Flow Control Limited v Il Forno Limited
[2021] NZHC 1301
•4 June 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-002409
[2021] NZHC 1301
UNDER Section 290 of the Companies Act 1993 BETWEEN
FLOW CONTROL LIMITED
Appellant
AND
IL FORNO LIMITED
Respondent
Hearing: (On the papers) Counsel:
James Kleine for the Appellant Michael Lenihan for the Respondent
Judgment:
4 June 2021
JUDGMENT OF MOORE J
[Leave to appeal]
This judgment was delivered by me on 4 June 2021 at 4:00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar / Deputy Registrar Date:
FLOW CONTROL LIMITED v IL FORNO LIMITED [2021] NZHC 1301 [4 June 2021]
Introduction
[1] In my judgment of 29 April 2021 I declined Douglas James Kleine’s application to appear on behalf of the applicant, Flow Control Limited (“Flow Control”).1 Mr Kleine now seeks to appeal that decision. As such he requires leave of this Court to do so as the decision is interlocutory in nature.
Submissions
[2] Mr Kleine seeks leave on a variety of grounds. First, he submits I erred in finding and placing significant weight on two facts; the first being that Mr Kleine viewed the substantive proceedings as a vendetta between himself and his estranged brother and secondly, that a trial document which was discovered in an altered form was of no substance. Secondly, Mr Kleine claims that I failed to properly consider the elements in the Re G J Mannix Ltd2 test which were favourable to Flow Control, including the limited scope of the proceeding and the proper manner in which Mr Kleine had previously conducted himself. Thirdly, he says the principle relating to “‘one-man’ company[ies]” in Re G J Mannix Ltd is independent of and more persuasive than the other criteria. He says there is public interest in this issue because it involves consideration of how applications made in reliance on Re G J Mannix Ltd are categorised. Fourth, he says I failed to consider how the respondent’s conduct was linked to the unavailability of counsel. Finally, Mr Kleine claims I failed to properly consider the implications of Mr Kleine already being in Court in relation to the same issues.
[3] The respondent, Il Forno Limited (“Il Forno”) opposes the application. For Il Forno, Mr Lenihan submits there is no arguable error of fact or law in the judgment and that I was entitled to make inferences and comments about Mr Kleine’s conduct. He submits I was correct to find the altered document had no bearing on the proceedings before Jagose J, that there is no public interest in granting the leave to appeal and that the decision not to grant Mr Kleine leave to represent Flow Control was correct.
1 Flow Control Limited v Il Forno Limited [2021] NZHC 946.
2 Re G J Mannix Ltd [1984] 1 NZLR 309 (CA).
[4] In any event, Mr Lenihan points out that after the issuing of the 29 April 2021 judgment, Mr Kleine failed to withdraw the application to set aside a statutory demand, instruct counsel to represent Flow Control or seek a stay of execution for the judgment. As a result, the application to set aside the statutory demand was heard before Associate Judge Andrew on 5 May 2021. Mr Lenihan submits the application for leave to appeal has now been overtaken and the interests of justice favour its dismissal.
Legal principles
[5] Section 56(3) of the Senior Courts Act 2016 requires leave be granted to appeal interlocutory applications:
“(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.”
[6] The rule was discussed by the Court of Appeal in Ngai Te Hapu Inc v Bay of Plenty Regional Council.3 Section 56(3) was intended to reduce the volume of interlocutory appeals to the Court of Appeal.4 It found:5
“…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]In Finewood Upholstery Ltd v Vaughan Fitzgerald J found that:6
“…the requirement for leave to appeal should serve as a ‘filtering mechanism’, to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made.”
3 Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291.
4 At [15].
5 At [17].
6 Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].
[8] The Court of Appeal in both Fairway Holdings Ltd v McCullagh7 and Greendrake v District Court of New Zealand8 adopted that approach. The Court in Greendrake went on to summarise key and relevant considerations for leave to appeal applications as follows:
(a)a high threshold exists;
(b)the applicant must identify an arguable error of law or fact;
(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;
(d)the circumstances must warrant incurring further delay; and
(e)the ultimate question is whether the interests of justice are served by granting leave.
The effect of the 24 May 2021 judgment
[9] Since the issuing of my judgment of 29 April 2021, Associate Judge Andrew has heard two applications in these proceedings. The first was an application to set aside a bankruptcy notice9 and the second an application to set aside a statutory demand.10 His judgment was issued on 24 May 2021.11 Of relevance is the second application to set aside a statutory demand.
[10] The effect of my judgment of 29 April 2021 was that Mr Kleine was unable to represent Flow Control at the hearing. Mr Kleine had indicated to me that the application to set aside the statutory demand would be withdrawn. However, this was not done and the application proceeded. Flow Control was unrepresented before Associate Judge Andrew and did not appear at the hearing. Il Forno did not admit the
7 Fairway Holdings Ltd v McCullagh [2018] NZCA 605 at [11].
8 Greendrake v District Court of New Zealand [2020] NZCA 122 at [6], referring to Finewood Upholstery Ltd v Vaughan, above n 6 at [9].
9 CIV-2020-404-2196.
10 CIV-2020-404-2409.
11 Flow Control Ltd v Il Forno Ltd [2021] NZHC 1159.
claim. Il Forno was entitled to judgment dismissing the proceeding12 under r 10.8 of the High Court Rules 2016.
[11] Associate Judge Andrew reasoned he would not have allowed the application even if Flow Control had been represented. There was no substantial dispute as to whether or not the debt was owing and Flow Control did not have a counterclaim, set- off or cross demand.13 He concluded that the challenge to the statutory demand was in substance a collateral attack on the earlier, related judgments of Jagose J.14 Any attempt to re-litigate them would constitute an abuse of process.
[12] It appears to me that Mr Lenihan is correct in his submissions that this application has been overtaken by subsequent events. The application in which Mr Kleine sought to represent Flow Control has been heard and dismissed, thus rendering the current application nugatory.
[13] Despite that, I set out my reasons as to why I would have dismissed this application for leave to appeal regardless.
Discussion
[14] The case law requires an arguable error of law or fact significant enough to meet the high threshold that exists. The error has to be of general or public importance warranting determination. Otherwise, it needs to be of sufficient importance to the applicant to outweigh the lack of general or precedential value. The circumstances of the case must also warrant a further delay and the ultimate question is whether the interests of justice will be served by granting leave.
[15] Mr Kleine submits I made a factual error by finding he viewed the proceedings as something of a personal vendetta. I formed this view based on the history of the litigation, and after observing and interacting with Mr Kleine during the course of the hearing. I was entitled to use this experience in informing my conclusion that this is
12 Flow Control Ltd v Il Forno Ltd, above n 11 at [63].
13 At [66].
14 At [66].
“intensive, intra-familial litigation”15 which required the engagement of a professional and objective practitioner.
[16] Mr Kleine submits the second factual error was my finding that the document delayed in discovery and subsequently allegedly discovered in an altered form was irrelevant to the matters in issue. I explained the provenance, context and perspective of the document in my judgment and do so again. The allegedly altered document consists of a single transaction being omitted from one bank statement in a bundle consisting of over 7,500 pages. I rejected Mr Kleine’s claim that the document was intentionally altered. Mr Kleine had the opportunity to give evidence and put the original statement into evidence. He did not do so. There was no application by Mr Kleine for the recall of any of Il Forno’s witnesses so that they could be re-examined on the discrepancy. There was no presumption of prejudice flowing from these allegations and I found there had been no resulting prejudice to Mr Kleine or Flow Control.16 No additional evidence has been placed before the Court on this issue. I remain satisfied I was correct in finding that the document was of little relevance and consequently no prejudice has been suffered.
[17] Even if I am wrong in my view of Mr Kleine, or in my finding that the altered document has no substantive relevance, these errors would not be of a level of general or public importance to warrant a grant of leave.
[18] Mr Kleine submits an error of law was made in the way in which Re G J Mannix Ltd was applied to his specific circumstances. It is well-settled and apparent that a grant of leave for an individual to represent a company will be an exception to the norm that companies must be represented by a barrister or solicitor. The principles in Re G J Mannix Ltd are binding on me. The relevant law was set out at [18]-[20] of my judgment. For completeness I reproduce the relevant segment here:
“[18] While there is no bar in the District Court to a company being represented by its director in proceedings, that latitude does not extend to proceedings in the High Court. As various authorities have commented, the legal principles for applications of this sort are well settled. As did Associate Judge Lester in Keemati Ltd v MR Civil Ltd,17 I adopt in full the analysis
15 Flow Control Ltd v Il Forno Ltd, above n 11 at [36].
16 Flow Control Ltd v Il Forno Ltd, above n 1 at [37].
17 Keemati Ltd v MR Civil Ltd [2021] NZHC 538 at [5].
contained in Dreamtech Designs & Productions Pty v Clown Fish Entertainment Ltd18 as set out below:
‘[8] The legal principles governing this application are well established. We gratefully adopt the following summary in the judgment of Stevens J in this Court in Kai Iwi Tavern Ltd v The New Zealand Guardian Trust Company Ltd:
[6] In Re GJ Mannix Ltd this Court held that it is “well settled” that “a company has no right to be represented in the conduct of a case in Court except by a barrister; or by a solicitor in Courts or proceedings where solicitors have the right of audience…”. Cooke J continued:
‘There was cognate rule that, apart from statutory exceptions, a corporation has no right to bring or carry on proceedings in a Court except by a solicitor. This refers to the filing of documents – writs, statements of defence, notices of appeal, etc.’
[7] This principle has recently been affirmed by this Court in New Zealand Cards Limited v Ramsay and Commissioner of Inland Revenue v Chesterfields Preschools Ltd. The policy reasons behind this principle are set out at
[34] of Chesterfields. Briefly stated, the rule ensures that proper consideration is given to the validity of proceedings, decreases the likelihood that appellants will require indulgences in the rules of procedure, and ensures that those who appear before the Court are cognisance of the duties and responsibilities that are owed to the Court.
[8] The Court has a discretion to allow non-lawyers to appear on behalf of companies where appropriate. As Cooke J stated:
‘In general, and without attempting to work out hard- and-fast rules, discretionary audience should be regarded, in my opinion, as a reserve or occasional expedient, for use primarily in emergency situations when counsel is not available or in straightforward matters where the assistance of counsel is not needed by the Court or where it would be unduly technical or burdensome to insist on counsel. Especially in minor matters, costs-saving could also be a relevant factor. A ‘one-man’ company might be allowed to represented by its owner if the Judge saw fit in a particular case. But it could not be right, for instance, to issue some sort of tacit continuing or general licence to an unqualified agent to appear in winding up or any other class of proceedings.’
(footnotes omitted)
18 Dreamtech Designs & Productions Pty v Clown Fish Entertainment Ltd [2015] NZCA 491, (2015) 23 PRNZ 141 at [8].
[19] I also adopt Associate Judge Lester’s helpful list of relevant considerations which the Court may take into account in exercising its discretion to permit non-lawyers to appear on a company’s behalf. These include:19
(a)the nature of the litigation;
(b)the complexities of the case;
(c)the extent of the dispute;
(d)the point at which audience is sought;
(e)the importance of an understanding of the law and a dispassionate consideration of the circumstances;
(f)that the preliminary interlocutory stages are important to the determination of litigation, and the filing of a compliance statement of claims assist this process; and
(g)the need for professional objectivity, including whether the person proposed to represent the company is closely associated with the applicant company and is also a witness.
[20] I would also add to that list of considerations whether or not the application is made in an emergency situation.20”
[19] In addressing Mr Kleine’s specific submissions, I note first that Re G J Mannix Ltd takes as a starting point that allowing leave for an individual to represent a company will be an exception.21
[20] The Court goes on to accept that there is a “residual discretion to allow unqualified advocates to appear before them”.22 The “one-man” company exception to which Mr Kleine refers does not carry any more weight than the other factors required to be considered when determining a grant of leave for an individual to represent a company. Further, such an exception will only be applied “if the Judge [sees] fit in a particular case”.23 I did not consider it appropriate in this case to exercise such discretion and allow Mr Kleine to represent Flow Control. The application to set aside a statutory demand was by no means straightforward and could not have been seen as fitting within the category of “minor matters”. The fact that Mr Kleine
19 Keemati Ltd v MR Civil Ltd, above n 17 at [6].
20 Re GJ Mannix Ltd, above n 3 at 314.
21 At 310 and 311.
22 At 314.
23 At 314.
considers the scope of the proceeding to be “limited” evidences his lack of understanding as to what was required for the substantive application.
[21] I am satisfied no error of law was made in my application of the Re G J Mannix Ltd principles. It follows I do not need to consider whether the issues engaged in this case are of sufficient general or public importance to justify a grant of leave.
[22]I turn next to Mr Kleine’s remaining submissions.
[23]Mr Kleine states at [6] of his application:
“His Honour failed to consider the manner in which the conduct of the respondent was linked to the unavailability of counsel”.
[24] I assume Mr Kleine is referencing what he perceives to be poor conduct by Il Forno in response to Flow Control not being represented by counsel. While Flow Control had been represented by experienced counsel in the proceedings before Jagose J, his instructions were not continued apparently because Mr Kleine felt he could do a better job, particularly given his understanding of the facts of the case. In my judgment I thoroughly considered the circumstances surrounding Flow Control’s lack of legal representation.24 This submission concerns Il Forno’s conduct and is not an error of fact or law.
[25] Mr Kleine’s final submission is that I failed to properly consider the implications of him already being in Court in relation to the same issues. It is correct that these are not the only proceedings in which Mr Kleine is currently involved. As I noted in my judgment “the application to set aside the statutory demand is simply the most recent hearing in a sequence of bitterly fought litigation”.25 Mr Kleine is involved in his personal capacity with this procession of litigation. I do not accept that there was a failure to consider the implications of his involvement. As I stated at
[34] of the judgment, knowledge and understanding of the underlying facts of a case is not in itself “…a sound reason for being permitted to represent a company in litigation. Indeed, the very opposite may be said…”. Mr Kleine’s involvement in
24 Flow Control Ltd v Il Forno Ltd, above n 1 at [33], [34] and [36].
25 Re GJ Mannix, above n 2 at [34].
other connected litigation cannot, in my view, weigh in favour of him being allowed to represent Flow Control. The circumstances of the case required the application of objectivity and professionalism. Counsel should have been engaged. On balance, any benefit to be derived from Mr Kleine’s knowledge and understanding of the facts was outweighed by the need for objectivity.
Summary of findings
[26]The application has been overtaken by events and is thus otiose.
[27] Despite that, I am not satisfied any arguable error of fact or law exists which would justify granting leave to appeal.
[28] Finally, I do not consider there is any public or general importance arising out of these issues. The interests of justice would not be best served by allowing leave to appeal.
Result
[29]The application for leave to appeal is dismissed.
Moore J
Solicitors:
Mr Lenihan, Auckland
Copy to:
Mr Kleine, Auckland
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