and, in the absence of either party indicating they wish to be heard on the matter, I will decide the question of costs on the basis of those memoranda and the material before the Court.
‘Justice D.I. Gendall’
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