Keemati Ltd v Mr Civil Ltd

[2021] NZHC 538

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-967

[2021] NZHC 538

BETWEEN

KEEMATI LIMITED

Plaintiff/First Counterclaim Defendant

AND

MR CIVIL LIMITED

First Defendant/ First Counterclaim Plaintiff

AND

JIE GAO

Second Defendant

AND

QNZ LIMITED

Third Defendant/Second Counterclaim Plaintiff

AND

KEEMATI LAL ANGURALA

Second Counterclaim Defendant

Hearing:	8 March 2021
Appearances:	Mr K Angurala seeking leave to represent Plaintiff (by AVL) Z Wall-Manning for Defendants (by AVL)
Judgment:	17 March 2021

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 17 March 2021 at 11.00 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 17 March 2021

KEEMATI LIMITED v MR CIVIL LIMITED [2021] NZHC 538 [17 March 2021]

[1]        Mr Angurala has applied for leave to represent Keemati Limited, the plaintiff in this proceeding. Mr Angurala is the sole director and only shareholder  of  Keemati Ltd.

[2]        This proceeding was filed on 22 May 2019. The plaintiff has been represented by three firms of solicitors since then, albeit the last only briefly. To date there have been five iterations of the statement of claim. The defendants maintain that none of the statements of claim have provided the necessary particulars, and I will refer to that issue below.

[3]        On 17 November 2020, Moore J heard an application for security for costs against the plaintiff and, in a judgment released 22 December 2020, made an order for staged security.1

[4]        Mr Angurala’s  application for leave to represent the plaintiff was filed on     1 December 2020. The application is opposed.

Applicable principles

[5]        There is no dispute as to the applicable principles. I adopt the summary contained in Dreamtech Designs & Productions Pty v Clownfish Entertainment Ltd which provides as follows:2

[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:3

[6]        In Re G J 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 …”.4 Cooke J continued:5

There is a cognate rule that, apart from statutory exceptions, a corporation has no right to bring or carry on proceedings in

1      Keemati Ltd v MR Civil Ltd [2020] NZHC 3496.

2      Dreamtech Designs & Productions Pty v Clownfish Entertainment Ltd [2015] NZCA 491, (2015) 23 PRNZ 141 at [8].

3      Kai Iwi Tavern Ltd v The New Zealand Guardian Trust Company Ltd [2013] NZCA 199.

4      Re G J Mannix Ltd [1984] 1 NZLR 309 (CA) at 310.

5      At 311.

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 Ltd v Ramsay and Commissioner of Inland Revenue v Chesterfields Preschools Ltd.6 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 cognisant 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:7

In general, and without attempting 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,  cost-saving  could  also   be  a relevant factor. A “one-man” company might be allowed to be 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.

[6]        Relevant considerations in the exercise of the Court’s discretion to allow non-lawyers to appear on a company’s behalf include:

(i)the nature of the litigation;

(ii)the complexities of the case;

(iii)the extent of the dispute;

(iv)the point at which audience is sought;8

6      Commissioner of  Inland  Revenue  v  Chesterfields  Preschools  Ltd  [2013] NZCA 53, [2013] 2 NZLR 679 at [25] - [34]; New Zealand Cards Ltd v Ramsay [2012] NZCA 285 at [21].

7      Re G J Mannix, above n 4, at 314.

8      Re G J Mannix, above n 4, at 316.

(v)the importance of an understanding of the law and a dispassionate consideration of the circumstances;9

(vi)that the preliminary and interlocutory stages are important to the determination of litigation, and the filing of a compliant statement of claim assists this process;10 and

(vii)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.11

Background

[7]        As to a summary of the background, I have the advantage of Moore J’s decision in the security for costs judgment, which in turn was influenced by an earlier decision of Associate Judge Paulsen in relation to an application to sustain a caveat by Keemati Ltd.12

[8]The following is taken from the security for costs judgment:13

[5]        The third defendant, QNZ, is  a  property  development  company. Mr Qiu is QNZ’s sole director and CEO.

[6]        The first  defendant, MR Civil is a construction contractor.   It is     a wholly owned subsidiary of QNZ. Mr Qiu is MR Civil’s sole director and CEO.

[7]        The second defendant, Ms Gao, is Mr Qiu’s wife. She was formerly  a director of MR Civil and QNZ. She is not a party to the present application.

[8]        In late 2016 QNZ14 employed Mr Angurala to carry out construction work on its residential subdivision at Flat Bush School Road.

[9]        Shortly after this, Mr Angurala was made a director of MR Civil. QNZ engaged MR Civil as the construction contractor to carry out earthworks at Flat Bush School Road. MR Civil also carried out other construction projects which Mr Angurala supervised. These included two large earthwork projects on Matua Road.

9      Re G J Mannix, above n 4, at 316.

10     Commissioner of Inland Revenue v Chesterfields Preschools Ltd, above n 6, at [28].

11     Dreamtech Designs & Productions Pty Ltd, above n 2 at [13].

12     Keemati Ltd v QNZ Ltd [2020] NZHC 299.

13     Keemati Ltd v MR Civil Ltd, above n 1.

14     At this time QNZ was called Chimbusco International Limited.

[10]      In November 2017, 40 per cent of the shares in MR Civil were transferred to Keemati. The circumstances and purposes of this transfer are disputed.  Mr Angurala says the shares were gifted.   Mr Qiu says they were a loan to enhance Mr Angulara’s credibility with suppliers and contractors.

[11]      The relationship between Mr Angurala and Mr Qiu soured. Each attributes the breakdown to the other. In any event, on 3 September 2018, the two men met to discuss the basis on which Mr Angurala would exit MR Civil’s business. Mr Angurala took notes of what he claims was agreed between them. The notes were signed by Mr Qiu. Notwithstanding the notes, it appears to be common ground that they do not reflect everything which was agreed between the parties. In material respects, Mr Qiu does not accept the agreement as claimed by Mr Angurala. It is, however, accepted that it was agreed Keemati would relinquish its shares in MR Civil and Mr Angurala would resign as director. But there is a dispute as to the terms on which the shares would be transferred. Mr Angurala says that certain properties were to be transferred to Keemati in consideration for Keemati shares and upon titles becoming available. Mr Qiu says that QNZ was to pay nothing. The shares were, as they always had been, on loan to Keemati.

[12]      The relationship between Mr Qiu and Mr Angurala remains hostile. Mr Angurala claims Mr Qiu made it impossible for Keemati to complete the Matua Road projects. And on 5 May 2019 Mr Angurala wrote to the Matua Road   developers   telling  them   he   was  quitting  the  projects  and,  as     a consequence, the developer cancelled the contract with MR Civil.

[13]      There  is  also  a   dispute  relating   to   whether  the  terms   of   the 3 September 2018 agreement were breached. Keemati claims that MR Civil did not pay the sum due as a result of the 3 September 2018 agreement.    MR Civil disagrees. It says it has paid all the sums owing.  Keemati sues  MR Civil and QNZ in breach of contract. Mr Gao is sued in breach of trust and breach of directors’ duties. To a considerable extent the determination of these proceedings will turn on credibility findings.

Basis of the application

[9]Mr Angurala, in support of his application, makes the following points:

(i)He says he is a suitable person to conduct the case on behalf of the plaintiff, being its director, founder and sole shareholder, and that he is a highly educated person who will be ethical in his conduct in court;

(ii)He will consult with a lawyer on the pleadings to ensure they are valid; and

(iii)Mr Angurala says he has had difficulties with former lawyers which have added to delay and costs. Involving another lawyer, he says, “will

create more inconvenience than facilitating the [litigation] process”. He is concerned he may face similar difficulties in the future if the plaintiff is required to instruct counsel.

[10]      Mr Angurala   relies   on   the    decision    of    Hinton    J    in    AFCO    New Zealand Ltd v NZ Premium Trading Company Ltd, where her Honour granted leave to a director of the defendant company to appear on behalf of the defendant.15

[11]      Each application of this kind depends on its own facts and circumstances.     I consider the present case to be quite different from the one before Hinton J in AFCO. The only similarities are that both applications involved tightly-held companies where the interests of the company and the proposed representative are aligned. As noted by Mr Wall-Manning, counsel for the defendants, in AFCO leave was granted when the proceeding was ready for a hearing and it does not appear the application was opposed by the plaintiff.

[12]      I do not consider this an appropriate case to invoke the exception recognised in Re G J Mannix Ltd. I now give reasons for that conclusion.

[13]      This is a complex commercial case, anticipated to require two weeks of hearing time with the potential for expert evidence. That is the basis upon which security for costs were fixed. The proceeding is at an early stage with the Court already commenting that further interlocutory skirmishes are inevitable. The legal issues involved are not straightforward.

[14]      Justice Moore, in the security for costs  judgment at [13], recognised that to   a considerable extent the determination of the proceeding would turn on credibility findings. In this case, there are substantial disputes between the parties and the reality is that if Mr Angurala were granted leave to represent the plaintiff, he would be both counsel and witness in a case where there is hostility between the parties.

[15]      The professional objectivity that underlines the Mannix rule cannot be achieved through Mr Angurala representing the plaintiff.

15     AFCO New Zealand Ltd v NZ Premium Trading Company Ltd [2017] NZHC 2218.

[16]      Further, the statement of claim is not yet settled. There is an outstanding application for particulars of the claim to be heard. Mr Angurala in effect submits that the application for particulars is a tactical one designed to exhaust his resources. If that is the case, the defendants will face costs consequences for an unsuccessful application. However, the present application is not the place to have a dry run as to whether particulars are required.

[17]      Mr Angurala’s assurance that he will consult with a lawyer on the pleadings so as to avoid any issue with their validity is some acceptance the pleadings require further work.

[18]      Significantly, in the papers filed for the hearing, Mr Angurala does not say the plaintiff cannot afford representation. Given the company’s position in the security for costs application that the plaintiff was in a sound financial state, such omission was not surprising. Mr Angurala, in his affidavit of 1 December 2020 in support of the present application, says:

12. In the light of all the issues I have had with former two lawyers and undue financial pressure, there is no guarantee that the same situation will not recur , and if Keemati is put in a similar pressurized situation again, then Keemati Ltd or I will be in an extreme position and may struggle to pay the massive fees of lawyers in addition to meeting the costs obligations therefore required by the Court.

[19]      While hinting at the possibility that there may be financial pressures on Keemati Ltd in the future, Mr Angurala did not say in his evidence that financial issues were such an impediment to counsel being instructed now.

[20]      At the hearing, however, Mr Angurala said that if he was not given leave to represent the company, it will have to drop its case and this was not in the company’s interests. Mr Angurala did not attempt to reconcile these statements with the material advanced in the security for costs hearing, nor did he address this issue in his reply submissions when Mr Wall-Manning referred to the inconsistency and submitted the Court should adopt the conventional approach of determining the application on the sworn evidence. That is what I have done. However, having heard Mr Angurala from the bar contradict his sworn evidence from the security for costs hearing without

offering an explanation, reinforces my view that the present application should not be granted.

[21]      Perceived deficiencies in the skills or the effort of prior counsel do not justify further counsel not being instructed.

[22]      I also note from Mr Angurala’s affidavit that he may also be intending to give expert evidence. That Mr Angurala contemplates he could be a witness of fact, an expert witness, and counsel, only reinforces that it would be inappropriate for his application to be granted.16

[23]      The reference in Re G J Mannix Ltd to the discretion being “a reserve or occasional expedient” is to allow a director to represent a company:17

… 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.

[24]      This is not an emergency situation. It is early on in the proceeding and the suggestion is that Mr Angurala would represent the plaintiff not in a relatively minor one-off hearing but in all aspects of the proceeding through to its conclusion.

[25]      The application is really based on little more than Mr Angurala being frustrated with the efforts of prior counsel and a concern that if new counsel were instructed he may  encounter  similar  frustrations.  This  is  well  short  of  justifying  granting   Mr Angurala leave to represent the plaintiff and his application is dismissed.

[26]      The interests of both parties to a proceeding are inherent in a number of the factors considered in an application such as this.  Both sides are better served where a proceeding runs simply and quickly.  In a legally and procedurally  complex case   a party dealing with a company represented other than by counsel faces the high likelihood of delay and extra costs as a result.

16     GB & JZ Chambers Ltd v AEL Corporation Ltd (1994) 7 PRNZ 635 (HC) at 642.

17     Re G J Mannix at 314; above n 4, and Dreamtech  Designs & Productions Pty Ltd, above n 2,   at [10].

[27]      Mr Angurala submitted that the delays to date were at least in part due to the interlocutory applications brought by the defendants in the caveat dispute. Given this application focuses on who can represent the plaintiff going forward, I do not find trying to attribute responsibility for historical delay helpful one way or the other.

[28]      I have not lost sight of the fact that Mr Angurala is named as second counterclaim defendant and in that capacity he can represent himself. That, however, is not of itself justification for granting him leave to represent the plaintiff. The application is dismissed.

Costs

[29]      There is no reason why costs should not follow the event on a 2B basis in favour of the defendants.

Associate Judge Lester

Solicitors:

Chapman Tripp, Auckland Copy to:

Mr K Angurala