FLOW CONTROL LIMITED v IL FORNO LIMITED [2021] NZHC 1301

FLOW CONTROL LIMITED v IL FORNO LIMITED [2021] NZHC 1301 [4 June 2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2020-404-002409[2021] NZHC 1301UNDER Section 290 of the Companies Act 1993BETWEEN FLOW CONTROL LIMITEDAppellantAND IL FORNO LIMITEDRespondentHearing: (On the papers)Counsel: James Kleine for the AppellantMichael Lenihan for the RespondentJudgment: 4 June 2021JUDGMENT OF MOORE J[Leave to appeal]This judgment was delivered by me on 4 June 2021 at 4:00 pmpursuant to Rule 11.5 of the High Court Rules.Registrar / Deputy RegistrarDate:Introduction[1] In my judgment of 29 April 2021 I declined Douglas James Kleine'sapplication to appear on behalf of the applicant, Flow Control Limited ("FlowControl").1 Mr Kleine now seeks to appeal that decision. As such he requires leave ofthis Court to do so as the decision is interlocutory in nature.Submissions[2] Mr Kleine seeks leave on a variety of grounds. First, he submits I erred infinding and placing significant weight on two facts; the first being that Mr Kleineviewed the substantive proceedings as a vendetta between himself and his estrangedbrother and secondly, that a trial document which was discovered in an altered formwas of no substance. Secondly, Mr Kleine claims that I failed to properly consider theelements in the Re G J Mannix Ltd2 test which were favourable to Flow Control,including the limited scope of the proceeding and the proper manner in whichMr Kleine had previously conducted himself. Thirdly, he says the principle relatingto "'one-man' company[ies]" in Re G J Mannix Ltd is independent of and morepersuasive than the other criteria. He says there is public interest in this issue becauseit involves consideration of how applications made in reliance on Re G J Mannix Ltdare categorised. Fourth, he says I failed to consider how the respondent's conduct waslinked to the unavailability of counsel. Finally, Mr Kleine claims I failed to properlyconsider the implications of Mr Kleine already being in Court in relation to the sameissues.[3] The respondent, Il Forno Limited ("Il Forno") opposes the application. ForIl Forno, Mr Lenihan submits there is no arguable error of fact or law in the judgmentand that I was entitled to make inferences and comments about Mr Kleine's conduct.He submits I was correct to find the altered document had no bearing on theproceedings before Jagose J, that there is no public interest in granting the leave toappeal and that the decision not to grant Mr Kleine leave to represent Flow Controlwas correct.1 Flow Control Limited v Il Forno Limited [2021] NZHC 946.2 Re G J Mannix Ltd [1984] 1 NZLR 309 (CA).[4] In any event, Mr Lenihan points out that after the issuing of the 29 April 2021judgment, Mr Kleine failed to withdraw the application to set aside a statutory demand,instruct counsel to represent Flow Control or seek a stay of execution for the judgment.As a result, the application to set aside the statutory demand was heard beforeAssociate Judge Andrew on 5 May 2021. Mr Lenihan submits the application forleave to appeal has now been overtaken and the interests of justice favour its dismissal.Legal principles[5] Section 56(3) of the Senior Courts Act 2016 requires leave be granted to appealinterlocutory applications:"(3) No appeal, except an appeal under subsection (4), lies from any orderor decision of the High Court made on an interlocutory application inrespect of any civil proceeding unless leave to appeal to the Court ofAppeal is given by the High Court on application made within 20working days after the date of that order or decision or within anyfurther time that the High Court may allow."[6] The rule was discussed by the Court of Appeal in Ngai Te Hapu Inc v Bay ofPlenty Regional Council.3 Section 56(3) was intended to reduce the volume ofinterlocutory appeals to the Court of Appeal.4 It found:5"leave to appeal should only be granted where the significance orimplications of an arguable error of fact or law, either for the particular caseor for the applicant or as a matter of precedent, warrants the further delaywhich the appeal process would involve."[7] In Finewood Upholstery Ltd v Vaughan Fitzgerald J found that:6"the requirement for leave to appeal should serve as a 'filteringmechanism', to ensure that unmeritorious appeals of interlocutory orders, orappeals of interlocutory orders of no great significance to either the parties ormore generally, do not unnecessarily delay the proceedings in which theorders were made."3 Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291.4 At [15].5 At [17].6 Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].[8] The Court of Appeal in both Fairway Holdings Ltd v McCullagh7 andGreendrake v District Court of New Zealand8 adopted that approach. The Court inGreendrake went on to summarise key and relevant considerations for leave to appealapplications as follows:(a) a high threshold exists;(b) the applicant must identify an arguable error of law or fact;(c) the alleged error should be of general or public importance warrantingdetermination or otherwise of sufficient importance to the applicant tooutweigh the lack of general or precedential value;(d) the circumstances must warrant incurring further delay; and(e) the ultimate question is whether the interests of justice are served bygranting leave.The effect of the 24 May 2021 judgment[9] Since the issuing of my judgment of 29 April 2021, Associate Judge Andrewhas heard two applications in these proceedings. The first was an application to setaside a bankruptcy notice9 and the second an application to set aside a statutorydemand.10 His judgment was issued on 24 May 2021.11 Of relevance is the secondapplication to set aside a statutory demand.[10] The effect of my judgment of 29 April 2021 was that Mr Kleine was unable torepresent Flow Control at the hearing. Mr Kleine had indicated to me that theapplication to set aside the statutory demand would be withdrawn. However, this wasnot done and the application proceeded. Flow Control was unrepresented beforeAssociate Judge Andrew and did not appear at the hearing. Il Forno did not admit the7 Fairway Holdings Ltd v McCullagh [2018] NZCA 605 at [11].8 Greendrake v District Court of New Zealand [2020] NZCA 122 at [6], referring to FinewoodUpholstery Ltd v Vaughan, above n 6 at [9].9 CIV-2020-404-2196.10 CIV-2020-404-2409.11 Flow Control Ltd v Il Forno Ltd [2021] NZHC 1159.claim. Il Forno was entitled to judgment dismissing the proceeding12 under r 10.8 ofthe High Court Rules 2016.[11] Associate Judge Andrew reasoned he would not have allowed the applicationeven if Flow Control had been represented. There was no substantial dispute as towhether or not the debt was owing and Flow Control did not have a counterclaim, set-off or cross demand.13 He concluded that the challenge to the statutory demand wasin substance a collateral attack on the earlier, related judgments of Jagose J.14 Anyattempt to re-litigate them would constitute an abuse of process.[12] It appears to me that Mr Lenihan is correct in his submissions that thisapplication has been overtaken by subsequent events. The application in whichMr Kleine sought to represent Flow Control has been heard and dismissed, thusrendering the current application nugatory.[13] Despite that, I set out my reasons as to why I would have dismissed thisapplication for leave to appeal regardless.Discussion[14] The case law requires an arguable error of law or fact significant enough tomeet the high threshold that exists. The error has to be of general or public importancewarranting determination. Otherwise, it needs to be of sufficient importance to theapplicant to outweigh the lack of general or precedential value. The circumstances ofthe case must also warrant a further delay and the ultimate question is whether theinterests of justice will be served by granting leave.[15] Mr Kleine submits I made a factual error by finding he viewed the proceedingsas something of a personal vendetta. I formed this view based on the history of thelitigation, and after observing and interacting with Mr Kleine during the course of thehearing. I was entitled to use this experience in informing my conclusion that this is12 Flow Control Ltd v Il Forno Ltd, above n 11 at [63].13 At [66].14 At [66]."intensive, intra-familial litigation"15 which required the engagement of a professionaland objective practitioner.[16] Mr Kleine submits the second factual error was my finding that the documentdelayed in discovery and subsequently allegedly discovered in an altered form wasirrelevant to the matters in issue. I explained the provenance, context and perspectiveof the document in my judgment and do so again. The allegedly altered documentconsists of a single transaction being omitted from one bank statement in a bundleconsisting of over 7,500 pages. I rejected Mr Kleine's claim that the document wasintentionally altered. Mr Kleine had the opportunity to give evidence and put theoriginal statement into evidence. He did not do so. There was no application byMr Kleine for the recall of any of Il Forno's witnesses so that they could bere-examined on the discrepancy. There was no presumption of prejudice flowing fromthese allegations and I found there had been no resulting prejudice to Mr Kleine orFlow Control.16 No additional evidence has been placed before the Court on this issue.I remain satisfied I was correct in finding that the document was of little relevance andconsequently no prejudice has been suffered.[17] Even if I am wrong in my view of Mr Kleine, or in my finding that the altereddocument has no substantive relevance, these errors would not be of a level of generalor public importance to warrant a grant of leave.[18] Mr Kleine submits an error of law was made in the way in which Re G JMannix Ltd was applied to his specific circumstances. It is well-settled and apparentthat a grant of leave for an individual to represent a company will be an exception tothe norm that companies must be represented by a barrister or solicitor. The principlesin Re G J Mannix Ltd are binding on me. The relevant law was set out at [18]-[20] ofmy judgment. For completeness I reproduce the relevant segment here:"[18] While there is no bar in the District Court to a company beingrepresented by its director in proceedings, that latitude does not extend toproceedings in the High Court. As various authorities have commented, thelegal principles for applications of this sort are well settled. As did AssociateJudge Lester in Keemati Ltd v MR Civil Ltd,17 I adopt in full the analysis15 Flow Control Ltd v Il Forno Ltd, above n 11 at [36].16 Flow Control Ltd v Il Forno Ltd, above n 1 at [37].17 Keemati Ltd v MR Civil Ltd [2021] NZHC 538 at [5].contained in Dreamtech Designs & Productions Pty v Clown FishEntertainment Ltd18 as set out below:'[8] The legal principles governing this application are wellestablished. We gratefully adopt the following summary in thejudgment of Stevens J in this Court in Kai Iwi Tavern Ltd vThe New Zealand Guardian Trust Company Ltd:[6] In Re GJ Mannix Ltd this Court held that it is "wellsettled" that "a company has no right to be represented in theconduct of a case in Court except by a barrister; or by asolicitor in Courts or proceedings where solicitors have theright of audience". Cooke J continued:'There was cognate rule that, apart from statutoryexceptions, a corporation has no right to bring orcarry on proceedings in a Court except by a solicitor.This refers to the filing of documents – writs,statements of defence, notices of appeal, etc.'[7] This principle has recently been affirmed by thisCourt in New Zealand Cards Limited v Ramsay andCommissioner of Inland Revenue v Chesterfields PreschoolsLtd. The policy reasons behind this principle are set out at[34] of Chesterfields. Briefly stated, the rule ensures thatproper consideration is given to the validity of proceedings,decreases the likelihood that appellants will requireindulgences in the rules of procedure, and ensures that thosewho appear before the Court are cognisance of the duties andresponsibilities that are owed to the Court.[8] The Court has a discretion to allow non-lawyers toappear on behalf of companies where appropriate. AsCooke J stated:'In general, and without attempting to work out hard-and-fast rules, discretionary audience should beregarded, in my opinion, as a reserve or occasionalexpedient, for use primarily in emergency situationswhen counsel is not available or in straightforwardmatters where the assistance of counsel is not neededby the Court or where it would be unduly technical orburdensome to insist on counsel. Especially in minormatters, costs-saving could also be a relevant factor.A 'one-man' company might be allowed torepresented by its owner if the Judge saw fit in aparticular case. But it could not be right, for instance,to issue some sort of tacit continuing or generallicence to an unqualified agent to appear in windingup or any other class of proceedings.'(footnotes omitted)18 Dreamtech Designs & Productions Pty v Clown Fish Entertainment Ltd [2015] NZCA 491, (2015)23 PRNZ 141 at [8].[19] I also adopt Associate Judge Lester's helpful list of relevantconsiderations which the Court may take into account in exercising itsdiscretion to permit non-lawyers to appear on a company's behalf. Theseinclude:19(a) the nature of the litigation;(b) the complexities of the case;(c) the extent of the dispute;(d) the point at which audience is sought;(e) the importance of an understanding of the law and a dispassionateconsideration of the circumstances;(f) that the preliminary interlocutory stages are important to thedetermination of litigation, and the filing of a compliance statementof claims assist this process; and(g) the need for professional objectivity, including whether the personproposed to represent the company is closely associated with theapplicant company and is also a witness.[20] I would also add to that list of considerations whether or not theapplication is made in an emergency situation.20"[19] In addressing Mr Kleine's specific submissions, I note first that Re G J MannixLtd takes as a starting point that allowing leave for an individual to represent acompany will be an exception.21[20] The Court goes on to accept that there is a "residual discretion to allowunqualified advocates to appear before them".22 The "one-man" company exceptionto which Mr Kleine refers does not carry any more weight than the other factorsrequired to be considered when determining a grant of leave for an individual torepresent a company. Further, such an exception will only be applied "if the Judge[sees] fit in a particular case".23 I did not consider it appropriate in this case to exercisesuch discretion and allow Mr Kleine to represent Flow Control. The application to setaside a statutory demand was by no means straightforward and could not have beenseen as fitting within the category of "minor matters". The fact that Mr Kleine19 Keemati Ltd v MR Civil Ltd, above n 17 at [6].20 Re GJ Mannix Ltd, above n 3 at 314.21 At 310 and 311.22 At 314.23 At 314.considers the scope of the proceeding to be "limited" evidences his lack ofunderstanding as to what was required for the substantive application.[21] I am satisfied no error of law was made in my application of the Re G J MannixLtd principles. It follows I do not need to consider whether the issues engaged in thiscase are of sufficient general or public importance to justify a grant of leave.[22] I turn next to Mr Kleine's remaining submissions.[23] Mr Kleine states at [6] of his application:"His Honour failed to consider the manner in which the conduct of therespondent was linked to the unavailability of counsel".[24] I assume Mr Kleine is referencing what he perceives to be poor conduct byIl Forno in response to Flow Control not being represented by counsel. While FlowControl had been represented by experienced counsel in the proceedings beforeJagose J, his instructions were not continued apparently because Mr Kleine felt hecould do a better job, particularly given his understanding of the facts of the case. Inmy judgment I thoroughly considered the circumstances surrounding Flow Control'slack of legal representation.24 This submission concerns Il Forno's conduct and is notan error of fact or law.[25] Mr Kleine's final submission is that I failed to properly consider theimplications of him already being in Court in relation to the same issues. It is correctthat these are not the only proceedings in which Mr Kleine is currently involved. As Inoted in my judgment "the application to set aside the statutory demand is simply themost recent hearing in a sequence of bitterly fought litigation".25 Mr Kleine isinvolved in his personal capacity with this procession of litigation. I do not acceptthat there was a failure to consider the implications of his involvement. As I stated at[34] of the judgment, knowledge and understanding of the underlying facts of a caseis not in itself "a sound reason for being permitted to represent a company inlitigation. Indeed, the very opposite may be said". Mr Kleine's involvement in24 Flow Control Ltd v Il Forno Ltd, above n 1 at [33], [34] and [36].25 Re GJ Mannix, above n 2 at [34].other connected litigation cannot, in my view, weigh in favour of him being allowedto represent Flow Control. The circumstances of the case required the application ofobjectivity and professionalism. Counsel should have been engaged. On balance, anybenefit to be derived from Mr Kleine's knowledge and understanding of the facts wasoutweighed by the need for objectivity.Summary of findings[26] The application has been overtaken by events and is thus otiose.[27] Despite that, I am not satisfied any arguable error of fact or law exists whichwould justify granting leave to appeal.[28] Finally, I do not consider there is any public or general importance arising outof these issues. The interests of justice would not be best served by allowing leave toappeal.Result[29] The application for leave to appeal is dismissed.Moore JSolicitors:Mr Lenihan, AucklandCopy to:Mr Kleine, Auckland