Erceg v Balenia Ltd

[2008] NZCA 535

IN THE COURT OF APPEAL OF NEW ZEALAND

CA553/2008
[2008] NZCA 535

BETWEENIVAN VLADIMAR JOSEPH ERCEG

Appellant

ANDBALENIA LTD

Respondent

Hearing:2 December 2008

Court:Chambers, Ellen France and Baragwanath JJ

Counsel:L Ponniah for Appellant

G J Kohler for Respondent

Judgment:5 December 2008 at 11am

JUDGMENT OF THE COURT

AThe second affidavit of Mr Erceg will form part of the record available for consideration by this Court on the forthcoming appeal.  But we do not give leave at this stage for it to be admitted.

B        We do not give leave for the affidavit of Mr Leonida to be admitted.

C        The affidavit of Ms Harper is admitted.

DPursuant to R 46 we direct the Registrar to request the Associate Judge to provide a report on the matters to which Ms Harper deposes.

____________________________________________________________________

REASONS OF THE COURT

(Given by Baragwanath J)

[1]       On 1 September 2008 Associate Judge Hole gave judgment by way of summary judgment on Balenia’s claim for specific performance of a settlement agreement between itself as seller and Mr Erceg as buyer of three super yachts.  On 29 January this Court is to hear an appeal by Mr Erceg against the order for specific performance pronounced against him.  Mr Erceg has applied to this Court under r 45 of the Court of Appeal (Civil) Rules 2005 for leave for leave to file further evidence.

[2]       The application relates to three affidavits: one by Mr Erceg, a second by Mr John Leonida, a partner of Clyde & Co, solicitors, London, and the third by Ms Bethany Harper, a solicitor who was present at the hearing before the Associate Judge.  The chronology of events was as follows:

27 June 2008

Statement of claim by Balenia filed together with application for summary judgment supported by affidavits of Anthony John Nicholson, Franklin William Taylor and Valery Cheshinsky.

5 July 2008

Service of documents.

7 July 2008

Notice of opposition by defendants.

9 July 2008

Mr Erceg arrives in New Zealand and meets counsel.  His affidavit in opposition filed.  Harrison J directs defendants to file any further affidavits in answer by 23 July 2008 and Balenia to file any affidavits in reply by 8 August 2008.

23 July 2008

Time fixed for filing further defence affidavits expires.  Mr Erceg elects not to file further affidavits.

29 July 2008

Defence solicitors advise that Mr Erceg’s affidavit, intituled in the matter of injunction proceedings, will be relied upon in defence of the application for summary judgment.

8 August 2008

Time fixed for plaintiff’s affidavits in reply.

Defendant’s solicitors confirm that they are relying solely on Mr Erceg’s affidavit of 9 July for the purposes of summary judgment application.

18 August 2008

Plaintiff’s reply affidavits by Mr Taylor and Mr Nicholson filed and served.

21 August 2008

Summary judgment hearing.

1 September 2008

Judgment delivered.

[3]       Mr Erceg’s company, Sensation Yachts Ltd, had contracted with Balenia to design and build five super luxury yachts for it.  Disputes arose, resulting in a series of arbitration hearings and a settlement agreement by which Mr Erceg agreed to buy three of the vessels from Balenia for a price of US$21,500,000.  The agreement included the term:

4.   The payment by Mr Erceg or nominee shall be made as follows:

(a)   A 10% deposit shall be made to Balenia within 7 working days of Balenia providing evidence to the satisfaction of Clyde & Co (London) that it has clear title to SY32, SY34 and SY35.

The balance was payable on release by Balenia of clear title to the three vessels.

[4]       The issue before Judge Hole was whether, as Balenia contended and Mr Erceg denied, the conditions of cl 4(a) had been satisfied.

[5]       Clyde & Co are a firm of London solicitors who specialise in shipping law and practice.  Neither party to the summary judgment application elected within the timetable period to obtain an affidavit from Clyde & Co.  Mr Ponniah candidly advised the Court that Mr Erceg decided not to seek or file such affidavit by the deadline of 23 July 2008 because the defence considered that Balenia had failed to make out its case.

[6]       As Judge Hole recorded, the only affidavit filed by Mr Erceg was that dated 9 July 2008.  It was intituled only as being in support of a notice of opposition to an interlocutory application for an interim injunction without reference to the summary judgment application, although it was intended by the solicitors for Mr Erceg to be relied upon also in opposition to the summary judgment application.

[7]       Counsel for the plaintiff had expected a new affidavit to be filed in support of the notice of opposition to the summary judgment application.  There is an ambiguity in the sequence which we do not however need to resolve: that on 29 July 2008 the defendant’s solicitors had advised counsel they would rely on Mr Erceg’s original affidavit, yet it was not until 8 August 2008 that the solicitors for Mr Erceg confirmed that the affidavit also applied to the summary judgment application.  By this point Balenia was out of time for filing its affidavits in reply and for this reason they were filed and served late.

[8]       At the outset of the hearing counsel for Mr Erceg objected to the admission and reading of the affidavits in reply: the second affidavit of Mr Taylor and the second affidavit of Mr Nicholson.  Judge Hole granted leave for the affidavits in reply to be filed.  He recorded that this gave rise to a question whether Mr Erceg should be entitled to an adjournment.  The fixture was a priority fixture.  Mr Erceg’s counsel was given the opportunity of an adjournment to the following week.  He elected to proceed with the hearing on 21 August.  As will appear, there is an unresolved dispute as to the sequence and significance of events before the Judge.

Further evidence from Mr Erceg?

[9]       Mr Ponniah submitted that the second affidavits of Messrs Taylor and Nicholson, served on 18 August, raised for the first time the exchange of correspondence between Clyde & Co and the plaintiff’s solicitors.  He submits that the matters raised in the affidavits were new: they did not just answer matters raised in Mr Erceg’s affidavit of 9 July but introduced new material which should have been contained in the plaintiff’s original affidavits in support of the summary judgment application.  He submitted that the purport of the evidence they contained was that Clyde & Co were being unreasonable in their demands; or that Balenia had provided all that could possibly be required; and that most of the documentation was new to Mr Erceg.  He submitted that the defendants ought to have been given a reasonable opportunity to take instructions, to contact Clyde & Co, and to respond to the new evidence - especially in the context that it was the plaintiff who insisted on a priority fixture.  When the further affidavits were served on 18 August, Mr Erceg was overseas and the Clyde & Co witness Mr Leonida was in London.  He submitted that the time available to respond was less than two working days and to obtain a response from Mr Erceg was difficult and from Mr Leonida impossible.

[10]     At the hearing on 21 August Mr Ponniah had a draft second affidavit from Mr Erceg which had been signed but not sworn, but nothing from Mr Leonida.

[11]     He contended that the Judge had refused counsel both leave to produce the Erceg document and effectively (in terms of obtaining evidence of any detail from London) an adjournment of the hearing.  The judgment does not address counsel’s attempt to introduce the Erceg document.

[12]     For Balenia Mr Kohler submitted that there was no entitlement for Mr Erceg to file a further affidavit and that the appropriate response to any complaint that the rejection of the affidavit by the Judge was wrong is not to bring an application pursuant to r 45 but rather to appeal the rejection.

[13]     We accept Mr Kohler’s submission.  The second Erceg affidavit will form part of the record available for consideration by this Court on the forthcoming appeal.  But we do not give leave at this stage for it to be admitted.

Evidence from Mr Leonida of Clyde & Co?

[14]     The proposed evidence of Mr Leonida, a partner in the firm of Clyde & Co, was tendered to us by way of draft affidavit extending to some 12 pages with attachments extending from A to P.  Mr Ponniah submitted that the evidence ought to be produced: it could not, with exercise of reasonable diligence, have been obtained for the summary judgment hearing; alternatively the circumstances render the case exceptional. 

[15]     We are not satisfied that the evidence satisfies the strict requirements which apply to an application under r 45.  The Supreme Court has confirmed that the well understood and firmly established principles developed under previous rules remain: Paper Reclaim Ltd v Aotearoa International Ltd [2007] 2 NZLR 1. Those requirements are that the evidence be fresh, credible and cogent. It will not be regarded as fresh if it could, with reasonable diligence, have been produced at the trial: Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1988] 3 NZLR 190 at 192. Particular weight will be accorded in summary judgment proceedings to the need for finality: it is only in exceptional circumstances that the Court will permit further evidence to be filed on appeal: Lawrence v Bank of New Zealand (2001) 16 PRNZ 207 (CA). 

[16]     Clyde & Co were retained by Sensation Yachts.  There is no suggestion Clyde & Co would not have responded appropriately to a request for an affidavit to be filed in accordance with the timetable set on 9 July 2008.  The decision not to seek and file such evidence was a tactical one on behalf of the defendants.

[17]     Any other approach would unravel the summary judgment procedure.  Justice Côté in his Well-Run Appeals (2006), written for the Canadian Judicial Council, offers at 26 a warning from that jurisdiction:

6     Exceptions Devour Rules

There are many Rules of Court which individual judges have virtually repealed.  They create a host of exceptions, and almost every reported case declines to apply the Rule.  Any competent barrister quickly learns that that Rule is a broken reed upon which he or she cannot put any weight.  Indeed, almost every court can name Rules which it never enforces and more or less ignores.  There are many more which it thinks that it enforces, but in fact does not enforce.  The judges thus train the bar to ignore that Rule completely, and mistrust all the rest of the Rules of Court.

[18]     We again accept Mr Kohler’s submission that if the second affidavits of Messrs Taylor and Nicholson contain material extending beyond what was admissible in reply, those parts of the affidavits should not have been read by the Judge.  Any error on his part can be corrected on appeal.

[19]     We do not give leave for the affidavit of Mr Leonida to be admitted.

Further evidence from Ms Harper?

[20]     The affidavit of Ms Harper, a solicitor employed by the appellant’s solicitors, gives an account of the events in Court at the hearing on 21 August.  Mr Kohler resists Mr Poniah’s application and contests some of what the witness says on what are potentially important issues.  These include whether a concession was made by counsel for the defendants, and concerning the reasonableness of the Judge’s refusal to admit Mr Erceg’s second affidavit and to permit inquiry of Clyde & Co.

[21]     These are potentially matters germane to the decision of this Court of the forthcoming hearing as to whether the summary judgment should stand.  The affidavit of Ms Harper is admitted.

[22]     Mr Kohler requested that we seek a written report from the Associate Judge pursuant to r 46 on the matters to which Ms Harper deposes.

[23]     We are satisfied that such course is appropriate. We direct the Registrar to request the Associate Judge to provide a report on the matters to which Ms Harper deposes.

Solicitors:
Corban Revell, Waitakere City for Appellant
Burton & Co, Auckland for Respondent