Tavendale & Partners Limited v Dineen

[2023] NZHC 157

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2021-409-000586

[2023] NZHC 157

BETWEEN

TAVENDALE & PARTNERS LIMITED

Plaintiff

AND

MARK JOHN DINEEN

Defendant

Hearing:

On the papers

Counsel:

A S Butler KC and J A Tocher for Plaintiff

P F Whiteside KC and J R Pullar for Defendant

Judgment:

9 February 2023

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 9 February 2023 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

TAVENDALE & PARTNERS LTD v DINEEN [2023] NZHC 157 [9 February 2023]

[1]                  The plaintiff (Tavendale) is an incorporated law firm. Mr Dineen was formerly a director and practising lawyer with Tavendale. He now practises law at another law firm.

[2]                  Tavendale commenced this proceeding against Mr Dineen alleging breach of fiduciary duties in respect of certain transactions he entered into with clients of the firm and that he had breached a personal undertaking in respect of Tavendale’s electronic data.

[3]                  Mr Dineen applied for a stay of this proceeding and referral of the disputes to arbitration under art 8(1) of sch 1 of the Arbitration Act 1996. Tavendale opposed the application.

[4]                  In a judgment dated 30 June 2022, I granted Mr Dineen’s application.1 I held there was at least a prima facie case that the claims brought against Mr Dineen by Tavendale were the subject of an arbitration agreement between the parties and capable of resolution by arbitration. I stayed this proceeding pending a determination by the arbitral tribunal as to whether it has jurisdiction to determine the disputes.2

[5]                  Tavendale now seeks leave to appeal from my judgment. It argues that it has reasonably arguable grounds of appeal and that it is in the interests of justice to grant leave to appeal in all the circumstances of the case.

[6]                  Counsel filed comprehensive submissions in relation to the application and asked that it be decided on the papers.

Legal principles

[7]                  There appears to be no dispute that Tavendale requires leave to appeal from the judgment.

[8]Section 56(3) and (4) of the Senior Courts Act 2016 relevantly provide:

1      Tavendale & Partners Ltd v Dineen [2022] NZHC 1530.

2 At [94].

56       Jurisdiction

…

(3)No appeal, except an appeal under subsection (4), 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  on  application  made  within 20 working days after the date of that order or decision or within any further time that the High Court may allow.

(4)Any party to any proceedings may appeal without leave to the Court of Appeal against any order or decision of the High Court---

(a)striking out or dismissing the whole or part of a proceeding, claim, or defence; or

(b)granting summary judgment.

[9]                  The principles that apply to an application for leave to appeal under s 56(3) are also not in dispute. They were set out by the Court of Appeal in Greendrake v District Court of New Zealand.3 The Court of Appeal stated:4

[6]      In Finewood Upholstery Ltd v Vaughan, to which Dunningham J referred to in the leave decision, Fitzgerald J appropriately observed that the requirement for leave to appeal should serve as a filtering mechanism to ensure that unmeritorious appeals of interlocutory orders, or appeals of interlocutory orders of no great significance to either the parties or more generally, do not unnecessarily delay the proceedings in which the orders were made.5 The following considerations were recognised as relevant on an application for leave to appeal:

(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;

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

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

[7]This Court in Ngai Te Hapu Inc v Bay of Plenty Regional Council6

indicated that considerations similar to the principles applicable to

3      Greendrake v District Court of New Zealand [2020] NZCA 122. See also Lobb v Ryan [2021] NZCA 224 at [2].

4      Greendrake v District Court of New Zealand, above n 3.

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

6      Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291.

applications under the former s 24G of the Judicature Act 1908, as explained in Meates v Taylor [Leave],7 apply to applications under s 56(5) stating:

We agree that leave to appeal should only be granted where the significance or implications of an arguable error of fact or law, either for the particular case or for the applicant or as a matter of precedent, warrants the further delay which the appeal process would involve.

Proposed grounds of appeal

[10]              Tavendale wishes to advance four grounds of appeal. The first ground is that in finding in favour of Mr Dineen I relied upon an arbitration clause found in cl 7.3 of a Heads of Agreement between the parties which had not been invoked by Mr Dineen in his application for stay or at any stage prior to being raised by me at the hearing. It is argued that by granting a stay on the basis of an unpleaded arbitration clause, I had overruled the autonomy of the parties to choose their forum of dispute, and that Tavendale was prejudiced in being unable to advance evidence with a bearing on the matter.

[11]              The second ground is that I adopted the incorrect standard of review. As I noted in my judgment, when faced with a stay application under art 8(1) on grounds challenging the existence or validity of an arbitration agreement and/or its scope, the courts have generally adopted either a prima facie assessment or full review approach.8 I considered the prima facie assessment standard was appropriate in this case.

[12]              The third ground is that although the judgment concluded there was at least a prima facie case that there was a legally binding arbitration agreement between the parties, the language used to dismiss Tavendale’s arguments was more absolute and the conclusions reached were wrong having regard to all of the evidence and arguments presented by Tavendale.

[13]              The fourth ground is that the scope of the arbitration agreement that I found was binding between the parties did not extend to the conduct of Mr Dineen that is the subject of Tavendale’s claim.

7      Meates v Taylor (1992) 5 PRNZ 524 (CA) at 526.

8      Tavendale & Partners Ltd v Dineen, above n 1, at [35]-[41].

[14]              Tavendale also argues it is in the interests of justice that it be granted leave to appeal. Six reasons are advanced. First, it is said the judgment has effectively brought Tavendale’s claim before the Court to an end and given the effective finality of the decision, it should be permitted an appeal where one is reasonably arguable. Second, it is said the appeal will not cause any delay in this proceeding because it has been stayed. Third, the appeal is unlikely to cause any delay to related arbitral proceedings as Tavendale has not sought a stay of such proceedings. Fourth, that as a matter of fairness, Tavendale should be permitted to challenge my findings in an appellate court, otherwise there is a risk that an arbitrator might be influenced or feel bound by the conclusions reached in the judgment. Fifth, that at least two of the proposed grounds of appeal raise issues of public importance such that the benefits of achieving clarity in law outweigh any possible delay. Finally, it is submitted the appeal is of sufficient importance to Tavendale to outweigh any concerns about delay because it has always made it clear that the choice of forum is important to it and it considers that Mr Dineen is attempting to hide his misconduct behind a veil of secrecy that arbitration will provide him.

[15]              Mr Dineen emphasised the high threshold for granting leave to appeal and argues that there are no errors of fact or law as asserted by Tavendale, nor are there any issues of public importance such that the outcome of an appeal will have little significance beyond this case. He argues that to grant leave to appeal will cause delays in resolving the dispute and will prejudice him. It is said also that Tavendale’s desire in pursuing its application for leave to appeal is to embarrass Mr Dineen and gain tactical advantage contrary to the wider purpose of s 56(3) of the Senior Courts Act.9

Are the grounds of appeal arguable?

[16]              I do not consider the first proposed ground of appeal has sufficient merit to justify the granting of leave to appeal. While it is correct that the relevance of cl 7.3 of the Heads of Agreement had not been identified by counsel prior to the hearing, my reliance upon it was entirely consistent with the approach Mr Butler advanced for Tavendale that the real question was the legal effect of the Heads of Agreement.

9      Li v Chief Executive, Ministry of Business, Innovation and Employment [2018] NZHC 1171 at [20].

Further, while Tavendale submits it could have provided further evidence as to whether the Heads of Agreement had been abandoned, it had already filed evidence in support of that position and has not identified what further evidence could have been provided.

[17]              I accept that the second ground of appeal is arguable and raises an issue of general importance. There have been different approaches to the question of the appropriate standard of review in decisions of this Court and I am not aware of any appellate authority as to the proper approach in a case such as this. I note that very recently in HWD NZ Investment Co Ltd v Body Corporate 392418 Associate Judge Brittain considered authorities on the point and held that a full review was justified in the circumstances of that case. I accept the submission for Tavendale that given the prevalence of arbitration clauses in commercial contracts and the growing importance of arbitration as a means of settling disputes, an appellate precedent on the issue is desirable.

[18]              The third and fourth grounds of appeal challenge both my factual findings and interpretation of the Heads of Agreement and the 2014 draft shareholders agreement. I accept that these grounds are arguable. I do not, however, accept that they raise issues of public interest. The facts of this case are plainly unique and any findings made on these issues will have little significance beyond the parties.

The importance of the alleged errors

[19]              I do not accept Tavendale’s submission that Mr Dineen seeks to hide misconduct “behind a veil of secrecy”. It was plainly the case, in my view, that the expectation of the parties, as reflected in the various iterations of shareholders agreements and the Heads of Agreement was that disputes would be resolved by arbitration. However, I accept there are good reasons, related to costs and procedures, why Tavendale may wish to pursue its claim before the High Court rather than by arbitration and that the choice of forum is a matter of importance to it.

Delay

[20]              I do not consider the issue of delay significant in this case. It is only the resolution of Tavendale’s claim that will be delayed while it pursues its appeal. Further, this is not the only dispute between these parties. Mr Dineen wishes to pursue claims against Tavendale by way of arbitration and is not precluded from doing so. As it appears Tavendale will object to the arbitrator’s jurisdiction to determine such other claims, it may in fact assist the parties and result in a quicker resolution of the disputes between them to have a ruling from the Court of Appeal.

Interests of justice

[21]              Ultimately the issue for me is whether the interests of justice require that leave to appeal be granted. I do not accept several arguments advanced by Tavendale on this issue. For instance, I do not accept that my judgment brings its claim before this Court to an end. The effect of the judgment is to stay proceedings until the issue of jurisdiction is determined by the arbitral tribunal. If it is found such jurisdiction does not exist, the stay would be lifted. I also do not accept the submission that Tavendale should be allowed to challenge my findings due to the risk that an arbitrator might be influenced or feel bound by my conclusions reached in the judgment. Such concerns appear fanciful.

[22]              That said, as noted, I accept that several grounds of appeal are arguable and that one of them raises an issue of public interest and that delay is not an important factor in this case. On balance I consider the interests of justice weigh in favour of granting leave to appeal.

Result

[23]              Under s 56(3) of the Senior Court Act 2016, Tavendale is granted leave to appeal my decision of 30 June 2022.

O G Paulsen Associate Judge

Solicitors:

Woods Fletcher (R Fletcher), Wellington. Counsel: A S Butler KC, Wellington. Taylor Shaw (J Pullar), Christchurch. Counsel: P F Whiteside KC, Christchurch.