McCullagh v Fairway Holdings Limited
[2018] NZHC 1883
•27 July 2018
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV 2018-470-000026
[2018] NZHC 1883
UNDER The Companies Act 1993 and Part 19 of the High Court Rules BETWEEN
CHRISTOPHER CAREY MCCULLAGH and STEPHEN MARK LAWRENCE
Applicants
AND
FAIRWAY HOLDINGS LIMITED
First Respondent
QUEST PROJECTS LIMITED
Second Respondent
Hearing: On the papers; final submissions received 24 July 2018 Counsel:
B J Burt and JRF Cochrane for the Applicants
G Brittain QC and J Delaney for the First and Second
Respondents and 18th and 19th Defendants in CIV 2016-470- 000138J Heatlie and B Foster for the Plaintiffs in CIV 2016-470-000138 S A Harrigan for the 10th and 11th Defendants in CIV 2016-470- 000138
Judgment:
27 July 2018
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by me on
27.07.18 at 3:30pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
C C MCCULLAGH and S M LAWRENCE v FAIRWAY HOLDINGS LIMITED AND QUEST PROJECTS LIMITED [2018] NZHC 1883 [27 July 2018]
Introduction
[1] The respondents, Fairway Holdings Ltd and Quest Projects Ltd (Fairway and Quest) have made an application pursuant to s 56(3) of the Senior Courts Act 2016 to appeal my interlocutory judgment of 17 May 2018 to the Court of Appeal. In that judgment I dismissed the respondents’ application for consolidation pursuant to r
10.12 of the High Court Rules.
Relevant legal principles
[2] Under s 56(3) of the Senior Courts Act 2016 no appeal lies from an interlocutory order, unless leave is given.
[3] The overriding consideration is an assessment of the interest of justice. Factors applied in previous cases include:1
(a)A high threshold exists for the granting of leave. An allegation of error of law or fact is generally insufficient. An applicant should raise an arguable error;
(b)Leave should only be granted where the circumstances warrant incurring further delay;
(c)The alleged error should be of general or public importance or otherwise of sufficient importance to the applicant to outweigh any lack of any general or presidential importance.
[4] The requirement for leave should filter unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to the parties or more generally.2
1 A v Minister of Internal Affairs [2017] NZHC 887 at [10] – [12]; Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [9].
2 Finewood Upholstery Ltd v Vaughan, above n 1, at [13].
[5] In Kacem v Bashir3 the Supreme Court distinguished between a general appeal and an appeal against a decision made in the exercise of a discretion. In the latter case, the criteria for a successful appeal are whether the judgment under appeal:
(a)Made an error of law or principle;
(b)Took into account irrelevant considerations;
(c)Failed to take into account relevant considerations;
(d)Resulted in a decision which is plainly wrong.
Background
[6] The background to the three proceedings, the subject of the application for consolidation, is set out at paragraphs [10] to [24] of my decision of 17 May 2018. There is no utility in repeating that here.
[7] For the purposes of this judgment I also adopt the same terminology of defective building proceedings and the Companies Act proceedings i.e. the dividend and voidable proceedings.
Competing positions of the parties
[8] Fairway and Quest contend that the existence of the defects in the Cayman Apartments and the arrangements between Hamilton Street Investments Ltd (Hamilton) and CBC Construction 2010 Ltd (CBC 2010) are intertwined. They submit that in reaching my conclusion that in substance there are no real common questions of fact arising in the Companies Act proceedings and the defective building proceedings, I have failed to take into account relevant matters which led to a decision that was plainly wrong.
3 Kacem v Bashir [2011] 2 NZLR 1 (SC) at [32].
[9] Fairway and Quest also contend that the rights to a fair hearing, including the right to cross-examine witnesses giving adverse evidence, are very much at issue in the proposed appeal. Thus, while there is no general issue of public importance, the rights at stake are very important to the parties.
[10] The applicant liquidators and the Body Corporate plaintiff in the defective building proceedings contend that there is no tenable basis upon which the proposed appeal could succeed and there would be no prejudice by my declining leave to appeal. They say that the supplementary submissions of Fairway and Quest which cross reference the third statement of claim, are without foundation. The alleged agreement of July 2014 cannot be a common issue because it post-dates the liquidation of Hamilton.
Analysis and decision
[11] All parties accept that the discretion under Rule 10.12, the power to order consolidation, is a very wide one.4 It is also agreed that different principles apply when what is proposed is an appeal against the exercise of a discretion.
[12] The substantive rights of the parties are not at issue in the proposed appeal. The issue of consolidation is entirely procedural – “almost administrative” as the Court of Appeal has reasoned.5
[13] In assessing whether Fairway and Quest have met the high threshold to obtain leave to appeal, it is also important to observe that even where one of the grounds for consolidation is made out (e.g. common questions of fact) the Court still retains a discretion to decline an order of consolidation. To succeed on appeal, Fairway and Quest will need to demonstrate not only that my assessment on the issue of common facts was plainly wrong, but the overall interests of justice favour consolidation.
[14] I find that leave to appeal should be declined. I am not persuaded that there is any real merit to the proposed grounds of appeal. Furthermore, even if I did err in my
4 Regan v Gill [2011] NZCA 607.
5 At [15].
assessment of a lack of common facts, the alleged error is not of sufficient importance to Fairway and Quest to outweigh any lack of general or precedential importance.
Arguable Error
[15] To meet the threshold of common questions of fact, Fairway and Quest need to demonstrate some real and relevant degree of commonality, not just some broad intermingling of events or genesis from the same general background. I reject the contention of Fairway and Quest that whatever defects were evident in 2014 is a relevant issue in the defective building proceedings. On the pleadings, they are not.
[16] It may be, as I concluded in my judgment of 17 May 2018 that in a broad sense the right to relief in both the Companies Act proceedings and the defective building proceedings arise out of the same events or transactions. However, Fairway and Quest have not challenged that conclusion.
[17] As to the allegation that the issue of the arrangements in place to deal with the defects in 2014, are common questions of fact, it is again difficult to accept that this argument has much merit. As the applicant liquidators submit, the dates do not correspond and it is also necessary to distinguish between the arrangements agreed between the Body Corporate and CBC 2010 and any arrangements in place between Hamilton and CBC 2010. Even if there are some common questions of fact, they relate to one or a small number of a multitude of issues apparent in the defective building proceedings.
Prejudice - fair trial rights
[18] I am also not persuaded by the argument of Fairway and Quest that the proposed appeal is of great importance to them because the fair trial rights of the parties may be in jeopardy.
[19] What is characterised as a breach of a right to a fair trial, namely the inability to challenge adverse evidence by potentially hostile witnesses through cross- examination is, in the circumstances here, rather more a loss of some tactical
advantage or inconvenience, than any real prejudice. There is no basis for the underlying assumption that there is a risk of the witnesses changing their evidence depending upon whether it is given in the Companies Act proceedings or the defective building proceedings, or an examination-in-chief or cross-examination.
[20] Furthermore, as the applicant liquidators submit, the untenable nature of the respondent’s argument on this point is evident when one considers the position that would pertain if only the Companies Act proceedings were on foot. In such circumstances, there would be no question that the respondents would receive a fair trial. It cannot thus be said that, simply because other proceedings are also on foot, the respondents will no longer receive a fair trial - and Fairway and Quest cannot avoid the consequences of the statutory reversal of the burden of proof they face in the voidable proceeding. In any event, as I reasoned in my judgment of 17 May 2018, there are options available within the scope of separate trials to address any legitimate concerns that Fairway and Quest might have.
[21] It is also pertinent to note that the applicants for consolidation were Fairway and Quest. Fairway and Quest are also the applicants for leave to appeal. Neither is a party to the defective building proceedings. As a result, neither can suffer prejudice as a result of consolidation being declined or leave to appeal being refused.
[22] According to Fairway and Quest, the parties who will be prejudiced if leave to appeal is refused are Messrs Cooney, Turner, Lagerberg and Beekie and CBC 2010. However, none of those parties applied for the proceedings to be consolidated, none were formally represented at the hearing of the application for consolidation, and none have applied for leave to appeal, despite having the opportunity to do so. Accordingly, and as the liquidators submit, it is difficult to see how those parties have standing in relation to the proposed appeal.
[23] The purpose of a requirement for leave to appeal is to filter unmeritorious appeals or those of no great significance to the parties or more generally.6 Fairway and Quest have not met the requisite threshold.
6 See fn 1 above.
Result
[24] The application for leave to appeal pursuant to Section 56(3) of the Senior Courts Act 2016 is dismissed.
[25] Costs should follow the event. Costs are to be paid by Fairway and Quest to the applicant liquidators in this proceeding and the plaintiffs in the defective building proceedings (CIV 2006-470-000138) on a 2B basis.
Associate Judge P J Andrew
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