KRISHNAYYA v FOREST OWNER MARKETING SERVICES LIMITED HC NAP CIV 2011-441-017

KRISHNAYYA v FOREST OWNER MARKETING SERVICES LIMITED HC NAP CIV 2011-441-017 [31 July 2012]IN THE HIGH COURT OF NEW ZEALANDNAPIER REGISTRYCIV 2011-441-017[2012] NZHC 1917BETWEEN GORINOORI RAMA KRISHNAYYAPlaintiffAND FOREST OWNER MARKETINGSERVICES LIMITEDDefendantHearing: 31 July 2012(Heard at Wellington)Counsel: J Krebs for PlaintiffT Castle for DefendantJudgment: 31 July 2012Reasons: 1 August 2012JUDGMENT OF MALLON JContentsIntroduction ....................................................................................................................................... [1]Background ........................................................................................................................................ [3]Application to vacate fixture .......................................................................................................... [14]Application to amend the statement of claim................................................................................ [21]Costs ................................................................................................................................................. [22]Introduction[1] This proceeding was scheduled to be tried before me in Wellington over five days commencing on 6 August 2012. On 31 July 2012 I heard applications by the plaintiff (Dr Krishnayya) to vacate the fixture and to amend the statement of claim. Both applications were opposed by the defendant ("FOMSL"). At the conclusion ofthe hearing I made the following orders:(a) The five day fixture commencing on 6 August 2012 is vacated;(b) Leave is granted to amend the statement of claim as per the draft amended statement of claim which has been submitted;(c) Costs are ordered in FOMSL's favour on the two applications on a 2Bbasis. The costs are calculated at two allowances of 0.6 at the category 2 rate (for preparation for the hearing on 31 July 2012) and one quarter day at the category 2 rate (for the hearing). Dr Krishnayya is to pay this sum within two weeks of today'sjudgment, failing which it can be paid out of the sum held by the Court as security; and(d) The proceeding is adjourned to the Associate Judge's list in Napier inOctober 2012. The call of the proceeding at this time can take place by way of telephone conference. The purpose of the call is to set a new fixture date in either Napier or Wellington. It is noted that theplaintiff's preference is for a Napier fixture and that is appropriate provided that an available fixture in Napier is not significantly later than an available fixture in Wellington.[2] I advised that my reasons would follow. I now set out my reasons.Background[3] The plaintiff's claim is summarised in a judgment of the Associate Judge dated 17 August 2011. For convenience I set out paragraphs [7] to [9] of that judgment:[7] A brief summary of these claims made by the plaintiff, all of which are strenuously disputed by the defendant, is as follows:(a) The defendant allegedly failed to adequately update its financial projections for the project or to report back to the plaintiff on changes in foreign exchange rates and log prices affecting profitability between November 2008 and May 2009. It is said this resulted in the plaintiff being deprived of the opportunity to suspend harvesting operations until log prices improved, which he maintains caused him to suffer losses of around $540,000 due to lower than expected returns on his logs. The defendant strenuously denies this allegation and contends that in fact during the period in question it provided several updated reports to the plaintiff. Also, the defendant notes that throughout all of 2009, the plaintiff was perfectly happy to make repeated requests for advance payments under the Agreement so presumably he was happy with progress at that time.(b) The plaintiff says the defendant also failed to prepare an appropriate (or any) forest plan, resulting in a haphazard approach to the harvesting that caused him to suffer further losses due to inefficiencies in the harvesting process. The defendant steadfastly denies this allegation and says that a harvest plan was produced, it was used as the basis of the creation of the budget, and it was followed.(c) The plaintiff also claims that the defendant approached the construction of roading on the land in an illogical and unnecessary manner, resulting in roading costs increasing beyond initial estimates. It is alleged that parts of the roading construction were completed to a poor standard and required further remedial work amounting to $74,750. Again, the defendant denies these allegations.(d) The defendant, its employees or agents are said to have felled and improperly removed from the land native timber belonging to the plaintiff, being Matai valued at $7,500 and at least eight Rimu trees valued at $80,000. The defendant denies these allegations.(e) The plaintiff also contends that the defendant took an inefficient approach to harvesting and failed to process or remove a number of pine trees within an appropriate period of time, resulting in a loss of value to the plaintiff that has yet to be particularised.(f) Further, the defendant is alleged to have deposited and failed to remove slash from water courses in two areas on the property, in breach of the Resource Management Act 1991 and below the standard required of a reasonable and careful harvest manager. It is said that costs to clear the water courses, as yet unknown, will be incurred.(g) The defendant it is claimed improperly excavated shinglefrom the plaintiff's property and used the shingle forpurposes unrelated to the plaintiff, resulting in a further loss of value to the plaintiff yet to be particularised. Again, the defendant denies this allegation.[8] As a result of all of this, the plaintiff says he purported to cancel the Agreement on 29 January 2010, pursuant to both the terms of the Agreement and the Contractual Remedies Act 1979. The defendant denies that the plaintiff was entitled to cancel the Agreement.[9] In addition, the defendant has made a counter-claim against the plaintiff for the sum of $91,742.04, which it says is owed by the plaintiff for unpaid work completed in accordance with the Agreement.[4] The counterclaim in this proceeding began as a claim in the District Court at Napier. It was commenced in about March or April 2010 (i.e. shortly after Dr Krishnayya cancelled the contract). Dr Krishnayya's wife died in September2010. It is acknowledged by counsel for Dr Krishnayya that FOMSL was sympathetic to Dr Krishnayya as a result of his loss and did not seek to push on the District Court claim at that time.[5] Dr Krishnayya filed his claim in the High Court at Napier on 14 January2011. FOMSL's statement of defence included a counterclaim which mirrored its District Court claim. The District Court claim was stayed pending the determination of the High Court proceeding.[6] Timetable directions were made by the Associate Judge in February and May 2011. Pursuant to the February directions, on 29 April 2011 FOMSL applied for security for costs. The May directions included a timetable for the hearing of that application and for completion of discovery. In a judgment given on 17 August 2011 the Associate Judge ordered that security for costs in the sum of $40,000 be paid. That sum was paid into Court about one month later – Dr Krishnayya needing time to make arrangements to obtain that sum. On 5 October 2011 the Associate Judge issued his decision on costs in respect of the security for costs application.[7] Further timetable directions were made by consent on 1 December 2011. These related to the filing of an amended statement of claim and discovery. A further timetable conference was scheduled for 15 March 2012. At that conference further timetable directions were given and the fixture in Wellington commencing on 6 August 2012 was set. The parties had agreed that the trial would take place in the High Court at Wellington because an earlier fixture was available there.[8] A further telephone conference was scheduled for 31 May 2012. However this was brought forward to 22 May 2012 because FOMSL was concerned that Dr Krishnayya was in default of the timetable for providing his briefs of evidence. The day before that telephone conference counsel for Dr Krishnayya submitted a memorandum advising that Dr Krishnayya wished to have the fixture in Wellington vacated and for a new fixture to be set in the High Court at Napier on a date as soon as possible after August 2012. This was sought on the basis that Dr Krishnayya was"not mentally or emotionally capable of dealing with the case at present." It wassupported by a letter from Dr Krishnayya's doctor advising that Dr Krishnayya wassuffering from a "prolonged episode of moderate to severe depression".[9] Dr Krishnayya's application was opposed by FOMSL. This opposition wason the basis that that there had already been prolonged delays in the resolution of matters between Dr Krishnayya and FOMSL, particularly in relation to the District Court proceeding. FOMSL submitted that Dr Krishnayya's claim should either bediscontinued or struck out.[10] At the telephone conference on 22 May 2012 the Associate Judge declined the application to vacate the 6 August 2012 fixture. He did not give reasons for declining the application. However he did say that any request to vacate the fixture must be made to the allocated trial Judge or the List Judge. Counsel advise that the Associate Judge had explained to counsel on the telephone conference that this was the protocol operating in the Wellington registry. The Associate Judge also reserved leave to Dr Krishnayya to apply within the next 48 hours to the List Judge to vacate the fixture. He also made further timetable directions for the exchange of briefs.[11] In the event, Dr Krishnayya did not apply to the List Judge pursuant to the leave reserved. Briefs were exchanged in accordance with the new timetable. Dr Krishnayya also provided additional documents by way of further discovery.[12] On 27 June 2012 counsel for Dr Krishnayya filed a memorandum seeking leave to amend the statement of claim to add two new causes of action: for misrepresentation and for a breach of the Fair Trading Act. FOMSL opposed the granting of leave on the basis that there was no sufficient reason why the amendments could not been made earlier.[13] On 27 July 2012 a memorandum of counsel for Dr Krishnayya was filed seeking to vacate the fixture. The memorandum was supported by an affidavit from Dr Krishnayya's doctor and an affidavit from Mr McKinnel (a private investigator who has been assisting Dr Krishnayya's counsel with the proceeding). The requestto vacate the fixture was opposed by FOMSL on the basis that the request should have been made earlier, that the evidence supporting the request was inadequate, and that the determination of the proceeding should not be further delayed.Application to vacate fixture[14] The application to vacate the fixture is on the basis that counsel for Dr Krishnayya has been unable to obtain instructions from Dr Krishnayya to enable counsel to conduct the trial on his behalf. This is because Dr Krishnayya continues to suffer from depression. Counsel says that Dr Krishnayya's depression has madeobtaining instructions from Dr Krishnayya "difficult and more recently impossible".Counsel has been unable to obtain instructions from Dr Krishnayya as to the detailed briefs of evidence served on behalf of FOMSL at the end of June 2012 despite efforts on his part and the part of Mr McKinnel to do so. Counsel says that that the application is not made lightly. He says that he is fully aware of his professional responsibilities to the Court, to his client and to his opposing counsel/party. Counsel says that Dr Krishnayya wishes to pursue his claim and this is not a delaying tactic. Counsel says that the position is that he cannot proceed with the trial on 6 August 2012.[15] I accept counsel's advice on this. There is no reason why I should not. It issupported by Mr McKinnel's affidavit which outlines the difficulties he has had inmeeting with Dr Krishnayya and obtaining information from him in July 2012. It is also supported by Dr Beacham's affidavit. Dr Krishnayya has been a member of Dr Beacham's practice for 10 years. Dr Beacham saw Dr Krishnayya on 25 July 2012. He concluded that Dr Krishnayya was suffering from "severe depression" dueto loneliness, the death of his wife and financial stresses. His view is that due to his depression he is not able to focus on the documentation as required by his lawyer. Dr Beacham says that, as things have become a lot worse, he intends to refer Dr Krishnayya to a specialist so that his depression may be treated.[16] Dr Krishnayya's counsel has explained why he did not proceed to apply tothe List Judge to vacate the fixture in the 48 hour period which the Associate Judge set. He advises that, having discussed this with Dr Krishnayya, Dr Krishnayya wanted to try to get on with finalising the briefs and to proceed with the trial if possible. As matters transpired, the briefs were able to be finalised but Dr Krishnayya's health has deteriorated as the fixture date has loomed closer. AsDr Krishnayya's counsel submits, the decision not to take up the opportunity to apply to the List Judge in accordance with the Associate Judge's leave, does notprevent an application being made at this time on the basis of the current circumstances.[17] In light of this evidence and counsel's view that he does not have instructionsto be able to proceed on 6 August 2012, it is in the interests of justice to vacate the fixture. The issue then is whether the proceeding is to be adjourned for a new fixture to be set; or whether Dr Krishnayya must elect to non-suit and discontinue the proceeding (and subsequently commence his proceeding afresh should he wish to do so). FOMSL urges the latter course as appropriate. However there are two difficulties that potentially arise with that course.[18] The first difficulty is that the proposed Fair Trading Act will soon become statute barred. The claim is subject to a three year limitation period (for representations said to have been made in 2008 and 2009). The second difficulty isthat FOMSL would be free to proceed with its claim in the District Court. FOMSL'scounsel acknowledges that the issues arising in that claim all arise in Dr Krishnayya's claim in the High Court. Therefore there is the potential for issueestoppel to arise and to thereby effectively prevent Dr Krishnayya from pursuing his High Court claim.[19] Against those difficulties must be balanced FOMSL's interests in having the High Court proceeding determined without undue delay. The two main periods of delay are in 2010 in relation to the District Court claim and the delay now caused by vacating the present fixture and setting a new fixture. Although the delay is undesirable, it has not yet reached the stage where it is inordinate. In both cases Dr Krishnayya has a sufficient explanation for the delay. In my view the interests of justice favour an adjournment of the fixture.[20] For these reasons I made the orders set out in [1](a) and (d) above.Application to amend the statement of claim[21] If the fixture was to be adjourned, FOMSL's counsel accepted that he couldnot claim any prejudice if leave were granted to amend the claim. In the absence of prejudice there is no reason to refuse leave. I therefore made the order set out in [1](b) above.Costs[22] Counsel for FOMSL sought costs in respect of both applications. He submitted that costs should be significant. I accept that it is appropriate to order costs on the applications even though Dr Krishnayya has succeeded in obtaining the orders he sought on the applications. Dr Krishnayya's applications soughtindulgences. And, where counsel has been preparing for an imminent trial and the trial date is then vacated, there is an inevitable additional cost in getting back up to speed at the time of the new trial date. Category 2B costs are appropriate.[23] Counsel for FOMSL submitted that it would be appropriate to order that the costs be paid out of the sum paid into court as security of costs. He made an oralapplication to that effect. Counsel for Dr Krishnayya sought time for Dr Krishnayya to pay the costs without it needing to come from the sum that has been paid as security. Counsel for Dr Krishnayya says that he is "asset rich" but "cash poor" andproposed that Dr Krishnayya have two weeks to make the payment, otherwise the costs could come from the security sum. I considered the request for time to be reasonable.[24] For these reasons I made the order in [1](c) above.Mallon JSolicitors:Langley Twigg, Napier for the PlaintiffTreadwell Gordon, Wanganui for the Defendant