Tellen Systems NZ (2013) Limited v Williams
[2022] NZCA 315
•14 July 2022 at 10:30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA368/2021 [2022] NZCA 315 |
| BETWEEN | TELLEN SYSTEMS NZ (2013) LIMITED |
| AND | SIMON ANDREW WILLIAMS |
| AND BETWEEN AND | TELLEN SYSTEMS (NZ) 2013 LIMITED |
| Court: | Clifford and Katz JJ |
Counsel: | B D Gustafson for Applicant |
Judgment: | 14 July 2022 at 10:30 am |
JUDGMENT OF THE COURT
AThe application for an extension of time to file the case on appeal and apply for a hearing date is declined.
BThe applicant must pay the respondents one set of costs for a standard application on a band A basis and usual disbursements.
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REASONS OF THE COURT
(Given by Katz J)
Tellen Systems NZ (2013) Ltd (Tellen) applies under r 43 of the Court of Appeal (Civil) Rules 2005 (the Rules) for a further extension of time to file a case on appeal and apply for a hearing date.
Tellen says there are valid reasons for its delay in filing a case on appeal. It seeks an extension to a date 10 days after this Court releases its decision on the extension application.
Background
Facts
In 2017 Tellen purchased shares in a company, Sedco New Zealand Ltd (Sedco), from Simon Williams. The business failed and Sedco was placed into liquidation in February 2018. A dispute arose between Tellen and Mr Williams over the sale and purchase of the Sedco business. Gault J released his decision in respect of that dispute on 27 May 2021, the result of which was that:
(a)Mr Williams was to pay Tellen $137,094.80 (plus interest); and
(b)Tellen was to pay Mr Williams $568,429.45 (plus interest) and 67 per cent of further payments made by Mr Williams to Sedco’s creditors.[1]
[1]Williams v Tellen Systems NZ (2013) Ltd [2021] NZHC 1199 at [160].
Following Gault J’s decision, Mr Williams served a statutory demand on Tellen seeking payment of the judgment sum.
Extension of time
Tellen filed an appeal in this Court against the High Court decision on 23 June 2021. Pursuant to r 43(1) of the Rules, Tellen was required to apply for the allocation of a hearing date and file its case on appeal by 23 September 2021. It did not do so.
On 4 October 2021, Tellen was placed into receivership by Fibre Investments Ltd (Fibre), a secured creditor and shareholder of Tellen.
On 21 October 2021, this Court granted Tellen an extension of time for complying with r 43 until a date 10 working days after Auckland reverted to COVID‑19 Alert Level 2. The next day, on 22 October 2021, Tellen was placed into liquidation.
Auckland never moved to Alert Level 2. However, lockdown restrictions imposed in Auckland were progressively eased from September 2021 onwards. Subsequently, a new framework was introduced — the COVID-19 Protection Framework (also known as the “Traffic Light System”). This came into force on 2 December 2021.
On 30 December 2021, Auckland moved into the Orange Level in the new Traffic Light System. However, businesses which did not require direct client contact had been able to resume operations several months before that. Specifically, under the COVID-19 Public Health Response (Alert Level Requirements) Order (No 12) 2021 (the Order), which came into force on 21 September 2021, businesses (including law firms) were able to operate from their usual premises, provided they could do so in compliance with certain safety requirements (including appropriate physical distancing).
Against this background, the Registrar emailed the parties on 19 January 2022 indicating that r 43 should be complied with by 1 February 2022. When the case on appeal had still not been filed by that date, a telephone conference was convened. This took place before Brown J on 8 February 2022. During the telephone conference it emerged that a number of developments had occurred since the appeal was filed, including the appointment of a receiver and liquidator, and the commencement of litigation involving them. Specifically, on 11 January 2022, the liquidators had applied for an urgent injunction to prevent Fibre and/or the receiver appointed by it from selling Tellen assets. The injunction was granted by Doogue J on 14 January 2022.[2] On 21 January 2022, Fibre filed an application to discharge the injunction. The liquidators opposed this application. On 4 February 2022, Doogue J refused to grant the discharge.[3]
[2]Tellen Systems NZ (2013) Ltd (in rec and in liq) v Fibre Investments Ltd [2022] NZHC 19.
[3]Tellen Systems NZ (2013) Ltd (in rec and in liq) v Fibre Investments Ltd [2022] NZHC 92.
During the 8 February 2022 telephone conference before Brown J the respondents raised concerns regarding Tellen’s representation in this Court, particularly given that the company was now in liquidation. Timetabling directions were made for the filing of memoranda addressing that issue. Those memoranda also addressed the present application for an extension of time.
Relevant law
The ultimate issue when considering whether to grant an extension of time under r 43 is what the interests of justice require.[4] Other relevant considerations, as set out in Almond v Read, include:
(a)the length of the delay;
(b)the reason for the delay;
(c)the conduct of the parties, particularly of the applicant;
(d)any prejudice or hardship to the respondent or to others with a legitimate interest in the outcome; and
(e)the significance of the issues raised by the proposed appeal, both to the parties and more generally.[5]
[4]Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801 at [38].
[5]At [38].
The merits of the proposed appeal may also be relevant. That is because there will be occasions on which a court will risk facilitating unjustifiable delaying tactics by the parties if the merits of an appeal are not addressed.[6] However, any consideration of the merits must be relatively superficial.[7]
Should an extension be granted?
[6]At [39].
[7]At [39(c)].
Over a year has now passed since the appeal was filed on 23 June 2021. Tellen was originally due to file its case on appeal by 23 September 2021 but failed to do so. It was then given what turned out to be a very lengthy extension (ultimately through to 1 February 2022). The extension gave Tellen, in total, over seven months to file its case on appeal.
The first submission advanced by counsel for Tellen is that the COVID-19 lockdown conditions imposed on Auckland in August 2021 meant that it was unable to complete preparation of the case on appeal or apply for a hearing date on time, due to access to limited resources.
We have some difficulty accepting this submission. The initial extension that was granted recognised the difficulties posed by the sudden Auckland lockdown in August 2021. Initially at least, most law firms had to transition into working fully remotely. With the progressive easing of lockdown restrictions, however, it became possible for law firms to resume more normal operations (although client contact, court hearings and so on continued to take place largely by remote means). Indeed, the applicant’s legal team was engaged in communications about, and litigation concerning, the receiver and liquidator since October 2021, notwithstanding COVID‑19 restrictions.
Accordingly, we do not accept that COVID-19 restrictions prevented the applicant’s legal advisers from being able to prepare and file the case on appeal during the period October to December 2021. Rather, it seems more likely that their failure to do so may have been due to Fibre (which is funding this appeal) having other priorities at the time. Specifically, during the period October to December 2021, Fibre’s primary focus, through the receiver it appointed to Tellen, appears to have been on selling the Tellen business. Mr Simmonds, who appears to be the ultimate owner or beneficiary of the Fibre business, was the intended purchaser. If the sale of the Tellen assets to Mr Simmonds had proceeded, that may well have impacted on Fibre’s willingness to continue to fund this appeal. On 14 January 2022, however, Doogue J issued an injunction preventing the sale.[8]
[8]Tellen Systems NZ (2013) Ltd (in rec and in liq) v Fibre Investments Ltd, above n 2.
By way of further explanation for the delay in filing the case on appeal, counsel for the applicant explains that it was not possible to prepare the case on appeal in January of this year, as most of the firm’s staff were on leave for the first part of the month and, further, the firm was trying to complete the fit-out of its new premises. Additionally, and significantly, the applicant’s legal team was heavily involved in the injunction proceedings (acting for Fibre, on that occasion) in the first half of January.
Obviously, this situation could have been avoided if the case on appeal had been prepared during the latter part of 2021 and not left to the “last minute”. In any event, even accepting that the applicant’s legal team was heavily committed to the injunction proceedings in the first half of January 2022, they should have prioritised preparation of the case on appeal following delivery of Doogue J’s decision on the injunction application on 14 January 2022.
Turning to the issue of prejudice, Mr Williams says that he is prejudiced by the delay because:
(a)The receiver is in the process of shutting down Tellen and its value is diminishing by the day.
(b)Fibre was trying to sell the business of Tellen to itself (or a related party) at a price which had not been reached independently, which the liquidator thought was low, and which prejudiced Tellen. Any further delay will mean the liquidator will not be able to rescue the business for the benefit of the concurrent creditors.
(c)Tellen, purportedly through the receiver or the secured creditor, is still pursuing litigation against a Mr Lambert in respect of issues which have already been ruled on by Gault J, so is pursuing litigation doomed to fail. This in turn prejudices Mr Williams as there will be less money for concurrent creditors because of the lawyers’ fees that will be incurred.
Given that there has been no stay of the decision under appeal, we do not accept that the prejudice to Mr Williams is as great as counsel for Mr Williams suggests. We accept, however, that the ongoing uncertainty (in the context of a company that is in both receivership and liquidation) gives rise to at least some prejudice.
Overall, given the various matters we have outlined, we have not been persuaded that it is in the interests of justice to grant a further extension.
Given this conclusion, it is not necessary for us to express any firm views on the representation issues which are addressed comprehensively in the parties’ memoranda. For completeness, however, we note our preliminary view that there may well be some force in the respondent’s view that there are issues with Mr Gustafson and Ms Grant (funded by Fibre) acting for Tellen in this application, while at the same time acting for Fibre against Tellen in the related High Court proceedings referred to at [10] above. In particular, there appears to be a risk that the interests of Fibre and Tellen are not completely aligned.
Result
The application for an extension of time to file the case on appeal and apply for a hearing date is declined.
The applicant must pay the respondents one set of costs for a standard application on a band A basis and usual disbursements.
Solicitors:
Grant & Co, Auckland, for Applicant
CavellLeitch, Christchurch, for Respondents
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