COMMISSIONER OF INLAND REVENUE V PATEL HC AK CIV-2012-404-4075

COMMISSIONER OF INLAND REVENUE V PATEL HC AK CIV-2012-404-4075 [4 March 2013]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2012-404-4075[2013] NZHC 477UNDER the Companies Act 1993 Section 284(1)(g)BETWEEN COMMISSIONER OF INLANDREVENUEPlaintiffAND PRITESH R PATELDefendantHearing: 4 March 2013Appearances: N H Malarao and C K Wood for the PlaintiffD G Collecutt for the DefendantJudgment: 4 March 2013ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELLSolicitors:Meredith Connell (N H Malarao/C K Wood) Auckland, for PlaintiffEmail: Nick.Malarao@meredithconnell.co.nz / Cyril.Wood@meredithconnell.co.nzShean Singh (Dhirendra Singh) Balmoral, Auckland, for DefendantEmail:qshean@sheansingh.co.nz / office@sheansingh.co.nzCopy for:D Grant Collecutt, AucklandEmail: gcollecutt@gmail.com[1] The Commissioner has applied under s 284 of the Companies Act 1993 for an order declaring that the appointment of Mr Patel as liquidator of Dovey Holdings Ltd is invalid. The proceeding was set down to be heard today. The plaintiff applies for an adjournment. This decision is about the adjournment application.[2] There have already been decisions on the question of adjournment. On 26 February 2013 the plaintiff filed a memorandum. The memorandum proposed that directions be given for discovery. I called a telephone conference. The defendant did not oppose the case being put off for further discovery directions. I treated the proposal that directions be given for discovery to involve an adjournment of the proceeding. Giving directions for discovery would not make any sense if the case was still to proceed on 4 March 2013. I declined to adjourn the matter and issued a minute giving reasons.[3] After I gave that decision, the plaintiff filed a written application for adjournment. That application was referred to me. I declined to deal with it because it seemed to involve an application for my decision to be reconsidered. I thought that it would be better considered by another Judge. The matter went to Venning J.[4] Venning J declined to deal with the application on the merits. Instead, he held that the application was a second application for an adjournment. He held that leave to bring a second application under r 7.52 was required. Such leave had not been sought. Leave had not been granted, and he said he would not be prepared to grant leave. He left it in place for this matter to proceed today. He however added at [8] of his decision:While it remains open to the plaintiff to seek to renew the application for adjournment at 10:00am on Monday 4 March 2013, before doing so the plaintiff would have to address the above procedural issues before any such application for adjournment could be considered on its merits by Associate Judge Bell.He also directed the parties to prepare for the substantive fixture on the basis that it will proceed.[5] Mr Malarao is correct that there is something of a misconnect betweenVenning J's decision and my own decision because in my own decision I had saidthat leave would not be granted for any evidence to be filed. The existing directions for the hearing of the case had directed that evidence was to be by affidavit and the time for filing affidavits had already expired.[6] The plaintiff now seeks leave under r 7.52 to renew its application for an adjournment. I am required to decide:(a) Whether to grant leave;(b) The merits of the adjournment application; and(c) Any consequential orders.Should leave be granted under r 7.52?[7] Rule 7.52 provides that a party who applies by an interlocutory application must not apply again for the same or similar order without first obtaining the leave of a Judge, and a Judge may grant leave only in special circumstances. The plaintiff submits that there are special circumstances that entitle leave to be granted. The defendant contends to the contrary.[8] There is helpful guidance on the meaning of "special circumstances" in thedecision of the Court of Appeal in Kidd v Van Heeren1 where it was held that thewords "special circumstances" are:... wide, comprehensive and flexible words indicating something abnormal, uncommon or out of the ordinary but something less than extraordinary or unique.1 Kidd v van Heeren (1997) 11 PRNZ 422 (CA) at 424.[9] Those words were applied in the context of an application under r 7.52 by Chisholm J in Hargreaves v The Radio Network Ltd.2 Equally helpful is the decision of Associate Judge Doogue in Lawrence Riverside Ltd v C P Holdings Ltd.3I can do no better than reproduce what Associate Judge Doogue stated in his judgment:4[17] In my view the policy of the rule is based upon an analogy with the requirement for finality in litigation. That doctrine does not strictly apply because the parties are not bound by an issue estoppel any previous order declining to permit amendment would be interlocutory in nature. It would also seem to be directed towards the need for the issues in a case to be settled promptly as part of the case management objective of defining the issues for the purposes of trial or to foster settlement. As well it reflects theneed for the Court to control its processes so that the Court's resources arenot taken up with unnecessarily duplicated interlocutory applications. If firm control is not maintained, repetitive applications will result in unnecessary cost and delay to other parties to the proceedings. To that end, the rules do not prohibit outright the making of a second application concerning the same subject matter, but instead subject it to the requirement for Court consent.[18] I would expect that the rule would be applied where, because of an understandable mistake, a particular aspect of an order was not sought or a ground which might support the making of the order was overlooked. I donot consider that, in general terms, it is designed to give a party a "second bite of the cherry".[19] The wording of the rule would not seem to restrict its application to any particular circumstances in which it is necessary for a second application to be made. But the scope of the rule is not unlimited. For example, while it might not literally be ruled out by the words of the rule, it would be difficult for an application to succeed where the essential ground is that counsel who was in possession of the facts when the first application was made has since come up with a further legal argument in support of the application that had only occurred to him or her since. Reduced to its essentials, that is the ground here. I agree with the statement in Civil Procedure: District Courts and Tribunals that:5This rule is not intended to provide a disgruntled applicant with a second opportunity to argue an unsuccessful application: Kiwi Co- Operative Dairies Ltd v Capital Dairy Products Ltd (1989) 1 PRNZ 622 at 627–628.[20] The second aspect of rule 7.52 which has relevance here is the needfor there to be "special grounds" present before a Judge can make an order. I2 Hargreaves v The Radio Network Ltd HC Christchurch CIV-2002-409-725, 19 October 2011at [10].3 Lawrence Riverside Ltd v C P Holdings Ltd HC Auckland CIV-2006-404-473913 December 2010.4 At [17]-[20].5 Civil Procedure: District Courts and Tribunals (online looseleaf ed, Brookers) at [HC7.52.01].agree with the following passage from Civil Procedure: District Courts and Tribunals:"Special circumstances", therefore, are something abnormal,uncommon or out of the ordinary (but not, necessarily, extraordinary or unique): Kidd v van Heeren (1997) 11 PRNZ 422 (CA) at 424.[10] In this case, counsel for the plaintiff filed his memorandum on 26 February 2013 anticipating that what he had proposed to the court should proceed without undue difficulty. He may have had some justification for that, because he was relying on the default of the defendant in complying with timetable directions I had given. In particular, the defendant had not provided an affidavit of documents although required to do so by 19 October 2012. The plaintiff had pressed the defendant to provide that discovery. The defendant was in default.[11] Given that background, the plaintiff may have anticipated that she would not face any opposition from the defendant, because the defendant could not rely on his own default opportunistically to stand in the way of directions sought for discovery. However the plaintiff, perhaps to her surprise, found a judge who was not prepared to simply adjourn on the say-so of the parties but held that there were other factors going to the public interest which also counted on the decision whether to adjourn.[12] That response may have been unanticipated. If it had been anticipated the plaintiff may have put more effort into the memorandum that was initially filed.While this may be stretching the concept of "special circumstances", I am preparedto grant leave under r 7.52 on the basis that the plaintiff should be given the opportunity to develop her submissions more fully. Accordingly, I grant leave under r 7.52.Should this proceeding be adjourned?[13] The matter arises for consideration under r 10.2. I recorded some of the facts in my minute of 28 February 2013. The plaintiff has taken the opportunity in this hearing to present fuller information. I have been provided with a chronology and copies of correspondence that have passed between the parties. The correspondence of greatest interest is that which passed after my minute giving timetable directions in September 2012.[14] My directions had required both parties to make discovery by 19 October 2012, and to inspect documents by the end of October 2012. Neither side completeddiscovery on time. The defendant's lawyer raised the matter with the plaintiff on7 November 2012 and invited the plaintiff's lawyer to contact to discuss. There was a response from the plaintiff's lawyer with proposals to address the question of discovery and a suggestion that the parties should ask for an amended timetable fromthe court. There was a response from the defendant's lawyer on 29 November 2012.Amongst other things the lawyer said:We are preparing our client's list of documents which should be with you some time next week.Notwithstanding that intimation, the affidavit of documents was not provided.[15] The plaintiff's lawyer took the matter up again on 5 December 2012, indicating that the plaintiff's list of documents was ready to be sent. That was followed up again on 20 December 2012. At this stage the plaintiff sent her list ofdocuments. Again there was no response from the defendant. After the plaintiff'slawyer had returned to work in the New Year, he re-sent the documents to thedefendant's lawyer. On 22 January 2013 he also wrote addressing the question ofdiscovery and the failure of the defendant to comply, but also setting out in summarythe plaintiff's case, proposing that the defendant should simply consent to being removed as liquidator. There were then no further steps until the memorandum filed in court on 26 February 2013.[16] Both parties were remiss in not making discovery and arranging inspection of documents by the end of October 2012. By that stage the plaintiff's lawyers shouldhave been alerted to the requirement to obtain proper discovery and should also have attended to discovery themselves. The matter was critical for the plaintiff because the plaintiff was required to file her affidavit evidence by the end of November 2012.[17] I interpose that Mr Collecutt has had no involvement in this proceeding until he has appeared today.[18] Mr Collecutt submitted that it was open to the plaintiff to file some evidence – even without discovery at that stage. Equally, I can understand that the plaintiff would be concerned to obtain full discovery before launching into evidence so that the plaintiff could be careful to ensure that the evidence it gave was consistent with documents that it obtained on discovery.[19] Nevertheless, the time for addressing these matters was in November and December 2012. It would have been open to the parties to ask for a fresh conference, to ask for adjustments to timetables and, if necessary, to ask for the fixture to be vacated. What went wrong is that the plaintiff tried to push ahead without filing any evidence, without having obtained discovery, and only sought an adjournment belatedly when it filed its memorandum on 26 February 2013.[20] The difficulty with that is that a fixture had already been set for this case. It was too late to give the time available for this case to some other case awaiting hearing. If a decision had been made on 28 February 2013 to vacate the fixture there would not have been opportunity to set another case to be heard in substitution.[21] In support of the application for an adjournment, the plaintiff submits that the interests of the parties ought to take priority over the interests of the court in the efficient despatch of its business. The authorities she cites include O'Malley vSouthern Lakes Helicopters Ltd,6 where Tipping J said:However, the essential question which the court always has to consider when asked for an adjournment, is whether or not that is necessary in order to do justice between the parties. One must not overlook that not only is it necessary to do justice to the party who is seeking the adjournment but also justice to the party who wishes to retain the benefit of the fixture. It is essentially a balancing exercise.The significance of that statement is that it does not suggest that there is any need to have regard to the interests of other litigants.[22] The plaintiff also referred to the decision of Henry J in Feasey v Dominion Leasing Corp Ltd.7 That was an appeal from a decision of the Magistrates' Court6 O'Malley v Southern Lakes Helicopters Ltd HC Christchurch CP513/89, 4 December 1990.7 Feasey v Dominion Leasing Corp Ltd [1974] 1 NZLR 593 (SC).where a defence request for an adjournment had been refused. The magistrate hadfollowed an established practice in the Otahuhu Magistrates' Court of not grantingadjournments to ensure the due despatch of business. Henry J held that while there had been delay on the part of the defendant in getting his case into order, an adjournment was still appropriate and the Magistrate had erred in not ordering an adjournment, given the requirement for the defendant to be given a proper opportunity to present a properly argued defence. Henry J cited with approval Mahon J in Fontainebleau Restaurants Ltd v Stanley Buildings Ltd:8Rules of practice or procedure are of course subservient to the paramount rights of litigants to obtain proper determination of proceedings duly instituted. 9[23] Those decisions are consistent with the traditional approach to applications for an adjournment. They follow well-known authorities such as Maxwell v Keunand Walker v Walker.10[24] However, since those decisions the courts have come to recognise that the question of adjournment impacts not only the interests of the parties to the proceeding but also other people who use the courts. For example, in Gray v ThomPenlington J said:11I recognise, as did the learned Judge, that the administration of justice is a relevant factor. An adjournment affects not only the party opposing the adjournment, but also the other patient litigants waiting in the queue. The opponent of an adjournment is inevitably delayed in getting a resolution of the matter to which he or she is a party. Likewise, waiting litigants are deprived of the opportunity of using the court time because of inadequate lead time to get ready for trial. An adjournment disrupts the court programme. It sometimes leads to the wastage of a scarce resource, judicial time.[25] In that case also, Penlington J held that "the dictates of the system must, however, always yield to the interests of justice", and referred with approval to thedictum of Mahon J in Fontainebleau Restaurants Ltd v Stanley Buildings Ltd.8 Fontainebleau Restaurants Ltd v Stanley Buildings Ltd [1974] 1 NZLR 46 (SC).9 At 48.10 Maxwell v Keun [1928] 1 KB 645 (CA); Walker v Walker [1967] 1 WLR 327.11 Gray v Thom (1997) 20 PRNZ 373 (HC) at 379.[26] In the High Court of Australia, Brennan, Dean and McHugh JJ stated the importance of the interests of others using the courts in an adjournment case, Sali v SPC Limited,12 where they said:In determining whether to grant an adjournment, the judge of a busy court is entitled to consider the effect of an adjournment on court resources and the competing claims by litigants in other cases awaiting hearing in the court as well as the interest of the parties. As Deane J pointed out in Squire v Rogers[[1979] FCA 48; (1979) 27 ALR 330, at 337] this "may require knowledgeof the working of the listing system of the particular court or judge and the importance in the proper working of that system of adherence to dates fixedfor hearing." What might be perceived as an injustice to a party whenconsidered only in the context of an action between parties may not be so when considered in a context which includes the claims of other litigants and the public interest in achieving the most efficient use of court resources.[27] That factor has taken on even stronger force in Australia with the decision of the High Court in Aon Risk Services Australia Limited v Australian National University.13 That was a decision on the amendment of pleadings. The court approved the approach taken in its earlier decision of Sali v SPC Ltd and re- emphasised the importance of having regard to the efficient despatch of business. The High Court tied the objective of the quick, efficient and just disposal of cases to the case management system and the need to have regard to the interests of other users of the court system.[28] Of particular importance are the judgment of French CJ14 and the judgment of Dawson, Gaudron and McHugh JJ:1590. The overriding purpose of r 21, to facilitate the just resolution of the real issues in civil proceedings with minimum delay and expense, is stated in the rules of other courts in Australia, although those purposes and the obligations cast upon the court and the parties may be stated in somewhat different terms.91. In submissions before Gray J, Aon relied upon a decision of the New South Wales Court of Appeal which distinguished JL Holdings (Queensland v JL Holdings Ltd [[1997] HCA 1; [1997] 189 CLR 146] on the basis of later provisions of the Civil Procedure Act 2004(NSW). His Honour did not consider those provisions to be comparable with the Court Procedure Rules and the Act under which12 Sali v SPC Limited (1993) 116 ALR 625 (HCA) at [11].13 Aon Risk Services Australia Limited v Australian National University [2009] HCA 27;(2009) 239 CLR 175.14 At [23]-[25].15 At [90]-[95].they were made, the Court Procedures Act 2004 (ACT). No issue is taken concerning that aspect of his Honour's decision. Theimportance of r 21 to an application for leave to amend is to be determined by reference to its own terms.92. The purposes stated in r 21 reflect principles of case management by the courts. Such management is now an accepted aspect of the system of civil justice administered by courts in Australia. It was recognised some time ago, by courts here and elsewhere in the common law world, that a different approach was required to tackle the problems of delay and cost in the litigation process. In its report in 2000, Managing Justice: A review of the federal civil justice system, the Australian Law Reform Commission noted that: "Overthe last ten years the Australian courts have become more active in monitoring and managing the conduct and progress of cases beforethem, from the time a matter is lodged to finalisation."93. Rule 21(2)(b) indicates that the rules concerning civil litigation no longer are to be considered as directed only to the resolution of the dispute between the parties to a proceeding. The achievement of a just but timely and cost-effective resolution of a dispute has an effect upon the court and upon other litigants. In Sali v SPC Ltd [(1993) 67 ALJR 841] Toohey and Gaudron JJ explained that case management reflected:"[t]he view that the conduct of litigation is not merely amatter for the parties but is also one for the court and theneed to avoid disruptions in the court's lists with consequentinconvenience to the court and prejudice to the interests ofother litigants waiting to be heard ...".94. It will be recalled that in JL Holdings the plurality said that nothing in Sali v SPC suggested that principles of case management might beemployed "except perhaps in extreme circumstances, to shut a partyout from litigating an issue which is fairly arguable". Their Honourssaid that case management was not to be seen as an end to itself and that the ultimate aim of the court remained the attainment of justice, even in changing times. In Gale v Superdrug Stores Plc [[1996] 1 WLR 1089 at 1098; [1996] 3 All ER 468 at 477] Millett LJ expressed a similar concern, regarding the need to ensure that justice is not sacrificed. Waller LJ, delivering the judgment of the Court of Appeal in Worldwide Corporation Ltd v GPT Ltd [[1998] EWCA Civ 1894], said that such a concern did not pay sufficient regard to the fact that the courts are concerned to do justice to all litigants. Where a party had had a sufficient opportunity to plead his or her case, it may be necessary for the court to make a decision which may produce a sense of injustice in that party, for the sake of doing justice to the opponent and to other litigants.95. The statement of Waller LJ identifies a fundamental premise of case management. What may be just, when amendment is sought, requires account to be taken of other litigants, not just the parties to the proceedings in question. The statement is consistent with what was said in Sali v SPC, which reflected a proper understanding of case management. The statements in JL Holdings do not reflect suchan understanding and are not consistent with what was said in Sali v SPC. To say that case management principles should only beapplied "in extreme circumstances" to refuse an amendment impliesthat considerations such as delay and costs can never be as important as the raising of an arguable case; and it denies the wider effects of delay upon others.[29] Also telling are the comments of Heydon J:16... The proceedings reveal a strange alliance. A party which has a duty to assist the court in achieving certain objectives fails to do so. A court which has a duty to achieve those objectives does not achieve them. The torpid languor of one hand washes the drowsy procrastination of the other. Are these phenomena indications of something chronic in the modern state of litigation? Or are they merely acute and atypical breakdowns in an otherwise functional system? Are they signs of a trend, or do they reveal only an anomaly? One hopes for one set of answers. One fears that, in reality, there must be another.[30] The High Court was considering rules of the Supreme Court of the Australian Capital Territory which, to all intents and purposes, have similar objectives and similar case management provisions to our own High Court Rules. Rule 1.2 of our rules, the guiding objective, has a parallel provision under the relevant rules in theSupreme Court of the Australian Capital Territory. While the High Court'sstatements are directed at Australian practice and procedure, they are equally applicable in New Zealand.[31] In response to the challenge issued by Heydon J, my comment, so far as this court is concerned, is that I regard this case as an anomaly. The mismanagement in this proceeding is not typical. By and large the standard running of cases in this court is that parties do apply themselves conscientiously to complying with directions. If there is slippage, counsel responsibly take the matter up with the court so that further directions can be given.[32] This case is unusual in that the parties did not pay proper regard to the directions given by the court and then, belatedly, at the last minute, asked for an adjournment. They found themselves caught short – from not having filed any evidence at all, not having obtained proper discovery and not having taken the matter up with the court. So the question here is whether parties who have been inefficient16 At [156].in their conduct of a proceeding should be allowed a further date for a hearing of this case, ahead of those who run their cases efficiently.[33] In these circumstances the balance of justice lies in favour of other users of the court who apply themselves diligently and efficiently to bring their cases on for hearing. I cannot think of any reason why the parties to this case who have been inefficient ought to enjoy priority over other users of the court. The interests of the plaintiff in having this case heard must yield to the interests of other users of the court.[34] Accordingly, I decline the application for an adjournment.What order should follow?[35] Before the non-suit rules were abolished, the standard procedure if a judge had given a decision that a case was to proceed and a plaintiff was not in a position to proceed, was for the plaintiff to seek a non-suit. There is no evidence before the court at present on which the court can make any findings in favour of the plaintiff on its application. Ordinarily that would simply result in the dismissal of the proceeding. While I consider that the plaintiff has been remiss in her conduct of the case, I also bear in mind that the defendant also carries a large measure of responsibility for non-compliance with the directions I gave. It would give the defendant an undeserved victory if I were to give judgment in favour of the defendant when in fact the defendant, to a large measure, has contributed to the unsatisfactory state of affairs. For those reasons I decline to grant judgment to the defendant.[36] An appropriate response is to simply strike out the proceeding. The basis of strike-out is the failure of the plaintiff to prosecute her claim within r 15.2. On that basis I strike out the claim, but I decline to dismiss the claim on the merits. It remains for the plaintiff to decide whether she wishes to institute another proceeding.Costs[37] Mr Collecutt seeks costs, contending that the case has now gone his client'sway. He does not claim costs entirely, and concedes that his client must bear some responsibility for the state of affairs. This is a case where I apply r 14.7. The defendant has contributed to the unsatisfactory state that this case has reached. In particular the defendant has failed to comply with timetable directions. It may well be that if the defendant had made discovery in a timely way in October 2012 the plaintiff could still have got her case into order. If there is any blame I suspect it lies more with the defendant than with the plaintiff. I have held against the plaintiff because the plaintiff did not take the appropriate steps to get the case into order, but that does not in any way free the defendant from criticism. I apply r 14.7(f) to rule that the defendant should not have costs. Costs lie where they fall....................................................Associate Judge R M Bell