Shea Limited t/a Stonewood Homes East Auckland v District Court at Manukau
[2021] NZHC 1880
•23 July 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2021-404-350
[2021] NZHC 1880
IN THE MATTER OF an Application for Judicial Review pursuant to the Judicial Procedure Act Section 16(3)(a) and/or Part 30 of the High Court Rules BETWEEN
SHEA LIMITED trading as STONEWOOD HOMES EAST AUCKLAND
Applicant
AND
THE DISTRICT COURT AT MANUKAU
First Respondent
CEDRIC EDWARDS and NICOLE EDWARDS
Second Respondents
Hearing: 21 July 2021 Appearances:
N Woods for the Applicant
No appearance for the First Respondent Second Respondents in person
Judgment:
23 July 2021
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 23 July 2021at 2:30pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
SHEA LIMITED trading as STONEWOOD HOMES EAST AUCKLAND v THE DISTRICT COURT AT MANUKAU [2021] NZHC 1880 [23 July 2021]
Introduction
[1] Shea Ltd applies for judicial review of the District Court’s decision to dismiss its appeal against an order of the Disputes Tribunal. The first respondent, the District Court at Manukau, abides this Court’s decision. The second respondents, Mr and Mrs Edwards (the Edwards), the successful parties in the Disputes Tribunal and the District Court, oppose the application.
[2]In summary, Shea Ltd alleges that:
(a)There was a failure of natural justice in the Tribunal, primarily because Shea Ltd was not given an adequate opportunity to answer the Edwards’ claim, and because the Tribunal Referee demonstrated a lack of impartiality.
(b)The Referee’s decision was unreasonable.
(c)Judge Bergseng’s decision was unreasonable, because he did not deal adequately with the above challenges to the Tribunal decision.
[3] I have to decide whether these allegations are available on a judicial review, and if so whether Shea Ltd has established them.
Factual background
[4] Stonewood Homes Franchisor NZ Ltd (Stonewood) carries on business as a home builder franchisor. Shea Ltd is one of Stonewood’s franchisees.
[5] On 30 August 2017, the Edwards entered into a building contract with Shea Ltd for the construction of a Stonewood design home on the Edwards’ land (the Build Agreement). The contract price was $1,030,755.65. The Edwards paid a deposit of
$51,500 to Shea Ltd.
[6] A covenant on the Edwards’ land required plans to be approved by a Design Review Board. The Stonewood design was rejected on 5 October 2017, so the Edwards engaged an independent architect to prepare a design for submission to the
Design Review Board. This design was accepted. Shea Ltd had been retained in the role of builder. However, when it was unable to provide an acceptable quote for construction, the Edwards chose to cancel the Build Agreement.
[7] The Edwards then sought to recover the $51,500 deposit. Shea Ltd’s position was that the deposit was not refundable.
[8] The parties attempted to resolve this dispute. On 14 May 2018, Ms Jean Dougherty, Business Manager at Shea Ltd, emailed the Edwards with a proposal to refund the deposit less certain costs:
Hi Cedric and Nicole,
Thank you for your patience and we have now received all of the final costs and information for your contract settlement. We have negotiated a credit through our head office based on the fees below but typically building contracts are not refundable. Stonewood Homes has made an exception due to your circumstances have and [sic] passed on our costs to date only. We have also not charged you for any of the time during preconstruction advising you on you [sic] final architectural concept plans.
…
Fees Amount Notes Franchise fees 15,461.33 1.5%-typically 2.5% Sales Commission 15,461.33 Paid to Dennis Fillet Design Fee 575.00 Paid to Synergy for concept QS Fees 2,071.15 Quantity surveyor time Concept fees 1,294.61 Drafting fee time 34,863.43 Deposit paid
$51,500.00
Credit
…
16,636.57
[9] In response, on 15 May 2018 Mr Edwards sent an email to Ms Dougherty. Among other things, he asked when the costs (which Shea Ltd proposed be deducted from the deposit) had been paid or generated. Ms Dougherty’s email response, on 16 May 2018, did not clearly answer Mr Edwards’ question. She said Shea Ltd had only charged “the minimum costs against the deposit”.
[10] Mr Edwards was not satisfied with Ms Dougherty’s response. On 21 May 2018, he sent an email to Steven Zhu, of Stonewood. Mr Edwards expressed concern that some of the amounts (that is, the costs that Shea Ltd proposed be deducted) “have been manufactured”. He asked Mr Zhu to investigate whether the franchise fee “exists”. That fee (shown by Ms Dougherty’s email to be $15,461.33) would have been payable or paid, if at all, by Shea Ltd to Stonewood.
[11] By email dated 21 May 2018, Mr Zhu declined to answer Mr Edwards’ questions. He referred Mr Edwards back to Shea Ltd.
[12] Shea Ltd’s solicitors, Rice Craig, then emailed a letter to Mr and Mrs Edwards on 25 May 2018. Relevantly, the letter said:
6.In reliance on clause 2.3, SHEA’s position is that the deposit you paid is not refundable under the [Build Agreement].
7.Nevertheless, SHEA reasonably offered to only retain its costs to date and to refund the remainder of the deposit to you. This is a reasonable (and generous) position.
8.You have suggested that SHEA had a duty to include “all additional and known conditions in the contract”. We don’t agree that SHEA had any such duty.
9.The costs set out in SHEA’s email to you dated 14 May 2018 are all costs related to steps taken before the DRB rejected the original design and include:
(a)The franchise fee payable under SHEA’s contract with the franchisor;
(b)Commission paid to a third party under a contract between SHEA and the third party;
(c)The Design Fee payable under SHEA contract with Synergy; and
(d)Reasonable costs allocated for time spent by SHEA’s employees, including for its quantity surveyor’s time and for drafting of the concept plan.
Offer to you
10.SHEA now offers to refund you the sum of $16,636.57 from your deposit, in full and final settlement of all issues to date arising out of the [Build Agreement].
11.If the offer is not accepted, SHEA reserves the right to retain the full amount of the deposit.
[13] Mr Edwards responded by email on 25 May 2018. He said that before he and Mrs Edwards could consider the offer, they needed confirmation of what steps Shea Ltd had taken to mitigate the franchise fee. Rice Craig replied on 1 June 2018, advising that Shea Ltd had made an application to have the franchise fee reduced already – to the 1.5 per cent indicated in Ms Dougherty’s email of 14 May 2018.
[14] On 6 June 2018, Mr Edwards sent another email to Mr Zhu. Mr Edwards referred to Ms Dougherty’s email of 14 May 2018 having stated that Shea Ltd had incurred a franchise fee. Mr Edwards said:
We raised some concerns about that the costs in particular the franchise fee and have asked a number of times when it was or will be paid. We have not had this clarified to date.
[15] Mr Edwards concluded the email by putting a proposal to Mr Zhu, which included:
The franchise fee has not been paid and we believe there is an opportunity for you to waive the franchise fee once an application is submitted.
[16] On 7 June 2018, Rice Craig emailed Mr and Mrs Edwards, noting that the Edwards had been corresponding with Stonewood. Rice Craig repeated Shea Ltd’s offer in the 25 May 2018 letter, and said that offer would be withdrawn at 5 pm the next day. Mr Edwards responded by email the same day:
We accept the offer as of 25 May and request the refund be deposited in our account … within 2 working days. We also request that your client provide confirmation to us of when and the amount of the franchise fee paid to HQ.
[17] Rice Craig replied on 11 June. It did not address Mr Edwards’ request for confirmation of Shea Ltd’s payment of the franchise fee to Stonewood:
Thank you for advising you accept the full and final settlement offer made by SHEA. … SHEA will make payment to you today in the sum of $16,636.57
… . Upon payment being made, all issues to date between you and SHEA arising out of the contract will be fully and finally settled.
Claim in Disputes Tribunal
The claim
[18] On 12 July 2018, Mr Edwards lodged a claim in the Disputes Tribunal seeking reimbursement of $15,000 in respect of the $15,461.33 withheld from the deposit refund for the franchise fee. The balance of $461.33 was abandoned to bring the claim within the Disputes Tribunal’s jurisdiction.
[19] Mr Edwards brought the claim against Stonewood, rather than Shea Ltd. He later explained that this was because he and Mrs Edwards assumed that the franchise fee had been paid to Stonewood.1
[20] On 29 October 2018, the hearing of the Edwards’ claim commenced but did not conclude. This was because Referee J S Dryden ordered that Shea Ltd be joined to the proceeding as second respondent and that Mrs Edwards be added as a joint applicant. The reasons for this order were apparently (underlining added):2
The matter of whether the franchise fee is a cost that can be deducted from the
deposit paid cannot be determined without the involvement of Shea Limited
… The matter as to whether there is a quasicontractual relationship between Mr Cedric Edwards and Mrs Nicole Edwards cannot be determined until the
issues as to whether a franchise fee has been paid by Shea Limited to
Stonewood Homes New Zealand Franchisor Limited and what are the conditions of paying for a franchise fee when a contract is terminated.
[21] Although Shea Ltd was joined to the proceeding, I was informed that the Edwards were not required to, and did not, file or serve a claim form against Shea Ltd.
[22] Despite that, Shea Ltd must have been aware that the Edwards’ claim was concerned with whether the franchise fee had been paid and could be deducted from the deposit. That was apparent from the Referee’s reasons for Shea Ltd being joined.3 It was also reflected in a memorandum of counsel that Shea Ltd’s solicitors, Rice
1 Transcript of Disputes Tribunal hearing, 4 March 2019 at 10/1.
2 The evidence that the parties produced for the hearing before me did not include a copy of Referee Dryden’s reasons. However, in the District Court hearing, Judge Bergseng read out the reasons. I have relied on the transcript from the District Court hearing (which Shea Ltd put in evidence before me).
3 In the District Court, counsel for Shea Ltd acknowledged that the reasons for the order had been sent to Shea Ltd: transcript of District Court hearing, 3 July 2020 at 25.
Craig, filed in advance of the next Tribunal hearing. In that memorandum, dated 20 December 2018, counsel asserted the Edwards were estopped from pursuing a claim against Shea Ltd because there had been a full and final settlement between those parties. Therefore, counsel submitted (my underlining):
The issues and particulars relating to the deposit (including the relationship
and payments between the franchisor and franchisee) cannot now be revisited by the [Edwards].
[23] The memorandum was expressed to be by counsel for Shea Ltd. However, the memorandum also addressed the position of Stonewood. Counsel submitted there was no privity of contract between the Edwards and Stonewood, so that there was no legal foundation for the Edwards’ claim against Stonewood.
Disputes Tribunal hearing
[24] The Edwards’ claim was heard before Referee J Tam on 4 March 2019. Shea Ltd challenges the procedural fairness of the Tribunal hearing. I will therefore summarise what happened at the hearing.
[25] The Edwards attended the hearing. Stonewood did not. Ms Dougherty attended, on behalf of Shea Ltd.
[26] The Referee began by inviting the Edwards to outline the basis of their claim. Mr Edwards did so.
[27] The Referee then invited Ms Dougherty to respond. Ms Dougherty said she was “only here just to serve” the memorandum from Rice Craig, and that she was “only here as a representative” and was not privy to the arrangements between Stonewood and Shea Ltd.4
[28] The Referee then read Rice Craig’s memorandum aloud, asking some questions of Ms Dougherty as he did so. She was unable to answer his first question.
4 Transcript of Disputes Tribunal hearing, 4 March 2019 at 14/1 and 14/24.
The Referee observed that was “a bit strange because, look normally, the person who is sitting in here … in the seat would be able to assist me”.5
[29] Having read Rice Craig’s memorandum, the Referee understood that Rice Craig’s submission was that there had been a full and final settlement, so that there could be no claim by the Edwards against Shea Ltd.6
[30] The Referee then asked the Edwards to respond. Mr Edwards’ responses included that if Shea Ltd’s settlement offer was made with the knowledge that Shea Ltd was not going to pay the franchise fee, then the offer was “based on a misrepresentation and can be revisited”.7
[31] The Referee then looked at some of the correspondence that had led up to the settlement agreement. It is apparent from the transcript that his initial view was that there was no basis for the Edwards to revisit the settlement. The Referee then addressed the position of Stonewood. He raised the possibility of adjournment, and of requiring Stonewood to be at an adjourned hearing, and also for Ms Dougherty “to please get somebody who can assist me”.8
[32] The Edwards declined the suggestion of an adjournment. Mr Edwards then redirected the Referee’s attention to the correspondence that led up to the settlement agreement, in particular to the email from Ms Dougherty dated 14 May 2018. It appears that until seeing Ms Dougherty’s email the Referee had assumed that Ms Dougherty had no direct knowledge of the dispute, because the following exchange then occurred:9
Referee: Hey, that’s you Ms Dougherty? Ms Dougherty: Yeah.
Referee: What do you say you know nothing about this case?
Ms Dougherty: No, well I don’t know anything about the legal side. Ronny, the solicitor had told me to come and she said, “Don’t get involved because
5 At 15/15.
6 At 18/20.
7 At 20/20.
8 At 34/10.
9 At 39/15.
it’s a legal case between the owner and these guys.” So that’s why she gave me this letter [the memorandum] to bring and said, “Just be a representative, take notes and that’s it.”
[33] The Referee then observed, referring to Ms Dougherty’s email of 14 May 2018, that the basis of the settlement was “costs to date”.10 He raised the possibility that if the franchise fee had not been incurred by Shea Ltd, he could re-open the settlement. Ms Dougherty responded: “That’s up to you.” She said that she had been told by the owner of Shea Ltd that the fee was “payable”. The Referee asked whether the franchise fee had been paid since the settlement. Ms Dougherty said she was unsure. The Referee said he would like to give Ms Dougherty five minutes, if she wished, to call someone and tell him whether or not the franchise fee had been paid. Ms Dougherty responded: “I do not wish to do that.”11
[34] The Referee then explained that if the franchise fee had been paid he would not re-open the settlement agreement, but that if it had not been paid he might make a decision that Shea Ltd had to pay back $15,000 to the Edwards. He again asked Ms Dougherty whether the franchise fee had been paid or not. She said she did not know.12
Disputes Tribunal decision
[35] Referee Tam ordered Shea Ltd to pay $15,000 to the Edwards. In his reasons, he said that the basis upon which the Edwards agreed to settle was that Shea Ltd would only withhold “costs to date”, as recorded in Ms Dougherty’s email of 14 May 2018. He said Rice Craig’s settlement offer reaffirmed Ms Dougherty’s email. He said the Edwards were therefore entitled to get Shea Ltd to account for the franchise fees purportedly paid to Stonewood. His reasons continued:
I therefore asked Ms Dougherty to confirm at the hearing if the “franchise fees” of $15,461.33 was actually paid to [Stonewood] either during the settlement negotiations or anytime after the settlement had been concluded.
Ms Dougherty did not respond to this query directly or in any meaningful fashion. She said that she was unsure of whether the franchise fee has or has not been paid. Ms Dougherty simply said she did not know. Ms Dougherty reiterated that she was only directed to attend the hearing and read out prepared written submissions on behalf of [Shea Ltd].
10 At 41/1.
11 At 41/33.
12 At 42.
[Shea Ltd] was well aware prior to attending today’s hearing that they will be asked to account for payment of the franchise fee.
[36] The Referee referred to ss 18(6), 18(7), 19(1)(e) and 19(1)(f) of the Disputes Tribunal Act 1988 (the Act). Section 19 relevantly provides:
19 Orders of the Tribunal
(1)The Tribunal may, as regards any claim within its jurisdiction, make 1 or more of the following orders:
…
(e)where it appears to the Tribunal that an agreement between the parties, or any term of any such agreement, is harsh or unconscionable, or that any power conferred by an agreement between them has been exercised in a harsh or unconscionable manner, the Tribunal may make an order varying the agreement, or setting it aside (either wholly or in part):
(f)where it appears to the Tribunal that an agreement between the parties has been induced by fraud, misrepresentation, or mistake, or any writing purporting to express the agreement between the parties does not accord with their true agreement, the Tribunal may make an order varying, or setting aside, the agreement or the writing (either wholly or in part):
[37] The Referee said he drew a negative inference from Ms Dougherty’s failure to answer the question whether the franchise fee had or had not been paid. The inference was that the franchise fee either had not been paid or was not payable to Stonewood. The Referee concluded:
Consequently, I find that the settlement agreement reached between the parties in June 2018 has been induced by a misrepresentation by [Shea Ltd] that the franchise fee has been paid or is payable to [Stonewood]. This is ultimately not true.
I accordingly reopen the terms of the settlement agreement and require [Shea Ltd] to account for the $15,461.33 under the settlement agreement that [Shea Ltd] represented to have been withheld from [the Edwards’] deposit purportedly for franchise fee.
It would be unconscionable to allow [Shea Ltd] to hide behind the veil of accord and satisfaction in the circumstances.
[38] The Referee made no orders against Stonewood because it was not privy to the Build Agreement.
District Court decision
[39] Shea Ltd appealed from the order of the Disputes Tribunal. The appeal came before Judge J B Bergseng on 3 July 2020. The appeal was part-heard because the Judge wanted to obtain a transcript of the Disputes Tribunal hearing. The appeal resumed on 4 December 2020. The Judge delivered his judgment on 22 January 2021.13
[40] By ss 23 and 50(1) of the Act, there is only a limited right of appeal from an order made by the Tribunal. An appeal may be brought only on the grounds that the proceeding was conducted by the Referee in a manner that was unfair to the appellant and prejudicially affected the result of the proceeding.
[41] Judge Bergseng recorded the factors which Shea Ltd submitted comprised the unfairness as follows:14
(a)[The decision is] plainly wrong at law and contrary to established principles of accord and satisfaction.
(b)There is no transcript available from the first hearing at which time SHEA was joined as a party.
(c)No properly formed claim against SHEA was ever served and they were unaware of any reasons or grounds to be named as a party prior to the commence[ment] of the hearing. Without knowing the detail of a properly articulated claim against it, SHEA was unable to reply fairly.
(d)In the circumstances as were known, [it was reasonable for SHEA] to rely solely on the memorandum that was presented at the hearing. There was significant prejudice to SHEA as the “two-stage process described in that Memorandum was not followed by the Referee”. This resulted in SHEA being unfairly prejudiced at the hearing. The Referee’s failure to consider the two-stage approach was “procedurally unfair”.
(e)It is submitted that the Referee did not read the memorandum.
(f)It is submitted that the Referee applied the wrong onus of proof for putting it on SHEA rather than the Edwards to establish their claim.
(g)It is submitted that the Referee in the course of the hearing suddenly changed their view which was without “any justification nor any specified rational basis”.
13 SHEA Ltd v Edwards [2020] NZDC 25283.
14 At [40].
(h)It is submitted that the inference drawn by the Referee that the franchise fee has not been paid or is not payable is not a logical inference. It is submitted that the Referee has failed to consider facts before him and wrongly made assumptions.
(i)It is submitted that the…reliance on s 18 of the Act does not empower the Referee to act “contrary to law, contrary to natural justice, contrary to any rule of just process”. It is submitted that the Referee’s approach at this junction is arbitrary and that an arbitrary determination is neither just nor fair.
(j)It is submitted that the question of whether the franchise fee was paid or payable was “an irrelevant question”.
(k)It is submitted that there is bias on the part of the Referee in that at page 44 line 1 the Referee appears to refer to the Edwards as “his client”.
[42] To assess these submissions, the Judge recorded, by close reference to the transcript, how the hearing before Referee Tam evolved.15 In particular, he recorded the following features:
(a)Ms Dougherty said she was present “only as a representative” for Shea Ltd. In response to any questions the Referee asked, she referred to the memorandum that Rice Craig had filed.16
(b)The Referee read Shea Ltd’s memorandum.17
(c)The Referee invited Mr Edwards to respond to Shea Ltd’s memorandum.18
(d)The Referee was initially sceptical towards the Edwards’ claim in the light of the full and final settlement agreement.19
(e)The Referee’s amended view, that the Edwards’ claim was valid, followed Ms Dougherty’s inability to answer (and unwillingness to
15 At [18]–[39].
16 At [18] and [21].
17 At [22].
18 At [25].
19 At [26]–[29].
seek an answer to) the question whether the franchise fee had been paid.20
[43] The Judge referred to s 18 of the Act, which sets out the functions of the Tribunal. In particular, s 18(6) provides that the Tribunal shall determine the dispute “according to the substantial merits and justice of the case, and in doing so shall have regard to the law but shall not be bound to give effect to strict legal rights or obligations or to legal forms or technicalities”. The Judge reasoned:
[44] … The Referee asked both parties questions about the memorandum and was initially sceptical about the Edwards’ claim. As is often the case, the Referee approaching the matter with an open mind changed his initial view and focused on the issue which has always been the primary concern raised by the Edwards – had the franchise fee actually been paid.
[45] The Referee asked Ms Dougherty this question as at March 2019. Ms Dougherty at one point said she did not think it had been paid. She was given the opportunity to make contact with others within the business to have this confirmed. She chose not to.
[46] The Referee was entitled to draw the inference that he did from the actions of Ms Dougherty, who make [sic] it clear she was there only to present the memorandum and nothing more.
[47] The Referee clearly came to the view that the settlement was reached on the basis that costs incurred by SHEA were properly deductible. If there [sic] were not properly payable, then there had been a misrepresentation.
[48] That was the very question that the Referee on 29 October 2018 set out in the minute that joined SHEA to these proceedings.
Decision
[49] For SHEA to say that they were effectively blindsided by the way that the proceedings went has no basis. In this case SHEA took a considered approach, that they would hide behind “confidentiality”. They have never sought to substantiate this claim of confidentiality and the email of 14 May 2018 counts against any claim of confidentiality where the details of the fee payable are set out.
[50] There is nothing procedurally unfair about he way that the hearing proceeded. By procedural unfairness, it is meant, for example, that a party has not been given a proper opportunity to present their case, or a proper opportunity to ask questions of witnesses.
[51] The mere fact that a Referee may have overlooked or ignored some provision in the contract or some general principle of law does not provide a basis for an appeal.
20 At [30]–[39].
[52] What the appellant seeks to do is to present “arguments on the merits dressed up in procedural robes”.21
Shea Ltd’s application for judicial review
The decision under review
[44] Shea Ltd’s statement of claim stated that the decision under review was the decision of Judge Bergseng in the District Court (not the decision of the Referee in the Disputes Tribunal). Consistently with that:
(a)Shea Ltd named the District Court, but not the Disputes Tribunal, as a respondent.
(b)Ms Dougherty made an affidavit in support of the application for judicial review. She said that Shea Ltd sought an order that the decision of Judge Bergseng, which she identified as the decision under review, be set aside.
[45] That Shea Ltd was seeking review only of the District Court decision was reinforced by what Ms Dougherty exhibited to her affidavit. She exhibited the decision of Judge Bergseng and the transcript of the hearing before the Judge on 3 July 2020. She did not exhibit the order of Referee Tam or the transcript of the hearing before the Referee.22
[46] On 3 June 2021, counsel for Shea Ltd, Mr Woods, filed a memorandum. This said that Ms Dougherty’s affidavit had “put before the Court the whole of the relevant proceeding under review”.
[47] On 7 July 2021, Mr Woods filed his synopsis of submissions for the hearing. His synopsis started by stating that the decision under review was that of Judge Bergseng.
21 McFarland v Belfast Timber Processing Ltd DC Christchurch CIV-2010-009-2751, 24 November 2010.
22 The Referee’s order and the transcript of the hearing before the Referee were nonetheless before me, as they were produced by the Edwards.
[48] Nonetheless, there were indications that Shea Ltd also wished to review (in this application) the Referee’s decision. Its statement of claim alleged reviewable errors by the Referee as well as by the Judge, and it sought orders setting aside the decisions of both the Referee and the Judge. Mr Woods’ synopsis concluded by asking for the decisions of both the District Court and the Disputes Tribunal to be set aside.
[49] At the start of the hearing I asked Mr Woods to clarify which decisions Shea Ltd was seeking to review. He answered that Shea Ltd was seeking to review the decisions of both the Judge and the Referee.
[50] This was unsatisfactory. I nonetheless allowed Mr Woods to make submissions directed towards alleged reviewable errors in the decision of the Referee. This was because his challenge to the Judge’s decision was (in large part) that the Referee’s decision was so wrong (procedurally and substantively) that the Judge’s dismissal of Shea Ltd’s appeal was unreasonable and unfair. Dealing with that challenge required consideration of the alleged procedural and substantive errors in the Tribunal.
Grounds of review
[51]Shea Ltd put forward the following grounds of review in its statement of claim:
(a)The Referee and the Judge relied on an irrelevant matter, namely whether the franchise fee had been paid. Shea Ltd said this was irrelevant “for the deposit was refundable either way”.
(b)The Referee and the Judge failed to consider relevant matters. These included that there was no identified misrepresentation relating to the full and final settlement, and no term of settlement that required payment of the franchise fee.
(c)The Referee failed to act in accordance with the principles of natural justice, in that he did not provide Shea Ltd with a fair opportunity to be heard. Shea Ltd said no claim form had been filed against it articulating a ground for setting aside the settlement agreement. Shea Ltd also said
that the Referee exhibited bias against Shea Ltd. It is alleged that Judge Bergseng failed and refused to consider these matters.
(d)The Referee exceeded the jurisdiction of s 18(6) of the Act, in that to set aside a settlement agreement “is seldom if ever (and not in these circumstances) in accordance with the substantial merits or justice of a case”. Shea Ltd said Judge Bergseng failed and refused to consider this allegation.
(e)The decisions of the Referee and the Judge were “erroneous at law, unreasonable, substantially unfair, and innominate [sic]”. Shea Ltd said this was because at the time the settlement agreement was entered into the Edwards knew the franchise fee had not been paid, and so they could not have been induced by any alleged misrepresentation.
[52] These grounds of review are wide-ranging. Mr Woods, in his synopsis and at the hearing, narrowed Shea Ltd’s challenges. The grounds of review that he pursued were:
(a)There had been a failure of natural justice in the Tribunal, primarily because Shea Ltd was not given an adequate opportunity to answer the Edwards’ claim that the settlement agreement should be revisited on the grounds of misrepresentation. Mr Woods also submitted the Referee had demonstrated a lack of impartiality.
(b)The Referee’s decision to reopen the settlement agreement was unreasonable, as the Edwards had not been induced to enter into that agreement in reliance upon a representation the franchise fee had been paid. Mr Woods submitted the Edwards were aware at the time they entered into the agreement that the franchise fee had not been paid.
(c)Judge Bergseng’s decision was unreasonable (in a judicial review sense), because he did not deal adequately with the above challenges to the Referee’s decision.
The issues
[53] I have to decide whether the above grounds of review are available on a judicial review of a decision on appeal from a Tribunal decision, and if so whether Shea Ltd has established them.
[54]I will first outline the relevant legal principles.
Legal principles
[55] As noted earlier, there is only a limited right of appeal from an order made by the Disputes Tribunal. An appeal may be brought to the District Court only on the grounds that the proceeding was conducted by the Referee in a manner that was unfair to the appellant and prejudicially affected the result of the proceeding.23 The District Court on appeal is not able to examine the merits of the Tribunal decision.24 There is no further right of appeal from a decision of the District Court.25
[56] The limited right of appeal informs the scope for judicial review of Tribunal decisions or of District Court decisions on appeal from the Tribunal. “An application for judicial review cannot be used as a mechanism to bypass the limited rights of appeal from Tribunal decisions which the legislature has prescribed.”26 If a plaintiff cannot come within the limited scope of appeal provided by s 50 of the Act, “the prospects of inducing this Court to intervene by way of review are slight”.27 An application for judicial review is not an occasion to review the merits of the decision reached, either by the Tribunal or by the District Court.28
[57] The scope of review is also informed by the purpose of the Act. As the Court of Appeal said in Graeme Martin Contracting Ltd v Disputes Tribunal, when considering the right to natural justice:29
23 Disputes Tribunal Act 1988, ss 23 and 50(1).
24 McFarland v Disputes Tribunal [2013] NZHC 2885 at [6].
25 Mellow v Tsang (2004) 17 PRNZ 343 (HC).
26 McFarland v Disputes Tribunal [2013] NZHC 2885 at [8].
27 Evans v Disputes Tribunal at New Plymouth (2000) 14 PRNZ 183 (HC) at [17].
28 Kamo Landscape & Quarry Supplies Ltd v Whangarei District Court [2021] NZHC 170 at [19].
29 Graeme Martin Consulting Ltd v Disputes Tribunal [2018] NZCA 328, [2018] NZAR 1636.
[37] The principles of natural justice undoubtedly apply to hearings in the Disputes Tribunal; these principles apply in all tribunals. However, what is necessary to facilitate the right to natural justice depends on the particular circumstances. The question is what is required to ensure fairness in the particular case. Context is always important, including the significance of the decision and the purpose of the statute under which the decision-making power is exercised.
[38] The purpose of the Disputes Tribunal Act is to provide for the prompt resolution of disputes involving modest sums. The Tribunal is required to determine disputes coming before it according to the substantial merits and justice of the case without being bound to give effect to strict legal rights or obligations, legal forms or technicalities. Orders of the Tribunal are final and binding on the parties in terms of s 23 of the Act, subject to the limited appeal rights conferred under s 50. The only available appeal right in this case is that the proceedings were conducted by the referee in a manner that was unfair to GMCL and prejudicially affected the result of the proceedings.
(citations omitted)
Was there a breach of natural justice in the Tribunal?
Was Shea Ltd given inadequate notice of the claim?
[58] Mr Woods’ primary submission on the natural justice ground was that Shea Ltd was not given adequate notice of the Edwards’ claim. He noted that the Edwards’ claim form articulated a claim only against Stonewood. It did not set out the basis upon which a claim could be made against Shea Ltd. The absence of a properly articulated claim meant Shea Ltd was not given a fair opportunity to respond. The Edwards’ challenge to the settlement agreement, based on misrepresentation, emerged only at the hearing. Mr Woods said Shea Ltd could not fairly prepare a response to that challenge without the hearing being adjourned. The Referee should have adjourned.
[59] Moreover, Mr Woods submitted, Judge Bergseng failed to engage with this breach of natural justice. His failure was unreasonable, in a judicial review sense.
[60] I accept that a breach of natural justice is a ground on which a party may seek to review a Tribunal decision. It may also be the basis of a ground for reviewing a decision of the District Court on appeal from the Tribunal, if the Court has dealt with that appeal ground in a way that is itself reviewable.
[61] But I reject Mr Woods’ submissions that there was any breach of natural justice. It is correct that the Edwards’ claim form did not articulate the precise legal basis upon which they sought to revisit the settlement agreement. But the basis upon which the Edwards sought to recover from Shea Ltd was known to Shea Ltd in advance of the hearing: it was that Shea Ltd had not actually paid the franchise fee. The correspondence from the Edwards at the time of settlement made clear that the Edwards were concerned about whether the franchise fee had been paid. The order joining Shea Ltd to the proceeding stated it was being joined so that a determination could be made as to whether that fee was paid by Shea Ltd.
[62] Shea Ltd was able to articulate its position in advance of the hearing, through counsel, that whether the franchise fee had been paid “cannot now be revisited”. Shea Ltd chose to take a position (with the assistance of legal advice) that whether the franchise fee had been paid was irrelevant (which is how Ms Dougherty put it in her affidavit in support of the application for judicial review). This seems to explain Shea Ltd’s decision to send a representative to the hearing who was instructed merely to “serve” counsel’s memorandum and “take notes”.
[63] Early on in the hearing Mr Edwards asserted that they could revisit the settlement agreement on the basis of Shea Ltd having misrepresented that they had paid the franchise fee. The Referee gave Shea Ltd fair opportunity to deal with and respond to that allegation. The fairness of that opportunity has to be assessed not only in the context of the purpose of the Act (prompt resolution of disputes involving modest sums) but also in the context of the decisions that Shea Ltd took in respect of the hearing, on legal advice. Shea Ltd knew, in advance of the hearing, that whether the fee had been paid was an issue. It took the position that payment of that fee was irrelevant. It sent a representative who was unable or unwilling to answer the Referee’s question whether the fee had been paid. The Referee explained to Ms Dougherty, twice, that if she was unable to answer the question he may revisit the settlement agreement. He offered her the opportunity to call someone else. Ms Dougherty said she did not wish to do so. Ms Dougherty did not ask for an adjournment (despite the possibility of an adjournment having been raised by the Referee shortly before, in relation to the non-attendance of Stonewood).
[64]I conclude that there was no breach of natural justice by the Referee.
[65] For completeness, I also reject Mr Woods’ submission that Judge Bergseng failed to address the allegation of breach of natural justice. At [40](c) of his judgment the Judge recorded Shea Ltd’s argument that, without a properly formed claim, Shea Ltd was unable to reply fairly. At [45] the Judge recorded that the Referee asked Ms Dougherty whether the fee had been paid, and gave her the opportunity to call someone else to have this confirmed, which she declined. The Judge concluded that there was no basis to say that Shea Ltd was blindsided, and that there was nothing procedurally unfair in the hearing: [49] and [50]. The Judge had already described, in some detail, the course of the hearing.
Did the Referee demonstrate a lack of impartiality?
[66] In his written synopsis Mr Woods submitted that the Referee had demonstrated a lack of impartiality. Mr Woods did not make any oral submissions on this point, though he did not formally withdraw the submission.
[67] For the avoidance of any doubt, I reject the submission. It was based on a passage near the end of the transcript of the Tribunal hearing. The passage appears after the Referee had just stated that he would be re-opening the settlement agreement and requiring Shea Ltd to pay $15,000 to the Edwards. The Referee then explained to the Edwards why he was not making any order against Stonewood:
Referee: [T]he reason why I’m not making the order against the first respondent [Stonewood], is because there is no privity of contract, there is no contractual relationship between you and the first respondent, it’s always just with the second respondent and my client can join them incorrectly, and I thought Ms Dougherty was never involved in this at all, but this very document which is going to form the basis for my decision against the company is based on your agreement, so I’m not sympathetic with your – I’m not saying anything stance, I’m sorry.
[68] Mr Woods submitted that in that passage the Referee was referring to the Edwards as “my client”. I do not accept that. It is difficult to make any sense of the words “my client” in that passage,30 but the words cannot be a reference to the Edwards, as the Referee had just referred to the Edwards in that passage as “you”.
30 The transcript has many obvious errors of transcription, and this may be one.
Was the Referee’s decision to reopen the settlement agreement unreasonable?
[69] Mr Woods submitted that the Edwards were aware at the time they entered into the settlement agreement that the franchise fee had not been paid. He said this was clear from Mr Edwards’ email to Mr Zhu of Stonewood on 6 June 2018. He said this meant the Edwards cannot have been induced to enter into the agreement in reliance upon a representation the franchise fee had been paid. He submitted, therefore, that the Referee’s decision to reopen the settlement agreement was unreasonable.
[70] This is an attempt to review the merits of the Referee’s decision. As explained in the above review of legal principles, that is not an available ground for judicial review of a Referee’s decision.
[71] For completeness, even if it were an available ground of review, I would not have accepted the underlying premise of Mr Woods’ submission. He focused on one passage in Mr Edwards’ email of 6 June 2018. Mr Edwards concluded the email by putting a proposal to Mr Zhu, which included:
The franchise fee has not been paid and we believe there is an opportunity for you to waive the franchise fee once an application is submitted.
[72] Mr Woods plucked the words “the franchise fee has not been paid” out of the email, and said these words showed that the Edwards knew that the fee had not been paid. With respect, Mr Woods ignored the context of those words. There was no means by which the Edwards could have known whether the fee had been paid. The Edwards had asked that question of Shea Ltd, and Shea Ltd had not answered. Mr Edwards referred to those questions earlier in the same email, commenting “We have not had this clarified to date.” In context, Mr Edwards’ concluding words to Mr Zhu were simply Mr Edwards putting a position. The email as a whole does not support Mr Woods’ submission that the Edwards knew the fee had not been paid.
Result
[73]For the above reasons, I dismiss Shea Ltd’s application for judicial review.
[74] The Edwards have succeeded in this proceeding. Because they are self- represented, they are not entitled to recover costs from Shea Ltd. They are, however, entitled to recover their reasonable disbursements in this proceeding, such as any filing fees, printing or photocopying costs, or travel costs. I order Shea Ltd to pay to the Edwards their reasonable disbursements that they have incurred in this proceeding.
Campbell J
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