Kleine v Il Forno Limited
[2021] NZCA 207
•26 May 2021 at 11 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA668/2020 [2021] NZCA 207 |
| BETWEEN | DOUGLAS JAMES KLEINE |
| AND | IL FORNO LIMITED |
| Court: | Cooper, Courtney and Goddard JJ |
Counsel: | Applicant in person |
Judgment: | 26 May 2021 at 11 am |
JUDGMENT OF THE COURT
AThe application for an extension of time in which to appeal is granted.
B The appeal must be brought within 20 working days after the date of this decision.
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REASONS OF THE COURT
(Given by Cooper J)
The appellant, Douglas Kleine, has sought an extension of time to appeal a judgment of the High Court under r 29A of the Court of Appeal (Civil) Rules 2005 (the Rules).[1] His application was lodged 56 working days after the date that the appeal should have been filed.
[1]Il Forno Ltd v Kleine [2020] NZHC 1889 [Substantive judgment].
The appellant also seeks to appeal a separate judgment of the High Court which dealt with the issue of costs.[2] In this case the appeal was filed one day late, but by consent Brown J extended the time to file it by minute dated 2 March 2021. This judgment deals with the issue of whether the appellant should also be granted an extension of time for appealing against the substantive judgment.
[2]Il Forno Ltd v Kleine [2020] NZHC 2730 [Costs judgment].
The dispute involved a bakery and café situated in Ponsonby, Auckland under the trading name Il Forno Ltd (Il Forno). It was run by Andrew Kleine and his partner Helane Mead. With financial assistance from his brothers Barry Kleine and the appellant (referred to as Jim in the High Court judgment), Andrew Kleine acquired a half interest in the business. The appellant provided the business with professional accounting services through his company Flow Control Ltd (Flow Control), but in November 2015 Andrew Kleine brought those arrangements to an end, alleging the appellant’s professional accounting services had been inadequate and negligent, causing Il Forno to be liable for fines for failing to file its tax returns. Il Forno sought declarations that Andrew Kleine was the sole legal and beneficial shareholder of the company, the appellant’s or Flow Control’s involvement with the company had been cancelled and the company had no further obligations towards the appellant or Flow Control. Il Forno sought compensation under the Contract and Commercial Law Act 2017, or damages in contract or negligence. The appellant resisted those claims and counterclaimed, asserting amongst other things that Andrew Kleine held a portion of his shares in Il Forno on trust for Flow Control. The counterclaim also raised allegations of breach of trust and advanced a quantum meruit claim.
In the substantive judgment, Jagose J declared that Andrew Kleine was Il Forno’s sole legal and beneficial shareholder.[3] He ordered the appellant to pay Il Forno the sum of $14,185 in damages for negligence and to deliver up all digital files in his possession containing any information belonging to Il Forno.[4] He dismissed the other causes of action in both the claim and counterclaim.[5]
[3]Substantive judgment, above n 1, at [28].
[4]At [87].
[5]At [88].
On the subject of costs the Judge said:
[89] In my preliminary view, although Il Forno has achieved a measure of success, no party can claim comprehensively to be successful in the proceeding, and the family context of the proceeding also justifies avoiding continued grounds for dispute. For those reasons, from what I presently know, costs should lie where they fell or fall: that is, legal expenses are to be borne by the party incurring them.
[90] If that is not accepted, or the parties cannot otherwise agree, I reserve costs for determination on short memoranda of no more than five pages …
Notwithstanding those observations, after the Judge had considered the submissions that were filed on the issue of costs he ordered the defendants (the appellant and Flow Control) jointly and severally to pay costs to Il Forno in the amount of $91,828 plus disbursements of $83,744.[6] As we have seen, the costs judgment is itself subject to an appeal. However, the appellant now wishes to appeal against the substantive judgment as well. He seeks to argue that the Judge should not have found him personally negligent; rather, the finding should have been made against his company, Flow Control. He contends that if the finding of negligence had been made against Flow Control, then a set-off would have been available and there would have been no damages. In those circumstances Il Forno would have been unsuccessful and costs would not have been awarded in its favour. He also argues that his quantum meruit claim should have succeeded.
Relevant principles
[6]Costs judgment, above n 2, at [10].
The Court may extend the time for appealing under r 29A of the Rules applying the principles set out by the Supreme Court in Almond v Read.[7] In that case, the Supreme Court held that exercise of the discretion to extend time necessitates an assessment of the particular circumstances of the case, bringing into account:[8]
(a)the length of the delay;
(b)the reasons for the delay;
(c)the conduct of the parties, particularly of the applicant;
(d)any prejudice or hardship to the respondent or others with a legitimate interest in the outcome; and
(e)the significance of the issues raised by the proposed appeal, both to the parties and more generally.
Ultimately, however, the question is what the interests of justice require.[9]
[7]Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801.
[8]At [38].
[9]At [38].
The Supreme Court accepted that the merits of a proposed appeal might in principle be relevant to the exercise of the discretion to extend time, noting that there might be occasions when the court would risk facilitating unjustifiable delaying tactics if it does not consider the merits.[10] However, it accepted there would be qualifications to that principle, including in cases where the merits or otherwise of a proposed appeal would be “overwhelmed” by other factors (such as the length of the delay or the extent of prejudice to the respondent or others).[11]
[10]At [39].
[11]At [39(a)].
In any event, the Court said that consideration of the merits of an appeal in the context of an application to extend time will necessarily be relatively superficial. It endorsed observations of the Court of Appeal of England and Wales in R (Hysaj) v Secretary of State for the Home Department to the effect that the court should firmly discourage much argument on the merits and reach a view about them only when they are obviously very strong or very weak.[12] A decision to refuse an extension of time based only on a lack of merit should be made only where the appeal is “clearly hopeless”.[13] The Supreme Court said:[14]
An appeal would be hopeless, for example, where, on facts to which there is no challenge, it could not possibly succeed, where the court lacks jurisdiction, where there is an abuse of process (such as a collateral attack on issues finally determined in other proceedings) or where the appeal is frivolous or vexatious. The lack of merit must be readily apparent. The power to grant or refuse an extension of time should not be used as a mechanism to dismiss apparently weak appeals summarily.
This case
[12]R (Hysaj) v Secretary of State for the Home Department [2014] EWCA Civ 1633, [2015] 1 WLR 2472 at [46].
[13]Almond v Read, above n 7, at [39(c)].
[14]At [39(c)].
Here, the appellant seeks an extension of time on the grounds that there are good reasons for his delay since he had to wait for the costs judgment to be issued before determining whether to pursue an appeal (the grounds of which, he claims, all have a connection to costs) and he had relied on the Judge’s comments in the substantive judgment that his preliminary view was that costs ought to lie where they fall. The appellant says he was entitled to give that significant weight. He also asserts that the appeal has merit.
He notes that the substantive judgment was issued on 31 July 2020, but the costs judgment was not delivered until 19 October 2020. The appellant claims his delay in filing the appeal is attributable to the delay in delivery of the costs judgment. He submits that there is no prejudice to Il Forno.
Il Forno opposes the application, claiming that the length of the delay is significant and suggesting that the explanation given for the delay amounts to no more than a deliberate decision on the part of the appellant not to pursue an appeal. There is a degree of prejudice evident from an affidavit of Andrew Kleine in which he sets out the emotional and financial toll that the proceeding has taken on him and his family. It is said that there is no public interest in the appeal and the substantive decision was primarily an application of settled law to the facts. Il Forno also submits the appeal has no merit.
Decision
We accept that the delay that has occurred is reasonably significant. We also consider the explanation for it is not particularly strong. There is merit in the proposition advanced by counsel for Il Forno that in effect the appellant chose not to appeal following the issue of the substantive judgment albeit that decision may have been influenced by the Judge’s preliminary observations about costs. There is no other issue arising out of the conduct of the parties which needs to be taken into account in the present context.
This is not a case where it would be appropriate to treat the merits of the appeal as influential on the outcome of the present application. Our impression is that the merits of the appeal are weak but we do not consider the case falls into the category of one which is so obviously hopeless that an extension of time for appealing should be refused. There is no public interest in the appeal, nor are the private interests engaged particularly significant.
That leaves for consideration the issue of prejudice.
On this issue, opposition to an extension of time is based on an affidavit of Andrew Kleine affirmed for himself and his partner Helane Mead. In his affidavit he refers to the litigation as having involved “five years of relentless financial strain”. He refers to claims being advanced without substantive evidence, and constant challenges to the credibility of himself and his partner. Andrew Kleine explains how the company has been forced to take on debt to fund legal and expert costs fighting the case and overall the litigation has resulted in a considerable emotional toll.
We have no doubt the picture painted by Andrew Kleine in his affidavit honestly expresses the effect the litigation has had on him and his partner. The difficulty is that it recounts the effect that the litigation has had on them over the five-year period addressed. Our concern in the present case is what prejudice should be taken into account as specifically referable to the grant of an extension of time. The kinds of concerns addressed in the affidavit are inevitably not focussed in that way.
While we understand that the prospects of an appeal against the substantive decision will result in ongoing emotional and financial cost for Andrew Kleine as the director and shareholder of Il Forno, and his partner, that would have been the case had the appeal been filed in time. Some degree of ongoing pressure would in any event arise from the costs appeal and there is now no issue that appeal will proceed.
Standing back and looking at the overall interests of justice, we have concluded that it will be appropriate to extend the time for appealing on the basis that there is no demonstration of prejudice properly linked to the delay of 56 working days in filing the appeal. For that, and the reasons we have already addressed in relation to the other relevant considerations, we have decided that time should be extended accordingly.
Result
The application for an extension of time in which to appeal is granted.
The appeal must be brought within 20 working days after the date of this decision.
Solicitors:
Hornabrook Macdonald, Auckland for Respondent
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