Gordhan v Kerdemelidis

[2012] NZHC 1987

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2010-409-002982 [2012] NZHC 1987

BETWEEN  MUKESH GORDHAN Plaintiff

ANDSAVVA KERDEMELIDIS ALSO KNOWN AS SAVVAS KERDEMELIDIS Defendant

Hearing:         2 August 2012 (By Telephone) Appearances: K Puddle for Plaintiff

G H Nation for Defendant

Judgment:      6 August 2012

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      In  this  proceeding  the  plaintiff  seeks  judgment  based  on  an  unsatisfied judgment entered for the plaintiff against the defendant on 23 August 2010 in the Eighth Judicial District Court for Clark County, Nevada in the USA.

[2]      Initially the plaintiff sought summary judgment.   This was withdrawn by leave.  The defendant applied for an order striking out those parts of the claim which assert that the Nevada Court has jurisdiction over him.  The plaintiff applied to strike out the parts of the defence presented by the defendant which allege fraud by the plaintiff.   On 20 December 2011 the Court issued a judgment on the competing strike-out applications.  The plaintiff’s application to strike out parts of the statement of defence was dismissed, and the defendant’s application to strike out succeeded only in small measure.  The proceeding is now set down for trial in February 2013

with seven days reserved.

MUKESH GORDHAN V SAVVA KERDEMELIDIS ALSO KNOWN AS SAVVAS KERDEMELIDIS HC CHCH CIV-2010-409-002982 [6 August 2012]

[3]      In paragraphs [5] to [13] of the judgment of the Court dated 20 December

2011 the Judge summarised the background to this case and the entry of judgment in Nevada against the defendant.  It is unnecessary for me to repeat, in this judgment, the material set out there.

[4]      The parties are agreed that to determine this proceeding the Court will need to resolve two issues: first, whether the defendant submitted to the jurisdiction of the Nevada Court, and secondly, whether the plaintiff obtained the judgment of the Nevada Court by fraud.  It is common ground that if the defendant is found not to have submitted to the jurisdiction of the Nevada Court, the judgment cannot be entered in this country.  The defendant maintains that resolution of this issue first, and separately from the second issue, will avoid a great deal of cost for the parties and a substantial amount of time not only for the parties but also for the Court.  Thus an order is sought under r 10.15 of the High Court Rules.  The issue before me is whether it is appropriate to make this order.

[5]      Rule 10.15 provides:

The  court  may,  whether  or  not  the  decision  will  dispose  of  the proceeding, make orders for –

(a)     the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding; and

(b)     the  formulation  of  the  question  for  decision  and, if  thought necessary, the statement of a case.

[6]      The defendant also relies on r 7.9 which, in more general terms, provides that a Judge may give directions to secure the just, speedy and inexpensive determination of a proceeding, and direct how the hearing of a proceeding is to be conducted.

Principles to be applied

[7]      White J summarised the principles by which the Court should approach the exercise of its discretion on this issue in Turners & Growers Ltd v Zespri Group Ltd:[1]

[1] Turners & Growers Ltd v Zespri Group Ltd HC Auckland CIV-2009-404-4392, 5 May 2010.

[9]     There is no dispute that the Court has a broad discretion under both rules to decide whether justice requires a split trial for a cause of action or a separate question of law.   In exercising the broad discretion, however, the Court will take into account not only the interests of the parties immediately affected but also the interests of other parties to other cases awaiting hearing before the Court.

[10]    The starting point therefore is the assumption that all matters in issue are to be determined in one trial because that would normally be the most expeditious and efficient manner for dealing with a proceeding: Clear Communications Ltd v Telecom Corporation of New Zealand Ltd (1998) 12

PRNZ 333 (HC) at 334.   Consequently the burden of displacing the presumption rests on the party contending for the split trials.  The burden has

been described as “heavy” or “not insignificant”: Clear Communications v
Telecom Corporation of New Zealand Ltd at 335 and KPMG New Zealand v

Gemmell HC Auckland CIV-2008-404-4288, 27 March 2009 at [20].

[11]     Criteria that have been taken into account in other cases to decide whether to order a split trial include –

(a)     The likelihood of delay in finally resolving the proceeding. (b)        The probable length of the hearings if there is a split trial.

(c)     Whether a decision one way or the other on the separate questions would end the litigation.

(d)     The impact on the length of any subsequent hearing.

(e)     A balancing of the advantages to the parties and the public interest in shortening litigation as against any disadvantages asserted by parties opposing a split trial.

(f)      Demarcation difficulties in defining issues to be addressed at the first trial.

(g)     Resulting difficulties of issues estoppel.

(h)     Inadvertent disqualification of a Judge who has expressed views at the first trial on matters for decision at the second trial.

(i)     Inadvertent findings at the first trial upon matters that are for full evidence and argument at the second hearing.

(j)     The need to recall some witnesses at the second hearing.

(k)     The duplication of time involved in the Court and counsel “coming up to speed” again for the second hearing.

(l)     The prospect of multiple appeals.

(m)    A second round of discovery or other interlocutories and amended pleadings following the first trial.

(n)     Rostering difficulties in ensuring that the same Judge is available for the second hearing.

Argument for the defendant

[8]      Mr Nation said that on the submission to jurisdiction issue three witnesses will be called.  The defendant will give evidence on the basis on which he took steps on the Nevada proceeding, and the advice he received on those steps from both a New Zealand lawyer and his Nevada attorneys.  Evidence will also be led from one of those attorneys, and from an independent Nevada attorney, as an expert witness, on the law in Nevada on submission to the jurisdiction.  The Court will be presented with a bundle of documents drawn principally from the records of the Nevada Court for consideration in conjunction with this evidence.   The evidence of the Nevada attorneys could be given by video if the Court so directed.

[9]      Mr Nation said the Court will have to decide whether in terms of Nevada law the steps the defendant took involved a submission to the jurisdiction of that Court, and next, whether according to New Zealand law, the defendant submitted to the jurisdiction of the Nevada court.[2]    Mr Nation recognised that the application may require resolution of the question whether or not a New Zealand court can hold that a defendant has submitted to the jurisdiction of a foreign court if the steps taken were not sufficient to constitute submission to that foreign court’s jurisdiction in terms of

[2] Von Wyl v Engeler [1998] 3 NZLR 416.

the law of that foreign court.  Counsel referred to cases on this issue.[3]

[3] Adams v Cape Industries Plc [1990] Ch 433,

[10]     On this defence, the Court will focus on the process before Nevada court, and its legal consequences.

[11]     Mr Nation submitted that if a separate trial of the submission to jurisdiction point is not ordered, the Court will then need to deal also with his client’s claim that the plaintiff obtained judgment in the foreign court by fraud.   These allegations involve a substantially greater body of contentious factual and legal issues, including a much greater volume of documentary evidence.  The factual issues are raised in the statement of defence and are canvassed in the affidavits filed in relation to the summary judgment and strike-out applications to which I have referred.   The documents cover an eight year period.  The enquiry will have as its principal focus the events on which the fraud allegations are based.

[12]     Although the case has presently been set down for seven days, Mr Nation estimates that the submission to jurisdiction point would take no more than three days at most, but that the fraud defence would take in the order of 10 days to hear. Thus, the present fixture allocation of seven days is manifestly inadequate, in any event, and dealing with the submission to jurisdiction defence at a separate hearing has the potential, should the defence succeed, to cut likely trial time to about one- quarter of the time now estimated.

[13]     Mr  Nation  said  that  there  is  also  a  great  deal  more  investigative  work required  between  now  and  the  trial  to  be  ready  to  present  the  fraud  defence, including the examination of company records, the briefing and calling of a number of additional witnesses from America who were involved in the activities upon which the fraud defence is based, and an analysis of a substantial amount of material by both the defendant and his advisors, including counsel.   In turn, this material would need to be presented to and assessed by the Court.

[14]     The  ambit  and  complexity  of  the  fraud  defence  are  summarised  in  the judgment of this Court of 20 December 2011.

[15]     Mr Nation noted that the defendant is on legal aid, and has approval of funding  for  counsel  for  the  further  steps  required  to  pursue  the  submission  to

jurisdiction defence.  Legal aid has deferred making a decision on whether funding would be available in  relation to the fraud defence.   Mr Nation submitted that allowing the matter to proceed by way of two separate trials would be in the public interest because of the potential significant saving in terms of legal aid, and because of the potential avoidance of court and judicial time.

The plaintiff’s position

[16]     Mr Puddle structured his submissions by reference to a number of the criteria in Turners and Growers Ltd v Zespri Group Ltd (above).   He referred first to the likelihood of delay in finally resolving the proceedings.  In his prepared submissions he pointed out the likely difficulty of resolving the submission to jurisdiction point in advance of the fixture allocated for February 2013, and when, in discussion, I made it clear that this could not occur, he submitted that splitting the hearing would inevitably delay the final outcome of this proceeding.

[17]     Secondly, Mr Puddle submitted that both issues would require the plaintiff and the defendant to be called, and that the experts on Nevada State and US federal law which he would need to call would be called on both issues, leading to increased costs and inconvenience.   He accepted that with leave of the Court, overseas witnesses could give evidence by video link.

[18]     Thirdly, counsel submitted there would be duplication in the time the Court would be involved and cost and inconvenience in counsel and the Court coming up to speed for the second hearing.

[19]     Fourthly, Mr Puddle referred to the probable length of the hearings, if split, and the impact of a prior decision on the length of any subsequent hearing.  Initially Mr Puddle referred to splitting the total of seven days which was estimated earlier; in the end, however, he agreed that the submission to jurisdiction issue would take up to three days but the rest of the trial would be likely to take around 10 days.

[20]     Mr  Puddle  said  that  there  would  be  a  high  probability  of  the  plaintiff appealing if unsuccessful on the submission to jurisdiction issue, so one way or the

other there would be a further hearing.  He submitted there is a prospect of multiple appeals, certainly more than if there is one hearing.

[21]     Mr Puddle submitted that the Court cannot take into account the prospect of the defendant succeeding on the submission to jurisdiction issue when deciding whether to order separate trials.   He relied on Harcourts Group v Harvey Realty Group[4] where the Court said:

[4] Harcourts Group v Harvey Realty Group (2002) 16 PRNZ 291 (CA), at [22].

This application must be examined on the basis that the answers may not be as favourable to the appellants as they suppose because we are not prepared to hazard an answer to the proposed questions in order to decide whether they should be asked.

[22]     Finally,  Mr  Puddle  submitted  that  it  is  difficult  to  identify  any  actual advantage in having a split hearing, to weigh against the disadvantages which he had identified and, accordingly, it is not in the public interest to split the hearing.

Discussion

[23]     I have approached my consideration of this application in the context of judicial warnings emphasising the risks involved in ordering split trials.[5]     As Associate Judge Bell said in Perpetual Trustee Company Ltd v Downey:[6]

[5] Windsor Refrigerator Co Ltd v Branch Nominees Ltd [1961] 1 Ch 375 at 396,

Tilling v Whiteman [1980] AC 1 (HL) at 25, Esso Resources Canada Ltd v Stearns

Catalytic Ltd (1991) 77 DLR (4th) 557, Tepko Pty Ltd v Water Board (2001) 206 CLR 1 (HCA).

[6] Perpetual Trustee Company Ltd v Downey HC Auckland CIV-2001-404-4096,

25 October 2011, at [58].

It is often said that split hearings are treacherous shortcuts.

[24]     That said, every case must be considered individually and the possibility of a split trial should never be dismissed out of hand.  The most important single question is usually the interaction between the issues intended to be traversed at the first

hearing and those destined for the second.[7]

[7] Clear Communications Ltd v Telecom Corporation of New Zealand Ltd (1998) PRNZ 333 at 335 as quoted in Turners & Growers Ltd v Zespri Group Ltd above, at [13].

[25]     I start  my assessment  with  that  issue.    The interaction  between  the  two defences is minimal.  The submission to jurisdiction issue involves an examination of the facts surrounding the processes of the Court in Nevada.  The fraud defence involves an examination of the conduct of the plaintiff and the defendant which gave rise to the Nevada proceedings.   This is a different enquiry altogether, and a substantially greater one than the enquiry into the Nevada Court process.  Mr Nation would not call, in relation to the fraud defence, either of the independent witnesses he would call on the submission to jurisdiction defence, though he would call his client.  Mr Puddle indicated that the independent witnesses the plaintiff would call on the submission to jurisdiction defence would also be called on the fraud enquiry though, as I understand it, he accepted that there would be little overlap in their evidence.  Even if these witnesses were called, it would not be necessary for them to travel to New Zealand as counsel agreed that their evidence could be given by video link, subject of course to the agreement of the trial Judge.

[26]     The legal issues requiring determination by this Court on the submission to jurisdiction defence are quite different from those requiring determination by this Court on the fraud defence.

[27]   Relevant to this issue, also, is the fact that all documents required for determination of the submission to jurisdiction defence have already been discovered (and indeed are exhibited already on affidavits filed for the strike-out applications). Conversely, it is apparent that significant further discovery will be required from United States sources for the fraud defence, this in itself being a costly exercise, and analysis of those documents is also expected to be an extremely time-consuming exercise.

[28]     All  these points  are  relevant  to  the  interaction  between  the issues  to  be traversed in relation to each of the defences and, in my opinion, weigh significantly in favour of ordering separate hearings to determine each of these defences.

[29]     Other points also favour this outcome.  First, as the defendant is on legal aid, the possible saving of legal aid by a very substantial reduction in preparation, and a reduction of some two-thirds in trial time, should the submission to jurisdiction issue

be determined in favour of the defendant, are matters of public interest.  In the same vein a significant amount of Court time will be saved in this event.  On the other hand, I am not satisfied that any significant additional time for either counsel or the Court would be incurred by splitting the trials, when compared with running the trial as a single process.   Given the lack of any significant overlap between the issues raised by each defence, the second trial would simply move into a consideration of the fraud defence if run separately, much as it would if run at the same time.  I see little difficulty for the trial Judge in recollecting sufficient of the first trial for this to occur seamlessly, and availability of a trial Judge able to hear both trials if necessary is manageable.  I do not see any significant difficulties for counsel either.

[30]     A disadvantage of proceeding with separate trials is that judgment on the submission to jurisdiction defence opens the way for appeals, and if ultimately that defence is not sustained, there is scope for appeals from a separate judgment on the fraud defence.  This factor weighs against ordering separate trials.

[31]     The final factor I take into account is that the fixture for both defences, presently arranged for seven days in February 2013, is not of sufficient duration – in fact it is unlikely to be more than half of the total time required.  That, coupled with the need for further discovery and investigation of the facts which will need to be canvassed in relation to the fraud defence, point to that fixture either being vacated entirely, or, more practically, used for determination of the submission to jurisdiction issue.

Outcome

[32]     Weighing up all factors, I am satisfied that the advantages of splitting the trial as requested by the defendant well outweigh the disadvantages.  I therefore direct:

(a)     All issues relating to the defence to this proceeding on the basis of the defendant not having submitted to the jurisdiction of the Nevada court will be tried separately from all other defences, and the counterclaim.

(b)The trial will commence on Monday, 25 February 2013 at 10.00 am with three days reserved.

[33]     It is desirable to settle a statement of issues for determination at the trial. Counsel may also consider that directions in place in relation to evidence need to be reviewed given this decision.  I ask counsel to confer in relation to preparation of an agreed statement of issues, and I reserve the right to counsel to apply by memorandum for a telephone conference to discuss any other matters that need direction for the run-up to trial.

[34]     Arrangements will need to be made for the presentation of evidence from witnesses who are overseas.  Counsel are asked to investigate arrangements for this with the Registrar, and then file a memorandum for the trial Judge no later than

8 February 2013 seeking consent to the arrangements proposal.

[35]     Costs are reserved.

J G Matthews

Associate Judge

Solicitors:

Lowndes Jordan, PO Box 5966, Auckland. Email: [email protected] / [email protected]

Wynn Williams, PO Box 4341, Christchurch. Email: [email protected]

Akai Pty Ltd v People’s Insurance Co Ltd [1998] 1 Lloyds Rep 90,
The Eastern Trader [1996] 2 Lloyds Rep 585,
The Atlantic Emperor (No.2) [1992] 1 Lloyds Rep 624.