Seaview Road Limited v Verboeket HC Wellington CIV 2010-485-1296

[2010] NZHC 1830

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-485-1296

BETWEEN  SEAVIEW ROAD LIMITED Applicant

ANDPETER CHARLES VERBOEKET Respondent

Hearing:         6 September 2010

Appearances: O. Paulsen - Counsel for Applicant

P. Withnall - Counsel for Respondent

Judgment:      13 September 2010 at 3.30 pm

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

This judgment is delivered by Associate Judge D.I. Gendall on 13 September 2010 at

3.30 pm under r 11.5 of the High Court Rules.

Solicitors:           Cavell Leitch Pringle & Boyle, Solicitors, PO Box 799, Christchurch

CV Law Limited, Solicitors, PO Box 13-453, Wellington

SEAVIEW ROAD LIMITED V PC VERBOEKET HC WN CIV-2010-485-1296  13 September 2010

Introduction

[1]      The applicant, Seaview Road Limited (“Seaview”), applies for a transfer of proceedings to the High Court pursuant to s 45 of the District Courts Act 1947. Seaview, which is the defendant in the District Court proceedings, seeks the order for transfer on the grounds that the value of a counterclaim it has made against the plaintiff exceeds the jurisdiction of the District Court.

[2]      Mr Verboeket, who is the plaintiff in the proceeding, is opposed to the application to the extent that it seeks transfer of the entire proceeding.

Background

[3]       The parties’ dispute arises from an Agreement for Sale and Purchase (“the Agreement”) of a building known as Apex House in Lower Hutt. The Agreement was entered into on 8 October 2009 by Mr Verboeket as purchaser and by Seaview as vendor. The purchase price was $1,650,000.00. The Agreement was subject to a number of special conditions of sale, including a requirement that Mr Verboeket obtain a suitable registered valuer’s report by 21 December 2009. The settlement date under the Agreement was 1 February 2010.

[4]      On 29 October 2009, Seaview entered into a lease of one room of Apex House for a term of four years from 25 March 2010. The parties are in dispute as to whether Mr Verboeket was aware of that lease and whether he was consulted before it was entered into.

[5]      On 23 December 2009, Seaview gave notice of its intention to cancel the Agreement for failure by Mr Verboeket to confirm the special condition to obtain a registered valuer’s report by 21 December 2009. Mr Verboeket then confirmed the special condition by letter dated 24 December 2009. Later on 8 January 2010, he confirmed  the  finance  condition  in  the  Agreement  had  also  been  satisfied,  the contract “remains on foot” and “is now unconditional”.   It appears that the parties subsequently proceeded on the basis that the Agreement was in fact unconditional and had either not been cancelled or it had been reinstated in some way.

[6]      Thus, on 8 January 2010, Mr Verboeket paid the deposit of $165,000.00 to

Seaview’s real estate agent.

[7]      As I have noted, the Agreement called for settlement to take place on 1

February 2010.  This did not happen.  On 2 February 2010, therefore Seaview issued to  Mr  Verboeket  a  settlement  notice  provided  for  under  the  Agreement.  Mr Verboeket  did  not  comply with  the  notice  and,  on  23  February 2010,  Seaview cancelled the Agreement. It then made attempts to resell Apex House, but without success.

[8]      Mr Verboeket’s essential claim now is that the Agreement was cancelled by

Seaview for non-fulfilment of one of the special conditions of sale on 23 December

2009 and thus it ceases to exist. Seaview, on the other hand, contends that it only cancelled the Agreement following Mr Verboeket’s repudiation of, or failure to settle, the Agreement, that subsequently it was reinstated/replaced and the parties proceeded on the basis the sale and purchase was still on foot.

[9]      On 26 March 2010, Mr Verboeket filed proceedings in the District Court seeking return of the deposit he had paid of $165,000.00 and damages of about

$15,000.00. In total, Mr Verboeket claims $179,917.50 plus interest at 8.4 per cent per annum from 8 January 2010. The interest is claimed pursuant to s 62B of the District  Courts  Act  1947,  with  the  result  that  it  is  not  taken  into  account  in calculating the jurisdictional limit: s 42A of that Act. Mr Verboeket claims that he is entitled to the deposit because Seaview cancelled the Agreement. He relies on alternative causes of action in equity, under the Fair Trading Act and for wrongful repudiation.

[10]     On 5 May 2010, Seaview filed a notice of defence and counterclaim against Mr Verboeket, seeking damages suffered as  a result of Mr Verboeket’s alleged failure to perform the Agreement. Seaview later quantified its damages claim at

$472,925.32 based on a market valuation for Apex House.

[11]     On 17 June 2010, Mr Verboeket filed his information capsule in the District

Court.

[12]     On 13 July 2010, Seaview filed its application to transfer the proceeding to the High Court, following Mr Verboeket’s refusal to consent to a transfer.

Counsel’s Arguments and My Decision

[13]     While Seaview seeks an order that the whole proceeding be transferred to the High Court, Mr Verboeket contends that only the counterclaim should be transferred to the High Court, and that his claim should remain in the District Court. Both of these scenarios are provided for in s 45 of the District Courts Act 1947, which provides as follows:

45 Transfer of proceedings where there is a counterclaim

(1) Where, in any proceeding commenced in a Court, any counterclaim or set-off and counterclaim which involves matter beyond the jurisdiction of a Court has been filed by any defendant, any party to the proceeding may, within such time as may be prescribed by the High Court Rules, apply to the High Court or a Judge thereof for an order that the whole proceedings, or the proceedings on the counterclaim or set-off and counterclaim, be transferred to the High Court.

(2) On any such application the High Court or Judge may, as it or he thinks fit, order either—

(a) That the whole proceedings be transferred to the High Court; or

(b) That the  whole proceedings be heard and determined in the

Court; or

(c) That the proceedings on the counterclaim or set-off and counterclaim be transferred to the High Court and that the proceedings on the plaintiff's claim and the defence thereto other than the set-off (if any) be heard and determined in the Court:

Provided that, where an order is made under paragraph (c) of this subsection, and judgment on the claim is given for the plaintiff, execution thereon shall, unless the High Court or a Judge thereof at any time otherwise orders, be stayed until the proceedings transferred to the High Court have been determined.

(3)  If  no  application  is  made  under  this  section  within  the  time  prescribed  as aforesaid, or if on such an application it is ordered that the whole proceedings be heard and determined in the Court, the Court shall have jurisdiction to hear and determine the whole proceedings, notwithstanding any enactment to the contrary.

(4) Where the High Court makes any order under the provisions of this section, the Registrar of the High Court shall send to the Registrar of the Court a copy of the order so made.

The factors to be considered when determining an application under s 45 were set out in Cromwell Property Holdings & Development Ltd v Checketts McKay (1999)

13 PRNZ 709 at [18]:

Counsel referred to the limited authorities on the issue. The leading authorities are the decision of Penlington J in Essar (NZ) Ltd v The Spa & Pool Factory Ltd 15/3/91, Penlington J, HC Auckland M307/91 and Stoupe v Nutri-metrics International (NZ) Ltd (1997) 10 PRNZ 389. In that latter decision, Master Thomson referred to the earlier decision of Penlington J and noted the factors which could properly be taken into account in exercising the discretion under s 45:

• The amount by which the counterclaim exceeds the jurisdiction of the District

Court;

• The nature and extent of the matters in issue, whether of fact or law;

• The relative cost in each Court;

• The relative time to dispose of the case in each Court; and

• Other factors including public or other importance.

[14]     Seaview contends that all of these factors support its application for transfer of the whole proceeding to the High Court. First, Seaview submits that quantification of its counterclaim for $472,925.32 is based on a genuine assessment of its loss, and that it exceeds the District Court’s jurisdiction by a considerable margin.  On this, reference is made to Essar (NZ) Limited v The Spa & Pool Factory Limited HC Auckland M307/91, 15 March 1991 and Effective Engineering Limited v Ecocover Limited HC Rotorua CIV-2009-404-5331, 15 March 2010.

[15]     The former case involved a counterclaim for $204,000.00, but it was brought at a time when the jurisdictional limit of the District Court was $50,000.00. The Court regarded as a significant factor that the counterclaim was four times the level of the maximum jurisdiction of the District Court. In the latter case, the High Court refused transfer of the proceedings although the counterclaim was for $2.3 million. In doing so, the Court noted however that the counterclaim was in fact made up of a multiple number of claims for $100,000.00 each, and that the basis of the counterclaim was not particularly complicated (at [14]).

[16]     For  Mr  Verboeket,  it  is  submitted  that these two  cases  bear  little or no similarity to the present case, and that the quantum of Seaview’s counterclaim here could be as little as $247,925.32.   In response, Seaview submits that, if the jurisdictional limits imposed by Parliament on the District Court are to have any meaning, the fact that its counterclaim is well in excess of the jurisdictional limit must be an important factor in favour of transfer.

[17]     Seaview’s counterclaim here does exceed the District Court’s jurisdiction by a considerable amount, and in my view this should be taken into account in weighing up all the relevant factors arising from its present application.

[18]     The second matter that is relied upon by Seaview is the nature and extent of the claim. While Seaview concedes that the facts of this case are not complicated, it submits that there are complex issues of law that arise which ought to be dealt with in the High Court. It refers, for example, to the question of whether Seaview validly cancelled  the  Agreement  on  23  December  2009;  whether  Mr  Verboeket  was estopped from denying that the Agreement was not effectively cancelled, or that it was reinstated or replaced in some way; whether Seaview breached its obligation in granting a lease in respect of a room in Apex House; whether Mr Verboeket was still obliged  to  settle  the  Agreement;  and  whether  Seaview  validly  cancelled  the “ultimate” Agreement. Mr Verboeket, on the other hand, contends that the claim is not especially complex, as it involves well established legal principles.

[19]     While I accept that clearly the District Court would be sufficiently equipped to deal with the legal issues arising in this case, I consider also that there is substance in Seaview’s submission that the proceeding will involve questions of some complexity that may not be entirely straight-forward. It seems, therefore, that the case is not so simple as to make a transfer to the High Court inappropriate or undesirable.

[20]     Seaview further contends that the claim and counterclaim are so inseparably linked that they should both be heard in the High Court. It maintains that it would be a waste of time and resources for the two claims to be heard by separate Courts given that they address largely the same issues between the same parties. Here, Seaview refers to the decision in Cromwell Property Holdings, where Venning J noted at [20]:

Another issue which is relevant is whether the counterclaim can be regarded as so inextricably linked to the claim itself that both should be considered together. I note in this  case  that Ms  Clarke accepts that if there is to be  an order transferring the counterclaim to the High Court then the respondent solicitors' claim should also be transferred to the High Court. With respect, that is a responsible and realistic concession. In this case the parties' cases are really two sides of the one coin. If the counterclaim fails then it is unlikely there will be any substantive defence to the

solicitors' claim for reimbursement for legal fees and expenses incurred on behalf of the applicant company.

[21]   The respondent in that case had sued the applicant for legal costs and disbursements, which was met with a counterclaim for negligence of  over $2.9 million by the applicant. Although the facts of Cromwell Property Holdings are not comparable to the present dispute, the case is similar insofar as the parties’ claims were “really two sides of the one coin”. Here, in my view, it is likely that ultimately the success or failure of the parties’ claims will be determined by the same issues regarding cancellation/repudiation/reinstatement  of the Agreement.

[22]     Seaview contends that it is made clear in Mr Verboeket’s own 5 August 2010 affidavit filed in opposition to the present application that the claims are inseparably linked, referring at para 7 to the following passage:

7.        Secondly, if any of my claims succeed then I understand by definition the Applicant’s Counterclaim in the District Court proceedings will not survive. The Applicant’s Counterclaim in the District Court proceedings is for damages allegedly suffered as a result of the Applicant cancelling the Agreement because I did not settle the Agreement on 1 February 2010. However, if any of my claims in the District Court proceedings succeed I will have been entitled not to settle the Agreement and there will be correspondingly no basis for the Applicant’s Counterclaim.

[23]     And, in relation to both claims, Seaview goes on to argue that the issue will be how the Agreement was cancelled ultimately, and a concern is that the parties will have a race to have their respective claims heard first if they are not determined together. Mr Verboeket, on the other hand, contends that the counterclaim will only be of relevance if his substantive claim is unsuccessful, and that the claims are thus “sequential” rather than “interwoven”. If it is found that Mr Verboeket was not required to settle the Agreement, Seaview’s counterclaim that Mr Verboeket repudiated the Agreement can have no basis. Mr Verboeket submits therefore that there is no reason why his claim should be transferred to the High Court, simply because Seaview’s counterclaim exceeds the jurisdiction limit of the District Court.

[24]     In my view, it is not realistic to describe the parties’ claims as “sequential”. The claims involve consideration of the same legal issues, and it would therefore be more practical if they were determined in one proceeding. In the language employed by Venning J in Cromwell Property Holdings, I am satisfied that the parties’ cases

here are really two sides of the one coin.  Although Mr Verboeket’s claim may, in the end, be successful and thereby effectively dispose of Seaview’s counterclaim, the arguments that will have to be considered in defence to Mr Verboeket’s claim will largely be analogous to Seaview’s counterclaim.

[25]     Thirdly, Seaview submits that there is nothing to suggest that the costs in dealing with the claim and counterclaim in the District Court will be any less than in the  High  Court.  On  the  contrary,  it  is  submitted  that  dealing  with  the  claims separately would effectively duplicate each party’s costs.

[26]     Mr Verboeket argues, however, that the most sensible solution would be to resolve his claim in the District Court first and then to determine the applicant’s counterclaim in the High Court if necessary. He contends that he will face higher fees in the High Court than in the District Court, and that it is likely that he will also incur greater legal costs, given that the new District Court Rules are designed to expedite proceedings. It is submitted that these costs could well turn out to have been unnecessary if Mr Verboeket’s claim is successful.

[27]     I have already noted my reservations with respect to the argument that the parties’ claims are “sequential” in nature and should be treated as such. In my view, it would be beneficial if the claims were heard together. I accept the applicant’s submission that it is unlikely that there would be no duplication of costs if two separate parallel proceedings were ordered.   It is also of relevance here, that Mr Verboeket would be compensated to an extent for his costs and disbursements if his claim was successful, but I do note that High Court scale costs are in many cases limited generally to about two thirds of actual costs.  On balance, although I accept that increased costs  are one of the factors that  should form part  of  my overall assessment, I do not consider this matter to hold any determinative force in the circumstances of this case.

[28]     The  final  issue  to  be  addressed  here  is  Seaview’s  submission  that  the proceeding could be dealt with more promptly in the High Court than in the District Court, given the flexibility of the High Court case management system. Seaview intends to join to the proceeding a third party, the real estate agent, and argues that,

while the new District Court procedure is inflexible in relation to the joinder of third parties, High Court procedures would ensure that there is no delay in this.

[29]     Mr Verboeket submits that his claim is well advanced in the District Court and that, were it not for the present application, the parties would be nearing the trial allocation procedure under the new District Court Rules. Seaview does not accept this argument. It points out that it has not yet filed its information capsule, and that the steps that would likely follow the filing of the capsule are the filing of a notice of pursuit of claim, the filing of a third party claim against the real estate agent by Seaview, a judicial settlement conference, and a directions conference. Accordingly, Seaview submits that there is no prejudice to Mr Verboeket in ordering a transfer at this stage in the proceeding, given that there would still be a “whole raft of steps” that would need to be completed before trial in the District Court.

[30]     While it may be difficult to foresee at this stage whether the proceeding could in fact be dealt with in a more timely manner in the High Court, I agree with the applicant’s submission that transfer of the proceeding would not result in undue delay. The claim in the District Court is still at a relatively early stage, and any delay or added cost arising from the transfer would be offset by the benefit of having the parties’ claims heard together in one proceeding.

[31]     Overall, I consider that the most appropriate way of dealing with the parties’ claims is to order a transfer to the High Court of the entire proceeding. Seaview’s counterclaim clearly exceeds the jurisdictional limit; the proceeding involves legal questions of some complexity; a transfer is unlikely to result in undue delay; and, most significantly, the claim and counterclaim relate to sale contract/s for one property and are inextricably linked. In these circumstances, the possibility that Mr Verboeket may incur greater costs in the High Court is not sufficient to tip the balance in his favour.

Conclusion

[32]     For these reasons, Seaview’s application for transfer of the entire proceeding to the High Court is successful and I make an order accordingly.

[33]     As to costs, Seaview has been successful in this application and I see no reason why costs should not follow the event in the usual way.  Costs are therefore awarded to Seaview on this application on a category 2B basis plus disbursements (if any) as approved by the Registrar.

‘Associate Judge D.I. Gendall’