Matsuoka v Zambion Limited
[2019] NZHC 1365
•17 June 2019
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2019-470-000006
[2019] NZHC 1365
UNDER the District Court Act 2016 IN THE MATTER OF
an appeal from a decision of the District Court
BETWEEN
JOHN MATSUOKA
Appellant
AND
ZAMBION LIMITED
First Respondent
ALLAN JOHN PUMPHREY
Second Respondent
Hearing: 11 April 2019 Counsel:
M W O’Brien for the Appellant G M Pollak for the Respondent
Judgment:
17 June 2019
JUDGMENT OF EDWARDS J
This judgment was delivered by me on 17 June 2019 at 11.00 am pursuant to r 11.5 of the High Court Rules.
Deputy Registrar
Counsel: M W O’Brien, Auckland
Solicitors: Garry Pollak and Co Ltd, Auckland
MATSUOKA v ZAMBION LTD [2019] NZHC 1365 [17 June 2019]
[1] Access to justice is a pillar of a properly functioning legal system. Access, however, is not guaranteed for those proceedings which are frivolous, vexatious or otherwise an abuse of the Court’s processes. Proceedings of those kind impinge on the ability of all those who seek to resolve their disputes according to the rule of law by diverting valuable Court resources and bringing the justice system into disrepute.
[2] These principles are brought into sharp focus in this appeal. Mr Matsuoka appeals from the judgment of Judge Mabey QC striking out his claim as an abuse of process.1 The Judge found that the claim was essentially a re-litigation of a costs dispute in the Employment Court albeit dressed up in different garb.
[3] Mr Matsuoka says that the District Court misconstrued the basis of the proceeding, and as a result did not give proper weight to the Employment Court’s limited statutory jurisdiction. In addition, Mr Matsuoka says that the District Court failed to give proper consideration to the fact that the proceeding was essentially ready to be set down for hearing, there had been an extensive discovery process, and there were no new facts warranting a departure from the Judge’s earlier decision declining an application to strike out the proceeding at that stage.
[4] The issue in this appeal is whether the District Court was right to strike out the proceeding as an abuse of process. In making that assessment, I consider the following questions:
(a)Was the Judge right to conclude that the proceeding is a re-litigation of the Employment Court costs dispute?
(b)What is the relevance of other litigation arising out of the same dispute?
(c)Should the Jameel principle be applied in this case?
(d)Does the current status of the proceeding preclude it from being struck out?
1 Matsuoka v Zambion Ltd [2018] NZDC 25761.
History of the dispute
Employment Court proceeding
[5] The current proceeding has its roots in an employment dispute dating back to 2011. Mr Matsuoka was employed by LSG Sky Chefs New Zealand Ltd (LSG) between 23 February 2011 and 11 July 2011. Following termination of his employment, Mr Matsuoka raised a personal grievance against LSG and brought proceedings in the Employment Relations Authority. Those proceedings were removed to the Employment Court on 14 March 2012 and were finally resolved on 17 May 2018.
[6] The first defendant (Zambion) is a payroll services company. It provides payroll services to LSG including operating and housing LSG’s payroll database. The second defendant (Mr Pumphrey) is the sole director of Zambion. The shareholders of the company are Mr Pumphrey, his wife, and their family trust.
[7] Mr Matsuoka sought discovery of his payroll information from LSG in an Employment Court proceeding.2 On 9 December 2016, Mr Matsuoka applied to the Employment Court seeking preservation orders requiring Zambion, and its related company, PSG Payroll Ltd (PSG), to take steps to preserve any payroll information relating to Mr Matsuoka. PSG is a company jointly owned by Mr and Mrs Pumphrey. As part of his application, Mr Matsuoka undertook to pay the reasonable costs of Zambion and PSG in complying with the orders sought.
[8] Mr Matsuoka’s application for preservation orders was granted on 20 December 2016. The Court ordered that any costs incurred by Zambion and PSG in complying with the orders both as to retrieval and storage were to be met by Mr Matsuoka. Apart from that, costs were reserved.3
[9] On 7 February 2017, Zambion’s solicitor forwarded to Mr Matsuoka an invoice for professional services. The invoice was dated 18 January 2017. It recorded
2 Matsuoka v LSG Sky Chefs New Zealand Ltd [2016] NZEmpC 174.
3 At [16].
5.5 hours of professional services charged at a rate of $450 per hour, totalling
$2,869.25 (first invoice).
[10] Mr Matsuoka’s solicitors queried the first invoice, noting that a breakdown of the time incurred had not been provided. A further revised invoice providing the breakdown sought was sent on 16 February 2017. The professional services were charged at the rate of $450 per hour in this invoice and the total sum remained the same as the first invoice.
[11] Subsequently, on 17 February 2017, Mr Matsuoka’s lawyers wrote to Zambion’s lawyers seeking clarification as to who had performed the work and noting that the hourly rate of $450 seemed high for a payroll provider. The response from Zambion’s lawyers is at the heart of Mr Matsuoka’s present claim. On 20 February 2017, Zambion’s counsel, Mr Pollak, replied in an email stating that the amended invoice would have to stand, that it had been itemised as requested and “the rate is in keeping with normal commercial terms”.
[12] There was a further exchange of correspondence between respective counsel on 28 February 2017 concerning the rate of $450 per hour. On 28 March 2017, Zambion issued a second invoice. That invoice was dated 18 January 2017 and recorded 5.5 hours of professional services. The professional services recorded in this invoice were charged at a rate of $350 per hour, totalling $2,236.77 (second invoice).
[13] Mr Matsuoka was not satisfied with this response. He engaged three expert witnesses to provide their views on the reasonableness of the hourly rate. The costs of those three experts combined was $840.94. Mr Matsuoka’s lawyers wrote to Zambion advising that, based on feedback from these experts, the rate of $350 was considered unreasonable.
[14] On 7 April 2017, Zambion’s counsel filed a memorandum with the Employment Court seeking orders that Mr Matsuoka pay the second invoice at an hourly rate of $350 per hour. The memorandum included a statement that “the rate of
$450.00 is the non-party’s charge out rate for specialized work”.
[15] Mr Matsuoka opposed Zambion’s request in a memorandum filed on 19 April 2017 on the ground that he was only required to pay reasonable costs as opposed to actual costs, and that based on the expert opinion, the rate of $350 per hour was unreasonable. Mr Matsuoka filed three separate affidavits from the expert witnesses all supporting the allegation that the hourly rate charged was unreasonable.
[16] The Employment Court delivered its judgment on 28 April 2017.4 It did not accept that either $450 or $350 per hour was a reasonable charge-out rate and ordered Mr Matsuoka to pay Zambion’s costs at the rate of $300 per hour. In deciding on that rate, the Court had regard to the affidavit evidence and observed that given those opinions “the quantum of that part of the fee in dispute is trivial” and that “it is unusual that a trivial dispute such as this would need to be placed before the Court to resolve”.5 The Court also rejected Mr Matsuoka’s request for a hearing in relation to the dispute, stating that it could be easily resolved on the papers.6
[17] In accordance with the Employment Court’s ruling, Zambion issued a further invoice on 2 May 2017 recording its rate for professional services at $300 per hour for
5.5 hours of professional services for a total sum of $1,920.50 (third invoice).7
Mr Matsuoka paid that invoice in May 2017.
District Court proceeding
[18] The District Court proceeding was commenced the following month, on 21 June 2017. Counsel for the respondents wrote inviting Mr Matsuoka to withdraw the claim on the basis that there was no issue as to costs. Mr Matsuoka, through his lawyer, responded that he would withdraw his claim if Zambion could produce documentation and invoices demonstrating that it charged its customers at a rate of
$450 per hour. Counsel for the respondents replied stating:
4 Matsuoka v LSG Sky Chefs New Zealand [2017] NZEmpC 42.
5 At [7]–[8].
6 At [9].
7 Two invoices were issued on 2 May 2017. The first was dated 18 January 2017. That was corrected in the second invoice which was dated 1 May 2017. For present purposes, the differences in date are irrelevant, and accordingly the invoice issued at $300 per hour is referred to as the third invoice.
Zambion does not conduct its business by invoice. It does not charge by the hour but by licence fee. It does not invoice. It did so only on this one and unique occasion.
[19] Needless to say, agreement could not be reached and a statement of defence was filed on 26 July 2017.
[20] The respondents applied to strike out the proceeding on 27 October 2017. One of the grounds raised was that the issues raised in the proceeding were res judicata. That application was determined by Judge Mabey in a decision dated 19 January 2018.8 The Judge noted that the “plaintiff’s dispute with LSG has all the hallmarks of an obsessive action driven by repeated interlocutory proceedings, appeals and litigation lacking objectivity”.9 The Judge also noted that the proceedings involved “petty sums which will be far exceeded, by a multiple in the tens if not hundreds, by the costs involved”.10 Nevertheless, the Judge considered it was the plaintiff’s right to bring proceedings in the Employment Court, and in the District Court, and the strike-out application was declined accordingly.
[21] Following that decision, Mr Matsuoka took a number of interlocutory steps in the proceeding including: applying for discovery orders (which were granted); issuing interrogatories (which were answered by the second respondent); and applying for the enforcement of the discovery orders made. A hearing on that latter application was heard on 20 August 2019 but was not determined prior to the proceeding being struck out.
[22] Two days after the hearing regarding discovery, on 22 August 2018, Judge Mabey issued a minute stating that he wished to revisit the application to strike out for an abuse of process and inviting the parties to make submissions. Mr Matsuoka filed an amended statement of claim on 27 August 2018. It was this amended statement of claim that was the subject of the strike-out application.
8 Matsuoka v Zambion Ltd [2018] NZDC 750.
9 At [3].
10 At [5].
[23] After receiving the parties’ submissions, Judge Mabey issued his decision striking out the proceeding on 13 December 2018.11 It is this decision which is the subject of the appeal.
The pleaded claim
[24] Mr Matsuoka pleads three causes of action in his amended statement of claim dated 27 August 2018: deceit, negligent misstatement, and breach of the Fair Trading Act 1986.
First cause of action: deceit
[25] In the deceit cause of action, Mr Matsuoka pleads that the first and second invoices contained representations that Zambion’s hourly rate was $450 and $350 per hour. Mr Matsuoka claims that Zambion did not charge customers at this rate and it is not Zambion’s actual commercial rate. He further alleges that Zambion, and Mr Pumphrey, knew that they were making a false representation as to Zambion’s commercial hourly rate, and intended Mr Matsuoka to accept the representations as true.
[26] It is further pleaded that Mr Matsuoka relied on the representations made by Zambion by incurring costs in instructing legal representatives to challenge the invoices in respect of the hourly rate and appointing experts to review those invoices and provide opinions on the reasonableness of the hourly rate charged.
[27] The damage that Mr Matsuoka claims he has suffered as a result of these representations is pleaded as follows:
aMr Matsuoka would not have otherwise incurred costs in respect of both instructing legal representatives, and appointing experts; and
bBut for the false representations, the Employment Court would have ordered Mr Matsuoka to pay Zambion at its actual commercial hourly rate (i.e. below $300 per hour). Accordingly, Mr Matsuoka has suffered loss in an amount to be determined, being the difference between the amount Mr Matsuoka was ordered to pay Zambion being
$1,920.50, and Zambion’s actual commercial hourly rate.
11 Matsuoka v Zambion Ltd [2018] NZDC 25761.
[28] In addition, Mr Matsuoka says he has continued to suffer damage as a result of these false representations, and further representations are pleaded in aid of what Mr Matsuoka alleges to be the original deceit.
Second cause of action: negligent misstatement
[29] The second cause of action, in negligent misstatement, is to similar effect. Mr Matsuoka pleads that the defendants had a duty to ensure that the information it provided to Mr Matsuoka was true and reflected Zambion’s actual commercial charges. Mr Matsuoka pleads that the defendants knew, or it was foreseeable, that the plaintiff would rely on representations as to its commercial charges.
[30] That alleged duty of care was breached, Mr Matsuoka says, by inaccurately stating Zambion’s actual commercial charges. Particulars of that allegation include a claim that “Mr Matsuoka was forced to incur costs he would not otherwise have incurred but for the inaccurate statement”.12
[31]The prayer for relief in relation to damages in this cause of action is as follows:
54As a result of Zambion’s inaccurate statement, the Employment Court ordered Mr Matsuoka to pay Zambion at an hourly rate that is higher than Zambion’s actual commercial hourly rate.
55Accordingly, Mr Matsuoka has suffered loss in an amount to be determined, being the difference between the amount Mr Matsuoka was ordered to pay Zambion being $1,920.50, and Zambion’s actual commercial hourly rate.
[32] In addition, and consistent with the deceit cause of action, Mr Matsuoka claims that he has continued to suffer damage as a result of further inaccurate statements made by the defendants in aid of their original inaccurate statement and those are particularised in the statement of claim.
12 Paragraph [53](c) amended statement of claim.
Third cause of action: Fair Trading Act 1986
[33] The third cause of action is for breach of the Fair Trading Act. Mr Matsuoka pleads that in complying with the Employment Court preservation orders, Zambion provided services to Mr Matsuoka “in trade”.
[34] Mr Matsuoka claims that the first and second invoices breached s 9 of the Fair Trading Act in that the hourly rate recorded in those invoices was not its actual commercial rate, and had been “… inflated by 600 percent in respect of the first invoice and 465 percent in respect of the second invoice”.13 Mr Matsuoka pleads that inflating a trading entity’s actual commercial rates is misleading and deceptive conduct in breach of s 9, and a false and misleading representation as to the price of services in breach of s 13(2) of the Fair Trading Act 1986. Mr Matsuoka also pleads that Mr Pumphrey aided and abetted a breach of the Fair Trading Act.
Relief
[35]For each cause of action, Mr Matsuoka claims the following:
(a)Special damages of $840.94 for costs incurred by Mr Matsuoka in appointing experts to review Zambion’s false representations;
(b)Damages in an amount to be determined being the difference between the amount Mr Matsuoka was ordered to pay Zambion being $1,920.50 and Zambion’s actual commercial rate;
(c)Interest pursuant to s 62B of the District Courts Act 1974; and
(d)Costs.
[36] In addition, Mr Matsuoka claims general damages of $25,000 for the “inconvenience and difficulty Zambion’s and Mr Pumphrey’s actions have caused Mr Matsuoka” in relation to the deceit and negligent misstatement claims. That is not
13 Paragraph 68(b) of the Amended Statement of Claim.
sought under the Fair Trading Act, but a declaration that Zambion and Mr Pumphrey have breached the Fair Trading Act is sought instead.
[37] Mr O’Brien submits that the discovery provided to date shows that the highest hourly rate Zambion charged a client for work outside the normal subscription package is $75 per hour. That is disputed by the respondents who insist that Zambion negotiates a fixed rate for a subscriber service with each of its customers. Nevertheless, on Mr Matsuoka’s best case as matters currently stand, the maximum quantum of damages recoverable is $2,348.94 comprising:
(a)The sum of $840.94 for the experts’ fees; and
(b)The sum of $1,508 being the difference between what Mr Matsuoka was ordered to pay ($1,920.50) and what Mr Matsuoka alleges to be the sum that should have been charged at an actual commercial rate of
$75 per hour ($412.50).
District Court decisions
First decision
[38] On 27 October 2017, the defendants applied to strike out the proceeding on the basis that: the matter should have been determined by the Employment Court and was res judicata; the causes of action had no chances of success; and the proceedings were an abuse of process on the grounds of vexatious motive and collateral purpose.
[39] In a reserved judgment, Judge Mabey declined to strike out the proceedings, albeit reluctantly,14 on the following grounds:
(a)The matter was not res judicata as the Employment Court judgment only dealt with issues of reasonable costs, not the issues raised in the District Court proceeding;
14 Matsuoka v Zambion Ltd [2018] NZDC 750 at [24]–[25].
(b)It was premature to say that the causes of action had no chance of success and that once discovery had been undertaken it would be clear whether Zambion had a normal commercial rate; and
(c)A strike-out for vexatious motives and collateral purpose could not proceed where there were disputed issues of fact.
Second decision
[40] The second decision, and the one subject to appeal, arose as a result of a minute sent by the Judge on 22 August 2019 seeking to revisit the strike-out application on abuse of process grounds. The Judge raised the possibility of striking out the proceedings based on the principle established in Jameel v Dow Jones and Co Inc.15 The principle in Jameel is considered in more detail further on in this judgment. For present purposes it is sufficient to note that the Jameel principle applies in a defamation context and allows a court to strike out a proceeding where the value of the claim at stake is disproportionate to the costs of pursuing it.16
[41] Following receipt of submissions from the parties, the Judge issued a second reserved judgment dated 13 December 2018.17 He did not consider that this was the correct case in which to extend the Jameel proportionality principles beyond the defamation context. Nevertheless, he ruled that the proceeding should be struck out as an abuse of process.
[42] After reviewing the pleaded claims, the Judge reached the view that the proceeding was really an allegation that the Employment Court should have reached a different decision in the dispute about the hourly rate. The Judge said:
[32] To plead in one Court that a Judge in another Court in a separate jurisdiction would have acted differently if not for the defendants alleged wrongs demonstrates the true reality of plaintiff’s claims in this Court.
[33] The matters now raised by the plaintiff in this Court although in a “different garb” could have been, and should have been raised before Judge Perkins in the context of the proceedings that he was seized of.
15 Jameel v Dow Jones and Co Inc [2005] EWCA Civ 75, [2005] QB 946.
16 Opai v Culpan [2017] NZHC 1036.
17 Matsuoka v Zambion Ltd [2018] NZDC 25761.
[34] The Employment Court has no jurisdiction in tort or under the Fair Trading Act but that is not the point. In reality the plaintiff is saying Judge Perkins was misled. He could have asked for a rehearing of the decision when the $300 per hour hourly rate was set or appealed it introducing fresh evidence. That was not done. Nor did the plaintiff seek to recover the cost of the experts incurred when the hourly rate was successfully challenged before Judge Perkins. He rather chooses to seek recovery in this Court.
[35] In Dotcom v District Court at North Shore his Honour Justice Brewer observed at [25]:
It is well-established, therefore, that to relitigate matters already determined including bringing proceedings dressed in different garb but having the same effect, is an abuse of process.
(footnote omitted)
[43] The Judge referred to his earlier decision but observed that there was no limit on the Court’s power to prevent an abuse of its processes, and if the Court’s processes were being abused, that abuse must be stopped.18 The essence of the Judge’s reasoning was summed up as follows:
[38] The causes of action that the plaintiff brings in this Court may be justified on the law that underlies them and as they are pleaded but the reality of the matter is that the plaintiff is seeking to pursue the defendants in one Court when his issue properly lies in another. Manipulation of pleadings to engage the jurisdiction of a separate Court is an abuse of process when it is seen as just that. That is how I see it and for the reasons I give the plaintiff’s claims against the defendants are struck out.
Legal framework
Strike out principles
[44] The strike-out application was brought under r 15.1 of the District Court Rules 2014 which provides:
15.1 Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b)is likely to cause prejudice or delay; or
(c)is frivolous or vexatious; or
18 At [37].
(d)is otherwise an abuse of the process of the court.
[45]The rule has its equivalent in r 15.1 of the High Court Rules 2016.
[46]The principles to be applied in a strike-out application are not in dispute:19
(a)The application proceeds on the assumption that the pleaded facts are true.
(b)The pleaded causes of action must be clearly untenable.
(c)A claim should not be struck out summarily unless the Court can be certain that it cannot succeed.
(d)The jurisdiction is to be exercised sparingly and only in clear cases.
(e)The Court should be particularly slow to strike out a claim in any developing area of the law.
[47] In Commissioner of Inland Revenue v Chesterfields Preschools Ltd, the Court of Appeal said this about the grounds in r 15.1(1)(b)–(d):20
The grounds of strike out listed in r 15.1(1)(b)-(d) concern the misuse of the court’s processes. Rule 15.1(1)(b), which deals with pleadings that are likely to cause prejudice or delay, requires an element of impropriety and abuse of the court’s processes. Pleadings which can cause delay include those that are prolix; are scandalous and irrelevant; plead purely evidential matters; or are unintelligible. In regards to r 15.1(1)(c), a “frivolous” pleading is one which trifles with the court’s processes, while a vexatious one contains an element of impropriety. Rule 15.1(1)(d) – “otherwise an abuse of process of the court”
– extends beyond the other grounds and captures all other instances of misuse of the court’s processes, such as a proceeding that has been brought with an improper motive or are an attempt to obtain a collateral benefit. An important qualification to the grounds of strike out listed in r 15.1(1) is that the jurisdiction to dismiss the proceeding is only used sparingly. The powers of the court must be used properly and for bona fide purposes. If the defect in the pleadings can be cured, then the court would normally order an amendment of the statement of claim
19 Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [10];
Attorney-General v Prince & Gardner [1998] 1 NZLR 262 (CA) at 267.
20 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [89].
(footnotes omitted)
[48] As noted in the above passage, an abuse of process under r 15.1(d) extends beyond the other grounds in r 15.1 and captures all other instances of misuse of the Court’s process. This includes bringing a proceeding with an improper motive, attempting to obtain a collateral benefit, or bringing an application that would “bring the administration of justice into disrepute among right-thinking people”.21 A consideration of this Court requires:22
… a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court …
Approach on appeal
[49] Appeals from decisions striking out a claim are generally addressed by way of rehearing.23 This means that the appellate court must reach its own view of both the facts and the law. If the appellate court’s opinion is different from the conclusion of the tribunal appealed from, then the appeal must be allowed.24
Was the Judge right to conclude that the proceeding is a re-litigation of the Employment Court costs dispute?
[50] At the core of the Judge’s reasoning for finding an abuse of process was the view that the proceeding was in effect a re-litigation of matters finally determined in the Employment Court. In reaching that decision, the Judge relied on the decision of Brewer J in Dotcom v The District Court at North Shore.25 After reviewing the principles relevant to this particular ground, Brewer J concluded as follows:
[25] It is well-established, therefore, that to relitigate matters already determined, including bringing proceedings dressed in different garb but having the same effect, is an abuse of process. In other words, the duplication
21 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [89]; Lai v Chamberlains [2006] NZSC 70 at [6].
22 Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 (HL at 31. Adopted in Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1 at [127].
23 High Court Rules 2016, r 20.18. see Craig v Stiekema (No 2) [2018] NZAR 1003 at [33];
Engini Ltd v NZ Net Internet Services Ltd (in liq) [2016] NZHC 1220.
24 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103 at [16], [2008] 2 NZLR 141.
25 Dotcom v The District Court at North Shore [2017] NZHC 3158.
of proceedings is an abuse of process, especially when a proceeding would pre-empt the decision of a superior court. As Lord Halsbury explained:
“ … I think it would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again.”
(footnotes omitted)
[51] Brewer J also confirmed that it may still be an abuse of process to challenge an earlier determination of an issue even when the strict requirements necessary to establish the substantive defences of res judicata or issue estoppel cannot be made out. His Honour cited the following passage from New Zealand Social Credit Political League Inc v O’Brien in support of that proposition:26
“Estoppel per rem judicatam, issue estoppel, and abuse of process in at least one of its manifestations, may be seen as exemplifying similar concepts — that a matter once determined may not be again litigated, that a matter which could and should have been raised in proceedings which have been determined should not be allowed to be raised subsequently, and that a collateral attack upon a final decision in other proceedings will not be permitted. The dual objects are finality of litigation and fair use of curial procedures… ”
[52] In this case, Mr Matsuoka submits that the District Court misconstrued the pleadings and erred in finding that the matter should have been brought in the Employment Court. Further, he says that the District Court failed to have proper regard to the Employment Court’s limited statutory jurisdiction, which gave rise to an error of law, and resulted in the District Court failing to consider a relevant matter.
[53] It is clear from the judgment that the Judge did have regard to the jurisdiction of the Employment Court. He expressly referred to the fact that the Employment Court has no jurisdiction in tort or under the Fair Trading Act, but said that this was “not the point”.27 I agree. What is required is an assessment of the substance of the claim, looking past the “garb” in which that claim may be dressed.
[54] In this case, I accept (as did the Judge) that there is a difference between the causes of action alleged by Mr Matsuoka in the District Court proceeding, and the
26 New Zealand Social Credit Political League Inc v O’Brien [1984] 1 NZLR 84 (CA) at 95.
27 Matsuoka v Zambion Ltd [2018] NZDC 25761 at [34].
issues before the Employment Court. The focus of the District Court proceeding is on representations made by counsel for the respondents as to its “normal commercial rate”, whereas the issue before the Employment Court concerned the determination of reasonable costs to be paid to a non-party for complying with a discovery order. That is a very slim difference, however, and, in the overall assessment of the substance of the claim, it is ultimately of no consequence. What is plain from the pleadings is that the real issue in the District Court proceeding is the reasonableness of the sum Mr Matsuoka was ordered to pay by the Employment Court.
[55] That is obvious from Mr Matsuoka’s prayer for relief. He seeks reimbursement of $840.94 for the expert fees he incurred for the three experts he engaged to assess the reasonableness of the hourly rate put forward by Zambion. That was a disbursement incurred by Mr Matsuoka in the context of the costs dispute in the Employment Court. He could have claimed that disbursement as part of his costs in relation to the costs dispute itself, but he did not. The Employment Court determined that the costs of the costs dispute were to lie where they fell.28 The claim for those expert fees is a collateral attack on the final decision of the Employment Court.
[56] Similarly, Mr Matsuoka claims relief in the District Court proceeding for the difference between what he was ordered to pay on the basis of $300 per hour ($1,920.50), and what he says was the respondents’ normal commercial rate (currently quantified at $75 per hour). Although the vehicle in which Mr Matsuoka has chosen to pursue his claim is different in kind, the essence of his claim is the same. Mr Matsuoka is challenging the sum determined by the Employment Court to be a reasonable hourly rate. That too is a collateral attack on the decision of the Employment Court.
[57] Finally, Mr Matsuoka claims general damages in the sum of $25,000. Even assuming all the facts as pleaded are true, this claim has no prospect of success. There is simply no harm or non-pecuniary loss alleged that could found a claim for general damages. There is a reasonable inference that this claim has been included solely to bring the proceeding within the jurisdiction of the District Court.
28 Matsuoka v LSG Sky Chefs [2017] NZEmpC 42 at [11].
[58] It follows that I agree with Judge Mabey’s assessment that Mr Matsuoka’s claims may be justified on the law that underlies them and as they are pleaded but:29
… the reality of the matter is that the plaintiff is seeking to pursue the defendants in one Court when his issue properly lies in another. Manipulation of pleadings to engage the jurisdiction of a separate Court is an abuse of process when it is seen as just that.
What is the relevance of other litigation arising out of the same dispute?
[59] The District Court proceeding is not the only claim brought by Mr Matsuoka arising out of the same dispute. Mr Pollak included a table of 16 other proceedings and complaints which, directly or indirectly, arose out of the same dispute. These include the employment dispute litigation, complaints to the Privacy Commissioner, the Police, an appeal to the Court of Appeal, and complaints to the New Zealand Law Society.
[60] Also included in that list is a claim by Mr Matsuoka against Mr Pollak personally commenced in the High Court at Auckland. That was a claim for contempt of Court for a memory stick of documents destroyed by Mr Pollak after the Employment Court proceeding had come to an end. The claim was struck out by Moore J as an abuse of process in a decision dated 13 December 2018.30
[61] Moore J found that the proceeding was frivolous in the sense that it lacked the seriousness required of matters for the Court’s determination. He concluded that the history of litigation between the parties was relevant to the question of abuse, and when the claim against Mr Pollak was considered against a backdrop of similar actions, he had “no hesitancy” in finding that it constituted an abuse of process.31 Buttressing the decision (but not forming part of the reasons) was evidence that suggested that the proceeding had an improper or ulterior purpose and if not vexatious, it was “most certainly, an abuse of process”.32
29 Matsuoka v Zambion Ltd [2018] NZDC 25761 at [38].
30 Matsuoka v Pollak [2018] NZHC 3292.
31 At [38]
32 At [51].
[62] Another proceeding included in the list is a claim by Mr Matsuoka against Mr Pumphrey in the Hamilton District Court. That claim related to an alleged breach of an undertaking not to remove Zambion or PSG from the Companies Office register. A claim of $1,324.00 plus $10,000 general damages was sought by way of relief. The proceeding was struck out because it did not disclose a cause of action, but the Judge also accepted the submission that the defendant’s claim was an abuse of procedure or vexatious.33
[63] I consider the web of proceedings and claims brought by Mr Matsuoka is relevant to whether the District Court proceeding is an abuse of process. As Moore J said in Matsuoka v Pollak, if it can be shown that the proceeding “forms part of a comprehensive pattern of conduct designed to intimidate, exact revenge, or improperly dissuade, such conduct would support a finding that the proceedings were initiated for a collateral purpose and are an abuse of process”.34
[64] Although the parties and claims vary, the District Court proceeding forms part of a pattern in which Court proceedings are pursued in respect of trivial matters, or matters arising out of the, now resolved, Employment Court dispute. Considered in that wider context, the District Court proceeding bears the features of a claim designed to cause the respondents harm. The improper use of Court processes may well constitute a vexatious proceeding, but at the very least, is an abuse of process.
Should the Jameel principle be applied in this case?
[65] Although Judge Mabey sought further submissions on the application of the Jameel principle, he ultimately decided that this was not the proper case to extend that principle, and he declined to strike out the proceeding on disproportionality grounds alone.35
[66] The Jameel principle applies in a defamation context. In essence, it provides that a plaintiff’s claim may be strictly actionable but will nevertheless be struck out on proportionality grounds because of the minimal harm involved. One of the underlying
33 Matsuoka v Pumphrey [2018] NZDC 19639.
34 At [32] citing Williams v Spautz (1991-1992) 174 CLR 509 (HCA) in support.
35 Matsuoka v Zambion Ltd [2018] NZDC 25761 at [7].
concerns behind the principle is that judicial and court resources are appropriately and proportionately used in accordance with the requirements of justice.36
[67] The origins of the principle, and subsequent developments in the law of defamation in the United Kingdom, were reviewed by Katz J in Opai v Culpan.37 Her Honour confirmed that the principle applies in New Zealand and she upheld a decision of Bell AJ striking out part of a defamation pleading on disproportionality grounds.38 The principle has also been applied in a number of other cases.39
[68] Understandably, the Court has expressed considerable caution in the application of the principle to an otherwise arguable claim. Palmer J declined to apply the principle in Sellman v Slater saying:40
[59] In terms of the general applicability of the Jameel principle in New Zealand law, I agree it is conceivable there may be some extreme circumstances in which legal proceedings place such a disproportionate burden on the litigants and the court system in terms of time and resources that they should not be allowed to proceed as an abuse of court process. The cost of the New Zealand court system is met by taxpayers who expect it not to be abused. In a strike-out context, that could fit under the general words of r 15.1(1)(d) that empower strike out, outlined at the beginning of this judgment: “otherwise an abuse of process of the court”. That would provide a basis, for example, for the strike-out in Opai.
[60] But I have difficulty with the notion, that seems implicit in Jameel, that a court can routinely use its ability to deal with abuses of process to stop a proceeding properly founded in law, because of something the law does not require (insufficient damage to reputation). The right of a person or group to access the courts in order to vindicate their legal rights has a high constitutional value in New Zealand, against however powerful or popular a defendant. As the United Kingdom Supreme Court stated in July 2017 in Unison v Attorney-General “[t]he constitutional right of access to the courts is inherent in the rule of law”. The Court traced the right from c 29 of the Magna Carta of 1297, which is part of the laws of New Zealand. The Court stated “People and businesses need to know, on the one hand, that they will be able to enforce their rights if they have to do so, and, on the other hand, that if they fail to meet their obligations, there is likely to be a remedy against them”.
(footnotes omitted)
36 Jameel v Dow Jones & Co Inc [2005] EWCA Civ 75, [2005] QB 946 at [54].
37 Opai v Culpan [2017] NZHC 1036.
38 Opai v Culpan [2016] NZHC 3004.
39 Deliu v Hong [2013] NZHC 735; Moodie v Strachan [2013] NZHC 1394.
40 Sellman v Slater [2017] NZHC 2392.
[69] Applying the Jameel principle in this case would involve extending it beyond the defamation context to an ordinary civil proceeding. I consider the Judge was right to find that this was not the right case to do so. The Jameel principle is interlinked with particular aspects of defamation law concerning the extent of publication, the seriousness of harm to reputation, and the vindicatory purpose of the proceeding. Extending the principle more generally to apply as a stand-alone category of an abuse of process for all civil proceedings risks the type of erosions into access to justice rights highlighted by Palmer J in the passage above.
[70] Nevertheless, I consider disproportionality has its place in strike-out applications. Disproportionality may be evident in a “frivolous” proceeding. Similarly, costs that are out of all proportion to the interests at stake in the proceeding may be an indicator that the proceeding itself is brought for an improper or ulterior purpose or is otherwise an abuse of the Court process. In other words, disproportionality may form part of the general circumstances to be considered by the Court in deciding whether to take the rare step of striking out a claim.
[71] This is one of those cases. Although disproportionality alone would not be enough to justify the strike-out decision, it is, nevertheless, one of several factors that, cumulatively, point to this proceeding being an abuse of process.
[72] As noted above, accepting Mr Matsuoka’s contention that Zambion’s normal commercial rate was $75 per hour (which is disputed), the maximum sum recoverable is $2,348.94. (For the reasons set out above, I put aside the general damages claim for
$25,000). To put that figure into perspective:
(a)The Disputes Tribunal has jurisdiction for all disputes under $15,000, or $20,000 if the parties agree.
(b)The respondents were ordered to pay the sum of $3,649 calculated according to scale for their first application to strike out. There have been many other interlocutory applications since that time.
(c)The respondent’s High Court scale costs for the appeal hearing will be three to four times the amount at stake, and their actual costs for the appeal are likely to be much more.
[73] It is apparent that the costs of proceeding with this litigation have already outstripped the maximum that Mr Matsuoka could presently recover even if he succeeded on all aspects of his claim at trial.
[74] This is not a case where it might be properly said that an interest or value was at stake which could explain that level of disproportionality. This is a claim about alleged misrepresentations made in open correspondence between solicitors on behalf of a client in the context of a costs dispute ruled on by the Employment Court.
[75] The extent of disproportionality in this case, when considered with the other features of the proceeding, shores up the assessment of this case as an abuse of process.
Does the current state of the proceeding preclude it being struck out?
[76] Mr O’Brien submits that the District Court failed to give proper consideration to the following factors:
(a)That the matter was ready to be set down for a substantive hearing, subject to the Court delivering its judgment on the adequacy of discovery (which had been heard);
(b)That the parties had incurred costs in dealing with all outstanding pre- trial issues, such as discovery and interrogatories; and
(c)There were no new facts that justified the Court departing from its earlier ruling in which it declined to strike out the proceeding.
[77] The state of the proceeding, and the costs incurred to date, are relevant factors in the exercise of the strike-out discretion. In the ordinary course, a strike-out application taken late in the day, on the eve of trial, may face greater obstacles than one filed early on. But it does not necessarily follow that claims brought for an
improper or ulterior purpose are otherwise an abuse of process. An improper purpose might not be immediately apparent, and the Court process may have to take its course before it can be said to amount to an abuse.
[78] That is the position in this case. The Judge had suspicions that the claim may have been an abuse in his first decision but that was not enough to knock out the claim at that stage. However, the subsequent applications for discovery and interrogatories was reason enough for the Judge to issue a minute with his concerns about the use of Court processes. That was a sufficiently new development to warrant having a fresh look at whether the proceeding was, in truth, an abuse.
[79] The history of this litigation affords no confidence at all that the proceeding will progress expeditiously towards trial as Mr O’Brien submits. Further interlocutory applications may be made depending on the result of the application argued before Judge Mabey last August. There are also issues to be resolved prior to trial regarding representation of the parties given it is statements in correspondence between existing counsel that is at issue in the proceeding. Mr Matsuoka has already been granted one adjournment of the trial date, and it appears that his counsel has previously estimated a two to three-day trial will be required, with at least eight witnesses to be called by the plaintiff. That speaks volumes about the prospect of this proceeding continuing in a proportionate and reasonable way should it be reinstated.
[80] In any respect, the Court cannot let a proceeding that is an abuse of process continue simply because it may be close to trial. Any abuse of the Court’s processes must be swiftly brought to an end. To let them to continue would bring the justice system into disrepute. It is for that very purpose that the strike out power in r 15.1(d) exists.
Conclusion
[81] It follows that I am satisfied that the proceeding is an abuse of process and the Judge was right to strike it out on that basis. The proceeding is, in substance, a collateral attack on the finality of the Employment Court decision. It is an improper attempt to relitigate the reasonableness of the costs ordered to be paid albeit dressed up in different legal garb.
[82] Even if I am wrong about that, the cumulative effect of the other features of this proceeding leave no real doubt that the District Court processes are being used for an improper purpose and the claim is clearly an abuse of process. Those other factors include the patterns evident in the other proceedings commenced by Mr Matsuoka concerning aspects of the same claim, and the disproportionality between the costs of the proceeding and the value of the interests at stake. The fact that the proceeding may be close to trial (assuming that is true) does not justify the continuation of a proceeding that is an otherwise an abuse of process.
Result
[83]The appeal is dismissed.
[84] The respondents are entitled to costs on a schedule 2B basis. If the respondents seek costs to be awarded on a different basis then they shall file and serve a memorandum (no longer than three pages in length, excluding schedules) in support of their claim within 10 working days of this judgment. The appellant may file a memorandum in reply (no longer than three pages in length excluding schedules) five working days thereafter. Costs shall be determined on the papers.
Edwards J
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