The Works Group Limited v Conlon and Wall

[2007] NZCA 310

IN THE COURT OF APPEAL OF NEW ZEALAND

CA229/07 [2007] NZCA 310

BETWEEN  THE WORKS GROUP LIMITED

Applicant

AND  MATTHEW PATRICK CONLON AND

ROBERT ERNEST WALL Respondents

Hearing:          16 July 2007

Court:            O’Regan, Ellen France and Wilson JJ
Counsel:        D G Hayes for Applicant

A J Nolan (by video link) for Respondents

Judgment:      24 July 2007 at 12 noon

JUDGMENT OF THE COURT

A        The application for special leave to appeal is dismissed.

BThe applicant must pay to each respondent costs of $750 plus usual disbursements.

REASONS OF THE COURT

(Given by O'Regan J)

THE WORKS GROUP LIMITED V MATTHEW PATRICK CONLON AND ROBERT ERNEST WALL CA CA229/07 [24 July 2007]

Introduction

[1] This is an application for special leave to appeal against a decision of Priestley J (HC HAM CIV 2006-419-1524 15 March 2007) in which he dismissed the applicant's appeal against a decision of Judge Tompkins (DC HAM CIV 2003-019-1097, CIV 2003-019-1070 3 October 2006). The applicant sought leave from the High Court to appeal to this Court, but that was declined: HC HAM CIV 2006-419-1524 2 May 2007.

Issue

[2] The issue before us is: Does the proposed appeal raise some question of law or fact capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of the further appeal, such that leave to appeal should be granted under s 67 of the Judicature Act 1908? That is the test to be applied in cases such as this, as confirmed in Waller v Hider [1998] 1 NZLR 412 at 413 (CA).

District Court proceeding

[3] The applicant held the Hamilton franchise for "Mr Green" and the respondents were franchisees of its lawn mowing operation. The respondents were dissatisfied with aspects of the operation of their franchise arrangements, and the franchise agreements were terminated. The franchise agreement provided that, on termination, the franchisee was to cease to serve the customers of the franchisee. The respondents breached this provision and continued to mow the lawns of their customers. The applicant commenced proceedings in the District Court, and Judge Clark entered summary judgment against both respondents as to liability, and directed that there be a hearing to deal with issues of quantum and also to deal with certain counterclaims by the respondents.

[4] That hearing was before Judge Tompkins. He entered judgment in the applicant's favour in relation to the respondents' counterclaims, but found that the

applicant had not proved loss and therefore entered judgment in favour of the respondents on the quantum claim.

[5] In brief terms, Judge Tompkins found that the applicant had not proved its loss. The applicant adduced evidence in the District Court from a chartered accountant to the effect that, if the respondents had complied with the requirement to cease serving customers, the applicant would have bundled up those customers with others and sold them as a franchise. On that assumption, the accountant calculated the applicant's damages by reference to the consideration which the applicant could have received if the franchise had been sold and the ongoing royalties which the applicant would have received from the new franchisee.

[6] Judge Tompkins said the assumptions on which the accountant had relied bore little or no connection with reality. This was because the applicant had made no effort to resume servicing the customers of the respondents or to contact those customers at the relevant time. He said that the applicant could have easily packaged the respondents' customers, as well as those which it was servicing itself, into a new franchise, but it did not do so and made no effort to do so. He concluded that the applicant had not proved that it had suffered any loss as a result of the admitted breach of the termination provisions by the respondents, and therefore its damages claim failed.

High Court appeal

[7] In the High Court, it was argued that Judge Tompkins had wrongly confused the issue of quantifying damages with the issue of mitigation of loss. It was argued that the fact that the applicant had not sold any franchises and had made no attempt to bundle up the respondents' customers into a new franchise was immaterial, in the absence of evidence contesting that of the accountant. It was suggested that the failure to contact customers raised an issue of failure to mitigate, rather than an issue relevant to the assessment of damages.

[8] Priestley J did not accept those submissions. He found that the approach taken by the applicant failed to focus on the loss which actually flowed from the  respondents' breaches, and was based on assumptions which the applicant had no intention of implementing, was in no position to implement, and never did implement. He concluded at [34]:

In short, the evidence relating to quantum before the Judge was not directed towards an appropriate measure of damages. The Judge's conclusion that the appellant had "... quite simply, not proved that it has suffered any loss as a result of the admitted breach of the termination provisions" is thus a correct conclusion.

[9] Accordingly, there are concurrent findings of fact in the District Court and the High Court on the crucial point, namely that there was no evidence to support the assumptions which had been used by the accountant in assessing the quantum of damages.

Leave judgment

[10] In his leave judgment, Venning J noted the difficulty faced by the applicant because of its failure to adduce evidence to support the proposition underpinning the claim for damages (that the applicant would have sold new franchises). He concluded that there could not be any serious or bona fide question of law that either the District Court or the High Court decisions sought to apply an incorrect legal test to the quantification of damages. Rather, he said, both Courts had simply held that, on the evidence before the Court, the applicant had failed to establish the loss for which it sought compensation. He also concluded there was no public policy element, given the unusual features of the case. He therefore declined leave.

Applicant's case for special leave

[11] In this Court, counsel for the applicant, Mr Hayes, renewed the arguments which he had made to Judge Tompkins, Priestley and Venning JJ. He said that the calculation of damages had to be made at the time of breach. The failure of the applicant to seek to reclaim the customers and to sell new franchises in the period after the breach occurred was not a relevant factor in the calculation of damages, though it may have been relevant to mitigation.   He said this was a legal error, and

although there may be no particular public interest involved, there was considerable private interest for the applicant in having its claim upheld by the Courts.

Our assessment

[12] Our assessment of the position is essentially the same as that of Venning J. This is a situation where there are concurrent findings of fact by the District Court and the High Court, to the effect that the assumptions made by the accountant in assessing loss have no evidential foundation. It is only in the most exceptional circumstances that a further appeal will be allowed on a factual issue in the face of concurrent findings in the trial court and on the first appeal, and we do not see this case as giving rise to any issue which would justify a departure from that rule of practice. We do not underestimate the significance of the case from the applicant's point of view, but we have come to the same conclusion as that reached by Venning J, namely that the issue raised by the applicant does not establish a bona fide or serious question of law for determination by this Court.

Result

1. We therefore decline special leave.

Costs

[14] On behalf of the respondents, Mr Nolan sought third party costs, either against the principal of the applicant, or against Mr Hayes as counsel. His reason for this was the apparent impecuniosity of the applicant, and its failure to pay earlier costs awards. There is nothing before us which would justify either of the courses of action proposed by Mr Nolan. In accordance with normal practice, we therefore award costs against the applicant in the sum of $1,500 ($750 to each respondent), plus usual disbursements.

Solicitors:

Ryan Law, Hamilton for Applicant

Anthony J Nolan, Hamilton for Respondents