i-Health Ltd v iSoft NZ Ltd - [2011] NZCA 575

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA661/2010
[2011] NZCA 575

BETWEEN i-HEALTH LIMITED
Appellant

AND iSOFT NZ LIMITED
First Respondent

AND iSOFT AUSTRALIA PTY LIMITED
Second Respondent

Hearing: 4 August 2011

Court: Arnold, Randerson and Harrison JJ

Counsel: M C Harris for Appellant
C Bryant for Respondents

Judgment: 14 November 2011 at 11.30 a.m.

JUDGMENT OF THE COURT

A The appeal is dismissed.

BThe appellant is to pay to the respondents costs as for a standard appeal on a band A basis plus usual disbursements.

___________________________________________________________________

REASONS OF THE COURT

(Given by Randerson J)

Table of Contents

Para No
Introduction	[1]
The issues	[6]
Background	[7]
The terms of the Agreement	[12]
The Variation Agreement	[17]
The approach to interpretation in the High Court	[21]
First issue: Can the parties agree to oust or limit the jurisdiction of the Court to exercise the discretion conferred by s 87 of the Judicature Act to award interest on damages?	[29]
Second issue: Was the Judge correct to rule that the $5 million cap included any interest awarded under s 87 of the Judicature Act?	[43]
Third issue: Does the limitation clause apply to any post-judgment interest to which i-Health would otherwise be entitled under r 11.27 of the High Court Rules?	[61]
Result	[64]

Introduction

The appellant (i-Health) was involved in the development of software products for use in the health sector. It agreed to sell its business to the first respondent (iSoft) on 17 December 2003 (the Agreement).
A minimum purchase price was agreed but this could be increased depending on the extent of revenue derived by iSoft from the sale of the software products over a five year period after the settlement of the sale. Under the Agreement, iSoft undertook to use reasonable endeavours to promote sales of the software products it purchased from i-Health. In proceedings issued in the High Court, i-Health alleges that iSoft breached those obligations and seeks damages of $14.25 million against iSoft and the second respondent as guarantor of iSoft’s obligations under the Agreement.
Soon after the Agreement was signed, variations were agreed and included in a Variation Agreement. This contained a clause limiting iSoft’s liability as purchaser. Subject to two identified exceptions, liability was to be limited to $5 million. In the High Court, Asher J was asked to determine as a preliminary question whether the limitation of liability included any award of interest in favour of i-Health which i‑Health might subsequently obtain under s 87 of the Judicature Act 1908, in addition to damages.
Asher J held that, on its true construction, any award of interest under the Judicature Act was included within the $5 million cap.[1] i-Health now appeals against that decision contending that any award of statutory interest is a discrete matter not included within the $5 million cap.
[1] i-Health Ltd v iSoft NZ Ltd HC Auckland CIV-2006-404-7881, 8 September 2010.
During the hearing of the appeal,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2011] NZCA 575
Decision Date: 14 November 2011

CaseChat Overview and Summary

The Court of Appeal considered an appeal by i-Health against a decision of the High Court that a $5 million cap on damages included statutory interest awarded under s 87 of the Judicature Act 1908. The Court found that the parties could agree to limit their liability for statutory interest, and that the $5 million cap included statutory interest awarded under s 87. The Court also found that the issue of whether the limitation clause applied to post-judgment interest was outside the jurisdiction of the Court in this appeal.

The Court found that the parties could agree to waive or limit the right to seek relief under s 87 of the Judicature Act, which provides that the Court may award interest on debts and damages in its discretion. The Court considered that the section was intended to remedy an obvious injustice in cases where no contractual or statutory interest rate applied, and that the ability to waive or contract out of a statutory right is essentially a matter of statutory interpretation.

The Court found that the $5 million cap on damages included statutory interest awarded under s 87. The Court considered that the limitation clause was intended to apply to any breach by iSoft of the best endeavours obligations, and that the parties had specifically turned their minds to the possibility of an award of legal costs or expenses being ordered by the Court in favour of i-Health. The Court found that, if the parties had intended to exclude statutory interest from the cap, then it would have been explicitly excluded.

The Court found that the issue of whether the limitation clause applied to post-judgment interest was outside the jurisdiction of the Court in this appeal. The Court considered that different legal and policy issues may arise in relation to post-judgment interest, and that the most obvious difference was that post-judgment interest applied to a judgment as a matter of right rather than discretion. However, the Court declined to reach any conclusion on this issue.

The appeal was dismissed, and the appellant was to pay to the respondents costs as for a standard appeal on a band A basis plus usual disbursements.

Orders