Effective Engineering Limited v Ecocover Limited HC Auckland CIV 2009-404-5331
[2010] NZHC 310
•15 March 2010
IN THE HIGH COURT OF NEW ZEALAND
ROTORUA REGISTRY
CIV-2009-404-005331
BETWEEN EFFECTIVE ENGINEERING LTD
First Applicant
ANDMARINUS EDUARDUS JOHANNUS KULIK AND KINGSLEY STANHOPE GORDON
Second Applicants
ANDECOCOVER LIMITED First Respondent
ANDECOCOVER DEVELOPMENTS LIMITED
Second Respondent
Hearing: 11 March 2010
Appearances: L Ponniah for Applicants
S H Barter for Respondents
Judgment: 15 March 2010 at 11.00 a.m.
JUDGMENT OF VENNING J
This judgment was delivered by me on 15 March 2010 at 11.00 a.m. pursuant to Rule 11.5 of the High
Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Corban Revell, Waitakere City
Barter & Co, Albany
EFFECTIVE ENGINEERING LTD AND ANOR V ECOCOVER LIMITED AND ANOR HC ROT CIV-2009-
404-005331 15 March 2010
Application
[1] The applicants seek to have the proceeding between the parties in the District Court at Auckland transferred to this Court. As the application is out of time the applicant also seeks an order enlarging the time to bring the application.
Factual background
[2] The case concerns a dispute between the parties relating to a commercial laminating plant which produces mulch mat. The respondents claim the intellectual property in the plant including copyright belongs to them. The first applicant, Effective, is an engineering company which the respondents say they commissioned to manufacture plants to their order. Effective manufactured two plants, one of which is established in Australia, the other in Czechoslovakia. In the District Court proceedings the respondents say that in breach of contract Effective and the second applicants have wrongfully refused to deliver up relevant drawings relating to the plant. The respondents also claim copyright in an electronic control module, which was created in 2007 to assist the automatic operation of the plant. Next the respondents claim copyright in the plant manufactured by Effective and the drawings related to it. The respondents also raise additional causes of action in conversion and detinue.
[3] In addition to declarations and injunctions in relation to the intellectual property the respondents seek general damages in the sum of $100,000 and exemplary damages in the same sum.
[4] When the respondents issued the proceedings they also sought and obtained mandatory injunction orders. On appeal, this Court upheld the mandatory injunction
in part but also allowed the appeal in part.
[5] The applicants then filed a counterclaim in which Effective claimed inter alia judgment for $2.3 million dollars representing the loss of net profit it expected from
the supply and manufacture contracts for a minimum of 25 commercial production laminating plants. Effective’s counterclaim is based on the pleading that a principal associated with the respondents, Mr Cruickshank, agreed in about June 2004 with Messrs Kulik and Gordon on behalf of Effective, that Effective would manufacture and supply a minimum of 25 plants over the next five year period. Effective calculates it would have made a profit of $100,000 on each plant. That forms the basis of the counterclaim. There are other, lesser, counterclaims within the jurisdiction of the District Court.
Procedural background
[6] On the counterclaim being filed and served it seems that all parties, including the Judge in the District Court, considered the proceeding would effectively be transferred to this Court. Judge Harvey made such an order before realising that he did not have jurisdiction to do so. An order for transfer to this Court pursuant to s 45
of the District Courts Act 1947 can only be made by this Court on application to it.
[7] The applicants then brought this application on the ground their counterclaim exceeds the jurisdiction of the District Court.
Preliminary matters
[8] The application to transfer was made out of time. It should have been made within five working days after the counterclaim was filed. The counterclaim was filed on 15 October 2009. The application to this Court was not made until 21 December 2009 after the procedural error was discovered in the District Court.
[9] However, as noted in Cromwell Property Holdings and Development Ltd v Checketts McKay the Court has a discretion to enlarge the time for application. The merits of the application for transfer can be taken into account in deciding whether to exercise the discretion to enlarge time. I propose to adopt the same approach in this case.[1]
[1] Cromwell Property Holdings and Development Ltd v Checketts McKay (1999) 13 PRNZ 709
[10] Mr Ponniah suggested, somewhat faintly, that it was not open for the respondent to oppose the application given that it had initially “gone along with” the transfer to this Court. There can be no estoppel to prevent the respondent opposing transfer. While the respondent may have gone along with a transfer on the mistaken understanding it had no choice in the matter, which seems to have been the basis that
all parties operated on, once the true position was discovered it was open for the respondent to oppose the application. The fact all parties were mistaken as to the correct procedure is, however, a factor relevant to the explanation for delay.
[11] I turn to deal with the application on its merits.
Decision
[12] The leading authorities are Cromwell Property Holdings & Development Ltd
v Checketts McKay; Essar (NZ) Ltd v The Spa & Pool Factory Ltd; and Stoupe v
Nutri-metics International (NZ) Ltd.[2] The factors to be taken into account include:
[2] Essar (NZ) Ltd v The Spa & Pool Factory Ltd; HC Auckland, M307/91, 15 March 1991; Stoupe
v Nutri-metics International (NZ) Ltd (1997) 10 PRNZ 389.
a) the amount by which the counterclaim exceeds the jurisdiction of the
District Court;
b) the nature and extent of the matters in issue, whether of fact or law;
c) the relative cost in each Court;
d) the relative time to dispose of the case in each Court; and
e) whether there are other factors, including public interest or other features of importance that would support a transfer.
2
The amount of the counterclaim
[13] As a preliminary point, both counsel accept that the claim and counterclaim ought to be heard together. If the proceeding is not to be transferred then both claim and counterclaim would be heard in the District Court. If the applicants’ counterclaim is to be heard in this Court then the respondents’ claim should also be heard in this Court.
[14] It is the quantum of the counterclaim that provides the basis for the application. On its face, a counterclaim of 2.3 million dollars is the sort of claim which one would expect to be heard in the High Court given the civil jurisdiction of the District Court is limited to $200,000. However, the basis of the counterclaim is not particularly complicated. The counterclaim of 2.3 million dollars is based on the applicant’s pleading that Mr Cruickshank, acting on behalf of the respondents, represented to the applicants that Effective would be commissioned to manufacture 25 plants over five years from 2004. Effective expected to make a profit of $100,000 on each plant. As only two plants have been commissioned the applicant seeks, by way of counterclaim, the balance of 2.3 million. While the quantum of 2.3 million is large, underlying it is a relatively straightforward contest between the parties as to whether or not there was a representation of the nature relied on by the applicants or not. If there was such a representation then there is a basis for the counterclaim. It will then be a matter of determining the net profit Effective would earn on each plant and then multiplying that by a factor of 23. If, on the other hand, there was no such representation then the counterclaim falls away. So although the quantum is large, neither the basis for the claim nor the calculation of it is particularly complicated.
The nature and extent of the matters in issue
[15] Mr Ponniah sought to emphasise that there would be quite detailed facts in issue and also that the legal issues were complicated because they involved intellectual property, particularly copyright issues.
[16] The fact the discussions between the parties occurred over a period of years does not make the matter factually difficult. As in any case of this nature there will
be a limited number of meetings or events which are of significance and the evidence will focus on those. As to the submission by Mr Ponniah that the law is complicated, intellectual property and copyright claims can be dealt with in the District Court. There is nothing particularly complicated about the issue in this case. I note that in a memorandum prepared on behalf of the applicants for a pre-trial hearing in the District Court in August counsel identified the issues to be determined as:
a) What precisely are the plaintiffs asserting copyright over?
b)Who owns the copyright and the materials over which the plaintiffs assert copyright?
c) Was there a joint venture between the parties and what are the terms
of this joint venture?
d)Do the terms of the joint venture include terms relating to copyright and the materials?
e) Whether the materials created or developed prior to 2004 are different from those which were developed after 2004?
f) How does this affect ownership of copyright?
g) The extent to which there has been invoicing for materials in which copyright is involved, as opposed to invoicing for building of the machinery.
[17] So the applicant did not, at least in August 2009, consider that the issues of copyright and intellectual property were so complicated that the District Court should not deal with them. If the applicants held that view then they could have applied for transfer under s 43 of the District Courts Act. They chose not to at the
time. There is nothing arising out of the counterclaim as such that from a legal point
of view complicates the matter any further.
The relative cost in each Court
[18] The procedures required to be adopted in terms of interlocutories, particularly discovery, will be the same in either Court. The costs awarded in this Court may be more on a party and party costs basis but the actual solicitor/client costs will be the same. As Mr Barter observed neither party has instructed senior counsel so that the solicitor/client costs should be the same to the parties in either Court.
Relative time to dispose of the case in each Court
[19] Mr Barter had made some informal inquiries of the Registry. His understanding was that the case could be heard this year in the District Court but could not be heard until towards the end of 2011 in this Court. There are steps being taken to address the backlog of civil fixtures in the High Court which may alter that informal advice Mr Barter has received. But I accept that on the information before the Court the parties are more likely to obtain a hearing in the District Court earlier than a hearing in this Court particularly if, as the parties seem to agree, a hearing of 10 days is required.
Other general factors
[20] There are no factors of public importance or novel law which would support
a transfer of the proceedings to this Court.
Result
[21] Considering the above factors I am drawn to conclude that the applicant has not made out its case for a transfer of the proceedings to this Court. Underlying the application is the sheer quantum of the applicants’ counterclaim but when analysed
the basis for that counterclaim is straightforward. It is essentially a multiple number
of claims of $100,000 each, with each based on a series of alleged representations, which are currently suitable for determination in the District Court.
[22] I decline the application and direct that the proceedings, including the counterclaim, be heard and determined in the District Court.
Costs
[23] Costs to the respondent on a 2B basis for the application and hearing in this
Court together with disbursements as fixed by the Registrar.
Venning J
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