Williams v Cameron

[2013] NZHC 1794

IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV 2013-442-218 [2013] NZHC 1794

BETWEEN  PETER ANTHONY WILLIAMS First Appellant

WILLIAMS TURBOCHARGERS LIMITED

Second Appellant

ANDTREVEOR NELSON CAMERON First Respondent

ROBIN WHALLEY Second Respondent

RICHARDS WOODHOUSE Third Respondent

Hearing:                   16 July 2013

(Heard at Wellington)

Counsel:                  Appellant P A Williams in person

J M Morrison for Respondents

Judgment:                16 July 2013

ORAL JUDGMENT OF THE HON JUSTICE KÓS

[1]      On  26  October  2012  District  Court  Judge  Tuohy  delivered  a  judgment holding that a professional negligence and breach of fiduciary duty claim brought by the plaintiffs against the defendant accountants was in most respects debarred from action by a settlement agreement made on 19 December 2007.  It followed that the plaintiffs were estopped from prosecuting the settled aspects of the claim.   The judgment was precise as to those parts of the claim settled and those parts that were

not.

WILLIAMS & ANOR v CAMERON & ORS [2013] NZHC 1794 [16 July 2013]

[2]      On 14 January 2013 the plaintiffs applied  to the Judge for recall of  his judgment.  The essence of the recall application was an allegation that the defendant Mr Cameron and his solicitors had knowingly made false statements to the Court, and produced “fabricated” documents.  On 15 April 2013 the Judge held that such allegations lay beyond the scope of recall. The application for recall was dismissed.

[3]      This is an appeal from that decision.

Background

[4]      The background to the present dispute is set out in a judgment of Mallon J two  years earlier, setting aside a decision of the District Court striking out the plaintiffs’ claim.1   It will suffice for present purposes to record that:

(a)      The defendant accountants acted for the plaintiffs (as vendors) and for another client (as purchaser) on the sale of a business owned by the plaintiffs.

(b)The plaintiffs take the view that the defendants were in conflict of interest in doing so.  And that in the course of that conflict they had prepared a valuation for the purchaser (showing a value range of between $822,000 to $957,000).  The purchaser ultimately paid only

$800,000 for the business.   The plaintiffs take the view that the defendants’ actions caused them loss (calculated initially at $157,000 plus interest).

(c)      The defendant accountants sent an invoice to the plaintiffs’ company, Turbochargers NZ Limited, in February 2007.   It was for $8,597. Subsequently, the plaintiffs sent the defendants an invoice for “losses incurred in the sale of business”, calculated as I have said initially in

the amount of $157,000 plus interest.

1      Williams v Cameron HC Nelson CIV 2010-442-222, 22 September 2010.   For simplicity of understanding I will continue to use the expressions “plaintiffs” for the appellants, and “defendants” for the respondents.

(d)Subsequently, the defendant Mr Cameron pleaded guilty before the Institute of Chartered Accountants of New Zealand Professional Conduct Committee of various breaches of the ICANZ code of ethics. These related to the management of conflicts and the failure to document properly matters such as his engagement and the valuation. He was censured and ordered to pay $8,000 costs.

[5]      The  October  2012  hearing  before  Judge  Tuohy  concerned  a  preliminary question directed by the Court to be heard ahead of trial.  The preliminary question was:

Were  all  of  the  plaintiffs’ claims  arising  out  of  the  sale  of  the  marine

business settled by agreement on or after 19 December 2007?

[6]      The Judge found that settlement of the dispute between the parties occurred following a meeting in Nelson on 19 December 2007.  The attendees at the meeting were the defendant Mr Cameron, his solicitor Mr Barton, the plaintiff Mr Williams and Mr Williams’ accountant Mr French.  An offer was made by the defendants at that meeting to withdraw their account if Mr Williams would withdraw his.   That offer was rejected by Mr Williams.

[7]      Mr Cameron gave evidence before Judge Tuohy that at about 3.00 pm on the same day he received a telephone call from Mr French.  Mr French said that he had taken Mr Williams to lunch and had convinced him to “back down” and accept the defendants’ offer to write off their invoice on the basis that Mr Williams would not pursue his claim further.   Mr Cameron said he asked Mr French to send an email confirming that.

[8]      The  plaintiffs’  then  counsel,  Ms  Grey,  expressly  acknowledged  before Judge Tuohy that no question arose as to Mr French’s authority to bind the plaintiffs. The  Judge  records  that  Mr  French  (who  gave  evidence  before  him,  as  did Mr Cameron  and  Mr  Williams)  acknowledged  that  he  had  had  lunch  with Mr Williams  after  the  meeting,  and  had  convinced  Mr Williams  to  accept  the proposal  made  at  that  meeting.     He  could  not  recall  the  specific  telephone

conversation, but did not deny that it took place.  He expressly disagreed with the

suggestion that he had said that Mr Williams had “backed down”.

[9]      It then appears that the following day Mr French sent an email confirmation as sought by Mr Cameron. The email, dated 20 December 2007 read:

Hi Trevor2

Further to our meeting of yesterday and subsequent phone call I confirm that after conversation with Peter3  I was instructed to contact you and accept on the bases of you crediting the accounting bill he will withdraw his invoice and take no further action.

I am pleased that all outstanding matters are ended.

...

Robin French

The Judge records that Mr French acknowledged sending that email.   He also acknowledged resending it on 8 January 2008.  The given reason the email had to be resent  was  that  on  its  face  it  was  sent  to  “[email protected]z”. Mr Cameron’s     evidence     was     that     his     email     address     was     actually “[email protected]z”.   Mr Cameron gave evidence that he had telephoned Mr French  on  8  January  2008  asking  where  the  confirmation  was,  and  that Mr French then resent the email.  As noted, Mr French does not deny having done so.

[10]     Also in evidence were emails sent by Mr Cameron to his solicitor Mr Barton. Privilege in those communications was waived by the defendants.   One (called “TC11”)  was  on  its  face  sent  immediately  after  the  telephone  conversation  on

19 December 2007.   The other (dated 8 January 2008, and called “TC13”) was

apparently sent as a covering email for the email sent by Mr French on 8 January

2008.  The Judge spent some time analysing those emails, but in my view they are of merely peripheral relevance.  What is important is not what was said by Mr Cameron to his solicitor Mr Barton.  What is important is what was said by Mr Cameron to

2      Mr Cameron.

3      Mr Williams.

Mr French, and vice versa.  That is, what happened in the telephone conversation of

19 December 2007.

[11]     In  reaching  his  conclusion  that  a  settlement  of  the  existing  claim  was achieved between Mr Cameron and Mr French in the conversation on 19 December

2007, the Judge relied on the following factors:

(a)      Mr French acknowledged sending the email of 20 December 2007, and resending it on 8 January 2008.  His authority to do so was not in issue.

(b)Mr   French   acknowledged   in   cross-examination   that   he   and Mr Cameron had “done a deal over the phone”.  He answered, “I think that’s evidenced by my email”.

(c)       The  email  (which  was  eventually  received  by  the  defendants  on

8 January 2008) read as written confirmation of an agreement already made.  After hearing the evidence the Judge held that that was indeed its true character.

(d)Mr French confirmed his own understanding that no response was required to that email from Mr Cameron.   What was required was “crediting the accounting bill”.

(e)      Mr   French   acknowledged   that   the   expression   “crediting   the accounting bill” did not necessarily require the issue of a credit note. Processing a journal entry would have been another way of dealing with it.  Processing a journal entry is precisely what Mr Cameron then did.

(f)      When Mr French then billed Mr Williams on 31 December 2007, the bill referred to “further discussions and settlement with the accountants”.

[12]     Given these considerations the Judge concluded that settlement occurred in the 19 December 2007 telephone call. The result was that the call concluded:

... all claims made by the plaintiffs in this proceeding arising out of the sale of the marine business was settled by agreement made on 19 December 2007 except for the claim for breach of fiduciary duty pleaded in paragraph 31(e), (f) and (g) of the statement of claim and for breach of contract pleaded in paragraph 36(vi) of the statement of claim.

[13]     On 22 November 2012 the Judge gave the defendants category 2B costs and disbursements of $19,353.

Recall application

[14]     On 14 January 2013 the plaintiffs filed their present application for recall of judgment.   The focus of that application was the Judge’s reliance on documents TC11 and TC13 described above.  The application refers to issues as to the “validity of documents TC11 and TC13”.   It alleges that “contradictory statements” were made by Messrs Cameron and counsel previously appearing for the defendants.  It says that they “knowingly made false statements to the Court”.

[15]     The application says:

We  submit  it  was  not  safe  for  the  Court  to  rely  on  the  integrity  of Mr Cameron’s  unsupported  evidence  and  affidavit  of  5  September  2012 when considering judgment in this matter.

It concludes:

We now seek a recall of this judgment because we believe the defendants’ affidavits sworn in 2010 and statements provided by counsel for the defendants provides clear evidence calling into question the integrity of the defendants’  statements,  affidavits  and  documentary  evidence  which  the Court relied on in arriving at judgment of 26 October 2012.

Decision appealed from

[16]     The present appeal is confined to the recall judgment delivered by Judge Tuohy on 15 April 2013.   By incorporation that includes a ruling made by Judge Tuohy on 6 March 2013.  But that is all.  It is not an appeal against Judge Tuohy’s

substantive October 2012 decision as to settlement.  Nor is it an appeal against the costs decision.

[17]     The 6 March 2013 ruling records that the application for recall, filed by the plaintiffs personally, did not refer to the relevant rule under which it was brought. However the Court treated it as if brought under District Court Rule 12.15.   That authorises the Court to order a retrial if (but only if) there has been a miscarriage of justice that justifies a retrial.

[18]     The   Judge   then   referred   to   the   decision   of   the   Supreme   Court   in Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd.4    The Judge set out [28] to [33] of that Court’s judgment, which discusses the principle of finality of judgment.  The Supreme Court noted that finality is subject to limited exceptions: recall, appeals (including potential appeals out of time) and (exceptionally) collateral attack on the ground of fraud.  The fraud exception imposed a very high standard for attack.   It must be supported by evidence doing more than merely giving rise to surmise, suspicion, or conjecture.  The Supreme Court’s decision also holds that the

appropriate  procedural  course,  where  a  party  against  whom  judgment  is  being entered alleges that it has been obtained by fraud, is to commence a separate proceeding seeking to have the judgment set aside.

[19]     Judge Tuohy said:

The answer then is clear: if this is a case involving the “fraud exception” to finality  of  judgments,  then  the  procedure  adopted  by  Mr  Williams  is incorrect; an entirely new proceeding with full and detailed pleadings is required.

[20]     The Judge then found that there was no doubt that the application for recall engaged the fraud exception, and the application for recall was therefore dismissed.

Submissions

[21]     Mr  Williams  (who  appeared  in  person  on  his  own  behalf  and  without objection on behalf of his company, Williams Turbochargers Limited) submits:

4      Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1

NZLR 804.

(a)      No agreement had been reached between Mr French and Mr Cameron in the telephone discussion.

(b)      If agreement had been reached, there would have been no reason for

Mr French to “twice send him a counteroffer seeking a credit”.

(c)      Documents   produced   by   Mr   Cameron   in   his   evidence   being documents  TC11   and   TC13   (the  emails   sent   to   his   solicitor, Mr Barton) were “fabricated”.

(d)Mr Darroch who was counsel at the hearing in October 2012, should not have acted then because to do so breached Conduct and Client Care Rule 13.5.

[22]     It is convenient to deal with this last point now.  I am satisfied that no basis has been shown on the evidence for saying that Mr Darroch was in breach of Rule

13.5 in October 2012.   The fact that two emails in evidence had been sent by Mr Cameron to Mr Darroch’s partner Mr Barton (and which Mr Cameron was to give evidence of) does not mean Mr Darroch was then precluded from conducting the hearing.  In any event, as I have already said, those emails were peripheral to the matters truly in issue.   It would not have been likely at the time that Mr Barton would have been expected to give evidence.   The witnesses at the October 2012 hearing were, as I have said, Messrs Williams, Cameron and French.  Mr Barton later gave affidavit evidence, but only in the recall hearing.

[23]     Mr Williams’ submissions  before  me  were  a  mixture  of  submission  and evidence.  I told him that I would not accept evidence from him in that form.  To his credit Mr Williams acknowledged that he had to play by the rules; he was himself seeking similar compliance by the defendants.  Mr Williams has now been involved in the Court process long enough to know that if he wishes the Court to rely on evidence (for instance,  that attributed to document examiners) he must put that evidence formally before the Court in an affidavit.  Mr Morrison for the defendants would then have an opportunity, if he wished, to apply to cross-examine.

[24]     For the defendants, Mr Morrison submits that:

(a)      the plaintiffs’ arguments are wrong and misdirected because they seek to relitigate the substantive District Court judgment of 26 October

2012;

(b)the appeal ignores the limited judgment appealed from (confined to recall); and

(c)      Mr Williams’ submissions make gratuitous and scurrilous allegations against the defendants and their legal advisors which are baseless and need not be answered.

[25]     In short, Mr Morrison submits that the judgment appealed from was correct because it was concerned with the procedural propriety of an application for recall based on alleged fraud.   The judgment correctly identified the relevant rule, and followed the Supreme Court decision in the Commissioner of Inland Revenue v

Redcliffe Forestry Ventures Limited.5

Discussion

[26]     I am satisfied that the present appeal is misconceived and must fail.

[27]     First, the power to recall is a very constrained one.  In the District Court it is particularly constrained, given that it is a court of statutory jurisdiction.  The Judge correctly identified  District  Court  Rule  12.15  as  the  sole  relevant  basis  for  the application.  As Rule 12.15.3 provides, unfair or improper practice, or misconduct, can be a basis for recall.  Not too much, however, should be read into that provision. In particular, I do not think it is intended to create a power of recall greater than that provided (in statutory form at least) in High Court Rule 11.9.  As is well known,

since the decision in Horowhenua County v Nash (No 2)6 the High Court recognises

three categories of cases in which unperfected judgments may be recalled: where

5      Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1

NZLR 804.

6      Horowhenua County v Nash (No 2) [1968] NZLR 632 (HC) at 633.

there has been amendment to a relevant statute or regulation, or a new judicial decision which is both relevant and of higher authority has been delivered; secondly, where counsel have failed to direct the Court’s attention to the foregoing (regardless of date); and thirdly “where for some other very special reason justice requires that the judgment be recalled”.  The third category has been called “narrow”, with cases

falling within it likely to be “rare”.7    It applies principally in situations where there

has been judicial error, or where matters or interests have changed significantly since entry of judgment.

[28]     Secondly, where the allegation is that a judgment has been procured by fraud (including, as here by alleged “fabricated” or perjured evidence), recall is not an appropriate course.   Recall is only appropriate where the Court is in a position to determine such matters on a summary basis.  That is, on the basis of evidence before the Court, and with limited additional affidavit evidence not requiring any extensive cross-examination.

[29]     Thirdly, where, as here, the allegations are gross and require both affidavit evidence and extensive cross-examination, the only appropriate course is to issue new uninfected proceedings to set aside the original decision.  That point was made clear by the Court of Appeal half a century ago in Sulco v ES Redit Ltd.8   It has been reinforced, recently, by the Supreme Court in Commissioner of Inland Revenue v Redcliffe Forestry Ventures Ltd.9    At [31] of the Redcliffe judgment, the following was said:

It is also established that the appropriate procedural course, where a party against whom a judgment has been entered, alleges that it has been obtained by  fraud,  is  to  commence  a  separate  proceeding  seeking  to  have  the judgment set aside.   This is because cases invoking the fraud exception allege there has been dishonesty, usually involving perjury, in the evidence given at trial which has deceived the trial court into making erroneous determinations of fact. It is because the challenge is directed at the integrity of the determinations of fact in the litigation that the party alleging fraud brings a fresh proceeding in the trial court, even where the impugned judgment has already been subject of appeal. In such a case the plaintiff does

7      Unison Networks Ltd v Commerce Commission [2007] NZCA 49 at [34].

8      Sulco v ES Redit and Co Ltd [1959] NZLR 45 (CA) at 70–71 per Hutchison J and at 76 per

Turner J.

9      Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1

NZLR 804.

not seek a review of the legal principles that were applied, being rather concerned with the consequence of their application to tainted evidence.

[30]     The reason for this approach is the proper protection of the Court’s processes. That is not confined simply to correction of error where there has been (as the plaintiffs allege) fraud.  It also exists for the protection of the successful party to the original judgment, against whom such allegations can readily be made with glib disregard for reality.  Whether the reality in the present case is as the plaintiffs assert it to be is beside the point.   But given the seriousness of the allegations made in Mr Williams’ submissions I do record that there was no admissible evidence before me which reached the standard of proof beyond conjecture and surmise referred to by  the  Supreme   Court   in   Redcliffe.      Procedurally,   however,   it   is   entirely inappropriate that mere suspicions of misconduct be advanced in a compounded concoction of submission and evidence which, if the plaintiffs were to have their way, would go entirely untested by cross-examination.

[31]     The rule in Redcliffe is a very clear one, and was made for very clear reasons. The District Court Judge followed that rule faithfully and correctly.

Result

[32]     Appeal dismissed.

[33]     Costs to the defendants on a 2B basis.

Stephen Kós J

Solicitors:

Duncan Cotterill, Nelson for Respondents