PVG Securities Trustee Limited v 100 Investments Limited
[2020] NZHC 3489
•21 December 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-2838
[2020] NZHC 3489
BETWEEN PVG SECURITIES TRUSTEE LIMITED
Plaintiff
AND
100 INVESTMENTS LIMITED
Defendant
Hearing: 26 November 2020 Appearances:
W N Fotherby for the Plaintiff P Michalik for the Defendant
Judgment:
21 December 2020
JUDGMENT OF HINTON J
This judgment was delivered by me on 21 December 2020 at 4:30 pm pursuant to Rule 11.5 of the High Court Rules
…………………………………………………………………… Registrar/Deputy Registrar
Solicitors/Counsel:
Meredith Connell, Auckland Canterbury Legal, Christchurch
Paul Michalik, Barrister, Wellington
PVG SECURITIES TRUSTEE LTD v 100 INVESTMENTS LTD [2020] NZHC 3489 [21 December 2020]
[1] This is part of a long-running proceeding arising from the severe damage done to a building at 110 Lichfield St, Christchurch in the 2010 and 2011 Canterbury earthquakes, the mortgages to which that property was subject, and the insurance pay- out in respect of that building.1
[2] In this latest chapter, the defendant applies for leave to appeal to the Court of Appeal against my judgment of 28 February 2020 dismissing the defendant’s application to enforce an undertaking the plaintiff gave as to damages.2
[3] The hearing of this leave application was delayed by a dispute as to the appropriate pathway for appeals against decisions on applications to enforce undertakings as to damages. On 29 September 2020 the Court of Appeal determined that leave to appeal must be obtained from this Court.3
Background
[4]On 21 December 2018, the plaintiff obtained an interim injunction restraining
$1,620,000 of the insurance pay-out in respect of 110 Lichfield St, which was otherwise payable to the defendant, saying it was entitled to that portion of the pay- out.4 That left $1,330,000 of the $2,950,000 pay-out unrestrained. The sum of
$1,620,000 was placed on interest-bearing deposit with the defendant’s solicitor.
[5] In support of the injunction, the plaintiff had given the standard undertaking as to damages. Following my dismissal of the plaintiff’s claim on 31 July 2019,5 the defendant sought to enforce that undertaking.
[6] As noted, I dismissed that application which, as the parties agreed, was to be determined as if:6
1 See PVG Securities Trustee Ltd v 100 Investments Ltd (Substantive Decision) [2019] NZHC 1847, (2019) 20 NZCPR 280 at [1]-[24].
2 PVG Securities Trustee Ltd v 100 Investments Ltd (Application to Enforce Undertaking) [2020] NZHC 328.
3 100 Investments Ltd v PVG Securities Trustee Ltd [2020] NZCA 458.
4 PVG Securities Trustee Ltd v 100 Investments Ltd (Minute of Downs J) HC Auckland CIV-2018- 404-2838, 21 December 2018, referring to the Judge’s direction, communicated by email, at 3.05 pm that afternoon.
5 Above n 1.
6 Above n 2, at [15], citing Hoffmann-La Roche v Secretary of State for Trade and Industry [1974] 2 All ER 1128 (HL) at 1150 at 1150(f)-(h) per Lord Diplock.
… the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction.
[7] It was agreed that ordinary principles of contractual damages applied. Counsel provided an extensive summary of those principles in submissions, including the basic measure and the concepts of expectation losses, remoteness, and the wronged party’s duty to mitigate.7 I did not, because of the factual findings I made, need to traverse those principles at any length, it being enough to emphasise that it was for the defendant as the party making the claim to prove its losses.8
[8] As to the claimed losses, Mr Michalik submitted the defendant had incurred losses of two types because of the plaintiff having (it ultimately transpired wrongfully) restrained the defendant’s funds.
[9] First, the defendant said that, at the date of the plaintiff’s undertaking, it owed some $825,000 to a company called PFSL, which debt it said it would have repaid using the restrained funds had they not been restrained. The defendant inferred the money it did receive was applied to a different, more expensive, debt. This meant, the defendant claimed, it had to pay PFSL $47,000 in interest over the 218-day period up until the plaintiff’s claim was dismissed, and also extend its loan facility with PFSL when the initial term of the loan came to an end during that period, causing further additional costs of $28,000.
[10] I agreed generally with Mr Michalik that it would be within commercial contracting parties’ reasonable contemplation that, if one of them were held out of money, debt funding costs might be incurred, such that those losses would not be too remote to claim as damages.9 However, I said I did not accept it was within the reasonable contemplation of the parties in this case that the PFSL debt would not be able to be paid and that interest/additional charges paid to PFSL would therefore be claimable.10 I noted that, unlike with standard breaches of contract, the defendant had had the opportunity to be heard prior to the injunction issuing, was commercially
7 At [16]-[18], fns 6-10.
8 At [18], citing Quadling v Bambury (1991) 3 PRNZ 440 (HC) at 443.
9 At [26].
10 At [27].
informed and represented, and had in fact referred only to debts of significantly less than the unrestrained sum.11
[11] Also, more primarily, I considered the defendant had failed to prove that the claimed loss was a consequence of the injunction being granted. It submitted it had given priority to another loan. However, there was no documentary evidence of the latter loan, nor a clear statement that funds were to be applied to it, nor even any evidence that the other loan was repaid. Mr Michalik had no instructions as to what did happen to the unrestrained sum, which it could have of course applied to repaying the PFSL loan. In those circumstances, I inferred the defendant had elected to use its money elsewhere rather than to pay off either “debt”.12 Absent evidence to the contrary, I found as a matter of fact that the costs arising from the non-repayment of the PFSL loan had not been proven to be damages able to be claimed in enforcement of the undertaking.
[12] Second, the defendant said the balance of the restrained sum (that is the amount above the quantum of the PFSL debt), some $795,000, would have been placed by it on interest-bearing deposit had it not been restrained, on better terms than it was with the defendant’s instructing solicitors.
[13] As I had rejected the defendant’s first argument, I considered this claim in respect of the full amount restrained. On this leg of its claim, the defendant invited me to calculate “reasonable interest” as if awarding interest on a money claim determined on 26 December 2018,13 on which damages were paid on 31 July 2019, in terms of the Interest on Money Claims Act 2016 (the Interest Act) and then deduct tax and the net interest actually earned on the solicitor’s trust account deposit. I was advised by counsel at the hearing of this application that the shortfall was in the order of $18,000-$23,000.
11 At [27] fn 20.
12 At [28]-[29].
13 Being the date on which the unrestrained portion of the insurance pay-out was paid to the defendant and the balance (the restrained sum) was deposited by the defendants’ solicitors in an interest-being trust account daily deposit in accordance with Downs J’s orders of 21 December 2020.
[14] I considered there was an attraction to that course of action, given the simplicity it offered in providing a proxy for the quantification of actual losses.14 However, I did not consider there to be any authority for that approach and considered it was contrary to the statements made by the Court of Appeal in Whangamata Metal.15 Therefore applying ordinary principles instead, I noted the formula under the Interest Act does not reflect, and cannot be taken as proving, how any one potential term deposit during the relevant period would have performed.16 Therefore, the defendant had not proven how the funds could have performed if invested. Nor, I noted, had it in fact proven it would have invested the funds, let alone any funds, on deposit, or the interest it would have earned.17
[15] Accordingly, I dismissed the defendant’s application to enforce the plaintiff’s undertaking as to damages.
Applicable Principles
[16] The defendant now seeks to appeal that decision to the Court of Appeal. The proposed appeal being from a decision on an interlocutory application18 pursuant to s 56(3), the defendant must first obtain leave from this Court.
[17] This leave requirement is, as Fitzgerald J put it in Finewood Upholstery Ltd v Vaughan, a “filtering mechanism” designed to ensure that unmeritorious appeals of interlocutory orders do not unnecessarily delay proceedings.19 Following a decision of Dobson J, she summarised the considerations relevant to applications for leave as follows:20
(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.
14 At [34].
15 At [35]-[38], citing Clarkson v Whangamata Metal Supplies Ltd [2007] NZCA 590, [2008] 3 NZLR 31 at [22]-[23].
16 At [39].
17 At [41]-[42].
18 Above n 3.
19 Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [9]-[14]. See also Western Joinery Ltd v Commissioner of Inland Revenue [2017] NZHC 3297 at [9], citing Sandle v Stewart [1982] 1 NZLR 708 (CA) at 715.
20 At [9], citing A v Minister of Internal Affairs [2017] NZHC 887.
(b) Leave should only be granted where the circumstances warrant incurring further delay.
(c) The alleged error should be of general or public importance that requires determination, or otherwise be of sufficient importance to the applicant to outweigh the lack of any general or precedential importance.
[18] The Court of Appeal cited this statement with approval in Ngai Te Hapu, adding that “there is no doubt that s 56(3) was intended to reduce the volume of appeals to this Court from interlocutory decisions in the High Court.”21 The Court of Appeal has again endorsed Fitzgerald J’s statement of the correct approach earlier this year, in its decision in Greendrake v The District Court of New Zealand.22
[19] In Greendrake the Court of Appeal said the following considerations are relevant on an application for leave:23
(a)that a high threshold exists;
(b)the applicant must identify an arguable error of law or fact;
(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;
(d)the circumstances must warrant incurring further delay; and
(e)the ultimate question is whether the interests of justice are served by granting leave.
[20] Mr Michalik made extensive submissions on the applicable principles, suggesting that a different, more easily satisfied standard, focused on the proposed appeal being “capable of bona fide and serious argument”24 should apply. This on the basis of certain aspects of the legislative history of s 56 as discussed in Ngai Te Hapu
21 Ngai Te Hapu Incorporated v Bay of Plenty Regional Council [2018] NZCA 291 at [15] and [17].
22 Greendrake v The District Court of New Zealand [2020] NZCA 122.
23 At [6], approving Finewood Upholstery Ltd, above n 19.
24 Li v Chief Executive of MBIE [2018] NZHC 1171; and New Zealand First v Director of the Serious Fraud Office [2020] NZHC 2528
and also because, counsel submits, this interlocutory appeal arises after this matter has already gone to substantive determination, such that concerns of impeding the resolution of the substantive dispute do not arise.
[21] I consider the argument as to the exact test for granting leave is more one of semantics than anything else and it does not make any difference in this case. But clearly it is not sufficient to just demonstrate there is a seriously arguable point. Ultimately as the Court of Appeal said, an appeal of this sort has to be in the interests of justice to be allowed to proceed.
[22] In addition, while it is Mr Michalik’s view that the defendant’s proposed appeal “is caught by the interlocutory appeal requirements as a matter of form rather than of substance”, that is not the view of the Court of Appeal in the current case,25 such that I do not accept there is anything distinctive about this particular appeal for the purposes of s 56. Also, I do not consider it makes any difference that this interlocutory appeal arises after the substantive hearing in this matter has completed. I agree with counsel for the plaintiff that there is no reason why the policy of promoting finality in litigation that animates ss 56(3) and 56(5) should be limited in that way. Gendall J in Filleul Apartments JV Ltd v Salis declined an application for leave to appeal a costs award,26 noting the cost and delay of a further appeal on interlocutory matters pursued after the substantive matter has been determined can be just as disproportionate to the importance of the issues at stake as an appeal pursued before that point in time. The Court of Appeal has in fact recognised that “appeals from [several] kinds of interlocutory applications which require leave might be the final procedural event in a proceeding.”27
[23]I intend to apply the approach endorsed by the Court of Appeal in Greendrake.
Proposed Appeal
[24]The defendant’s proposed grounds of appeal are, in summarised form:
25 Above n 3 at [17]-[18].
26 Filleul Apartments JV Ltd v Salis [2019] NZHC 2806 at [16(d)].
27 Above n 3 at [19].
(a)First, I was wrong in principle to “require specific proof of the hypothetical basis of the appellant’s claim” in respect of the debt servicing costs on the PFSL loan.
(b)Second, what was within the parties’ reasonable contemplation is not relevant when the plaintiff had been given express notice that the defendant would not be able to repay the PFSL loan if the injunction was granted.
(c)Third:
(i)the decision in Whangamata Metal28 is not binding on me because it was decided under the Judicature Act 1908 and not the Interest Act, where the basis for quantification of interest is quite different. I was therefore wrong to conclude that reference to the Interest Act regime was not enough and to instead require that the claim for interest as damages be proven with specific evidence as to what investments would have been entered into and what return would have been earned;
(ii)alternatively, even if I was correct to apply Whangamata Metal:
i I was wrong to find that the defendant had not proven it would have placed the balance of the restrained funds on interest-bearing deposit, such that it had not proven its losses. In doing so I decided the case on a basis for which neither party had argued, thereby breaching natural justice; and/or
ii the Court of Appeal should revisit its holding in Whangamata Metal and allow the defendant’s approach to prevail.
28 Clarkson v Whangamata Metal Supplies Ltd [2007] NZCA 590, [2008] 3 NZLR 31 at [22]-[24], as cited, above n 3, at [36]-[38].
Discussion
[25] I do not accept that any of the defendant’s proposed grounds of appeal are of sufficient importance either to the general public or to the defendant to warrant an appeal.
[26] As to the first point, the defendant simply failed to prove, as a matter of fact, the loss it claimed. The defendant claimed interest and costs incurred on the PFSL loan, but I was not satisfied that it was not able to repay that loan because of the injunction. It had the funds to repay that loan out of the unrestrained sum. I do not accept the defendant has identified an arguable error in this regard or in any event that it is sufficiently important.
[27] As to the second point, Mr Michalik is wrong to submit that the plaintiff had, at the time the injunction was granted, express notice that the defendant would not be able to repay the PFSL loan if the injunction was granted. At most, the plaintiff had notice of an outstanding loan of about $800,000, materially below the unrestrained sum. Again, this does not strike me as an arguable error and if it is, it is not of sufficient importance to warrant an appeal.
[28] As to the first framing of the third point of appeal I agree that the Interest Act provides a more realistic assessment of prevailing interest rates during a given period than was achieved by the fixed percentage rate applicable under the Judicature Act 1908.29 But it is still a formula designed for a different purpose than calculation of damages. It does not for example provide proof of how any one potential term deposit would have performed during a given period. What is being claimed here is “interest as damages”, not interest on damages, with which the relevant provisions of both the 1908 and 2016 Acts are concerned.30 As I said, that is a long-standing and well- recognised distinction, and in the face of the decision in Whangamata Metal, not one for this Court to abrogate.31 As follows, I do not think it is arguable that I was wrong to dispose of this issue on the basis of Whangamata Metal.
29 Above n 2, at [38].
30 At [36]-[37].
31 At [38]. See also at [34] fn 21.
[29] The alternative framing of the third point of appeal goes to whether I applied the existing law, that is Whangamata Metal, correctly in determining the defendant had not proved its losses in respect of its claim for interest as damages. I found that, as a matter of fact, the defendant had not proven it would have placed the money on deposit and the likely amount of interest that would have generated. Mr Michalik says that, in making this finding, I wrongly disregarded Mr Hide’s uncontradicted affidavit evidence that the defendant did intend to use funds in this way. However, as I said, that was not my impression of the evidence overall. In any event, it does not matter as there was no proof of the likely amount of interest that would have been earned.
[30] Nor can it be said that I decided the interest issue on a basis for which neither party had argued. The defendant made exhaustive submissions on all aspects of what is a relatively small part of the dispute between the parties and while obviously unhappy with the judgment, could in no way be said to have been taken by surprise by any part of it.
[31]Finally, if the Court of Appeal should revisit its finding in Whangamata Metals,
as the defendant argues, this is not the case to do it. The amount at stake is $18,000-
$23,000. It does not merit these parties going to the Court of Appeal on the issue. The costs involved would come close to that.
[32] It follows that I am not satisfied that any of the proposed grounds of appeal are arguable and/or of sufficient importance. Whichever standard applies, that means there is no basis for an appeal.
Result
[33] For all of the above reasons, the defendant’s interlocutory application for leave to appeal is dismissed.
[34] The plaintiff is presumptively entitled to costs on a 2B basis, and disbursements. If the parties are unable to agree costs, counsel for the plaintiff may, within 21 working days from the date of this judgment, file and serve a memorandum as to costs, with the defendant having 14 working days to reply. Memoranda are not
to exceed four pages, excluding intituling pages and supporting materials such as invoices.
[35] In the unusual circumstances of this leave application having already been the subject of a decision in the Court of Appeal,32 I direct that the Registrar is to communicate a copy of this judgment to the Registrar of that Court.
Hinton J
32 100 Investments Ltd v PVG Securities Trustee Ltd [2020] NZCA 458.
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