RG Developments Limited v MacLennan Realty Limited HC Auckland CIV 2003-404-3260

[2005] NZHC 1309

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2003-404-003260

BETWEEN

RG DEVELOPMENTS LIMITED

Appellant

AND

MACLENNAN REALTY LIMITED

First Respondent

AND

BRUCE MACLENNAN

Second Respondent

Hearing:

4 March 2005

Appearances: L Herzog for Appellant

PA Fuscic for Respondents Judgment: 18 March 2005

RESERVED DECISION OF LAURENSON J.

In accordance with r 540(4) I direct the Registrar to endorse this judgment with the delivery time of 3.30pm on Friday 18 March 2005.

Solicitors:

Foley & Hughes, Auckland for Appellant McVeagh Fleming, Auckland for Respondents

RG DEVELOPMENTS LIMITED V MACLENNAN REALTY LIMITED HC AK CIV 2003-404-003260 [18

March 2005]

Introduction

[1]    The respondents have applied to strike out an appeal wherein the appellant seeks to set aside two decisions in the District Court at Auckland, both of which refused applications by the appellant for an adjournment of the hearing of the substantive claim. When the second application was refused the District Court Judge granted leave to appeal against both the refusals to grant an adjournment. The appellant then entered a discontinuance.

[2]    When the appellant filed the appeal the respondents sought to have this struck out on the ground that there was no foundation for any appeal after the proceeding which gave rise to the appeal had been discontinued.

[3]    The appellant then filed applications in this Court and the District Court to have the discontinuance set aside. The respondents have objected to these applications.

Factual background and chronology

[4]    In late 1997 the appellant entered into negotiations to purchase a commercial property at 227-249 King Street, Pukekohe, owned by a Mr CS Bancroft. The property was tenanted by Stagecoach Hotel Ltd.

[5]    On or about 19 December 1997 the appellant and Mr Bancroft entered into an agreement for sale and purchase of the property subject to the tenant’s existing rights. The price was $1 million with settlement on 27 February 1998. The transaction was settled on that date.

[6]    The appellant alleges that, the tenant abandoned the property, on or about 12 April 1999.

[7]    On 22 December 2000 the appellant filed a proceeding in the High Court at Auckland claiming $569,377.90 from the respondents being rental due on the property to 21 April 2004.

[8]    The first respondent is a real estate agent which acted on behalf of Mr Bancroft. The second respondent is the first respondent’s governing director.

[9]    The appellant alleged that both Mr Bancroft and the respondents had misrepresented that the tenant, Stagecoach Hotel Ltd, was a good tenant.

[10]   The respondents deny the allegations and allege inter alia, that the appellant compromised a similar claim against Mr Bancroft, the effect of which was to estop the appellant proceeding against the respondents.

[11]   On 26 June 2002 the plaintiffs consented to an order that the proceeding be transferred to the District Court at Auckland following which on 30 January 2003 the appellant filed an amended statement of claim claiming a reduced amount of

$170,619.

[12]   On 7 March 2003 the parties were advised that the matter had been set down for hearing in the District Court at Auckland on 9 June 2003.

[13]   On 6 June 2003 the appellant applied for an adjournment on the ground that it had been unable to secure Mr Bancroft’s attendance as a witness. The application was heard by District Court Judge Jeremy Doogue, who dealt with the matter by way of a telephone conference. The application was refused for the reasons set out in a minute dated the same day. The relevant parts of the minute are:

[3]Mr Herzog has made an application for adjournment. this has been done by rather informal means. He apparently communicated with the office of the Court today to say that an adjournment would be sought. Apparently he did not communicate this to Mr Fuscic counsel for the first defendant. The fact of the request being  made for an adjournment was [sic] communicated to Mr Fuscic until after 10 am this morning.

[4]The grounds on which Mr Herzog says the fixture should be vacated is that the attendance of a critical witness, as he described him, a Mr Bancroft is in doubt. The reason for that is that Mr Bancroft shows some signs of reluctance to get involved in this proceeding. Mr Herzog said that the plaintiff who wishes to call him has been unable to serve him with a witness summons. A witness summons was apparently taken out on 12 May 2003, that is nearly a month ago according to Mr Herzog. The plaintiff has not filed any affidavit concerning these matters. No information has been provided as to

the detailed efforts, if any, that have been made to serve Mr Bancroft other than what Mr Herzog told me in his submissions.

[5]The defendant does not accept that it has been established that there have been attempts made to serve because they simply do not know what the detail is of those attempts. It would have been preferable if the plaintiff wanted to proceed to seek an adjournment that a detailed affidavit setting out what steps have been taken to serve and how they have been unsuccessful was filed and served ahead of this application. In the absence of agreement on the part of the defendant that there have been attempts made and timely ones I am not prepared to accept that all proper steps have been taken to subpoena the witness. That is particularly so given the circumstances. Mr Herzog described this man as a critical witness. Apparently a brief was prepared for him and sent to him but he declined to sign it. That should have been an indication of possible difficulties with the witness. As well one would have expected that arrangements would have been made ahead of the back-up fixture in April rather than leaving it until now to try and subpoena the witness.

[6]For all of those reasons it seems to me that the plaintiff is the author of its own misfortune in this matter. The proceedings started in 2000. They are concerned with events that are said to have occurred back in 1997. They must now be brought to a conclusion.

[7]It would not be in the interests of justice to allow an adjournment. I accordingly decline the application.

[8]Costs on the application will be reserved.

[14]   The application for adjournment was renewed before District Court Judge Gittos on 9 June 2003. On this occasion the appellant filed an application supported by an affidavit by Mr Thoms, the appellant’s governing director. This application was also refused for the reasons set out in Judge Gittos’ oral ruling delivered the same day. That ruling was as follows:

[1]        This matter comes before me today, ostensibly to commence a four day fixture. At the commencement of the hearing Mr Herzog  for  the plaintiff has made an application for adjournment. This is made on a written application apparently filed on Friday and supported by an affidavit.

[2]        The basis of the application for an adjournment is that an essential witness, Mr Bancroft, cannot be located and served with a subpoena by the plaintiff. It is evident that on Friday an application for adjournment on these very grounds was made to Judge Doogue and was refused. Judge Doogue’s minute dated 6 June is on the Court file and indicates that the matter was ruled upon and dealt with then.

[3]        Mr Herzog seeks to reopen it with me today upon the basis, he says, that the affidavit now filed was not before the Court when the matter was dealt with by Judge Doogue. That does indeed appear to be the case

inasmuch as the affidavit has been filed apparently after Judge Doogue’s determination, but it is plain that the material contained in the affidavit was all advanced informally before Judge Doogue and was rejected.

[4]        On that basis it is idle to suggest that there are fresh grounds before me which would justify a further consideration of the matter and what really Mr Herzog is asking me to do is to effectively sit on appeal from the decision of Judge Doogue given only last Friday at 4.20 pm in respect to this matter. That is something that I am not prepared to do; it would bring the procedure of this Court into disrepute.

[5]        The plaintiff has had ample time as Judge Doogue has indicated to get its house in order in relation to this matter and if it has not got this witness before the Court now then it must take the consequences of that state of affairs.

[6]        The plaintiff indicates that it is not ready to proceed today without that witness and I have indicated to Mr Herzog that if that is the position then the defendants are entitled to judgment by default - but I would reserve leave to the plaintiff in those circumstances to appeal my decision in respect to the adjournment and indeed with it, Judge Doogue’s earlier decision, which I am really declining to interfere with.

[7]        The plaintiff discontinues its proceeding. Both parties are to file and serve memoranda as to the costs implications of that and what cost orders they seek within ten days.

[15]   On 20 June 2003 the appellant filed a notice of appeal against both decisions refusing the adjournment.

[16]   The matter was first called before Baragwanath J where it was adjourned to enable the two decisions and transcripts to be obtained from the District Court.

[17]   The matter was then called on 19 October 2003 before Williams J. The  matter was further adjourned following an oral application by Mr Herzog, counsel for the appellant, that this Court should set aside the discontinuance pursuant to its inherent jurisdiction. This was opposed by the respondents. Further timetabling orders were then made.

[18]   On 5 November 2003 the appellant filed an application to set aside the discontinuance.

[19]On 10 November 2003 the respondent filed:

[a]a notice of opposition to the appellant’s application to set aside the discontinuance; and

[b]an application to strike out the appeal.

[20]   The matter was called before me on 27 November 2003. At this point a dispute arose as to the precise circumstances which had led up to the appellant entering the discontinuance in the District Court. In an effort to resolve this impasse  I directed Judge Gittos pursuant to s76 of the District Courts Act 1947 to rehear that part of the application for adjournment after the decision had been made to refuse the adjournment on 9 June 2003.

[21]   This unfortunately only served to confuse the matter even further. On 2 February 2004 Judge Gittos decided he was unable to proceed with the suggested limited rehearing because the respondent submitted that he had no jurisdiction to do so given that the discontinuance had been filed. The Judge suggested that the appellant should make an application to set aside the discontinuance pursuant to R480B of the District Court Rules 1992.

[22]   Having considered the Judge’s direction, the parties advised the Judge at a telephone conference on 15 July 2004 that the rule only provided for such an application to be made by a defendant. The defendant/respondents in this case were not prepared to do so. The matter was accordingly referred back to me.

[23]On 27 August 2004 I issued a minute in the following terms:

TO: The Registrar, District Court at Auckland

Re:     Your file NP2238/02

[1]        This matter continues to bedevil and perplex Judge Gittos and myself.

[2]        Despite his best attempts to rehear this matter, following my direction dated 27 November 2003, the conundrum still remains.

[3]Following a conference today, I determined that:

[a]The appeal in this Court will proceed.

[b]An application by the applicant (plaintiff) to withdraw the discontinuance will be heard as a preliminary matter.

[c]If there is jurisdiction to hear this application, then the parties will be permitted to call evidence as to what exactly were the circumstances, which led to the discontinuance being entered.

[d]The parties are agreed, as am I, that it will be of assistance if a report can be obtained from Judge Gittos, setting out his recollection of the circumstances which led to the discontinuance.

[4]        I therefore enclose a direction to Judge Gittos, pursuant to R715(c) of the High Court Rules, and would be grateful if you would draw this to His Honour’s attention.

[24]On 5 October 2004 Judge Gittos provided the report as follows:

REPORT OF JUDGE J P GITTOS TO HIS HONOUR JUSTICE A [sic] LAURENSON

[Pursuant to Rule 715C High Court Rules]

[1]        In accordance with Your Honour’s direction, I record the following as my present recollection of the salient features of the hearing before me in this matter on 9 June 2003. I did not record any contemporary note as an aide-mémoire other than that endorsed upon the minute sheet which I think Your Honour has already seen.

[2]        Once the case was called and counsel had announced their appearances, Mr Herzog for the plaintiff made an application for an adjournment. This was opposed by the defendant and I was referred to the minute of Judge Doogue who had heard and determined an application by the plaintiff on the same grounds on the previous Friday 6 June.

[3]        As my oral decision records it was immediately apparent that I could not properly review the decision of Judge Doogue, and I told counsel that I would not grant the adjournment. Mr Herzog then indicated that the plaintiff was not ready to proceed and he sought leave to appeal my decision to refuse the adjournment. I told him that leave was granted to appeal my  decision and indeed the earlier decision of Judge Doogue with  which I had declined to interfere, but that the matter must nevertheless proceed. I recall saying to him something to the effect that if the plaintiff was not in a position to proceed that day then the defendant would be entitled to seek judgment by default and suggested that the plaintiff might wish to consider electing to non-suit itself.

[4]        Mr Herzog at once reminded me that the rules as to non-suit had been replaced by new rules as to discontinuance. In the course of addressing me on the topic it appeared to me that Mr Herzog was fully familiar with the details of these new rules although I must confess that I myself was not. I do not recall putting the plaintiff to an election between suffering judgment by

default, or discontinuance as is evidently the plaintiff’s contention. What I  do recollect trying to make clear was that I did not consider I could properly revisit the earlier refusal of the adjournment and was not prepared to allow the granting of leave to appeal that decision to become in itself a basis for a de facto adjournment pending the outcome of hearing and determination of any such appeal. I was therefore insistent that the matter must proceed upon whatever basis the plaintiff chose or considered open to it. Mr Herzog then sought and was granted a brief adjournment to take instructions, and presumably did so.

[5]        When the hearing resumed Mr Herzog informed me that the plaintiff discontinued its action. I then canvassed issues of costs with counsel and directed both parties to file and serve memoranda as to costs within 10 days.

[6]        It may be germane to add that at the time that the matter was before me and the plaintiff notified its discontinuance, it was still open to the plaintiff to commence a fresh proceeding against the defendant upon resolution of costs in respect to the discontinued proceeding. Although the issue of limitations has since apparently arisen, it was not relevant and was not mentioned in the course of the hearing before me.

[25]   On 13 October 2004 I adjourned the matter until 9 December 2004 to enable counsel to consider the report and file submissions.

[26]   On 9 December 2004 Mr Herzog for the appellants did not appear, nor had he filed the further submissions. Further timetabling orders were made and the matter was adjourned to the civil callover list on 23 February 2005 with a direction that it be allocated a hearing date due in the week starting 28 February 2005.

[27]   On 21 February 2005 the appellant filed an application in the District Court  to set aside the discontinuance. The matter finally came on for hearing before me on 4 March 2005.

Preliminary discussion at hearing on 4 March 2005

[28]   At the commencement of the hearing, counsel were not agreed as to how it should proceed. Mr Fuscic for the respondents maintained the basic submissions that there was no jurisdiction to hear the appeal in view of R480A of the District Court Rules which provides that a proceeding ends against a defendant or defendants once a discontinuance has been filed or notified.

[29]   Mr Herzog for the appellants submitted that the matter should be further adjourned to the District Court to enable that Court to resolve the application to set aside the discontinuance. At that hearing the Court would be invited by consent to refer the issue back to this Court for resolution pursuant tos45B of the District  Courts Act. Mr Fuscic indicated that no consent would be forthcoming in that event.

[30]   The key to unravelling this procedural quagmire was, quite clearly, to determine whether the discontinuance could be set aside on the appellant’s application either by this Court pursuant to its inherent jurisdiction, or by the District Court pursuant to its inherent power to regulate its own procedures.

[31]   Both Courts have rules relating to discontinuances in identical terms apart from the reference to the relevant rules in each case. Rules 480A and 480B of the District Court Rules provide:

480A   Effect of discontinuance

(1)        A proceeding ends against a defendant or defendants, as the case may be, on-

(a)the filing and service of a notice of  discontinuance under rule 479(1)(a); or

(b)the giving of oral advice of the discontinuance at the hearing under rule 479(1)(b); or

(c)the making of an order under rule 480.

(2)The discontinuance of a proceeding does not affect the determination of costs.

(3)This rule is subject to rule 480B.

480B   Court may set discontinuance aside

(1)The Court may, on the application of a defendant against whom a proceeding is discontinued, make an order setting the discontinuance aside if it is satisfied that the discontinuance is an abuse of the process of the Court.

(2)An application under subclause (1) must be made within 30 days after discontinuance under rule 479(1).

[32]The corresponding High Court Rules are 476A and 476B.

[33]   After a quite lengthy discussion with counsel followed by an adjournment, Mr Fuscic advised me after taking instructions that he “is prepared to have this Court decide the question whether the District Court has jurisdiction to decide whether the District Court can entertain an application to set aside a discontinuance”.

[34]Following further discussion, I noted the agreed position as follows:

[a]The appellant has appealed against two decisions in the District Court refusing an adjournment of the substantive proceeding.

[b]The respondents have submitted there is no jurisdiction to entertain the appeal in this Court because of the effect of the discontinuance.

[c]The appellant submits that the respondents’ argument is met by the appellant’s argument that the District Court can entertain an application to set aside the discontinuance.

[d]The parties agree that the above issues can be resolved by this Court within the context of the respondents’ application to strike out the appeal.

[e]If this Court does conclude that the District Court does have power to set aside the discontinuance, then the parties are further agreed that this Court should then decide whether an order should be made to set aside the discontinuance. If so, this Court should then proceed on to consider the appeal. If not, the appeal should be struck out.

[35]   The hearing then proceeded on this basis with Mr Fuscic commencing with his submissions in support of the application to strike out the appeal.

The hearing – the parties’ arguments

[36]   Before Mr Fuscic commenced his submissions in  support of the application to strike out the appeal, it had become clear that the appellant’s overarching

arguments were that, if the appeal was struck out, then this would result in a miscarriage of justice for the following reasons:

[a]That grounds advanced in support of the application for adjournment made it manifestly clear that the adjournment should have been granted. When Judge Gittos refused the second application he thereby placed the appellant in a position of having a “Hobson’s choice” either to submit to a judgment or discontinue.

[b]In these circumstances it would only serve to perpetuate the alleged miscarriage of justice if the discontinuance was found to have the effect of preventing the appeal.

[37]   Mr Fuscic submitted for a start that, an examination of the two decisions refusing the applications for adjournment made it abundantly clear that there were no grounds for concluding that the merits of the applications justified an adjournment.

[38]   In support of this submission Mr Fuscic referred to the detailed reasons contained in Judge Doogue’s minute dated 6 June 2003 (see para [13] above). It is apparent from the Judge’s notes on the District Court file that the factual matters upon which the decision was reached were fully recorded. Taking into account the matters recorded and the conclusions based on them as stated in the decision, I have no doubt that the Judge was entitled to exercise his discretion in the manner he did. Putting the matter bluntly, the appellant should have established the position regarding Mr Bancroft well before it did and certainly at a point where, if there were difficulties apparent, at a point where an application for adjournment could  have been made well before it was made.

[39]   So far as Judge Gittos’ decision is concerned, I am equally satisfied by comparing the information he had available to him from the affidavit by Mr Thoms dated 6 June 2003 that he, Judge Gittos, was fully entitled to conclude as he did that there were no new grounds advanced before him to justify the adjournment.

[40]   The appellant submitted that Judge Gittos did not in fact exercise any discretion, rather he merely accepted what had previously been decided by Judge Doogue. It is quite clear to me from Judge Gittos’ decision (para [14] above) that it  is idle for the appellant to contend that the decisions by the two Judges were not in each case a proper exercise of the Judge’s judicial discretion.

[41]   Having reached this conclusion it follows that to the extent that the appellant relies on any argument that the merits of the application for the adjournment warrant relief must fail.

[42]   Mr Fuscic’s second submission was that the report by Judge Gittos dated 5 October 2004 (para [24] above) made it equally clear that the Court had not presented the appellant with a “Hobson’s choice” after refusing the adjournment for the second time.

[43]   The appellant’s argument under this head was that, Judge Gittos, had created an anomalous situation in that having refused the adjournment, he had then granted leave to appeal against it. It was certainly a difficult situation both for the Court and for the appellant. I do not see, however, that the situation could be said to be anomalous. If having granted leave to appeal the Judge had adjourned the matter to allow the appeal to be heard, that would in effect have resulted in the matter being adjourned and with it the prejudice to the respondents, which both Judges had found was unacceptable. In fact, Judge Gittos accepted that there was a discussion regarding the alternatives, namely, judgment by default in favour of the respondents or discontinuance, and, that he insisted that the matter proceed upon whatever basis the appellant chose or considered open to it. In the event, having given Mr Herzog time to take instructions the election was made to discontinue.

[44]   As noted by me in my minute dated 27 November 2003, it seemed to me that there was a further alternative, namely, that the appellant submit to judgment being entered by default, namely, not to offer any evidence and seek a stay of entry of judgment pending the hearing of the appeal for which leave had been granted. This did not apparently occur to the appellant’s counsel, nor was it incumbent on the Judge to raise it once the appellant elected to discontinue.

[45]   A further alternative which became apparent, which I mentioned to counsel, was that the appellant could have proceeded with whatever evidence it had but first request the Court to note its protest that it was being asked to proceed on the face of  a refusal to allow an adjournment on the ground that an allegedly critical witness was not available. Had this been done, not only would the present appeal have been preserved, but so would an appeal against the substantive judgment had the appellant been unsuccessful.

[46]   It is quite apparent from the records available that the appellant had never considered this alternative either. It had gone to the hearing on 9 June 2003 with no plan as to what it would do if the adjournment was refused. This is apparent from Judge Gittos’ report and the affidavit by the second defendant dated 22 January 2004 and also, Mr Thoms’ second affidavit dated 4 November 2003.

[47]   My conclusion from the above is that the appellant had not considered its position sufficiently clearly before the hearing on 9 June 2003. It should have, because it was not entitled to assume that the second application for adjournment would be successful.

[48]   So far as Judge Gittos’ position is concerned, I consider he was entitled to insist that the matter proceed. He apparently discussed two alternatives with the appellant’s counsel, but in addition to these there were at least two other alternatives which counsel should have considered beforehand. In the final result, the decision to discontinue was made by the appellant. I do not accept that any criticism can or should be levelled at Judge Gittos.

[49]   I therefore conclude that the second ground of alleged miscarriage of justice has been effectively met by the respondents.

[50]   Mr Fuscic’s third submission was that the terms in effect of RR480A and 480B are quite clear, namely, that the effect of a discontinuance was to end the proceeding and with it any appeal arising from that proceeding. Therefore, absent any evidence of an abuse of process amounting to a clear miscarriage of justice, there could be no argument in favour of the District Court having power to set aside

a discontinuance on the application of the plaintiff pursuant to that Court’s inherent power to control its own processes. The same applied to any power by this Court to do so pursuant to its inherent jurisdiction to control the processes of an inferior court.

[51]   Finally, in relation to this submission, Mr Fuscic submitted that, even if either Court did have the power to set aside the discontinuance, the particular circumstances could not justify such a course. Apart from the merits of any such application if it was available, Mr Fuscic pointed to the lengthy delays which had occurred before the application to discontinue was filed in this Court (some four months) later, and that filed in the District Court some one year and eight months later.

Conclusion

[52]   My findings to this point have effectively resulted in a resolution of this matter because the appellant’s justification for seeking a finding as to jurisdiction to set aside the discontinuance was predicated on the existence of the two grounds establishing a miscarriage of justice such that the bar presented by a discontinuance should not be allowed to prevail. Having found that the foundations for the argument do not exist there is, in my view, no point  in considering in the abstract whether  there is jurisdiction to set aside a discontinuance on a plaintiff’s application.

[53]   Counsel referred me to a number of cases notably, Auckland Trotting Club Inc v Ralf Enterprises Ltd (2003) 16 PRNZ 710 in which Harrison J recognised the “all or nothing” effect of a discontinuance; and Conybeare v Lewis (1880) 13 ChD 469 (CA) in which it was held that a discontinuance of the lower Court action put an end to the pending appeal and where the appeal was struck out.

[54]   Mr Herzog, as I have already noted, submitted that it would be quite contrary to the interests of justice for one or other of the Courts not to interfere in this case if indeed the miscarriages had occurred.

[55]   Rule 480B of the District Court Rules and the corresponding R476B of the High Court Rules both allow for a defendant to apply to set aside a discontinuance if

it is an abuse of the process of the Court. An application must be made within thirty days.

[56]   I can accept that it may well be within the High Court’s inherent jurisdiction, and possibly within the District Court’s inherent power to control its procedures, to set aside a discontinuance on the application of a plaintiff (there being no specific bar to this under the relevant rules) but if this is the case the Court would have to be satisfied that not to do so would amount to an abuse of process. Matters which counsel suggested might provide such basis could be coercion of a plaintiff,  irrational behaviour by counsel, fraud, or by consent of both parties. As Mr Fuscic submitted, however, there could be no sensible basis for suggesting that an abuse of process could arise in a situation where a discontinuance had arisen as a result of tactical or technical area. I agree.

[57]For the above reasons, I find:

[a]The issue as to whether either this Court or the District Court has power to set aside a discontinuance on the application of the plaintiff does not arise.

[b]It does not arise because the factual grounds alleged by the appellant to provide a basis for such an application i.e. an abuse of process amounting to a miscarriage of justice.

[c]The respondents’ application to set aside the appeal succeeds.

[d]The appellant’s appeal is accordingly dismissed.

Costs

[58]   The respondents are entitled to costs and disbursements. The costs so far as the matters dealt with in this Court are concerned are to be fixed on the basis of the 2B formula. Disbursements are to be fixed if necessary by the Registrar.

[59]   I note from the District Court file that Judge Gittos directed on 27 August 2003 that the fixing of costs in his Court was deferred until after the appeal was heard by this Court. This being the case, the question of costs in the District Court is to be referred back to Judge Gittos for determination by him.