Ttah Limited v Konninklijke Ten Cate N.V
[2013] NZHC 3029
•14 November 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-8250 [2013] NZHC 3029
BETWEEN TTAH LIMITED First Plaintiff
TT INVESTORS LIMITED Second Plaintiff
AND KONINKLIJKE TEN CATE N.V.
First Defendant
ROYAL TEN CATE USA, INC Second Defendant
TEN CATE UK LIMITED Third Defendant
TIGERTURF NZ LIMITED Third Defendant
Hearing: 12 August 2013
Counsel: C Hadlee for Plaintiffs
R Lange and G Holm-Hansen for Defendants
Judgment: 14 November 2013
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 14 November 2013 at 4.30 p.m., pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………………….
Solicitors: Less Salmon Long, Auckland
Simpson Grierson, Auckland
TTAH LIMITED v KONINKLIJKE TEN CATE N.V. [2013] NZHC 3029 [14 November 2013]
[1] The first, second and third defendants (Ten Cate) apply for an order, under High Court Rule 15.1, to strike out the first and third causes of action in the plaintiffs’ (TigerTurf) amended statement of claim and an order for costs. The second cause of action is a discrete claim for allegedly unpaid consultancy fees and is not relevant to this strike out application. The application is opposed.
[2] At issue is whether Ten Cate has established that the first and third causes of action are not reasonably arguable or are an abuse of process because:
(a) Ten Cate cannot be contractually liable for default interest pursuant to the parties’ agreement for the sale and purchase of shares, as even though it paid $7,203,296 some months after settlement date, the court has already determined it was not in default and the agreement, as correctly interpreted, puts beyond argument that there is no default.
(b)TigerTurf is not entitled to a declaration that it has no liability for a warranty claim that Ten Cate relies on for the purpose of set off as the Court has no jurisdiction to make such a declaration.
Background
[3] The basis of this proceeding is an agreement for the sale and purchase of three tranches of shares in the TigerTurf group of companies entered into on
4 February 2009 between TigerTurf and Ten Cate. In terms of the agreement, Ten Cate settled its purchase of the first two tranches, which the parties refer to as Option I shares, without incident. However, the parties are in dispute over Ten Cate’s purchase of the third tranche of the shares, described as Option II shares, and its claimed setoff for breaches of warranties in the agreement (warranty claim). The dispute has its origins in events that occurred in the first half of 2011.
[4] On 31 March 2011, TigerTurf exercised the option provided for in clause 18 to require Ten Cate to purchase the Option II shares. This triggered certain provisions in the agreement resulting in the following obligations:
(a) Settlement was required on 14 April 2011, making that date the
Option II Settlement Date.1
(b)Payment was to be made without deductions subject however to clause 30.2
(c) Non payment on the settlement date would result in an obligation to pay default interest.3
[5] Pursuant to clause 30.1 Ten Cate made a written request to setoff against the purchase price for the Option II shares a deduction pending resolution of claimed breaches of warranty.4 The amount of the proposed setoff was 50 per cent of the warranty claim against TigerTurf. Ten Cate quantified the amount of the warranty claim as being $15,931,502. Thus 50 per cent of the warranty claim as assessed by Ten Cate exceeded the purchase price of the Option II shares of $7,715,000.5
[6] TigerTurf responded by giving written notice pursuant to clause 30.3 to reject the request to setoff. The notice was given two days before the Option II settlement date. As a result of this rejection the expert determination procedure under
clause 30.3.2 was invoked, together with the provisions of clause 30.4.
1 Pursuant to cls 18.7, 18.1 and 1.1
2 4.3 Payments: Subject only to clause 30 or any other express right of setoff conferred by this agreement, the Purchaser shall pay all amounts payable under this agreement in cash or in
immediately available funds in such a manner as the Vendor may reasonably stipulate...
4.3.3 Without any deduction or withholding on account of any other amount, whether by way of set-off, counterclaim or otherwise.
3 4.4 Default in payment. In the event of default by any party in payment of any amount of money
due to the other (including any refund or other amount due under this agreement) the party in default must pay to the party to whom payment is due, interest on the amount unpaid at the Default Interest Rate computed on a daily basis from a date on which such amount should have been paid until the date of actual payment but without prejudice to any other rights and remedies of the non-defaulting party in respect of such default.
4 30.1 Request to setoff: Subject to the provisions of this clause, if a Warranty claim (“Warranty
Claim”) is made by the Purchaser prior to the Option II Settlement Date, the purchaser may make a request in writing to the Vendor that 50% of the amount of the Warranty Claim be deducted from the
... unpaid Option II Share price (“Request to Setoff”) and paid into a stakeholder’s trust account until such time as the claim is finally settled or determined.
5 If accepted by TigerTurf the request to setoff would have resulted in the full amount of the purchase price of the Option II shares being paid into a stakeholder’s trust account until the claim was determined.
[7] Materially, these provisions state:6
30.3.2 ... an expert shall be appointed to determine whether the Warranty Claim is bona fide and has a reasonable chance of success. ... The expert shall determine all matters of process and procedures, shall determine the costs to be paid by each party in relation to this proceeding and his or her decision shall be final. When the expert has made his or her determination, clause 30.4 shall then apply.
30.4...If the... expert appointed pursuant to clause 30.3.2 has ruled that
Warranty Claim is bona fide and has a reasonable chance of success, then
50% of the disputed amount of the Warranty Claim may be deducted by the Purchaser from the unpaid... Option II Share Price on condition that it is paid directly and immediately on the relevant Settlement Date into the stakeholder’s trust account until such time as the claim is finally settled or determined. In all other circumstances unless expressly provided by this agreement, the Purchaser shall not be permitted to make any deduction or claim any right of setoff from the unpaid... Option II Share price.
[8] In the short two week window between TigerTurf exercising the option requiring Ten Cate to complete the purchase and the Option II settlement date, fulfilment of the condition in clause 30.4 was impossible, as was completion of the expert determination procedure. The procedure has barely begun. Nonetheless, apparently recognising the impossible timeframe in the agreement for fulfilment of the condition, it appears that the parties agreed that the procedure should be completed and they engaged in discussion about the appointment of the expert. Eventually on 19 August 2011 the parties entered into an expert determination agreement appointing a Queen’s Counsel as expert. The date for the hearing before the expert was fixed for 23 May 2012.
[9] In the meantime each side took other steps. On 9 December 2011, Ten Cate commenced proceedings in the District Court in Texas to pursue its substantive warranty claim. On 22 December 2011, TigerTurf commenced this New Zealand High Court proceeding claiming the purchase price for the Option II Shares ($7,715,000) plus default interest under clause 4.4 from 14 April 2011 to date of the
payment and indemnity costs under clause 16.4.
6 Relevantly, cl 30.3.2 states that the expert shall also “determine all matters of process and procedure, the costs to be paid by each party in relation to the process, and stipulates that his or her decision shall be final. It also states that “when the expert has made his or her determination, cl 30.4 shall then apply”.
[10] On 24 February 2012 Ten Cate filed an application for an order to strike out TigerTurf ’s claim in the High Court proceeding. TigerTurf filed documents in opposition and some months later, on 5 June 2012 filed an application for summary judgment on its claim together with an application for leave to make the application out of time.
[11] The summary judgment and strike out applications came before Associate
Judge Bell for a defended hearing. His Honour gave an oral decision on 18 June
2012. He dismissed Ten Cate’s application for strike out. His Honour found that Ten Cate had not established that TigerTurf’s claims were unarguable or hopeless. Additionally, he adjourned the summary judgment application to allow for the possibility of summary judgment later in the proceeding pending the outcome of Ten Cate’s warranty claim on which its defence is based.
[12] On 1 February 2013, the Texas District Court granted TigerTurf ’s motion to dismiss the Texas proceedings filed by Ten Cate on “forum non-conveniens” grounds. Ten Cate has filed an appeal in Texas which is pending.
[13] In the meantime the hearing before the expert proceeded, as the parties had earlier agreed, on the 23 May 2012. He released his determination on 25 January
2013. He determined that:
(a) Parts of the warranty claim were bona fide and had a reasonable chance of success and that the quantum that fairly reflected the extent of the actual or potential loss was $1,023,409.
(b) $511,704 should be deducted from the unpaid Option II Share price of
$7,715,000 and be paid into a stakeholder’s trust account pursuant to
clause 30.4 of the agreement, leaving $7,203,296 as the sum to be paid to settle the purchase of the Option II shares.7
7 The expert held that only four of the claims to set off could succeed. He then determined the quantum that fairly reflected the extent of actual or potential loss. The total came to $1,023,409.
$511,704 is 50% of this total.
[14] As counsel for Ten Cate pointed out, the expert made clear that his determination was for the purposes of setoff only and did not inhibit Ten Cate from proceeding with its substantive warranty claim. Counsel also points to clause 30.8 of the agreement which provides that the determination by the expert is “without prejudice to any subsequent Court or dispute resolution proceedings in relation to the warranty claim”.
[15] The determination did not deal with the issue of interest.
[16] As a result of the determination on 1 March 2013 settlement for the purchase of the shares was effected on the basis that Ten Cate paid $7,203,296 to Tiger Turf and. $511,704 to a stakeholder’s trust account as directed by the expert. At much the same time the parties affirmed the provisions of clause 30 of the agreement and signed an Independent Stakeholder Agreement.
[17] Under the terms of the Independent Stakeholder Agreement the payment of
$511,704 is held by McMahon Butterworth Thompson as the stakeholder. Materially clause 3.2 of the Independent Stakeholder Agreement provides that this amount is to be paid out in accordance with both the Stakeholder Agreement and clauses 30.6 and
30.7 of the original agreement.
[18] Clause 30.6 and 30.7 set out the process to be followed following the expert determination:
30.6 Claim abandoned or not upheld: if and to the extent that the
Warranty Claim:
30.6.1is abandoned by the Purchaser; or
30.6.2 is dismissed by a Court of Law (and all rights of appeal are exhausted or not pursued within the statutory time limits); or
30.6.3 is not actively pursued by the Purchaser lodging Court proceedings for its determination within three (3) months of the Request to Setoff being agreed or determined by the expert, or if those proceedings are not actively and diligently pursued by the Purchaser in a timely and efficient manner; or
30.6.4 is not able to be pursued because this agreement has been
cancelled as a result of the Purchaser’s default.
then the Vendor will be entitled to immediate payment of the amount of the Warranty Claim held by the stakeholder together with interest accrued thereon (if any) less withholding tax and the stakeholder’s commission.
30.7 Claim upheld: To the extent that the Warranty Claim is upheld by a Court of Law (and all rights of appeal are exhausted or not pursued within the statutory time limits), then the purchaser will be entitled to the immediate payment of the amount of the Warranty Claim held by the stakeholder together with interest accrued thereon (if any) less withholding tax and the stakeholder’s commission.
[19] On 16 April 2013 TigerTurf filed an amended statement of claim. On
23 May 2013 Ten Cate filed the strike out application that has come before me for determination. Before turning to the principles that govern the application I pause to refer to those part of the amended claim that are material to the application and to refer the grounds relied upon in the strike out application.
Amended Statement of Claim
[20] Tiger Turf prefaces its pleaded causes of action with a pleadings that:
(a) As a result of the expert’s ruling and the clauses relied on within the agreement,8 the sum of $7,203,296.00 ought to have been paid to TigerTurf on 14 April 2011.
(b) The Texas proceeding was dismissed for forum non conveniens.
(c) On or about the 20 March 2013 Ten Cate paid $511,704 into a stakeholders’ account pursuant to clause 30.4 of the acquisition agreement pending final resolution of the warranty claim.
[21] In its first cause of action Tiger Turf seeks interest on the monies it eventually received in March 2013. It pleads:
Under clause 4.4 of the Acquisition Agreement, Ten Cate was obliged to pay default interest on the Non-Deductible Option II Purchase Price at the default interest rate, being 14.80% per annum, computed on a daily basis from 14 April 2011 to date of actual payment.
8 Clauses 4.3, 5.1, 18.7, 18.8, 20.1 and 30.4.
Despite demand and an apparent acceptance that interest is properly payable on the Non-Deductible Option II Purchase Price since 25 January 2013, Ten Cate have failed to pay any interest on the Non Deductible Option II Purchase Price.
...
Claim for Relief
(a) Interest under clause 4.4 of the Acquisition Agreement on the sum of
$7,203,296.00 from 14 April 2011 to 1 March 2013.
(b) Indemnity costs under clause 16.4 of the Acquisition Agreement.
[22] The underlying theme is that:
(a) Ten Cate was obligated to settle the Option II Purchase Price on
14 April 2012 in accordance with the agreement despite the delayed expert determination.
(b)The delayed payment of $7,203,296 amount (the component of the purchase price that was held not to be subject to a setoff claim) was in default from the 14 April 2012 until it was paid on 1 March 2013.
[23] The third cause of action seeks a declaration that TigerTurf is not liable under Ten Cate’s warranty claim and judgment for the $511,704 amount held by the stakeholder plus default interest. It pleads:
TigerTurf are not liable to Ten Cate for the Warranty Claim.
The remainder of the Option II Purchase Price ought to be paid to TigerTurf. Under clause 4.4 of the Acquisition Agreement, Ten Cate was obliged to pay
default interest on the Non-Deductible Option II Purchase Price at the default interest rate, being 14.80% per annum, computed on a daily basis from 14 April 2011 to date of actual payment.
Under clause 16.4 of the Acquisition Agreement, Ten Cate also agreed to indemnify TigerTurf against all loss, costs and expense incurred as a result of any default by Ten Cate in payment of the remainder of the Option II Purchase Price.
Claim for Relief
(a) A declaration that TigerTurf are not liable under the Warranty Claim
(b) Damages in the sum of $511,704
(c) Interest pursuant to the clause 4.4 of the Acquisition Agreement from
14 April 2011 until date of payment.
(d) Indemnity costs pursuant to clause 16.4 of the Acquisition
Agreement.
[24] The underlying implication appears to be that there is no longer a bona fide dispute as to TigerTurf’s entitlement to be paid out the money held by the stakeholder.
The grounds for strike out
[25] The grounds for the strike out application are essentially that:
(a) Judge Bell’s decision determined that once clause 30 was invoked there could be no default in payment of the Option II Share price until such time as the expert determined the amount to be paid. Following the expert’s ruling the defendants duly paid the determined amount to the plaintiff. Accordingly the plaintiff is estopped from arguing that the portion of the Option II Share price has not been duly paid and is in default in accordance with the agreement.
(b)Alternatively, on a correct interpretation of the agreement it is beyond argument that there have been no defaults in payment in respect of any part of the Option II Share price as alleged in the first and third causes of action.
(c) The Court does not have jurisdiction to grant declaratory relief as claimed in the third cause of action.
Relevant law
[26] There is no disagreement as to the relevant law and principles. The application is made under r 15.1 of the High Court Rules. Relevantly it states that:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
...
(d) is otherwise an abuse of the process of the court.
[27] The general principles applying to strike out applications involving no reasonably arguable cause of action are well established:9
(a) Pleaded facts are assumed to be true.
(b)The cause of action must be clearly untenable. The court must be certain that it cannot succeed.
(c) The jurisdiction is to be exercised sparingly and only in clear cases,
reflecting the court’s reluctant to terminate a claim short of trial.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
(e) The court should be particularly slow to strike out a claim in any developing area of the law.
[28] Strike out applications relating to abuse of process can take different forms and may be pursued in respect of:
(a) Attempts to re-litigate manners already determined.10
(b) Duplication of proceedings.11
9 Couch v A-G [2008] NZSC 45 at [33]
10 Collier v Butterworths of New Zealand Limited (1997) 11 PRNZ 581.
11 Otis Elevator Co Limited v Linnel Builders Limited (1991) 5 PRNZ 72; Cowley v Shortland
Publications Limited (1991) 5 PRNZ 76.
First Cause of Action- Interest
[29] I turn then to consider whether in terms of r 15.1 and these principles the case for strike out is made out. I begin with the first of the grounds Ten Cate relies upon – issue estoppel.
Issue estoppel
[30] This is essentially an argument based on abuse of process.
[31] Counsel for Ten Cate’s submission is that this cause of action should be struck out as the issue of whether or not Ten Cate was in default of its payment obligations has been determined in Judge Bell’s judgment and that without default there is plainly no contractual entitlement to interest under clause 4.4 of the agreement.
[32] Counsel for Ten Cate relies in support on the following part of Judge Bell’s judgment and submits that it is a fundamental step in the logic of Judge Bell’s decision to adjourn the summary judgment application and to dismiss Ten Cate’s strike out application:
...there is no requirement for Ten Cate to pay until the point in clause
30.4 has been reached. Under clause 30.4, if the expert holds for Ten Cate,
50 per cent of the disputed amount of the warranty claim (to the extent upheld by the expert) is deducted from the price payable under clause 18.7,
on condition that it is paid to a stakeholder under clause 30.5. The balance of
the unpaid purchase price must be paid immediately to TigerTurf. Until the expert makes his determination, it cannot be established what or how much
Ten Cate has to pay TigerTurf. In this case, for example, Ten Cate has
asserted that 50 per cent of the disputed amount of its claim entirely exceeds the amount payable for the Option II shares. It cannot be in default of its obligations under clause 30 to pay until the expert has made a determination, from which it can be established how much, if anything, it has to pay to a stakeholder and how much, if anything, it has to pay to TigerTurf. It is apparent from the scheme of clause 30 that when Ten Cate invokes it provisions and the parties follow its procedures, TigerTurf’s right to be paid under clause 18.7 is modified. In so far as Ten Cate is able to pursue its claims under clause 30, TigerTurf cannot claim payment under clause 18.7.
[33] It is common ground that issue estoppel precludes a party from contending the contrary of a precise point that has been determined against that party. The Court
of Appeal in Joseph Lynch Land Co Ltd states that issue estoppel “precludes a party from contending the contrary of any precise point which, having once been distinctly put in issue, has been solemnly and with certainty determined against him.”12
[34] However, issue estoppel will not arise unless the relevant determination was fundamental to the earlier judgment.13 A fundamental determination is an “essential and fundamental step in the logic of the judgment, without which it could not stand.”14 Even if definitive language is used, determinations on anything less than a fundamental issue are insufficient. The issue must be one which it was necessary for the previous court to decide and which they did decide.15 The Court of Appeal has said that a useful test is considering whether the determination in issue could be appealed. If there could be no appeal against the determination “it is impossible to regard it as fundamental to the judgment.”16
[35] Materially, the Court of Appeal in Lynch stated that the rationale of issue estoppels is less powerful in an interlocutory context. The overall question is “whether in the circumstances it is reasonable to regard the earlier decision as a final determination of the issue which one of the parties now wishes to raise... If the earlier decision is in substance interlocutory it will usually be reasonable to adopt a
narrow view.”17
[36] At issue in the two interlocutory applications before Judge Bell was not the specific question of liability for interest or indeed whether Ten Cate was in default, from the settlement date. At issue was whether Ten Cate had an arguable defence to TigerTurf ’s claim (based on the warranty claim) and whether TigerTurf ’s claim was hopeless (by Ten Cate’s invoking the expert determination procedure). In deciding that there was an arguable defence to a claim that is arguable and not plainly hopeless, Judge Bell reasoned that it is “apparent” from the scheme of clause 30 that when Ten Cate invoked its provisions that the right to be paid is modified. That
reasoning was not a determinative of the effect of clause 30. Nor could it be given
12 Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 at 41.
13 Talyanich v Index Developments [1992] 3 NZLR 28.
14 At 37.
15 At 38.
16 At 38.17 Joseph Lynch Land Co Ltd v Lynch, above n 12 at 43.
the nature of the jurisdiction being exercised. In the context of the interlocutory applications before His Honour it is not reasonable to consider the reasoning that Ten Cate relies on as in any way determinative of when the payment became payable despite the use of some definitive language which counsel for Ten Cate sought to emphasise.
[37] The result is that Ten Cate has not established its right to strike out the first cause of action for reasons of issue estoppel.
[38] I am also not satisfied that there is a case for strike out based on Ten Cate’s
second ground. My reasons follow.
Correct interpretation of agreement
[39] This ground challenges the pleaded claim for interest under clause 4.4 of the agreement from 14 April 2011 as untenable on the basis that it relies on a reading of the agreement that cannot be right and conversely that on a reasonable reading of the agreement Ten Cate’s interpretation cannot be wrong.
[40] TigerTurf ’s position is that its pleading is based on a correct reading of the agreement in that the parties had fixed a settlement date and settlement price. Though Ten Cate had a right to a bona fide deduction on the purchase price if so determined by the expert, this right was conditional in that the deduction was to be setoff and paid to the stakeholder by the fixed settlement date. The fact that the amount of the permitted setoff was not determined by and paid on settlement date to the stakeholder did not modify Ten Cate’s obligation to settle on settlement date. It could elect to wait upon the expert to determine the amount of the deduction but it could not free itself of the obligation to pay default interest if it did not settle on time. Counsel for TigerTurf emphasised in submissions that the wording of clause
30.4 only creates an exception to the no set-off clause when the expert has ruled. He submits that this makes clear that the only entitlement that Ten Cate had, following the determination, was to point to the amount of the permitted deduction for which it ceased to be in default. Therefore, TigerTurf claims that as Ten Cate did not pay the purchase price on the 14 April 2011 it was in default of its payment obligations and is obliged to pay default interest pursuant to clause 4.4.
[41] Ten Cate refutes this interpretation of the agreement. Counsel for Ten Cate argues that the terms of the agreement must be taken to establish that no payment could be due until the expert had made his determination to fix any bona fide set off and therefore that when settlement date came and went, there was no default in payment or liability for interest on any unpaid amount under clause 4.4. Essentially, the argument is that TigerTurf’s right to payment on settlement day plainly must have been modified to allow a reasonable time to pay following the expert’s determination with the result that there could be no default in Ten Cate’s payment obligations. Counsel added that this is in accordance with clause 4.3 which makes payment of the Option II shares subject to clause 30 and the warranty setoff claim
process.18 Additionally, counsel argues that until the expert determined the allowable
deduction, the amount Ten Cate was required to pay was unknown and an unknown amount cannot become due and payable. He refers to authority which states that interest cannot accrue until there is an ‘ascertainable debt’.19 He argues that a literal reading of the agreement defies common sense and that a reasonable time after the expert’s determination must be given for payment.
[42] In order to succeed Ten Cate must show that its interpretation of the agreement is beyond argument and therefore that TigerTurf ’s cause of action cannot succeed.
[43] Ten Cate’s argument is not without some attraction but I am not satisfied it is beyond argument, or that it demonstrates that Tiger Turf ’s case on the agreement is wholly untenable. Though it may seem contrary to common sense that an unquantified amount could be said to be in default when quantum must be determined by an agreed process, the issue whether the deferral of payment on settlement date amounts to a default is one of contractual intention. On the face of it clause 30.4 appears to permit a deduction on condition that the deduction is paid directly and immediately “on the relevant settlement date” into the stakeholder’s account. As counsel for Ten Cate acknowledges, a strict reading of the agreement
would confine the right to make a deduction conditional upon the expert determining
18 In accordance with cl 20.1 of the agreement.
19 New Zealand Venue and Event Management Limited v Worldwide NZ LLC [2013] NZCA 130 at
[20] – [51].
the amount of the deduction before the settlement date of 14 April 2011, enabling payment of the permitted deduction to the stakeholder on that day in fulfilment of the condition in clause 30.4.
[44] Clearly what the parties intended by the terms of clause 30.4 is central to the argument about default but plainly there are wider issues of mixed fact and law that bear on that argument and the questions of correct interpretation of the agreement, not the least being whether there has been waiver or modification of the settlement date provision. Exactly what the parties intended by these provisions, and indeed by their subsequent agreements of 19 August 2011 and 26 March 2013 require careful consideration which is beyond the scope of the cases that each side has presented in this strike out application and is, in any event, inappropriate in the context of strike out.
[45] It follows that I am not satisfied that Ten Cate has made out its case that the first cause of action is untenable on the basis of a plain reading of the agreement.
Third Cause of Action – Declaration
[46] In its third cause of action TigerTurf seeks a declaration that it is not liable under the warranty claim. Counsel submits in support that the Court has a wide jurisdiction to give declaratory relief.
[47] Counsel for Ten Cate submits that the Court plainly has no jurisdiction to make such a declaration and therefore an order striking out is appropriate. As counsel for Ten Cate concedes, jurisdiction can be assumed. The real question is not whether the Court has jurisdiction to make a declaration but whether the nature of the case pleaded in support is appropriate and on its face establishes an arguable case for the declaratory relief sought. It is also a question of whether a declaration would be an abuse of process.
[48] The case of Nectar Ltd v SPHC Operations states: 20
20 At [30].
The real issue... is not one of jurisdiction. The Court clearly has jurisdiction to make declarations in a very wide range of circumstances... The real issues are those of discretion and policy. If it was clear that the Court would never exercise its discretion in favour of the plaintiff in the circumstances of this case, then it would be appropriate to strike out the prayer for declaratory relief...
[49] The case of Countrywide Finance v State Insurance is particularly relevant as to when declaratory relief is appropriate:21
If the plaintiff has a proper explanation for why this (supposedly) speedy and inexpensive form of relief is being resorted to, and it is clear that it is not a device to strip defendants, actual or prospective, from rights that they ought to have in proceedings, then in my judgment the Court ought not to turn the plaintiff away.
[50] TigerTurf seeks the declaration as a way of obtaining the ‘payment of remainder of Option II purchase price’. This refers to the $511,704 that has been paid into an independent stakeholder’s account as the parties agreed pursuant to the stakeholders’ agreement. That agreement affirms the application of clause 30 of the agreement which sets out clearly that the money can only be released in accordance with clauses 30.6 and 30.7. Relevantly, in accordance with these provisions, in order to prove an entitlement to the $511,704, TigerTurf must establish that the warranty claim has been dismissed by a court of law and that all rights of appeal are exhausted. There is no pleading that there has been such a resolution of the warranty claim. Rather TigerTurf pleads that it is not liable and provides no facts to support this pleading beyond that the Texas proceeding has been dismissed on forum non conveniens grounds.
[51] I am satisfied that insufficient facts are pleaded to support an arguable case. Further in the circumstances I am satisfied that the case pleaded is not appropriate to the relief sought. TigerTurf needs to establish in accordance with clause 30.6 that it is entitled to the money in the stakeholder account. A simple pleading that the Texas proceeding has been dismissed on forum non conveniens grounds, if proved, would not establish this.
[52] Aside from issues with the pleadings, in the circumstances of this case I am satisfied that a declaration of the type sought is an abuse of process. The case of
21Countrywide Finance v State Insurance [1993] 3 NZLR 745 at 752-753.
Chaffey v Mount Cook Air Services Limited is also apposite. The Supreme Court held that “the use of a separate declaratory action to determine a point of law already in issue in an existing action between the same parties is inappropriate.”22 An application for a declaratory statement of ‘no liability’ duplicates the essence of the Texas proceeding; namely TigerTurf ’s liability under the warranty claim. Though TigerTurf argue that the Texas proceeding is effectively dead as the District Court in Texas dismissed the claim, an appeal is currently pending and the outcome is not known. Furthermore the Court appears to have reserved leave to bring the matter
back to Texas if there is no jurisdiction in New Zealand.
Conclusions
[53] The application to strike out the first cause of action is dismissed. [54] The application to strike out the third cause of action is allowed.
[55] Costs are reserved. If the parties cannot agree on costs, any party seeking costs is to file a memorandum within ten working days from the date of this
judgment and any memorandum in response, within a further five working days.
Associate Judge H Sargisson
22 Chaffey v Mount Cook Air Services Limited [1969] NZLR 25 at 25.