Sharda Holdings Limited v Gasoline Alley Services Limited

[2010] NZCA 225

IN THE COURT OF APPEAL OF NEW ZEALAND

CA118/2010
[2010] NZCA 225

BETWEENSHARDA HOLDINGS LIMITED

Applicant

ANDGASOLINE ALLEY SERVICES LIMITED

Respondent

Hearing:18 May 2010

Court:Arnold, Ellen France and Baragwanath JJ

Counsel:D Singh for Applicant

D I Sheppard for Respondent

Judgment:1 June 2010 at 3 pm 

JUDGMENT OF THE COURT

AThe application for an extension of time is granted on the conditions set out in [14] of the reasons of the Court.

BThe applicant must pay the respondent costs for a standard application on a Band A basis and usual disbursements.

REASONS OF THE COURT

(Given by Ellen France J)

Introduction

[1]        This is an application for an extension of time under r 29A of the Court of Appeal (Civil) Rules 2005 to appeal decisions of Duffy J.  The decisions imposed security for costs and awarded costs to Gasoline Alley Services Ltd (GAS), the respondent, in relation to the application for security for costs.[1]

Background

[1]Sharda Holdings Ltd v Gasoline Alley Services Ltd HC Auckland CIV-2008-004-000539, 13 November 2009 and minute of 24 February 2010.

[2]        The applicant, Sharda Holdings Ltd (Sharda), subleased a service station from GAS.  The head lease between GAS and a third party contained a clause restricting competing businesses from operating in the shopping complex.  Sharda brought proceedings against GAS.  Sharda argues that when a competing business caused Sharda’s business to suffer, GAS did not do enough to enforce the terms of the head lease and protect Sharda’s rights.

[3]        GAS made an application for security for costs on the basis that Sharda would be unable to pay any costs awarded against it.  In granting the application for security for costs, Duffy J found that Sharda was impecunious.  There is no real challenge to that finding.  The Judge then went on to assess the merit of Sharda’s claim.  She concluded that it was weak both in terms of the allegations of breach of contract and in terms of causation.   Duffy J estimated that the costs would be $53,000 and so ordered Sharda to pay $45,000 by way of security for costs payable in three tranches each of $15,000.  On 24 February 2010, the Judge made an order that Sharda pay costs of $4,480 and disbursements of $600 on the security for costs application. 

[4]        Sharda has filed an application for an extension of time to appeal against both orders.  The application is opposed.

Discussion

[5]        The test for whether an extension of time to appeal should be granted under r 29A is as expressed in My Noodle Ltd v Queenstown-Lakes District Council:[2]

A number of factors are relevant to a decision as to whether time to appeal should be extended, including the reason for the delay, the length of the delay, the conduct of the parties and the extent of any prejudice caused by the delay:  New Plymouth District Council v Waitara Leaseholders Association Incorporate [2007] NZCA 80 at [22]. The overall test, however, is whether granting an extension would “meet the overall interests of justice”: Havanaco Ltd v Stewart (2005) 17 PRNZ 622 at [5] (CA).

[2]My Noodle Ltd v Queenstown-Lakes District Council [2009] NZCA 224, 19 PRNZ 518 at [19].

[6]        The application for an extension of time was not filed until 8 March 2010 so Sharda is about three months out of time.  Mr Singh for Sharda says the delay resulted from a misunderstanding on the part of one of the other solicitors in his firm.  Mr Singh explains that the solicitor thought that costs in relation to the security for costs application had to be dealt with first. 

[7]        GAS advances an alternative explanation, namely, that Sharda simply had a change of heart.  GAS points out that Sharda’s initial response to Duffy J’s decision was to apply for timetabling directions in relation to the payment of the tranches of security for costs. 

[8]        We cannot resolve this difference of views in the absence of any affidavit from the solicitor concerned.  The failure to file an affidavit is obviously highly unsatisfactory in the circumstances.  Indeed, but for the fact we consider the merits favour granting an extension of time, we would have found against Sharda on the basis that the explanation for the delay was inadequate.  

[9]        As we have foreshadowed, we have concluded that the proposed appeal is not hopeless.  It is not appropriate at this point to undertake an extensive examination of the merits.  We make just three points.

[10]       First, in concluding that the merits of Sharda’s claim against GAS were weak, the Judge relied on the absence of evidence of complaint to GAS by Sharda.  In other words, it appeared there was nothing to trigger GAS’s obligation to act.  However, Mr Singh was able to point us to correspondence, which was before the Judge, from the solicitors for GAS about the complaint which is consistent with Sharda’s claim that it did raise a complaint. 

[11]       GAS says there is an explanation for the approach in the correspondence, relating to the way in which Sharda’s claim has shifted over time.  No doubt these matters will be developed during the argument of the appeal and later at trial, if that occurs.  But, as the authors of McGechan note, there is “a very real limit as to how far ... an inquiry” into the merits and prospects of success can be taken at this early stage of the proceeding.[3]  At this point, what matters is that, contrary to the Judge’s finding, there was some evidence to support Sharda’s version of events in this respect.

[3]Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [HR5.45.03(2)].

[12]       Secondly, in terms of causation the Judge referred to evidence that Sharda’s sales were dropping off anyway, that is, regardless of any competing business operating in breach of the lease arrangements.  But Sharda had also provided contradictory evidence so, again, there is a contest about this factor.

[13]       Finally, it does appear that the Judge has included time needed for GAS’s counter-claim in the calculation of likely costs.  That time may be minimal but it may have had an impact on the amount of security awarded.

[14]       These matters, taken together, suggest the appeal is not hopeless.  Given that conclusion, and the absence of any real prejudice to GAS, we are satisfied that the interests of justice warrant an extension of time to pursue the appeals.  (The appeal against the costs order is linked with the appeal against security for costs.)   Obviously, Sharda should prosecute the appeals expeditiously. Accordingly, the application for an extension of time is granted on the conditions that, on or before 30 June 2010 Sharda is to:

(a)         File its notice of appeal;

(b)         Pay the filing fee;

(c)          Deal with security for costs;

(d)         Apply for the allocation of a hearing date; and

(e)         File a case on appeal.

Costs on this application

[15]       GAS sought costs on this application, claiming Sharda has not adequately explained the delay and it was not unreasonable to withhold consent to an extension of time.  Given the insufficiency of evidence from Sharda in explaining its delay, we agree that GAS should get costs on the application.  GAS is entitled to costs for a standard application on a Band A basis and usual disbursements.

Solicitors:

Shean Singh, Auckland for Applicant

Fitzherbert Rowe, Palmerston North for Respondent