Sohal Associates Limited v Khan

[2012] NZHC 454

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-001415 [2012] NZHC 454

BETWEEN  SOHAL ASSOCIATES LIMITED Appellant

ANDRAHAT FATEY ALI KHAN Respondent

Hearing:         16 March 2012

Counsel:         G Harrison for Appellant

Proceeding not served on Respondent

Judgment:      16 March 2012

JUDGMENT OF ASHER J

Solicitors/Counsel:

G Harrison, PO Box 99 617, Newmarket, Auckland. Email:  [email protected]

SOHAL ASSOCIATES LIMITED V RAHAT FATEY ALI KHAN HC AK CIV-2012-404-001415 [16 March

2012]

Introduction

[1]      The appellant has this afternoon filed a notice of appeal against the decision of Judge Andree Wiltens in the District Court at Manukau delivered this morning, declining an application for a writ of arrest.

[2]      The appellant is a New Zealand company.  Its director Suminder Sohal filed an affidavit in the District Court setting out the facts in support of the application. He asserted that the appellant entered into a contract with the respondent Rahat Fatey Ali Khan, who is an entertainer based in Pakistan.  The respondent was to perform concerts in Auckland, Sydney and Melbourne and the appellant was to pay him certain sums for the three events.  Mr Sohal exhibited the short contract dated 7 April

2011.

[3]      The proceeding was filed in the District Court yesterday.   It has not been served.  The application for the writ of arrest was filed contemporaneously with a statement of claim.  The application came before Judge Andree Wiltens, presumably on a busy list day, whose decision of this morning reads as follows:

Applications declined.

The  contract  is  between  the  plaintiff  and  another  party (not  the proposed defendant).  The contract states the performer is liable to a maximum of US$40k not the claimed loss profits of $300k.

[4]      Mr Harrison for the appellant filed the notice of appeal this afternoon and has appeared in person in support of the appeal.

[5]      Mr Harrison has carefully sought to meet all the requirements of the Rules and his obligations to the Court.  It can be assumed he has just received instructions. It must be observed that the procedure followed is quite unsatisfactory.   It is only good fortune that has resulted in Mr Harrison being able to be heard this afternoon. There is no explanation in the affidavit as to why the proceeding was only filed yesterday.

[6]      While the usual course would be to put this on an appeals list and to hear the appeal in due course, I have decided that the quickest and most efficient course is to determine the appeal today.

The appeal

[7]      Section 109(1) of the District Courts Act 1947 provides:

109  Absconding debtors may be held to bail

(1)   Where it appears to the satisfaction of any Judge by affidavit of the plaintiff or his authorised agent that the plaintiff has a good cause of action against a defendant for a sum within the jurisdiction of a court for which a proceeding has been commenced under this Act, and that there is probable cause (the grounds of which shall be stated in the affidavit) for believing that the defendant is about to leave New Zealand with the intention of evading the payment of that sum, the Judge may issue a writ of arrest under his hand returnable immediately; and, if payment of that sum is not made before execution of the writ, the defendant shall be brought before a Judge who, upon investigation of the case, may either discharge the defendant or hold him to bail, with or without  sureties  at  the  discretion  of  the  Judge,  for  any  sum  not exceeding the amount sworn to in the affidavit, with costs:

provided that the Judge may, before issuing the writ, require the person asking for the issue thereof to lodge in the court any sum of money not exceeding $2,000, or to give security therefore to the satisfaction of the court, to abide the decision of the court under paragraph (b) of section

110.

[8]      There are two relevant requirements.  The first is a good cause of action, and the second is probable cause (the grounds of which shall be stated in the affidavit) for believing that the defendant is about to leave New Zealand with the intention of evading the payment.  The Judge appears to have reached his decision on the basis of there being no good cause of action.

Good cause of action

[9]      The phrase “good cause of action” must be given meaning.  What is required is more than just a serious question to be tried which is the test in interim injunction

applications.   The phrase “good cause of action” is more in line with the “good arguable case” requirement for freezing orders.[1]

[1] ee Bank of New Zealand v Hawkins (1989) 1 PRNZ 451 (HC).

[10]     It  is  by no  means  clear that  it  is  correct,  as  the Judge has  assumed,  to conclude that the contract is between the plaintiff and another party who is not the proposed defendant.  The defendant, Mr Khan, is referred to when the parties are set out at the beginning of the contract.   The relevant sentence is “Maharashtra India [Representing/Managing  Rahat  Fatey  Ali  Khan  and  Party]”.     I  accept  Mr Harrison’s submission that it is entirely arguable that Mr Khan is a principal contracting party, bound by the signature of his agent Mr India.

[11]     The question of the entitlement to damages which was the second issue raised by the District Court Judge poses a greater problem for the appellant.  The contract having set out the appellant’s obligations then provides:

In  the  event  where  the  first  party  [the  defendant]  fail  to  provide  the performers or in the event of cancellation of the event the first party will be liable to refund all the money paid and the promotional expenses but not more than US$50,000 [fifty thousand] subject to the circumstances of cancellation such as an accident, death or natural calamities, but if it is because of any unprofessional act of the first party then [it’s] liable to pay the expenses incurred by the second party [the plaintiff].

[12]     On its face this states that should Mr Khan fail to perform he will be liable to refund all the money paid and promotional expenses up to $50,000, but if the failure to perform is the result of an “unprofessional act” then he will be liable for all the expenses incurred by the appellant without limitation. To put it a different way, up to

$50,000 must be paid if the cancellation has been due to an accident, death or natural calamities, but if the cancellation is the result of some deliberate act on the part of the respondent then he is liable to pay all the expenses incurred.

[13]     However, the statement of claim is not couched in this way.  It is a claim for loss of profits.  There is no evidence given of any expenses incurred save for a sum referred to in the statement of claim of US$10,000.  It is said that that sum was paid

to Mr Khan in consideration of his commitment to undertake the performances.

[14]     That is not the way in which the claim is put and it is not stated in any direct way in the affidavit itself that that $10,000 has been paid.   Rather, loss of profit calculated on the basis of $100,000 for each performance is claimed.

[15]     On its face, no cause of action for loss of profits arises.  Therefore, on the material before me, there is no good cause of action for the damages claimed.  Thus, on a somewhat different basis I agree with the District Court Judge that lost profits of $300,000 cannot be claimed.

Leaving New Zealand with intent

[16]     It seems to me that there is a second difficulty with the application for the writ.  That is, it must be shown that there is probable cause for believing that the respondent is about to leave New Zealand with the intention of evading the payment of the sum.  There is no evidence that Mr Khan is even aware of this claim at the present time.  He is not in New Zealand yet.  He is visiting New Zealand of his own volition for several days to perform and then he will leave.  There is no evidence that he has any particular connection with New Zealand.   There is, therefore, no good cause for believing that when he arrives in New Zealand (which he will be doing voluntarily to perform) and then later leaves he will be doing so with the intention of evading payment.  Rather he will be leaving solely because he is a temporary visitor here who lives elsewhere.   He has always planned to leave and his departure has nothing to do with the debt.  Indeed, his visa will presumably require him to leave within a certain period.

[17]     Mr Harrison has drawn my attention to other issues, in particular whether a writ of arrest can be sought contemporaneously with the proceeding being filed and before it is served.  I do not need to determine that issue and do not attempt to do so this afternoon.

Conclusion

[18]     I conclude,  however,  that  in  my view  the  Judge’s  decision  to  reject  the application was correct.  I agree with him that there is not a good cause of action,

and find further that there is no probable cause for believing that Mr Khan will be leaving New Zealand with the intention of evading payment.

Result

[19]     The appeal is dismissed.

……………………………..

Asher J