Watt v Sharma HC Auckland CIV-2006-404-002975

[2011] NZHC 1812

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2006-404-002975

IN THE MATTER OF     Section 145A of the Land Transfer Act

1952

AND IN THE MATTER OF Caveat No.6835462.1 (North Auckland

Registry)

BETWEEN  REGINALD JAMES WATT & ORS Plaintiffs

ANDSUREN SHARMA & ORS Defendants

Hearing:         14 December 2011

Counsel:         Plaintiff in person

DE Smyth for Defendants
OV Collette-Moxon for second named twelfth defendant

Judgment:      14 December 2011

JUDGMENT OF ASHER J

Solicitors/Counsel:

DE Smyth, DX CP21018, Auckland 1140. Email:  [email protected]

DLA Phillips Fox, DX CP24027, Auckland 1140. Email:  [email protected]

Copy to:

RJ Watt at email: [email protected]

WATT & ORS SHARMA & ORS HC AK CIV-2006-404-002975 14 December 2011

Introduction

[1]      This  is  an  application  to  discharge  freezing  orders  and  to  strike  out proceedings.    Mr Smyth  for Mr Sharma  appears in  support.    He represents  all defendants  save  the  second-named  twelfth  defendant  Mr  Bhanabhai,  for  whom Mr Collette-Moxon appears.  Mr Watt appears in person.

[2]      The proceedings have a long history.   They were filed on 29 May 2006. Initially there were 22 plaintiffs all of whom, in addition to Mr Watt, were companies with which he had an association.   There were also 12 defendants or groups of defendants that were all persons or entities associated with Mr Sharma or with whom he had a professional relationship at some stage.

[3]      The  core  of  the  claim  as  pleaded  appears  to  be  a  business  relationship between Mr Watt and Mr Sharma that existed between 1997 and 2006. This business relationship straddled Mr Watt’s bankruptcy in 2001 and his discharge from bankruptcy in 2004.  Mr Watt’s allegation appears to be that he has had a group of companies  or  businesses  that  have  in  some  way  continued  through  this  period despite his bankruptcy.  Mr Sharma has been described as a financial manager for the Watt’s  company  group  and  as  an  accountant  had  the  responsibility  for  all  the company accounts and business dealings of a finance and administration manager. Mr Watt alleges that Mr Sharma was responsible for the accounting side of the business.  He alleges that Mr Sharma has taken far more than he was entitled to from the businesses at Mr Watt’s expense.

[4]      Mr Smyth was not initially instructed.   The file shows case management through 2006 and 2007 with various interlocutory judgments being issued along the way.  These included a judgment of 25 May 2007 in relation to further discovery and interim distribution.  The case was set down for hearing in 2007 but for reasons that are not entirely clear it did not proceed.  There was a judgment of 4 September 2008 reserving property in the interim  and a judgment of 29 October 2008  directing certain payments out of funds that were held.   On 15 December 2008 Courtney J issued a decision in relation to certain funds that were subject to a freezing order.  A full  freezing  order  was  sought  by  the  plaintiffs  in  2010.    On  12 August  2010

Venning J issued a judgment granting leave to cross-examine Mr Sharma.   I heard that  freezing  order  application.    Mr  Sharma  was  cross-examined.    I  issued  a judgment on 17 August 2010 and freezing orders issued.  In that judgment I noted:[1]

Much of the core dispute between Mr Watt and Mr Sharma is as to what happened in the years that followed those investments.  Once Mr Watt came out of bankruptcy it seems that some further transactions were entered into. It is alleged funds from these pre-bankruptcy investments were used in the post-bankruptcy investments.   In those new transactions it is the broad allegation of Mr Watt that Mr Sharma and Mr Watt were acting as joint venture partners.  It is Mr Watt’s allegation that Mr Sharma was in charge of the accounting matters throughout.

[1] Watt v Sharma CIV-2006-404-2975, 17 August 2010 at [6].

[5]      I noted that Mr Watt’s claim and earlier statements of claim were somewhat lacking in particulars, and Mr Watt’s answer was that this was because Mr Sharma had resisted disclosure.

[6]      The freezing order did not only issue in these proceedings, it also issued in different  proceedings  brought  by Victoria Street Apartments  Ltd  (in  liquidation) against Mr Sharma (CIV-2009-404-8377) (“the Victoria Street proceedings”).  The Victoria Street proceedings had no direct overlap in terms of matters of fact with these proceedings, although the issues of dissipation that arose in relation to the freezing orders overlapped.  The Victoria Street proceedings have since gone to trial before Duffy J and the plaintiffs have obtained judgment against Mr Sharma.

Developments since the freezing orders of 17 August 2010

[7]      Since the issue of the freezing orders of 17 August 2010 Mr Watt has taken no steps.   There was a telephone conference before me on 22 July 2011.   It was called at the initiative of the Court because there had been no action on the file. Mr Grove, who acted for Mr Watt previously, sought leave to withdraw advising that he was no longer funded and that there was a possibility of a conflict of interest.  His instructing solicitors Ellis Law also sought leave to withdraw.  Leave was granted. Mr Watt had provided a new address for service which I recorded in my Minute as

238 Karangahape Road, Newton, Auckland; email:  [email protected].

[8]      I recorded in my Minute that Mr Smyth gave notice to Mr Watt that Mr Sharma was looking for substantive progress in bringing the application to a hearing “... failing which Mr Sharma will look to his remedies including an application to discharge the freezing order and an application to dismiss or strike out the proceedings”.[2]

[2] Minute of 21 July 2011 at [5].

[9]      Mr Watt had advised that he was seeking legal aid and wished to instruct new solicitors and counsel.  I observed:  “He is on notice that he must do this with all possible speed.”[3]     At that stage I adjourned  the proceeding for two  months.   I recorded that if there had been no progress the matter would be set down for another conference before me.   I noted that if there was no action within the two months Mr Smyth would be looking to bring an application.  I also explained to Mr Watt that

[3] Minute of 21 July 2011 at [6].

the freezing orders made were temporary orders made on the basis that the case would be brought promptly to a hearing.[4]

[4] Minute of 21 July 2011 at [8].

[10]     On 8 November 2011 Mr Smyth filed this application for Mr Sharma seeking a discharge of the freezing order and a striking out of the plaintiffs’ claim.  There was no notice of opposition filed.  The second conference took place by telephone before me on 21 July 2011.  In addition to Mr Grove, Mr Watt personally attended that telephone conference.

[11]     He did not attend the second conference on 23 November 2011.   This is despite the fact that notice of the conference had been given by the Court by email to Mr Watt’s email address. Also Mr Smyth advised that he had emailed Mr Watt about the conference.

[12]     In the Minute of 23 November 2011 I recorded that an application had been filed, and the case for urgency in relation to the freezing orders.  I stated that there would be a hearing for the application to discharge the freezing order and the application to strike out.   I set the matter down before me at 9am on Wednesday,

14 December 2011 and stated: “At that hearing I will determine the applications to

discharge the freezing orders and to strike out the proceedings.”[5]   I recorded that the application was to strike out the claims of all plaintiffs and if the application was successful the proceedings would be at an end.[6]

[5] Minute of 23 November 2011 at [6].

[6] Minute of 23 November 2011 at [7].

[13]     I  directed  that  the  Minute  be  sent  by  email  by  the  Court  to  Mr  Watt. Mr Smyth also agreed to physically serve Mr Watt with a set of the applications. An affidavit has been filed by Ms Lisa Godwin as to service on Mr Watt.  He appears to have been at the address of 238 Karangahape Road some two years earlier but is no longer there.  Mr Smyth made other efforts to serve Mr Watt that I do not propose to summarise.    He  also  emailed  the  Minute  of  23  November  to  Mr Watt’s  email address.

[14]     Mr Watt on appearance today acknowledges the email address as being his and this is why he was aware of the hearing.  He says that his address was not 238

Karangahape Road but 203 Karangahape Road.  However, it is no longer in use and he has given another address to the Court.

Positions of the parties

[15]     Mr Smyth’s position is straight forward.  Mr Sharma urgently needs to access his assets to settle the Victoria Street proceedings judgment. The freezing orders will remain in relation to all Mr Sharma’s assets in favour of the plaintiffs in those proceedings, but of course the plaintiffs will be able to discharge those as part of any settlement of the judgment.   What is urgent is the discharge of Mr Watt’s claims including caveats Mr Watt has placed against the titles of the defendants’ assets.  He submits that the delay since August 2010 is inordinate and inexcusable and that the proceedings have gone on long enough and need to be ended.

[16]     Mr Watt in reply says that he is low on funds.  He has sought to brief another barrister, although that barrister would only appear on a pro bono basis and has not been able to appear today.  He says it is difficult to prove the case in the absence of

proper disclosure from Mr Sharma and he made it clear that his fragile financial

position made it impossible for him to take further steps right now.  He is, however, hopeful that the new barrister will take up the cudgel at some stage in the future when he has an opportunity to do so.

Decision

The freezing orders

[17]     Rule 32.8 of the High Court Rules provides that a freezing order must reserve leave to the respondent to apply to the Court to discharge or vary the freezing order on whatever period of notice to the  applicant the Court considers just.   It also provides that such an application to discharge or vary a freezing order must be treated as an urgent application by the Court.  This is because as a matter of general practice parties have no right to obtain any form of security or hold over the assets of another party in civil proceedings.  The Mareva jurisdiction which led to the present freezing order rules constituted an exception to that general concept.  It was designed for urgent and particular cases where the Court process would effectively be defeated if freezing orders were not made.  As r 32.8 indicates, priority must be given to any application  to  discharge  or  vary  a  freezing  order.    Because  of  its  unique  and draconian nature it stops people dealing with their own assets and in the absence of any judgment where there has been a full airing of the claim against that person.

[18]     On examination of the freezing orders made there does not appear to have been any express leave reserved to apply to the Court to discharge or vary the freezing orders.  However, a party must always have the right to apply to make such an application.  The quid pro quo for a party obtaining such an order is that it must then take all reasonable steps to bring the proceeding to a hearing so that the undoubted adverse effects of the order against whom it is made will last for as short a period as possible.

[19]     The failure of Mr Watt to take any steps is remarkable and in my view inexcusable.  Mr Grove appears to have been instructed until July 2011 but nothing was done.  It was clear at the conference of 21 July 2011 to Mr Watt that he must take urgent steps to proceed with the case.  He did not do so.  It is not an adequate

excuse to say that he lacks funds to brief another lawyer.  Proceedings cannot just sit indefinitely because a party lacks funds. A party must either seek legal aid or if legal aid is not obtainable and the party wishes to continue with the proceedings, continue the proceedings personally.  Mr Watt did nothing.  It seems to me likely that if the freezing orders are not discharged today he will continue to do nothing.  I can have no confidence that any other barrister will pick up the cudgel on his behalf.

[20]     In these circumstances the freezing orders must be discharged.   I make an order discharging the freezing orders made in these proceedings.  I make it clear that it is only the orders in these proceedings that are discharged and the same orders that were  made  in  the  Victoria  Street  proceedings  (CIV-2009-404-8377)  are  not discharged and remain in place.

The strike out application

[21]     Rule 15.2 provides:

15.2  Dismissal for want of prosecution

Any opposite party may apply to have all or part of a proceeding or counterclaim dismissed or stayed, and the court may make such order as it thinks just, if—

(a)   the plaintiff fails to prosecute all or part of the plaintiff's proceeding to trial and judgment; or

(b)   the   defendant  fails   to  prosecute   all   or   part   of  the   defendant's counterclaim to trial and judgment.

[22]     I have now set out the general background of this proceeding and its history since 16 August 2010.  Quite simply the plaintiffs have entirely failed to prosecute this proceeding since that date.  Fifteen months have gone by.   It has been said in relation to r 15.2 that an applicant must show that the plaintiff has been guilty of inordinate delay and that the delay is inexcusable and has seriously prejudiced the

defendant.[7]    That comment would appear to be directed more to a situation where

[7] Lovie v Medical Assurance Society of New Zealand Ltd [1992] 2 NZLR 244 (HC) at 248.

there has at least been some action taken by the defendant.  When a plaintiff does nothing at all for such a long period there is not necessarily a requirement to show

specific prejudice.   The applicant can rely on the general prejudice to it of the proceedings being effectively in limbo and likely to continue that way.

[23]     The Court is not of course insensitive to the cost of briefing counsel and pursuing proceedings.  However, the fact is that parties of limited means can manage in one way or another to pursue High Court litigation.  As I have observed this can be done through the use of legal aid or in extremis by a party taking steps itself. Mr Watt has failed to do either of these things.

[24]     His statement that he has briefed a barrister who is prepared to help but cannot appear today does not give me any confidence that action will be taken. Indeed, to the contrary if the barrister is prepared to take the brief it could be expected that the barrister would have appeared today or arranged for someone else to appear.  It is quite simply grossly unfair to any defendant to require a defendant to have to stand by with serious High Court litigation  outstanding against it for a possibly indefinite period.   There is every chance, as I have already said, that the present inaction will continue for years.

[25]     For all these reasons I conclude that these proceedings should be struck out.  I am going to order that the proceedings are struck out under r 15.2.  However, I am prepared to give Mr Watt one last indulgence.    However, that order will lie in Court until midday, Friday 16 December 2011.  If I receive a memorandum from counsel which sets out in detail a proposal for future action sufficient to show at least on a prima facie basis that there is a real prospect that this case can be brought to a hearing  in  short  order,  I  will  revoke  the  strike  out  order  and  direct  a  further conference early in the New Year.  I will of course give Mr Smyth an opportunity to renew his application to strike out.  However, I emphasise that this will only happen if I get a full memorandum from counsel by midday Friday covering the matters that I have set out.

[26]     For the avoidance of any doubt I make it clear that in the absence of any Minute from me recording that I have received a memorandum and have revoked my strike out order, the strike out order can be sealed after 10am, Monday 19 December

2011.

Costs

[27]     Mr Smyth for Mr Sharma seeks costs on this application.   Costs should follow the event.   Therefore,  I order costs payable by the  plaintiffs to the first defendant on a 2B basis plus reasonable disbursements.

[28]     The general question of costs on the proceeding is not determined in this decision and will be a matter for the parties to pursue by way of separate application should they wish to do so.

……………………………..

Asher J