Pure Elite Holdings Limited v Bodco Limited

[2017] NZHC 2746

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA
KIRIKIRIROA ROHE

CIV-2016-419-261 [2017] NZHC 2746

UNDER

The Companies Act 1993

BETWEEN

PURE ELITE HOLDINGS LIMITED First Plaintiff

PEH NEW ZEALAND LIMITED Second Plaintiff

EVER HEALTH NEW ZEALAND LIMITED

Third Plaintiff

RANDOLPH EDWARD CASIMIR VAN DER BURGH

Fourth Plaintiff

GEOFFREY IAN POLLARD Fifth Plaintiff

AND

BODCO LIMITED First Defendant CONTINUED OVERLEAF

Hearing:

26 September 2017 (Defendants) and 2 October 2017

(Plaintiffs)      (ON PAPERS)

Appearances:

Mr A Ross for Plaintiffs
Mr M Branch for Defendants

Judgment:

9 November 2017

JUDGEMENT OF ASSOCIATE JUDGE J P DOOGUE On Recall of Judgment

This judgment was delivered by me on  09.11.17 at 3.30 pm, pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

Date……………

PURE ELITE HOLDINGS LIMITED & Ors v BODCO LIMITED & Ors [2017] NZHC 2746 [9 November

2017]

[1]      Following the issue of judgment on this matter,1 the defendants have brought an application for recall pursuant to r 11.9 of the High Court Rules.

Legal principles

[2]      There are three categories of cases in which a judgment may be recalled:2

… first, where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the Court’s attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled.

[3]      The defendants focus on the third category, namely ‘some other very special reason’.  Special reason generally refers to the situation where the court has failed to determine an issue that was properly put to it.  It is necessary to distinguish between the situation where a Judge does not refer to a matter at all and one where the Judge refers to the matter but makes an erroneous determination – the former situation

lends itself to recall but the latter does not.3

[4]      Ultimately, the Court of Appeal has concluded that the category is intended

to be “narrow” and cases appropriate for recall on that basis are “likely to be rare”.4

The arguments

[5]      With these principles in mind, consideration will be given to the grounds upon which the recall is sought.

[6]      The first of these is what could be categorised as a procedural ground.  It is concerned with the fact that after the defendants made their application for summary judgment, the plaintiffs filed and served an amended statement of claim.   For the first time, the plaintiffs squarely based their claim on alleged contractual breaches. The earlier heads of claim emphasised alleged fiduciary elements of the relationship

between the parties.   The point is, however, that the defendants had more than

1      Pure Elite Holdings Ltd v Bodco Ltd [2017] NZHC 2317.

2      Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633.

3      Clark v Central Lakes Homes Ltd [2016] NZHC 2164 at [10].

4      Unison Networks Ltd v Commerce Commission [2007] NZCA 49 at [23] and [34].

adequate time to prepare submissions for the hearing which dealt with the issues of the contractual breach.  Indeed, as Mr Ross QC has pointed out for the plaintiffs, the defendants themselves relied upon certain implied terms in the contractual arrangement.   I am unable to see that there is any substance in these procedural complaints.

[7]      Of more substance is the question about whether the exact issue which the defendants put before the Court was actually dealt with in the judgment.

[8]      In the judgment, I considered the possibility of whether the plaintiffs had been in breach of their contractual obligations to contribute capital.  This was a point which I resolved essentially by taking the position that it could be contended that there was uncertainty in the contract about when capital contributions were to be made, and also uncertainty about whether the timing of making such payments was of the essence.  I then went on to deal with the point about the parties’ rights in the event that the defendants had had no right to regard the plaintiff as being in breach of the contract.  I also made reference to the notice of cancellation of the contract which the plaintiffs had given.  That was relevant because if there had been a cancellation of  the  contract,  the  question  of  restitution  of  any  property  provided  under  the contract (the rights attached to the shares) would have to be dealt with in terms of the regime provided for in (the now) Part 2 of the Contract and Commercial Law Act

2017.5

[9]      Mr Branch  for the defendants  contends  that  there was  another  argument before  the  Court  which  provided  a  different  basis  of  claim  available  to  the defendants.  He asserts that the parties had agreed that the contract would come to an end in the event that funding was not provided within a 90 day period which the contract provided for.   In such circumstances, the contention for the defendants would be that not only would the contract be interpreted in such a way that it automatically expired after 90 days, but also that there was an implied term in the contract that property which had been provided by the defendants to the plaintiff in

the form of share entitlements and directorships could be reversed and recovered by

5      Section 43.

the defendants if the contract expired in the circumstances which had actually occurred.

[10]     I accept that an argument in substantially those terms was not addressed in the judgment which I issued.

[11]     However, construing the arrangements of the parties in the way suggested conflicts with other determinations which I made in the course of the judgment.  One of these was a doubt about whether the contract did in fact provide for performance at 90 days or not at all.  If it cannot be said with certainty when the obligation to provide funding was to occur, it plainly cannot be suggested that once the 90 day period had expired, it was beyond argument that the agreement must have come to an end because of an implied arrangement between the parties.  Alternative analyses are available.  One is that a 90 day backstop envisaged that the parties would in the meantime come up with a budget or cash flow program which established when the plaintiffs had to contribute capital to the project.  Alternatively, even if the 90 days was an agreed backstop, questions arise as to whether time was of the essence. Neither of these interpretations is consistent with the proposition that the parties must have impliedly agreed that the contract would come to an end once the time period for funding had been missed.

[12]     Mr Branch emphasises the fact that a letter on behalf of the plaintiffs from

Mr Pollard made a statement to the following effect:

Several actions contemplated by the HOA were completed by both parties and a number of others were not.  In particular both parties have failed to raise their respective capital commitments to the extent contemplated in the HOA.    The  HOA subsequently expired  on 19th   and  24  December  2014 respectively.   Despite this both PEH and Bodco have continued with their endeavours to raise funding and pursue the development of Danpac and MVM consistent with the general terms of the HOAs.

[13]     Presumably this is relied upon by the defendants as a statement which is inconsistent with the position that they are now taking in the litigation to the effect that the contract did not come to an end.   However, while no doubt admissions against interest involving clear-cut questions of fact may be regarded as very damaging to a party’s subsequent case, the same cannot be said when a layperson

expresses a view as to what is the correct interpretation of a moderately complex and somewhat obscure written commercial contract which they have entered into and what the parties’ positions are to be when that arrangement miscarries, the parties having come to no express agreement about that eventuality.

[14]     In  any  case,  it  may  be  thought  that  the  statement  made  in  the  letter  is equivocal in that, on the one hand, while Mr Pollard apparently acknowledged that the heads of agreement expired, what he records is that the parties have continued to conduct themselves so that the contract was still in existence.   His statement is equivocal and it is certainly not enough to carry the day for the defendants’ summary judgment application.

[15]     The types of arguments which I have referred to in the preceding paragraph seem to me to be entirely unsuitable for resolution on a summary judgment application.  Even acknowledging the fact that the judgment did not take account of this exact line of argument, I am not persuaded that it represents a viable theory of the case which would be the foundation of a reasonable chance for the defendants to obtain summary judgment against the plaintiffs.  I therefore consider that even if it were legitimate for the Court to recall the judgment, no real purpose would be served by so doing.

[16]     It remains the case in my judgment that the arguments which the defendants put forward could theoretically prevail with the Court at trial.   But that is not the same thing as agreeing that they entitle the defendants to summary judgment against the plaintiffs.  It cannot be said that the plaintiffs are not able to mount a reasonably arguable case that the contract continued after the point where the funding was supposed to have been provided.

[17]     It may be that the defendants mistakenly take the view that the fact that the Court has dismissed their application for summary judgment means that it is also concluding that the defendants’ case is wrong and that the plaintiffs’ case is correct. If they do, then, as I have said they would be mistaken.   The summary judgment application turns on the question of whether there is a proper issue to go to trial or whether the case for the plaintiffs is so unarguable that judgment ought to be entered

without the necessity for a trial?  If the matter goes to trial, it may well be that the defendants will succeed by one means or another in vindicating their position.

[18]     The application to recall the judgment is declined.  The parties should address the question of costs in memoranda not exceeding six pages on each side within 10

working days.

J.P. Doogue

Associate Judge