Lights American Sportscopter Inc v Ultra Helicopters Inc (NZ) Ltd HC Auckland CP413/00

[2002] NZHC 67

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP413/00

BETWEEN LIGHTS AMERICAN SPORTSCOPTER INC
Plaintiff

AND ULTRA HELICOPTERS INC (NZ) LTD (IN RECEIVERSHIP)
First Defendant

AND TREVOR VICEMAR ROGERS AND GLENDA FRANCES ROGERS
Second Defendants

AND TGR HELICORP (NZ) LTD
Third Defendant

Hearing: 12 February 2002

Counsel: R A Smith for Plaintiff
C J Orton for First, Second and Third Defendants

Judgment: 12 February 2002

ORAL JUDGMENT (No.2) OF RANDERSON J

Solicitors:
Brookfields, P O Box 240, Auckland for Plaintiff
Corban Revell, P 0 Box 21180, Henderson, Auckland for Second and Third Defendants

Background

[1] This proceeding commenced in September 2000. The plaintiff, a Taiwanese company, entered into certain contracts with the first defendant for the development of helicopters in New Zealand. As the claims stood prior to the commencement of this year, the plaintiff’s claim essentially is that the first defendant failed to carry out the development work as a result of which the plaintiff purported to cancel the contracts between the parties by letter of 8 June 2000. The plaintiff’s claim is for damages of US$400,000 for breach of contract and there are claims for conversion and detinue in relation to certain parts which it is alleged the first or second or third defendants have still retained. There are further claims for breach of the Fair Trading Act and contractual misrepresentation which are also said to give rise to damages in the same sum.

[2] The counterclaim by the first defendant filed on 11 June last year alleged that the plaintiff had repudiated the contract by failure to pay amounts due under it. It is also alleged that on 28 March 2000 the first defendant cancelled the contracts on the plaintiff’s repudiation. The amount claimed under the first defendant’s counterclaim was just over $1 million for expenses for parts, labour, and other costs incurred under the contracts and the cost to the first defendant of meeting certain legal obligations which it could not terminate. After allowing for amounts paid by the plaintiff, the first defendant’s counterclaim was for $1,082,425.

[3] These proceedings have been before the Court repeatedly. First, there was a series of applications by the plaintiff designed to secure the return of the helicopter parts. Second, there have been proceedings with regard to the proper parties to the proceedings. There have been a series of conferences before me as the assigned Judge dealing with other matters such as security for costs, discovery, and timetables for briefs of evidence.

[4] Last year a fixture for three weeks was made to commence on 25 March 2002. On 30 November 2001 I made consent timetable orders which called for the delivery of evidence between 21 December 2001 and 14 March 2002. The plaintiff’s briefs were to be delivered on 21 December 2002. Due to some difficulties experienced by the plaintiff in obtaining documents from the first defendant, the parties agreed that the plaintiffs’ briefs could be delivered by 21 January 2002. However, even that date was not met and the plaintiff’s briefs were not in the end delivered until 5 February. But for the other developments which I am about to mention, I am satisfied that the fixture could have remained despite the delays in the delivery of the plaintiff’s briefs. It would have meant that the time for the delivery of the defendants’ briefs would have been extended but there would still have been sufficient time prior to the hearing to avoid any injustice to any of the parties.

The defendants’ applications

[5] However, on 11 January 2002 the first defendant filed an application to serve an amended statement of defence and counterclaim introducing three entirely new causes of action. Then on 4 February 2002 the defendants applied for an adjournment of the proceeding. The new causes of action are:

[a] An allegation that the plaintiff negligently sent to the first defendant, an Email containing a virus which destroyed all the electronic data stored on the first defendant’s computer on or about 2 June 2000.

[b] An allegation that on 9 June 2000 the plaintiff wrote a letter to eight named parties located overseas in various countries including South Africa and the United States, which is said to have defamed the first defendant by alleging that the first defendant was infringing intellectual property rights owned by the plaintiff and that legal action was being taken accordingly.

[c] An allegation that on the same date and in the same letter, the plaintiff had committed the tort of intimidation by advising its distributors that they should not trade with the first defendant in order to avoid liability infringement. It is alleged that this latter conduct was unlawful in that it implied that legal proceedings would be issued against the first defendant which would have the dominant purpose of injuring or causing damage to the first defendant by causing the distributors to cease dealing with the first defendant.

[6] The damages claimed for the negligence cause of action relating to the virus are $1,560,628.60 being the difference between the alleged true value of the business (about $1.7 million in round terms) and its actual value as a result of the virus and the letter of 9 June 2000 which was said to be $129,214. The proposed amended counterclaim sets out a damages calculation which is based on future maintainable earnings for the first defendant of something over $400,000 per annum. Similar amounts are claimed for the other two new causes of action, Mr Orton submitting that it is not possible to differentiate between damage resulting from each of the three new claims.

[7] There has been no explanation given for the delay in seeking leave to amend the counterclaim other than the fact that in early January the first named second defendant, Mr Rogers, deposed that he became aware of a witness in the United States who is able to give evidence about the computer virus arising from an Email which he had received from Mr Rogers which had an attachment from a representative of the plaintiff. Apparently it is to be alleged that this attachment was the carrier of the virus although Mr Orton was unable to inform the Court as to whether any expert evidence would be led. At this stage apparently, that has not even been considered which is somewhat surprising given the indulgence which the first defendant seeks.

[8] It is evident that none of the new matters raised has any direct or indirect bearing on the ability of the first defendant to carry out the terms of the contracts with the plaintiff and all the matters alleged arise at or about the close of their relationship. Indeed, on the first defendant’s case they had decided not to continue with the contract prior to any of these events, ie, in March 2000, and had notified the plaintiff accordingly.

Defendant’s submissions

[9] Nevertheless, Mr Orton has submitted that in terms of r 187(2) of the High Court Rules, leave can and should be granted to ensure that the real controversy between the parties is before the Court. Relying on authorities such as Thornton Hall Manufacturing Ltd v Shanton Apparel Ltd (1989) 3 TCLR 249, he submits that the amendment would not have a material bearing on the length of the proceeding, suggesting that perhaps only another two or three days hearing would be required and that no further discovery would be necessary. He also submits that if the first defendant were obliged to bring separate proceedings against the plaintiff, then leave would be required under rr 219 or 220 of the High Court Rules and there would be the added difficulty of endeavouring to enforce a judgment in Taiwan, the plaintiff having no assets in New Zealand and there being no provision for reciprocal enforcement of judgments between this country and Taiwan. Mr Orton also submits that there should, in any event, be an adjournment because of the late delivery of the plaintiff’s briefs which would give inadequate time for the defendants to delivery their briefs and for the plaintiff to respond prior to trial.

Plaintiff’s submissions

[10] For the plaintiff, Mr Smith opposes both applications by the defendants and has submitted:

[a] The introduction of the proposed new causes of action can essentially be separated from the contractual issues.

[b] They would require further interlocutories such as particulars of the unlawful conduct relied upon for the intimidation cause of action and particulars of damages.

[c] The introduction of the new causes of action would necessarily result in a postponement of a trial because about one week’s further hearing would be required.

[d] There is little merit in the proposed causes of action. In particular, he says that the negligence cause of action is novel and he is not aware of any authority for the cause of action alleged. There are doubts about the ability of the first defendant to recover damages in defamation where its reputation has been harmed overseas and where it is necessary for the first defendant to establish pecuniary loss because it is a corporate entity.

[e] Finally, he submits there is no evidence of any unlawful conduct on the part of the plaintiff which would support the cause of action of intimidation.

Conclusions

[11] This matter has given me considerable concern given the extensive case management of this file over an extended period. The new causes of action have emerged only at the last minute and with no adequate explanation for the delay. There is no good reason whatsoever why these new causes of action could not have been introduced from the beginning. There is no question that the existence of the factual basis for the new causes of action has been known by Mr Rogers and his company from the time they were alleged to have occurred in or about June 2000. Nor can they be said to be directly connected to the principal issues between the parties and in that sense, they can be regarded as collateral.

[12] However, despite this most unfortunate history, I have concluded that it is appropriate to grant leave to amend the counterclaim as sought so that all relevant matters which are in controversy between the parties can be heard on a single occasion. I am satisfied, on balance, that it is preferable for all these matters to be aired together rather than to require the defendants to pursue them as separate proceedings with the attendant prejudice which Mr Orton has relied upon.

[13] The consequence of granting the amendment, however, will be to require at least one week’s additional hearing time and it is inevitable on the basis of the pleadings as they now stand that further interlocutory applications will be required. I am also satisfied that it would be unjust to the plaintiff to expect it to respond to these new allegations within the limited time frame now available.

[14] Regrettably, the effect of these developments will be to postpone the trial for some considerable time as I will not be able to hear it until some time after July this year. No doubt that will be of concern to the plaintiff but it is the inevitable result of allowing this application. In any event, I also note that the plaintiff has not complied with the timetable orders made so it cannot be regarded as an entirely innocent party in this whole affair. Needless to say, if these new causes of action prove to be as meritless as the plaintiff suspects, that will be a factor to be considered in relation to the costs should those claims fail in due course.

[15] Mr Smith has also signalled that the issue of security for costs may require revisiting in the light of the extended time for the hearing as a result of these new causes of action.

Orders

[16] I make the following orders:

[a] Leave is granted to the first defendant to file and serve the amended statement of defence and counterclaim in the form dated 12 February 2002.

[b] The trial is adjourned to a date to be fixed at the next conference (four weeks required).

[c] Any further interlocutory applications are to be filed and served by 12 March 2002 (one hour required).

[d] There will be a further conference before me on a date to be fixed after 12 March 2002.

[e] The defendants’ briefs, including their evidence relating to their counterclaims, are to be delivered by 12 March 2002.

[f] To the extent that any further interlocutory applications arise from the amended counterclaim, leave is granted to bring them.

[17] There will be an order for costs payable by the first defendant to the plaintiff on a 2B scale in relation to today’s hearing.