Westview Funeral Care Limited v Graham HC Auckland CIV 2006-404-6229
[2008] NZHC 2325
•13 May 2008
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2006-404-6229
BETWEEN WESTVIEW FUNERAL CARE LIMITED Plaintiff
ANDKEITH GRAHAM, JOYCE MARY GRAHAM AND COLIN HASLAM First Defendants
ANDTUIGAMALA AND SONS FUNERAL SERVICES LIMITED
Second Defendant
Hearing: 13 May 2008
Counsel: P J Stevenson for Plaintiff
P J Craighead for K and J Graham
D Watson for Mr Haslam
L Kemp for Second Defendant
Judgment: 13 May 2008
(ORAL) JUDGMENT OF HEATH J
Solicitors:
Duthie Whyte, PO Box 6444, Wellesley Street, Auckland
Alexander Dorrington, PO Box 7246, Auckland
Kemp, PO Box 600, Kumeu, Auckland
Counsel:
P J Stevenson, PO Box 5444, AucklandD Watson, PO Box 3886, Auckland
WESTVIEW FUNERAL CARE LIMITED V GRAHAM AND ANOR HC AK CIV 2006-404-6229 13 May
2008
[1] Westview Funeral Care Ltd (Westview) sues Mr and Mrs Graham and Mr Haslam (as its former landlords) for conversion of chattels and tenants’ fixtures. Those causes of action arise out of the purported re-entry of premises situated at 3
View Road, Henderson which had been occupied by Westview and used as a funeral parlour.
[2] Westview also sues Tuigamala and Sons Funeral Services Ltd (Tuigamala and Sons) for conversion of the tenants’ fixtures used by them in the course of its business as a funeral home, now carried on from the same premises.
[3] On 19 March 2008, Associate Judge Doogue heard and determined an application for security for costs made by Mr and Mrs Graham, Mr Haslam and Tuigamala and Sons. The Judge granted the application and ordered that security for costs be given in the sum of $35,000; such sum was to be held for the benefit of all three defendants represented in the proceeding. He intended that they participate equally in the security.
[4] Westview has not posted the security required. Instead it has applied to review Judge Doogue’s decision. I have heard that application for review today.
Extension of time to seek review
[5] The application for review was filed out of time. I am satisfied from the explanation provided to me by Ms Stevenson, on Westview’s behalf, that the delay is explainable. I am also satisfied that there are grounds to justify a reconsideration of the merits of the Associate Judge’s decision.
[6] For those reasons, I grant an extension of time for the application to be made.
[7] In its Statement of Claim of 5 October 2006, Westview alleges that it entered into possession of the View Road property in or about March 2002, pursuant to a lease entered into with Mr Graham, Mrs Graham and Mr Haslam.
[8] Mr Graham and Mr Haslam were the registered proprietors of the land but
Mrs Graham was also shown as a lessor on the lease document.
[9] The lease was for a term of one year with two further terms of two years by way of renewal. The final expiry date, if the renewals were taken up, was 31 March
2007.
[10] Unusually, the three landlords dealt with receipt of rent separately. Rent cheques were paid to Mr and Mrs Graham (on the one hand) and to Mr Haslam (on the other).
[11] In or about September 2003, Westview reached an agreement with Mr and Mrs Graham to vary the amount of rent payable to them. However, Mr Haslam was not prepared to accept the reduction in rent. Negotiations continued between Mr Williams, on behalf of Westview, and Mr Haslam for some time before an agreement was reached on 8 December 2005.
[12] The agreement was for Westview to pay all arrears of rent in full by 1 April
2006, to pay interest in terms of the lease by the same date and to pay costs totalling
$2874.40 also by the same date. Rent was to be reviewed on 1 April 2006, to equate to a quantum of $8 per square foot for the balance of the term, to expire on 31 March
2007.
[13] Westview alleges that, subsequently, it reached accommodations with Mr Haslam which enabled it to attempt to sell its business as a going concern and on the assumption that Mr Haslam would be prepared to grant a lease to any purchaser of the business. There is some documentation to suggest that an accommodation was
reached to that effect but, in material terms, the documentation can be seen as equivocal.
[14] Mr Williams and Mr Haslam have quite different recollections as to what, if anything, was agreed during this period. However, the accommodations alleged to have been reached form the basis for a difference in view as to whether Mr Haslam had the right, as a lessor, to effect re-entry of the demised premises on 12 April
2006.
[15] The dispute as to whether a valid re-entry was effected is at the heart of Westview’s claim that the lessors wrongfully converted chattels owned by them and tenants’ fixtures to which it says it was lawfully entitled.
Principles of review
[16] On an application to review an Associate Judge’s decision, the approach required of the Court depends on the nature of the decision in issue. Jurisdiction to review flows from s 26P of the Judicature Act 1908 and r 61C of the High Court Rules.
[17] In Midland Metals Overseas Pte Ltd v Christchurch Press Co Ltd (2002) 16
PRNZ 107 at para [13], Chisholm J held that, if the Associate Judge’s decision is a reasoned one following a defended hearing at which full argument was presented by opposing parties, a Judge of this Court exercising the power to review the Associate Judge’s decision ought to approach that task on an essentially appellate basis.
[18] Furthermore, where the decision of the Associate Judge involves the exercise of a discretion the applicant for review must demonstrate that the Judge acted on a wrong principle, failed to take account of some relevant factor, took into account some irrelevant factor, or was plainly wrong. The Court of Appeal has made it clear that it is inappropriate for a Judge to repeat the weighing exercise, unless satisfied that the Associate Judge gave excessive weight to some factor or patently inadequate weight to another, such as to make his or her decision patently wrong: see, Alex
Harvey Industries Ltd v Commissioner of Inland Revenue (2001) 15 PRNZ 361 (CA)
at paras [12]-[15].
The Associate Judge’s decision
[19] The application for security for costs was premised on r 60(1)(b) of the High
Court Rules. That rule provides:
60 Power to make order
(1) Where the Court is satisfied, on the application of a defendant,—
…
(b) That there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff's proceeding,—
the Court may, if it thinks fit in all the circumstances, order the giving of security for costs.
….
[20] Before the Associate Judge, Westview accepted that it was unable to meet the costs of the defendants if it were unsuccessful in its proceeding. Accordingly, the threshold requirement of r 60(1)(b) was met. It followed that the Associate Judge was obliged to consider discretionary factors in order to determine whether, and if so in what amount, security for costs should be awarded.
[21] The significant factors advanced before Judge Doogue in opposition to the application for security were that Westview had a strong claim against the defendants and that, if the Associate Judge were to make an order, it would have the effect of shutting out a genuine claim by a plaintiff of limited means.
[22] Judge Doogue was well aware of those arguments when he considered factors relevant to the decision whether or not order security for costs. He was also mindful of the argument advanced by Ms Stevenson, for Westview, before him, that the defendants had delayed applying for security.
[23] Judge Doogue took the view that it was not possible to analyse with any degree of precision the basis upon which Westview was in occupation of the premises on the date of re-entry. He was concerned about the absence of evidence pointing to a renewal of the lease. He took the view that in terms of cl 38 of the lease, Westview was “holding over” as a monthly tenant at the relevant time. That is not an issue which has been disputed before me today.
[24] On the claim based on conversion of chattels, Judge Doogue was of opinion that the claim was not strong. He said there was compelling evidence that Westview was in arrears under the lease. Accordingly, he took the view that there were grounds on which re-entry could be asserted.
[25] As to the fittings and fixtures, Judge Doogue considered that, on termination, the tenant had the obligation to remove those otherwise ownership would pass to the landlord.
[26] The Associate Judge considered Ms Stevenson’s argument that the landlord had waived any entitlement to re-enter and to seize the lessee’s property as a result of the discussions and accommodations alleged to have taken place and been agreed between Mr Williams and Mr Haslam. Judge Doogue expressed his views on those issues as follows:
[24] I have carefully considered a submission by Ms Stevenson for the plaintiff that the landlord’s entitlement to re-enter and seize the lessee’s property was waived. The argument seems to be based on the fact that Mr Haslam indicated his willingness to grant a new lease of the premises in the event that the plaintiff was able to sell the business. It is clear that the plaintiff was making some attempts to sell the business and in February 2006
Mr Haslam recorded, in a hand-written note, that any new owners of the Westview Funeral Care would have the opportunity to lease the property. He had also endorsed on that note though:
All rent and legal fees must be paid.
[25] As I read this note in the overall factual setting of the case Mr Haslam was willing to assist in having a replacement lessee installed in the premises. That of course makes sense: if he could get a solvent, reliable tenant on a reasonably long-term lease that could only be to his advantage. It made sense therefore for him to co-operate in granting a new lease and I read the document of 10 February 2006 as being a general statement of that intent. But it is a long stretch to argue from that stance which Mr Haslam took and to say that he therefore must have contemplated that the funeral home would
need to still be existence as a going concern and that therefore he must have impliedly agreed somehow that all fixtures and fittings would remain in place. If this is a submission that Mr Haslam by demonstrating willingness to assist in the grant of a new lease, was in all circumstances completely giving up his remedies for unpaid rent then it is quite unrealistic in my view. I would be very surprised if it would ultimately be found to justify a submission that somehow Mr Haslam and the landlords generally waived their rights under the agreement.
[26] I need to deal, as well, with a rather different formulation of much the same point that Ms Stevenson offered. That was that the plaintiff might well have thought that that was the position that Mr Haslam was taking. There was simply no evidence that that was the view or that Mr Haslam co- operated in fostering that view if in fact that was Mr Williams general belief.
[27] The Judge did not see counterveiling factors relating to the application, other than the issue of delay and the possibility of a valid claim being prevented by an order. The Judge dealt with those issues on quantum, by ordering a relatively modest amount as security for costs for the benefit of all three defendants represented in the proceeding.
[28] That sum was $35,000. Based on a hearing estimated to take four days, costs on a 2B basis and disbursements appear to be in the vicinity of $30,000 per represented defendant. The current claim is for $150,000 (under each cause of action) with a further claim for $50,000 as “aggravated damages”.
Analysis on review
[29] Ms Stevenson advanced careful submissions in support of the application for review. With respect to her, she has put the case for Westview as well as it could have been put. She has focussed particularly on the Associate Judge’s assessment of Westview’s prospects of success.
[30] Ms Stevenson argued that the Judge fell into error in not viewing independently the two causes of action pleaded. In her submission, the Judge, by conflating the two causes of action, gave too little weight to the stronger claim on the first cause of action for conversion of the chattels.
[31] It is difficult to advance an argument that prospects of success have been inadequately assessed by a first instance Judge. Assessing prospects of success is a predictive exercise fraught with difficulties. One cannot know whose evidence is likely to be accepted, where credibility is at stake and, in this case, there is such a clear conflict between the evidence of Mr Williams and Mr Haslam that a view on whose version of events is correct could not properly be formed until after the hearing.
[32] While there is some documentary evidence that points in favour of Westview’s claim, equally, much of it is consistent with what is said by Mr Haslam. I am not prepared to interfere with the assessment of likely prospects of success reached by an Associate Judge who has had carriage of interlocutory issues in this proceeding for some time.
[33] During the course of the hearing, I was concerned about the possibility of a genuine claim being shut out. I was also concerned about the apparent strength of the claim against Mr Haslam, as opposed to Mr and Mrs Graham and Tuigamala and Sons.
[34] The claim against Mr Haslam, seems to me to be stronger because he was a central figure in re-entering the property. He had conducted negotiations with Mr Williams, on behalf of Westview, as if he were the sole lessor. He had, in the course of those negotiations, achieved for himself a better rental return than his co- lessors were obtaining. In those circumstances, and in the absence of specific discussions between Mr Williams and Mr and Mrs Graham, it seemed to me that their prospects of being held liable were much lower than Mr Haslam’s.
[35] Similarly, the new tenant, Tuigamala and Sons, is not alleged to have had actual or constructive knowledge of any impediment to Mr Haslam authorising it to use or to acquire tenants fixtures in the course of its business which is now operated out of the View Road premises. Tuigamala and Sons was not involved in any of the dealings prior to re-entry and it also seemed to me that the prospects of success against that company were relatively weak.
[36] Having said that, those issues would only have arisen for reconsideration in the event of an application for review by either of those parties. It does not change the assessment of the Associate Judge as to the potential for liability on the part of Mr Haslam.
[37] In the context of the claims which have been made and the likely trial, which in my view will take between four and five days to complete, having regard to extensive oral evidence required, a quantum assessment of $35,000 for security for costs cannot be regarded as outside the range of orders available to the Judge.
[38] That means that the final issue is whether there is some likelihood of a genuine claim being shut out by the order for security. In that regard, Ms Stevenson has relied on A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA). In McLachlan the Court of Appeal recognised that a security for costs order may operate to prevent a claim from being advanced. The Court suggested that a first instance Judge should take care to ensure that a genuine plaintiff’s access to the Courts not be impeded by an order for security. Nevertheless, the Court of Appeal was also mindful of the need, where a plaintiff is impecunious of protecting a defendant against being drawn into unjustified litigation at a prohibitive cost. Delivering the judgment of the Court of Appeal in McLachlan, Gault P said:
[15] The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in which the claim has little chance of success. Access to the Courts for a genuine plaintiff is not lightly to be denied.
[16] Of course, the interests of defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.
[39] In my view, the Associate Judge did not depart from that statement of principle. In making a modest order for security which could be shared between the three represented defendants, the Associate Judge struck a proper balance between the need to ensure that a genuine claim could be brought to trial and the protection of defendants who would otherwise have no remedy against an impecunious plaintiff, if ultimately successful in defending the proceeding.
[40] In my view, the Associate Judge took into account all relevant factors. He did not take into account any irrelevant factors. No error of law can be discerned in his decision. It cannot be said that Judge Doogue was plainly wrong. Indeed, his balanced approach to the application demonstrates a concern to ensure that, provided a modest amount were paid into Court to protect the defendants, the plaintiff would be able to proceed to have its claim determined.
[41] Because on orthodox principles relating to review of an Associate Judge’s reasoned decision, no error has been identified.
Result
[42] Time to bring the application for review is extended but the application is dismissed.
[43] Costs are awarded in favour of each represented defendant on a 2B basis together with reasonable disbursements. Both are to be fixed by the Registrar.
Case management issues
[44] The final issues involve the case management of this proceeding.
[45] A trial date had been allocated for 26 May 2008. Because security has not been posted in accordance with Judge Doogue’s decision that hearing cannot proceed. Even if security were posted this week, there would be insufficient time to enable the parties to ready for trial, particularly when witness statements have not yet been exchanged.
[46] In those circumstances, I vacate the hearing scheduled for the week of 26
May 2008. All existing timetabling orders are also vacated.
[47] I adjourn the proceeding for a case management conference before Judge Doogue, on the first available date after 10 June 2008. I fix that date to provide a further opportunity to Westview to post security.
[48] If security were not posted, it would be open to the defendants to apply to have the claim struck out. Determination of any such application would be for the Associate Judge to consider on its merits.
[49] If Westview wished to resist an application to strike out, it should ensure that security for costs is paid to the Registrar of this Court before 10 June 2008 and that costs awarded on the application for security before Judge Doogue and on the
present application are both paid.
P R Heath J
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