Spark New Zealand Trading Limited v Bryan

[2023] NZHC 759

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-2433

[2023] NZHC 759

BETWEEN

SPARK NEW ZEALAND TRADING LIMITED
Plaintiff/Applicant

AND

SEAN DAVID BRYAN

Defendant/Respondent

Hearing:

On the papers

Appearances:

Zane Kennedy/Jade Yu for the Plaintiff/Applicant

Timothy J Rainey/Bruce Stainton for the Defendant/Respondent

Judgment:

19 April 2023

JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR

[Application for leave to appeal to the Court of Appeal]

This judgment was delivered by me on 19 April 2023 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules

…………………………. Registrar/Deputy Registrar

Solicitors:

MinterEllisonRuddWatts (Jade Yu) Auckland, for the Plaintiff

Stainton Chellew (Bruce Stainton/Lydia Tawse), Auckland, for the Defendant

Counsel:

Zane G Kennedy, Auckland, for the Plaintiff T Rainey, Auckland, for the Defendant

SPARK NEW ZEALAND TRADING LIMITED v SEAN DAVID BRYAN [2023] NZHC 759 [19 April 2023]

[1]                On 21 December 2022 the Court delivered a judgment (the Judgment) which declined the application of the plaintiff, Spark New Zealand Trading Ltd (Spark) for summary judgment against the defendant, Mr Bryan (Mr Bryan).1

[2]                Spark had filed an application for leave to appeal the Judgment to the Court of Appeal and  filed  a  synopsis  of  arguments  in  support  of  its  application  dated 13 February 2023.

[3]                The application is opposed by Mr Bryan who filed submissions in opposition on 21 February 2023. Spark have filed reply submissions to Mr Bryan’s submissions dated 24 February 2023.

Legal Principles

[4]                No appeal2 lies from any order or decision of the High Court made on an interlocutory application in respect of any civil proceeding unless leave to appeal to the Court of Appeal is given by the High Court or by the Court of Appeal following the High Court’s refusal of leave.3

[5]                The relevant principles are set out in the decision of the Court of Appeal in Greendrake v District Court4 where the Court of Appeal identified the following considerations:

(a)a high threshold exists;

(b)the applicant must identify an arguable error of law or fact;

(c)the alleged error should be of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value;

1      Spark New Zealand Trading Limited v Bryan [2022] NZHC 2397.

2      Except for those appeals provided for under s 56(4) of the Senior Courts Act (the Act).

3      Section 56 of the Act.

4      Greendrake v District Court [2020] NZCA 122 at [6].

(d)the circumstances must warrant incurring further delay; and

(e)the ultimate question is whether the interests of justice are served by granting leave.

[6]                The Court of Appeal in that decision also approved the observations of Fitzgerald J in Finemore Upholstery Ltd v Vaughan5 to the effect that the requirement for leave was a filtering mechanism to ensure that unmeritorious appeals of no great significance did not necessarily delay the proceedings in which the orders had been made.

Submissions

[7]The issues to be determined in this judgment are:

(a)has Spark identified arguable errors of law in the Judgment?

(b)are any of the issues of sufficient importance to justify an appeal at this stage?

(c)is the delay from any appeal warranted?

(d)should leave be granted in the interest of justice?

[8]I deal with each of these in turn.

Has Spark identified arguable errors of law in the Judgment?

[9]                Mr Kennedy for Spark submits that the Court erred in the Judgment in the following respects:

(a)At [48], that it is arguable that Mr Bryan was not the privy of Victory IT Ltd (in liquidation) (Victory) for the purposes of the arbitral award (the Award).

(b)At [55], that it is arguable that the elements of the two causes of action pleaded against Mr Bryan, namely conspiracy by unlawful means and knowing assistance, had not been definitely established by the Award.

5      Finemore Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].

(c)At [58], that it is arguable that Mr Bryan is not subject to cause of action estoppel or issue estoppel as a result and, at [64], that it is arguable that Mr Bryan should not be liable for the costs awarded by the arbitrator against Victory.

Arguable that Mr Bryan was not a privy of Victory for the purposes of the Award

[10]            Mr Kennedy submits that the Court’s finding that it is arguable that Mr Bryan was not Victory’s privy was an error. At [6] of his submissions, Mr Kennedy reiterates the arguments put forward at the hearing as to why Mr Bryan should be regarded as Victory’s privy. He submits that Spark relied upon the following authorities:

(a)The leading Court of Appeal authority in Shiels v Blakeley6 which held the relevant test was whether there was such a union, or nexus, community or mutuality of interest or an identity between the party to the first proceeding and the party claimed to be estopped in the subsequent proceeding, that estopping the latter would produce a fair and just result.

(b)The closely analogous case of Sharma7 in which the sole director and shareholder of a company was found to have the necessary mutuality of interest with the company, such that he was personally estopped from subsequently raising the same issues that the company had previously raised and had determined in arbitration. The Court found him to be the alter ego of the company.

[11]            Mr Kennedy submits that the Court’s findings that Mr Bryan was not Victory’s privy rested on the premises that:

6      Shiels v Blakeley [1986] 2 NZLR 262 (CA).

7      Victoria Street Apartments Ltd (In Liq) v Sharma HC Auckland CIV-2009-404-8377, at [41].

(a)the authorities referred to in Sharma in fact supported a narrower view of the doctrine of privity that requires that the alleged privy be in substance a party to the earlier litigation, and that an indirect interest in the outcome of the proceedings as a director or shareholder will not suffice because it would abrogate the doctrine of separate legal personality;

(b)the English decision of Standard Chartered Bank (Hong Kong) Ltd v Independent Power Tanzania Ltd8 was a relevant authority and ought to be followed.

[12]            Mr Kennedy submits that on the evidence and the authorities, Mr Bryan was plainly the alter-ego of Victory.

[13]            Mr Rainey, for Mr Bryan, submits that in determining the application for summary judgment, the Court had to be satisfied that was no arguable defence and the Court must be left without any real doubt or uncertainty. He relies on Pemberton v Chappell.9

[14]            Mr Rainey submits that to consider whether Mr Bryan was privy of Victory, the Court in the Judgment considered the authorities and applied them to the particular facts and circumstances in the case. He submits that Mr Bryan arguably did not have sufficient community or mutuality of interest of Victory for him to be its privy as there were differences between Mr Bryan’s position and that of Mr Sharma which might lead a trial Court to give a different decision once the full facts and circumstances are established based on admissible evidence. He submits Spark may ultimately establish community or mutuality of interest exists on the evidence at the substantive proceeding, but that does not establish any error by the Court in determining this issue for the purposes of the summary judgment application.

8      Standard Chartered Bank (Hong Kong) Ltd v Independent Power Tanzania Ltd [2016] 1 All ER (Comm) 233.

9      Pemberton v Chappell [1987] 1 NZLR 1 (CA).

Is it arguable that the elements of the causes of action are different?

[15]            Mr Kennedy submits that the view of the Court at [55] that it was arguable that the dishonesty elements of the two causes of action had not been definitively established against Mr Bryan by the Award was an error. He submits the Court did not appreciate that Victory could only act through Mr Bryan and dishonesty findings made by the arbitrator arose solely from the conduct of Mr Bryan as Victory’s sole director and shareholder. He relies on the findings in the Award that:

“led inexorably to the conclusion that Victory acted dishonestly. Mr Bryan knowingly participated in a scheme whereby an ongoing stream of work, charged at inflated rates, was directed to Victory and return for Victory paying approximately half of its profits to Spud/Mr Lester.”10

[16]            Mr Rainey submits that the submissions by Spark are an attempt to reduce the arguments made on behalf of Mr Bryan to the simple issue of whether he was a natural person whose acts or omissions were attributed to Victory for the purposes of the issues determined in the arbitration.   Mr  Rainey submits that Spark reasons that   Mr Bryan was the sole person who acted for Victory, and therefore because Victory was liable Mr Bryan must also be liable.

[17]            Mr Rainey submits the Court of Appeal recognised in Body Corporate 202254 v Taylor, the fact that individual acts or omissions which may be attributable to a non- individual person such as a company, does not automatically mean those same acts or omissions count as acts or omissions by the individual for the purposes of any legal liability which might attach to those acts or omissions.11

[18]            Mr Rainey submits that the enquiry depends on the particular facts and circumstances of the case which can only be made in context of a full hearing of all relevant evidence, and is not an issue suitable for determination in the context of a summary judgment application.

10 the Award, at [102].

11     Ibid, at 30-31.

Conclusion in respect of arguable errors of law or fact

[19]            In conclusion, in respect of whether Spark has established arguable errors of law or fact in the Judgment, in my view it has not done so. There are no doubt arguments that Mr Bryan was a privy of Victory and no doubt arguments that the findings of the Award were sufficient to establish the alleged causes of action against Mr Bryan. However, neither of the defences to these allegations raised by Mr Bryan were untenable. Consequently the Court could not be satisfied there was no arguable defence and accordingly the Court applied the correct test and, as a result, summary judgment should not be given in favour of Spark.

Are there any issues of sufficient importance to justify an appeal at this stage?

[20]Mr Kennedy submits that the proposed appeal raises issues of importance:

(a)general or public importance warranting consideration by the Court of Appeal of whether the legal test for the privity of interest remains as described in Shiels v Blakeley and whether there is a proper basis for a narrower view of the doctrine of privity that appears to have been accepted in the judgment in reliance on Standard Chartered Bank; and

(b)significant private importance to Spark as the dismissal of the summary judgment application will require Spark to relitigate afresh the very same issues that have been determined at arbitration. Mr Kennedy submits that will involve calling, or seeking to subpoena, more than 10 witnesses to give evidence over the course of approximately a week, and making the same detailed submissions that have already been heard by the arbitrator, which has a significant time and cost consequence for Spark.

[21]            Mr Rainey, on the other hand, submits in response to Mr Kennedy’s issues set out at [20]:

(a)there is no conflict between the decisions of Shiels v Blakeley and Standard Chartered Bank. He submits that both cases articulate the same test for whether a party is a “privy” to a party involved in the earlier litigation and both cases emphasised the factual nature of the enquiry into the relationship between the earlier litigant and the alleged privy. In the present case that issue is best determined in the context of a full hearing where all the facts and circumstances of the relationship between Victory and Mr Bryan will be established.12

(b)As to the second issue set out at [20](b), Mr Rainey submits that Spark is not required by the decision made by the High Court to relitigate afresh the same issues that have already been determined in the arbitration as it can choose to limit its evidence in support of its claim to the arbitration Award, and if it established that Mr Bryan is in fact the privy of Victory and the facts established in the arbitration are sufficient to establish the cause of the action against Mr Bryan, then Spark will succeed.

Conclusion in relation to whether there are issues of sufficient importance to justify an appeal

[22]            In my view, the justifications put forward by Spark do not justify an appeal at this stage. In my view there is not sufficient conflict between Shiels v Blakeley and the Standard Chartered Bank decision to justify this as a matter of public importance to be looked at by the Court of Appeal. In the final analysis, it will be a question of examination of the facts relating to the relationship between the earlier litigant and the alleged privy as to whether the necessary nexus or community of interest exists.

[23]            As to the second issue, I think Mr Rainey is correct that Spark is not required by the Judgment to relitigate afresh the same issues that have been determined in arbitration. Indeed, the proposition put forward by Spark is that the arbitration Award establishes all the causes of action against Mr Bryan that Spark should be able to rely on the arbitration evidence. The Judgment allows for this (see [67](b)).

12     Mr Rainey referred to the decision of the Court of Appeal in Huaneng Industrial Development Co. Ltd v Shi [2022] NZCA 534.

[24]Accordingly, I do not think there is justification for the appeal at this stage.

Circumstances warranting delay

[25]            Mr Kennedy submits the costs and delay associated with the appeal are justified. He submits the appeal is unlikely to take longer than half a day, and the Court of Appeal can be expected to hear and determine it within the next six months. Conversely, he submits that a substantive trial in the High Court is unlikely to take place before the end of 2024 and in that case the benefits of the summary judgment proceeding would have been squandered.13

[26]            Mr Rainey, on the other hand, submits that it is unlikely that the appeal would be heard and determined by the Court of Appeal this year. If the appeal fails it will be remitted back to the High Court to determine the substantive issues and, given the backlog in the High Court at the moment, this will result in a hearing in 2025 or 2026. Mr Rainey submits that from Spark’s perspective if leave to appeal is declined it must advance the claim to a substantive hearing, and there is no reason why the proceeding cannot be set down for a trial at an early stage given it is unlikely there will be any significant additional discovery required.

Conclusion in relation to whether delay for any appeal is warranted

[27]            In my view, the delay which would be occasioned by the appeal is a neutral factor, not pointing significantly one way or the other to allowing the appeal.

Interests of justice

[28]            Mr Kennedy submits the time and cost associated with relitigating the case afresh in the High Court would be prohibitive and wasteful of resources of the parties and the Court. He submits it would also introduce the prospect of inconsistent findings between the arbitrator and the Court.

13     Mr Kennedy refers to the decision of Yu v Bradley [2018] NZHC 2312 at [15].

[29]            Mr Kennedy submits Spark is currently left in an invidious position as the Judgment introduces significant uncertainty as to whether Spark is able to rely on the Award to found a cause of action or issue estoppel at trial. Accordingly, Spark would have no choice but to prepare for trial on the basis that it has to prove its case from the ground up. He submits the issues arising from Spark’s intended appeal are questions of law and amenable to determination in the summary judgment context. If the appeal is successful it would be dispositive of the case and result in considerable time and cost savings for both parties and the Court.

[30]            Mr Rainey, on the other hand, as already noted at [21](b), the Judgment does not require Spark to relitigate matters. He submits it may choose to do so rather than take the risk of relying on the arbitration Award evidence. On this point I reiterate the comment I have made above – that if Spark is confident that the arbitration Award establishes the causes of action against Mr Bryan, then they should be prepared to proceed to trial on that basis. If not, then it underlines that the matter is not suitable for summary judgment determination.

[31]            Mr Rainey also submits that the proposed appeal is not limited to issues of law and submits they are mixed questions of fact and law where the Court has already determined there is an arguable defence depending on the facts, which might ultimately be established at trial. In my view, this is a correct assessment to the position.

Result

[32]As a result of the conclusions I have reached at [19], [22], [27], [30] and [31],

I am of the view that the application for leave to appeal should be declined.

Orders

[33]I make the following orders:

(a)Spark’s application for leave to appeal the Judgment is dismissed.

(b)Counsel are directed to endeavour to agree costs within 20 working days of the date of this judgment. Failing agreement being reached within that time, then counsel for the respondent will file a memorandum as to costs (not exceeding 5 pages) within 10 working days of expiry of the 20 working day period, and counsel for the applicant will file a memorandum in reply (not to exceed 5 pages), within 5 working days of receipt of counsel for the respondent’s memorandum. Costs will then be determined on the papers.

(sgd) C B TAYLOR

…………………………….. Associate Judge Taylor