Singh v Shetty

[2019] NZHC 438

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1684

[2019] NZHC 438

BETWEEN

KAMAN SINGH

First Plaintiff

AND

SURKANDA ENTERPRISES LIMITED

Second Plaintiff

AND

SATISH SHAMBHU SHETTY

First Defendant

AND

SHAMIANA ENTERPRISES LIMITED

Second Defendant

AND

SHAMIANA LIMITED

Third Defendant

Hearing:

3 October 2018

Appearances:

T G Aherne for Plaintiffs

L T Meys & P Grant for Defendants

Judgment:

13 March 2019

JUDGMENT OF PAUL DAVISON J

This judgment was delivered by me on 13 March 2019 at 4:00 pm Pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:

Aherne Legal, Auckland Neilsons Lawyers, Auckland

SINGH v SURKANDA ENTERPRISES LTD [2019] NZHC 438 [13 March 2019]

Introduction

[1]    This is an application by Satish Shetty, Shamiana Enterprises Limited and Shamiana Limited (collectively “the defendants”) for an order transferring the proceedings brought against them by Kaman Singh and Surkanda Enterprises Limited (collectively “the plaintiffs”) in the District Court at Waitakere to the High Court, pursuant to ss 89 and 91 of the District Courts Act 2016. The defendants also apply for an order granting them leave to bring the application or for an enlargement of time to bring it, and an order staying the District Court proceedings until determination of their application.

[2]    The principal grounds relied on by the defendants are that the proceedings involve: complex issues relating to whether payments made by the plaintiffs were a bond or a non-refundable deposit; complex issues regarding the cancellation of contractual relationships; both the claim and counter-claim in the District Court proceedings involve substantial sums with the defendants’ counter-claim exceeding

$1 million. The defendants further say that as it is likely that a decision of the District Court will be appealed to the High Court, it is in the interests of justice that an order be made transferring the proceeding.

[3]    The plaintiffs oppose the applications on the grounds that: the issues in the proceedings are not complex; the total amount claimed by them in the proceedings is

$330,000 and not an amount in excess of the District Court jurisdiction as alleged by the defendants; the defendants have consistently delayed the District Court proceedings and the present application is another delaying tactic; and that the defendants’ present application was brought on 3 August 2018, over a year after they filed their counter-claim on 21 June 2017, claiming a sum in excess of the District Court jurisdiction and consequentially well outside the five working day period prescribed by r 5.69(2)(a) of the High Court Rules 2016 (the Rules).

[4]    The plaintiffs accordingly seek an order declining the application for an extension of time for the filing of the defendants’ application, and in the alternative, an order declining the application to transfer the proceeding to the High Court.

Alternatively, the plaintiffs seek timetable orders for the hearing of the application for security for costs, unless orders and a fixture for the substantive hearing.

Background

[5]    The plaintiffs have commenced proceedings in the District Court at Waitakere against the defendants in which they claim damages for breach of contract and misrepresentation relating to the plaintiffs’ management and operation of three restaurants owned by the defendants situated in Hamilton and New Plymouth. The plaintiffs allege that upon termination of the contracts in February 2015 pursuant to which they operated the three restaurants, they were entitled to repayment of bonds totalling $130,000 which they had paid to the defendants in respect of their management and operation of the two restaurants located in New Plymouth, and repayment of a bond of $200,000 which they had paid in relation to the restaurant located in Hamilton.

[6]    The plaintiffs commenced the proceedings in the Waitakere District Court in March 2017.1 The defendants filed a statement of defence and counterclaim dated 21 June 2017, in which they denied the plaintiffs’ allegations and denied liability to repay the bonds to the plaintiffs. The defendants contend that the sums paid by the plaintiffs were in the nature of non-refundable deposits. In their counterclaim the defendants alleged that the plaintiffs were liable to pay the defendants: $2,500 per week from March 2016 until September 2017 for rental of the New Plymouth premises; $750 per week from March to the date of the filing of the proceeding in respect of the Hamilton restaurant premises; and $1000 per week from July 2014 for rental in respect of the second New Plymouth restaurant. The defendants sought judgment for those amounts with the total to be quantified at trial together with general damages, interest and costs.

[7]The plaintiffs filed an amended statement of claim on 13 September 2017.

[8]    On 2 February 2018, the parties attended a judicial settlement conference (JSC). Although the JSC had been arranged following the mutual consent of the parties, it did not proceed because the defendants withdrew from the process and as a

1      The specific date of filing is not stipulated in the material before the Court.

result the matter was referred to a case management conference to take place on 22 February 2018.

[9]    On 22 February 2018 a second case management conference was held. In a Minute issued at the conclusion of the conference, Judge Jelas noted that the parties had filed a joint memorandum setting out their agreement as to timetabling orders, and she made timetable directions by consent which stipulated the steps required to be undertaken by the parties in preparation for the allocation of a fixture for a one day hearing. The timetable included a direction requiring the defendants to file and serve an amended counterclaim by 28 February 2018, and further provided that if no amended counterclaim was filed by that date, the defendants’ defence to the plaintiffs’ claim would be struck out in its entirety. The timetable directions also stipulated that if the defendants were applying for an order for security for costs, their application was to be filed within seven days.

[10]   On 28 February 2018, the defendants filed an amended statement of defence and counterclaim, in which they alleged that the plaintiffs abandoned the two restaurants located in New Plymouth and thereby repudiated their agreement with the defendants regarding their management and operation of those restaurants. The defendants alleged that from 2 March 2015 the plaintiffs had failed to make rental payments required under the leases of the New Plymouth premises, and claim amounts of $815,000 and $366,300 being the rent payable under the leases until expiry of the terms the leases on 30 May 2021. The defendants’ counterclaim also includes claims of $107,780 for unpaid rent or licence fees for the Hamilton premises.

[11]   On 3 March 2018 the defendants filed an application for security for costs and for an order staying the proceedings. The supporting affidavit was not filed until a week later on 9 March 2018. In a further Minute dated 3 May 2018, Judge Jelas noted the defendants’ application seeking an order for security for costs, and made timetable directions requiring the filing of affidavits by the parties in relation to that application and directed the Registrar to allocate a half-day fixture for the hearing of the application.

[12]   On 3 August 2018, the defendants filed an originating application in this Court, seeking an order for the transfer of the proceedings to the High Court. The defendants’ application for security for costs was stayed pending the outcome of the application to transfer the proceeding to the High Court.

Submissions

The defendants’ submissions

[13]   Mr Meys for the defendants submits that the plaintiffs’ claim and the defendants’ counterclaim both exceed the jurisdiction of the District Court of $350,000 plus interest and costs.2 The defendants’ counterclaim totals approximately $1.3 million.

[14]   Mr Meys says that the proceeding is not yet ready for trial and he notes that in addition to the currently stayed application by the defendants for security for costs, discovery has not been dealt with and finalised. He says that if the plaintiffs do not discover all of their relevant financial information and communications relating to their operation of the three restaurants and their planned business at Sylvia Park, then it is likely that the defendants will bring a further interlocutory application to seek an order requiring the plaintiffs to make further discovery. Mr Meys says that following further discovery it is anticipated that both parties will wish to respectively file an amended claim, counterclaim and defences.

[15]   Mr Meys notes that the defendants expect to call three witnesses of fact and an expert accounting witness. He says that the trial is likely to take a week and he submits that the following factors favour a trial in the High Court:

(a)the complex factual matrix and issues including the parties’ conduct and credibility regarding the statements alleged to have been misrepresentations;

(b)the issue of whether there are implied terms to be applied to the contractual arrangements entered into between the parties;

2      District Courts Act 2016, ss 74 & 82.

(c)the amount of outstanding licence fees and rent to be determined for each of the three restaurants, which combine to make the defendants’ counterclaim for a sum of approximately $1.3 million;

(d)the plaintiffs’ claim for lost opportunity cost relating to the restaurant located in Hamilton;

(e)the plaintiffs’ and defendants’ cases are inextricably linked and accordingly it is not a situation where the defendants’ claim could be efficiently dealt with as a separate proceeding in the High Court;

(f)the High Court is generally better equipped than the District Court to deal with longer hearings.

[16]   The defendants say that there is a considerable amount at stake for both parties in terms of the amount of money and reputation. Furthermore, the proceeding in the District Court has not yet reached the stage where it has been allocated to a judge, and accordingly the efficiency of the proceeding remaining for hearing before a judge with existing background knowledge of the case is not a factor.

[17]   Mr Meys submits that in all the circumstances an order transferring the proceeding to the High Court is in the interests of justice and in particular will serve the objective of securing a speedy and efficient determination of the proceeding.

[18]   Mr Meys explains the defendants’ delay in bringing their application by reference to the time taken by the parties’ involvement in a judicial settlement conference which resulted in progress of the proceedings being stalled while settlement was explored. He says that he cannot explain why the defendants’ application for security for costs was not made much earlier.

The plaintiffs’ submissions

[19]   Ms Aherne for the plaintiffs says that the defendants’ application to transfer the proceeding to the High Court is yet another attempt by them to delay a hearing of the plaintiffs’ claim. She submits that neither the plaintiffs’ claim nor the defendants’

counterclaim give rise to any complex matters of fact or of law which would warrant transferring the proceeding to the High Court.

[20]The plaintiffs oppose the application for transfer on the grounds that:

(a)the plaintiffs’ claim is within the jurisdiction of the District Court – and always has been. The plaintiffs’ three causes of action by which they allege that the defendants are liable to pay the plaintiffs $330,000, are in each case in the alternative to one another;

(b)the defendants have consistently and unreasonably delayed the proceeding to date;

(c)the defendants’ counterclaim does not give rise to issues that are of any complexity either legally or factually such as the interests of justice would require the matter to be heard and determined in the High Court.

[21]   Ms Aherne submits that the defendants’ delays are clearly illustrated by their belated application for an order for security for costs, more than three years after the first plaintiff told the first defendant that the plaintiffs would be in serious financial difficulties if the defendants did not repay the bonds they held in relation to the two New Plymouth restaurants, and a year after the proceeding was initiated. Ms Aherne refers to the transcript of a recorded conversation between the first plaintiff and the first defendant on 24 February 2015 in which the first plaintiff is recorded telling the first defendant of the financial pressure he was under. Ms Aherne notes that the defendants’ application for security for costs was made in March 2018 which was after the District Court had placed the matter on the ready list for allocation of a trial date.

[22]   Ms Aherne further notes that on 19 July 2018, the day before the scheduled hearing of the security for costs application in the District Court, the defendants filed a synopsis of argument in which they said that they would make an application to transfer the proceeding to the High Court. As a consequence, the District Court was unable to hear and determine the security for costs application pending determination of the defendants’ present application.

[23]   The plaintiffs also say that the defendants’ original counterclaim of 21 June 2017 was for a sum that exceeded the jurisdiction of the District Court. From that date the defendants had five days in which to make an application to transfer the proceeding to the High Court. They failed to comply with that requirement and did not make the application for transfer until 3 August 2018, over one year and one month later.

[24]   Ms Aherne submits that the defendants are now seeking to rely on their own delays to support their application for transfer in circumstances where their counterclaim has exceeded $450,00 since 21 June 2017. The defendants’ second and more recent amended counterclaim is merely for a larger sum of money.

[25]   In conclusion Ms Aherne says that the Court ought to decline the defendants’ application for an extension of time to file the application and should dismiss the defendants’ application for transfer of the proceedings to the High Court.

Law

[26]   The defendants here apply and rely on ss 89 and 91 of the District Court Act 2016 (the Act). Those sections confer the powers of the High Court to order the transfer of proceedings from the District Court to High Court.

[27]Section 89 of the Act provides:

89 High Court Judge may order removal of proceeding into High Court

(1)A High Court Judge may, on application by a party to a proceeding, order the removal of the proceeding into the High Court if the Judge is satisfied that it is desirable to do so.

(2)In deciding whether to make an order under subsection (1), the Judge must have regard to the following factors:

(a)the nature of the case:

(b)the complexity of the case:

(c)the general or public importance of the case:

(d)the amount in issue:

(e)the likely length of the hearing:

(f)the financial resources of the parties:

(g)whether it is otherwise in the interests of justice to make the order.

(3)The order may be made on such conditions, including conditions as to costs or giving security for costs, as the Judge thinks fit.

(4)This section overrides sections 86 to 88.

[28]Section 91 of the Act provides:

Transfer of proceeding to High Court if counterclaim exceeds jurisdiction

(1)This section applies to a proceeding in the court in which a counterclaim or set-off and counterclaim involves a matter that is outside the jurisdiction of the court.

(2)A party to the proceeding may apply, within the time prescribed by the High Court Rules 2016, to the High Court for an order transferring the proceeding, or the proceeding on the counterclaim or set-off and counterclaim, to the High Court.

(3)A Judge of the High Court may order that—

(a)the proceeding be transferred to the High Court; or

(b)the proceeding be heard and determined in the District Court; or

(c)only the proceeding on the counterclaim or set-off and counterclaim be heard in the High Court and that the rest of the proceeding be heard and determined in the District Court.

(4)Execution of a judgment of the court in favour of a claimant in a proceeding to which subsection (3)(c) applies must, unless the High Court orders otherwise, be stayed until the proceeding transferred to the High Court is heard and determined.

(5)The court has jurisdiction to hear and determine a proceeding to which this section applies if—

(a)no application is made under subsection (2) within the time prescribed by the High Court Rules 2016; or

(b)the High Court orders that the proceeding be heard and determined in the District Court.

(6)Subsection (5) overrides anything to the contrary in any other enactment.

(7)Where the High Court makes an order under this section, the Registrar of the relevant registry of the High Court must send a copy of the order to the Registrar of the relevant office of the District Court.

[29]Rule 5.69 of the Rules provides:

Transfer under section 91 of District Court Act 2016

(1)An application under section 91 of the District Court Act 2016 must be by interlocutory application.

(2)It must,—

(a)if made by the counterclaimant, be made within 5 working days after the counterclaim or set-off and counterclaim is filed in the District Court:

(b)if made by the party against whom the counterclaim or set-off and counterclaim is made, be made within 5 working days after service on that party.

(3)At any time after an application under subclause (1) has been filed, the court may order the proceedings in the District Court to be stayed pending its disposal.

(4)The order in subclause (3) may be made without notice and subject to any conditions or undertakings that the court thinks just.

(5)If the court orders that the counterclaim or set-off and counterclaim alone be transferred, references in these rules to the plaintiff must be read as references to the counterclaimant and references to the defendant must be read as references to the party against whom the counterclaim or set-off and counterclaim is made.

Where counterclaim exceeds the District Court jurisdiction

[30]   The relevant provision, as regards the removal of the proceeding into this Court, is s 91 of the Act, as the proceeding involves a counterclaim which exceeds the jurisdiction of the District Court. Section 91(2) provides that where a counterclaim is made which exceeds the civil jurisdiction of the District Court, the time prescribed for the making of an application to transfer the proceeding to the High Court is within five working days after the counterclaim is filed in the District Court. Where an application is not made within that time, the High Court nevertheless has jurisdiction to grant an extension of time for filing the application to hear and determine such a proceeding.

[31]   The defendants rely on r 1.19 to extend the time prescribed for their application under s 91 of the Act. While the rule confers an unfettered discretion on the Court to abbreviate or extend time limits provided for in the Rules,3 as Lord Guest said in the Privy Council case of Ratnam v Cumarasamy:4

3      Caltex Oil (NZ) Ltd v Hughes (1986) 1 PRNZ 235.

4      Ratnam v Cumarasamy [1965] 1 WLR 8 (PC) at 12.

The rules of Court must prima facie be obeyed, and in order to justify a Court in extending the time during which some step in procedure requires to be taken there must be material upon which the Court can exercise its discretion. If the law were otherwise, a party in breach would have an unqualified right to an extension of time which would defeat the purpose of the rules, which is to provide a timetable for the conduct of litigation.

[32]   In deciding whether to grant an extension of a prescribed time limit, the Court will consider the length of the delay, any explanation provided, and the consequences of the delay in terms of any prejudice caused to other parties to the proceeding .

[33]   The issue concerning the extension of time must necessarily be determined first, and before any consideration is given as to whether the Court should exercise its jurisdiction under s 91(3) to remove the proceeding to the High Court, or not.

[34]   In deciding whether to make an order for removal of a proceeding into the High Court, in accordance with s 91, it will be relevant for the Judge to have regard to the factors set out in s 89(2) of the Act.

Analysis

[35]   I decline to exercise my discretion, pursuant to r 1.19 of the Rules, to grant an extension of time to the defendants for the filing of their application, under s 91 of the Act, to remove the proceeding into the High Court.

[36]   The delay in the defendants bringing this application for removal of the proceeding to the High Court, is over one year and one month since the defendants filed their first statement of defence and counterclaim. That counterclaim, though stating that damages were for an amount to be quantified at trial, clearly set out the basis for those amounts to be determined, with the result that the figure arrived at exceeded the District Court threshold.

[37]   Even if on the most generous approach, the time that is said to have elapsed is determined as being the period between the defendant’s filing of their second counterclaim in which they seek over $1.3 million, and the filing of the present application in this Court, the delay is still over five months.

[38]   Either way those delays are considerable. The short, five working days time- frame for making an application for removal to the High Court, is consistent with the objective of ensuring that the proceedings and their ultimate determination are not unduly delayed. Accordingly when an issue of whether the proceedings are potentially to be transferred to the High Court arises by reason of the quantum claimed in a counter-claim, the Rules require the application to be filed promptly. Such an application simply concerns the forum in which the proceeding is to be determined, and this should be dealt with as quickly as possible so that the parties know in which jurisdiction their matter lies, and can plan and proceed accordingly. Conversely, a failure to act promptly will inevitably prejudice the plaintiff by reason of delay and the likelihood that costs will be expended on procedural and interlocutory matters in the District Court which may be wasted and redundant following transfer of the proceedings to the High Court.

[39]   Here the defendants have not provided a satisfactory explanation for their delay. The only explanation provided by Mr Meys is that the defendants engagement in the judicial settlement process delayed the progression of the matter. The JSC was to be held on 2 February 2018, and was abandoned that same day. Despite the JSC being put to an end, the defendants did not indicate to either the Court or the plaintiff that it intended to seek an order for the removal of the proceeding to the High Court for over five more months. Mr Meys has not sought to explain away this further delay.

[40]   I accept Ms Aherne’s submission that during the course of the proceeding in the District Court, the defendants have made interlocutory applications and conducted their case in a manner that appears to have been intended to delay the proceeding and frustrate the plaintiffs’ endeavours to progress their claim.

[41]   On the date of the proposed JSC in February 2018, despite having agreed six months earlier that they would proceed to a settlement conference, the defendants attended and informed the Judge and the plaintiffs that they would not engage with the conference any further.

[42]   The security for costs application made by the defendants on 2 March 2018, was not completed until the supporting affidavit was filed on 9 March 2018. In

accordance with r 7.13 of the District Court Rules 2014, the defendants were required to file such an affidavit at same time as filing the application. Nevertheless the application for security for costs was one year after the plaintiff had commenced the proceedings, and three years after the defendant was first alerted to the plaintiffs’ financial position. I also note the application for security for costs was made one week after the matter was placed into the Civil Ready List awaiting allocation of a short trial and almost three weeks after the defendants were directed by the 22 February 2018 Minute of Judge Jelas, that if they intended to make an application for security for costs that application was to be made within seven days.

[43]   The fixture set down for the determination of the issue as to security for costs also had to be abandoned when the defendants, once again at a very late stage, advised the court that they intended to pursue the present application to transfer the proceeding to the High Court. I further note that the defendants had failed to file their submissions on the application for security for costs until the day before the hearing, 10 days later than they had been directed. It was only in those submissions that the defendants advised their intention to make the present application. The eleventh hour timing of this application is yet a further indication that the defendant was employing the application in order to delay the proceeding.

[44]   Mr Meys argues that the complexity of the proceeding necessitates that it be removed to the High Court. However, as noted in the 22 February 2018 Minute of Judge Jelas, Ms Aherne appeared with the consent of all parties, following a joint memorandum having been issued on 16 February 2018, in which the parties had discussed timetabling of the proceeding. In that Minute orders were made for a short one-day fixture, with only the first plaintiff and first defendant appearing as witnesses.

[45]   The timetabling orders were agreed upon by both parties just prior to the defendant filing its second amended statement of defence and counter-claim on 28 February 2018. Judge Jelas noted in her Minute that Ms Aherne had assured her that the timetabling orders could still be met, regardless of the signalled filing of the amended counterclaim. As Ms Aherne was appearing with the consent of both parties, and as the defendants were parties to the joint memorandum as to timetabling, the

defendants cannot credibly contend that the complexity of the proceedings now requires their transfer to the High Court.

[46]   Even were the defendants granted an extension of time for the filing of the application under s 91 of the Act, I would not grant the application for transfer of the proceedings, as I do not consider it to be in the interests of justice. As noted above, I consider the defendants’ approach to this proceeding to have been characterised by a series of measures intended to cause delay. Against that background an order transferring the proceeding to the High Court would only compound and exacerbate the prejudice that has been caused to the plaintiffs by the delays to date.

[47]   Moreover, I do not consider this proceeding to be appropriately characterised as being “complex”. The defendants, by means of the joint memorandum filed in the District Court previously, proceeded on the basis that the issues in the proceeding were not unduly complex and only required the calling of two witnesses, and a single day for the hearing. The defendants have not provided any cogent reasons or basis to support their submission that the complexity of the issues in the proceeding requires a transfer to this Court.

Result

[48]   The defendants’ application for an extension of time to bring an application under s 91 of the Act is declined.

[49]   Had I not declined to grant an extension of time, I would in any event have declined the defendants’ application under s 91 of the Act for transfer of the proceeding to the High Court.

Costs

[50]The plaintiffs are entitled to costs as the successful party.

[51]   The current application, filed a year after the defendants’ first counterclaim was filed and only a day before the security for costs hearing was to be held – itself a

clearly belated application – appears to have been initiated to delay the plaintiff and the proceeding.

[52]   Under r 14.6(4)(a) of the Rules, the Court may order a party to pay indemnity costs if the party has acted vexatiously, frivolously, improperly, or unnecessarily in commencing or continuing a step in a proceeding.

[53]    Before proceeding to determine costs to be awarded to the plaintiffs, I direct the parties to file memoranda as to costs. Should the plaintiffs seek indemnity costs they are to support their application with submissions and include particulars of the amount and composition of their indemnity costs and any disbursements. The plaintiffs’ memorandum as to costs is to be filed and served on the defendants within 10 working days following the date of delivery of this judgment. The memorandum is not to exceed three pages in length other than any annexed documents.

[54]   The defendants are to file their memorandum as to costs within five working days following service on them of the plaintiffs’ costs memorandum. The memorandum is not to exceed three pages in length other than any annexed documents.

[55]   Following receipt by the Registrar of the costs memoranda filed by the parties, I shall determine the costs to be awarded to the plaintiffs.

Paul Davison J