Patel v Govan; Govan v Patel

[2006] NZCA 208

IN THE COURT OF APPEAL OF NEW ZEALAND

CA133/05

BETWEENNALINI NAGINBHAI PATEL

Appellant

ANDDAYAL NARSAI GOVAN

Respondent

CA237/05

AND BETWEEN             DAYAL NARSAI GOVAN

Appellant

ANDNALINI NAGINBHAI PATEL

Respondent

Hearing:18 July 2006

Court:Robertson, Arnold and Ellen France  JJ

Counsel:G W D Manktelow for Mrs Patel

T G Stapleton for Mr Govan

Judgment:10 August 2006 at 11.00 am

JUDGMENT OF THE COURT

CA133/05:

A        The appeal is abandoned.

B        THERE IS NO ORDER AS TO COSTS.

CA237/05:

A        The appeal is dismissed.

BThe appellant must pay the respondent costs of $3000, plus usual disbursements.

REASONS OF THE COURT

(Given by Arnold J)

Introduction

[1]       This is an unusual case.  In March 2005 Mr Govan issued proceedings against Mrs Patel seeking “all orders and relief necessary” to dissolve a partnership between them as from 31 March 2001, including two specific orders.  He applied for summary judgment in terms of the orders sought.  On 9 June 2005, Associate Judge Gendall granted the order for dissolution (essentially because it was undisputed) but refused the other orders.  He did so because there were disputed matters which he considered needed to be resolved at trial.

[2]       Following delivery of that judgment, counsel for Mr Govan, Mr Stapleton, prepared draft orders for sealing.  In relation to the substance of the claim, the draft contained the order made by the Associate Judge and three additional orders based on elements of the Associate Judge’s reasoning.  Apparently viewing the orders set out in the draft as uncontroversial, Mr Stapleton did not refer the draft to the solicitors or counsel for Mrs Patel but simply presented it for sealing.  A Deputy Registrar sealed the draft in the form presented by Mr Stapleton, without reference to the Associate Judge or to Mrs Patel’s advisers.

[3]       When Mrs Patel’s advisers were served with a copy of the sealed orders, they objected and filed an application for orders rescinding and correcting the sealed orders. They also filed on behalf of Mrs Patel an appeal against the Associate Judge’s decision of 9 June, essentially to protect Mrs Patel’s position until the outcome of the application to rescind and correct was known.  (This is appeal CA133/05.)

[4]       On 10 October 2005, Associate Judge Gendall granted Mrs Patel’s application by removing from the sealed judgment the three orders which were based on elements of his reasoning in the 9 June judgment.  Mr Govan appeals from the Associate Judge’s 10 October judgment.  (This is appeal CA237/05.)

[5]       We heard both appeals together, on the basis that Mrs Patel did not wish to pursue her appeal in CA133/05 if Mr Govan’s appeal in CA237/05 failed.

Background

[6]       Mr Govan and Mrs Patel were parties to a partnership, known as the Trojan Partnership, which invested in real estate.  In 1995 they signed a Heads of Agreement (HoA) relating to the partnership.  For present purposes the relevant parts of the HoA were clauses 9(f) and (g) and clause 11. 

[7]       Clauses 9(f) and 9(g) provide:

(f)The Partnership shall continue for a period of 5 years from the date of this agreement and on expiry Govan shall offer to Patel or her nominee a property nearest to the value of her share in the portfolio.  She shall have 14 days to accept the offer and a further 21 days to confirm finance with settlement 14 days after confirmation.

(g)If Patel or her nominee does not accept the offer then Govan shall have the option to purchase Patel’s share in the portfolio at market value on the same terms and conditions.

[8]       Clause 11 provides:

11.It is acknowledged that Patel claims she is entitled to 25% of the portfolio.  This is denied by Govan.  If she does not file the necessary papers to establish this claim within nine months of the date of this agreement (time being of the essence) then she acknowledges that the claim is withdrawn.  Upon withdrawal or non‑prosecution of the claim all actions and claims, if any, that Govan or his Trust may have against Mr or Mrs Patel will simultaneously be withdrawn and/or extinguished.  This clause is in relation to events up to the date of this agreement.

[9]       On 30 March 2001 Mr Govan wrote to Mrs Patel noting that the period specified in the HoA had expired and suggesting that the partnership should be terminated on 31 March 2001.  Mr Govan said that Mrs Patel’s interest in the partnership was 14%. Mrs Patel replied, objecting to Mr Govan’s “unilateral decision to dissolve the Trojan Partnership” and claiming that her share in the partnership was 25%.  She also raised a number of other issues, including disputing management and accounting fees charged to the partnership.  There was then an exchange of correspondence between the parties

[10]     Mr Govan had financial statements for the partnership as at 31 March 2001 prepared.  These were made available to Mrs Patel in late December 2001.  Mr Govan said that, according to these statements, Mrs Patel’s precise holding was 14.06%, which produced a figure of $173,969.00. Valuations (as at 31 March 2001) of the properties owned by the partnership had also been prepared, although these were not made available to Mrs Patel until February 2002.

[11]     Between February and April 2002 there was further correspondence between the parties, which culminated in Mr Govan purporting to exercise the option under clause 9(g) and offering Mrs Patel $173,969 for her share of the partnership.  When Mrs Patel rejected that, Mr Govan issued a settlement notice, requiring settlement by 26 April 2002.  Mrs Patel did not settle in accordance with that notice. 

[12]     There was then a lengthy period of inaction. Ultimately on 9 March 2005 Mr Govan issued proceedings against Mrs Patel seeking the following relief:

(1)All orders and relief necessary to dissolve the Partnership as at 31 March 2001 in accordance with the provisions of the Heads of Agreement including:

(a)    An order that the Defendant executes and delivers to the Plaintiff registrable transfers of the Defendant’s shares in the Partnership’s properties at 160-166 Cuba Street and 175‑179 Cuba Street, Wellington and transfers of her shares in Trojan Partners Limited and Scoter Ventures Limited within 7 days of judgment in this proceeding;

(b)    An order that on delivery of the executed and registrable transfers referred to in order (a) above, the Plaintiff then pays the Defendant the sum of $173,969 for her share of the Partnership (including her shares in Trojan Partners Limited and Scoter Ventures Limited) as at 31 March 2001 together with such interest on that sum as this Honourable Court deems appropriate.

(2)      Costs.

[13]     Mr Govan sought summary judgment in the same terms.

[14]     That application was opposed by Mrs Patel on the following grounds:

1.The defendant’s share of the partnership exceeds the sum of $173,969.00.

2.The defendant has a defence to the plaintiff’s claim.

3.Appearing by the affidavit filed herein.

The Associate Judge’s decision on Mr Govan’s summary judgment application

[15]     The Associate Judge dealt with Mr Govan’s application for summary judgment in a judgment dated 9 June 2005.  Having set out the factual background, summarised the arguments of counsel and referred to the High Court Rules and principal authorities governing summary judgment applications, Associate Judge Gendall turned to the merits. 

[16]     The Associate Judge noted that the parties did not dispute that the partnership between them had come to an end.  The Associate Judge said:

[45]     The plaintiff’s summary judgment application for an order that the partnership was dissolved as at 31 March 2001 in accordance with the provisions of the HoA is successful.  An order to this effect will follow.

[17]     The Associate Judge went on to say:

[46]     The real issues between the parties here appear to be twofold:

a)Whether the plaintiff has properly activated the procedures following dissolution of the partnership outlined in paragraphs 9(f) and 9(g) of the HoA; and

b)The issue of quantum – what is the value of the defendant’s share in the partnership.

[18]     The Associate Judge concluded that the plaintiff had properly followed the administrative procedures set out in the clauses and rejected Mrs Patel’s claim to a 25% interest in the partnership.  However, the Associate Judge said that there were disputed matters which would affect the value of Mrs Patel’s share in the partnership that he was unable to resolve at the summary judgment stage.   The Associate Judge said:

[71]     In conclusion, although one must have sympathy with the position in which the plaintiff finds himself, given what might appear to be inaction/obstruction on the part of the defendant over a number of years, nevertheless I repeat that under the circumstances prevailing here, the orders sought at paragraphs 1(a) and (b) of the plaintiff’s application before the Court are not suitable for summary judgment.

[19]     The Associate Judge then summarised his conclusions as follows:

[72]     At paragraph [45] of this judgment, I noted that the plaintiff’s summary judgment application for an order that the partnership was dissolved as at 31 March 2001 in accordance with the provisions of the HoA succeeds.  An order to this effect is now made.

[73]     As to the remainder of the plaintiff’s summary judgment application, for the reasons I have outlined above, it must fail.

The sealed orders

[20]     On receipt of the Associate Judge’s decision, Mr Stapleton prepared draft orders and submitted the draft to the Registry for sealing, without reference to Mrs Patel’s advisers.  A Deputy Registrar sealed the orders on 27 June 2005, without reference to the Associate Judge.

[21]     The sealed orders read:

1.The Partnership between the Plaintiff and the Defendant known as the Trojan Partnership (the “Partnership”) was dissolved as at 31 March 2001 in accordance with the provisions of the Heads of Agreement relating to the Partnership signed by the Plaintiff and the Defendant between 28 July and 7 August 1995 (the “Heads of Agreement”)

2.The Plaintiff properly followed the administrative procedures in paragraphs 9(f) and 9(g) of the Heads of Agreement to offer a property to the Defendant in terms of paragraph 9(f) and then to exercise his option to purchase the Defendant’s share in terms of paragraph 9(g).

3.The Defendant’s claim to a 25% share in the Partnership as at 31 March 2001 is rejected and her share as at that date is 14.06%.

4.Issues remain as to the calculation of the value of the Defendant’s share in the Partnership as at 31 March 2001 and, consequently, the remainder of the Plaintiff’s interlocutory application for summary judgment against the Defendant is dismissed.

5.The Registrar is to liaise with counsel for both parties to allocate an early directions telephone conference in this proceeding in order that all possible options for a way forward in this litigation may be considered.

6.There is no order as to costs.

[22]     Mrs Patel applied, principally under r 12 of the High Court Rules, for orders rescinding and correcting the sealed orders, on the ground that they were improperly obtained and did not reflect the Associate Judge’s judgment.  Mr Govan opposed the application.

The Associate Judge’s decision on Mrs Patel’s application to rescind and correct

[23]       On 10 October 2005 the Associate Judge granted Mrs Patel’s application.  He directed that the sealed orders made on 27 June 2005 be rescinded and in their place made the following orders:

(1)The partnership between the Plaintiff and the Defendant  known as the Trojan Partnership (“the Partnership”) was dissolved as a 31 March 2001 in accordance with the provisions of the Heads of Agreement relating to the Partnership signed by the Plaintiff and the Defendant between 28 July and 7 August 1995.

(2)The Registrar is to liaise with counsel for both parties to allocate an early directions telephone conference in this proceeding in order that all possible options for a way forward in this litigation may be considered.

(3)There is no order as to costs.

The effect of this was that the orders numbered 2, 3 and 4 in the orders sealed on 27 June 2005 were removed.

[24]     The Associate Judge identified the issue as being whether the orders as sealed represented “what was decided and intended when judgment was given”.  He noted that Mr Govan had not sought in the summary judgment application orders 2, 3 and 4 in the sealed orders, and rejected Mr Stapleton’s argument that those orders expressed what was decided in his 9 June 2005 judgment, and what was intended to be included in the sealed orders.

[25]     In relation to the order 2, the Associate Judge said:

[30]     In summary then, although strict administrative procedures might have been followed by the plaintiff in his efforts to purchase the defendant’s share in the partnership, none of this process could have been properly and effectively carried out until such time as the value of the defendant’s share was established.  As I have noted, this was always in dispute.

[31]     It follows then that the order noted at paragraph 2 is misleading and does not represent what was decided and intended by my judgment.

[26]     In relation to order 3 in the sealed orders, the Associate Judge said:

[34]     In paragraph [57] I express the view that I reject the defendant’s claim to a 25% share in the partnership.

[35]     That is a view, however, expressed upon the basis of the limited material before the Court for the present summary judgment application. It is a view reached to enable me to go on to consider the defendant’s further objections to the partnership accounts and expenses noted in those accounts, which are critical matters to the final determination of the value of her share in the partnership.

[36]     That said, my comments in paragraphs [56] and [57] as to the defendant’s claim to a 25% share in the partnership were merely ancillary to a consideration of the plaintiff’s contention that in offering to pay to the defendant the sum of $173,969.00 as her share in the partnership, he had properly followed the offer and purchase requirements outlined in paragraph 9 of the HoA.  It follows, therefore, that there was no decision or intention in my judgment that the comments relating to the defendant’s claim to a 25% share in the partnership would represent matters that were decided and intended when judgment was given to the intent that they would form the subject of an ultimate order of this Court.

[37]     It is therefore inappropriate for paragraph 3 of the sealed order to remain.

[27]     Finally, in relation to order 4, the Associate Judge said:

[39]     This paragraph 4 flows on from the matters referred to in paragraphs 2 and 3 of the sealed order which I have dealt with above.

[40]     Give that those paragraphs 2 and 3 are to be deleted, then it necessarily follows that paragraph 4 similarly is inappropriate.  It is to be deleted from this Court’s order.

[28]     Mr Govan appeals from that judgment.

Submissions

[29]     In essence Mr Stapleton made three points in his submissions.

[30]     First, Mr Stapleton disputed the Associate Judge’s conclusion that Mr Govan had not sought orders in terms of orders 2, 3 and 4.  He said that the application sought “all orders and relief necessary to dissolve the partnership as at 31 March 2001” in accordance with the HoA “including the orders set out at paragraphs (a) and (b)”.  Orders 2, 3 and 4 were, he said, necessarily part of the widely expressed relief sought by Mr Govan.

[31]     Second, Mr Stapleton disputed the Associate Judge’s conclusion that Mr Govan’s application for summary judgment had succeeded only in a limited way.  He argued that the Associate Judge’s reasoning on the merits of Mr Govan’s application amounted to a rejection of Mrs Patel’s defences and constituted “clear and unequivocal” findings which had been replicated in the language of orders 2, 3 and 4.

[32]     Third, Mr Stapleton argued that the Associate Judge had in the 10 October judgment introduced qualifications and refinements that were not present in the 9 June judgment and was, in effect, rewriting the earlier judgment.  Mr Stapleton relied on Neazor J’s decision in Broadview Investments Co Pty Ltd v Corporate Interiors (New Zealand) Ltd HC WN CP123/92 12 August 1998.

[33]     For Mrs Patel, Mr Manktelow argued that the Associate Judge’s decision to rescind the orders sealed on 27 June and to issue new orders involved the exercise of a discretion.  While Mr Manktelow did not spell out the consequence of this it is that Mr Govan must show that the Associate Judge made an error of principle, failed to consider relevant considerations, took into account irrelevant considerations and made a decision that was plainly wrong.

[34]     Mr Manktelow also argued that the matters dealt with in orders 2, 3 and 4 were simply steps in the Associate Judge’s reasoning as he considered whether Mr Govan had met the requirements for the issue of summary judgment.  He argued that these elements of the Associate Judge’s reasoning were not findings of a type that would give rise to an issue estoppel.  He relied on McCrory & Thomas Travel Ltd v House of Travel Holdings Ltd HC CHCH CP138/01 1 April 2003.

Discussion

[35]     We consider that the appeal must fail and can state our reasons quite shortly.

[36]     Rule 12 of the High Court Rules provides:

(1)If any judgment or order contains a clerical mistake or error arising from any accidental slip or omission, whether the mistake, error, slip or omission was made by an officer of the Court or not, or if any judgment or order is so drawn up as not to express what was actually decided and intended, the judgment or order may be corrected by the Court, or, where the judgment or order was made by a Registrar, then by the Registrar.

(2)The correction may be made by the Court or the Registrar, as the case may be, of its or his own motion or an interlocutory application made for that purpose.

[37]     This Rule confers a discretion, which is to be sparingly exercised.  The question is whether the discretion was wrongly exercised in the present case (in the sense appropriate to an appeal from the exercise of a discretion).

[38]     The Associate Judge exercised his discretion under r 12 because he considered that the orders sealed on 27 June 2005 did not represent, in the words of the Rule, “what was actually decided and intended” in his judgment of 9 June 2005.  In terms of the merits of the summary judgment application, the Associate Judge stated explicitly in his judgment of 9 June what order he was prepared to grant, and what orders he refused to make (see [16] – [19] above).  The orders sealed on 27 June went beyond the substantive order that the Associate Judge said that he was prepared to make.  Mr Stapleton was not entitled to select elements of what the Associate Judge said in his reasoning when determining that he would not make two of the orders sought and use those statements as the basis of further orders not sought in Mr Govan’s application.  We do not accept that the wording of the relief sought in the application, on which Mr Stapleton relied, allows such a course. 

[39]     Rule 138(4)(b) of the High Court Rules provides that a party applying for summary judgment must file and serve a notice of interlocutory application in form 19.  Form 19 requires the applicant to “specify the order or orders sought, numbering them if more than one is sought”.  No doubt this is to give the Court, and the other party or parties, proper notice of what is sought.  It is inconsistent with this requirement that an applicant, on the basis of general wording such as that relied on by Mr Stapleton, specify, after the delivery of judgment, orders that were not identified in its application but which the applicant says are implicit in the formulation of the relief sought and reflect elements of the Court’s reasoning.

[40]     It follows from what we have already said that we do not accept that the Associate Judge effectively rewrote or modified his 9 June judgment in his 10 October judgment.  The terms of the Associate Judge’s 9 June judgment are clear in this respect.

[41]     Had Mr Stapleton adopted the sensible course and submitted his draft orders to Mrs Patel’s advisers for comment before submitting them to the Registry for sealing, the points in contention would have been identified at the outset.  If the parties had remained in disagreement the disputed draft would have been referred to the Associate Judge for a decision.  The Associate Judge would not have authorised the sealing of the orders in terms of Mr Stapleton’s draft, because they did not represent the orders that he had indicated in his judgment he was prepared to make.  The Associate Judge would, no doubt, have authorised the sealing of orders in terms of the orders ultimately sealed.  It is difficult to see how Mr Govan could have challenged that decision.

Decision

[42]     Mr Govan’s appeal in CA237/05 is dismissed.  Mr Govan must pay Mrs Patel costs of $3000, plus usual disbursements.  As a consequence, Mrs Patel’s appeal in CA133/05 is abandoned.  There will be no order as to costs in that appeal.

Solicitors:

Brandons, Wellington for Appellant
Guy & Toby Manktelow, Lower Hutt for Respondent