ARTWORKS 2008 LIMITED v K & J KENDALL LIMITED [2016] NZHC 836

ARTWORKS 2008 LIMITED v K & J KENDALL LIMITED [2016] NZHC 836 [29 April 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2016-404-113[2016] NZHC 836BETWEEN ARTWORKS 2008 LIMITEDFirst AppellantRICHARD WELLSSecond AppellantAND K & J KENDALL LIMITEDRespondentHearing: 28 April 2016Counsel: R Wells in person for AppellantsJ Gould for RespondentJudgment: 29 April 2016JUDGMENT OF FOGARTY JThis judgment was delivered by Justice FogartyOn 29 April 2016 at 4.30 pmPursuant to R 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate .Solicitors: Meredith Connell, AucklandIntroduction[1] On 14 April 2015, judgment was entered in the District Court at Auckland by Her Honour Judge Sharp against Artworks 2008 Limited (Artworks) and Mr Richard Wells (Mr Wells) in favour of K & J Kendall Limited (Kendall).1 The judgment ordered the immediate return to Kendall 22 plaster moulds and further ordered costs, totalling $6,045, and disbursements totalling $1,786.69. The judgment was entered by default, there being no appearance or steps taken by or on behalf of Artworks or Mr Wells.[2] Later that year, on 16 November 2015, Judge Nicola Mathers of the District Court at Auckland heard an application by Artworks and Mr Wells to set aside the judgment obtained by default. Artworks and Mr Wells were represented by Mr Ropati and Kendall was represented by Messrs Malaroa and Gould. She delivered her decision on 5 February 2016.2 The decision is in two parts. The first was to consider whether or not the defendants had a prima facie defence. The second, to consider disputes as to whether or not the proceedings had been served on Artworks and Mr Wells.[3] Judge Mathers found first that the proceedings had been drawn to the attention of the company by way of substituted service and Mr Wells was also madeaware of the proceedings, finding that "Mr Wells has been playing games to avoidservice". Judge Mathers then found that the defendants had not overcome their onusof a prima facie dispute as to the moulds.[4] Mr Kendall was a sculpter. He was a customer of the Artworks business, then known as Art Castings Limited, when it was owned by Mr Pomeroy. Mr Pomeroy says he sold his shares in the company and so sold the business to a Ms Yik and states that some moulds did belong to his company and were sold but not those of Mr Kendall. Mr Wells claims he purchased the business directly from Mr Pomeroy. Mr Pomeroy says all his dealings were with Ms Yik.1 K & J Kendall Ltd v Artworks 2008 Ltd DC Auckland CIV-2014-004-1438, 14 April 2015.2 K & J Kendall Ltd v Artworks 2008 Ltd [2015] NZDC 24700. (Originally issued on 16 December 2015 and reissued on 5 February 2016.)[5] That decision of the District Court refusing to set aside the default judgment has been appealed to this Court. Before hearing that appeal, there is a preliminary issue to resolve. The issue is whether or not to grant Artworks and Mr Wells' jointapplication to adduce further evidence. This issue is the subject of this judgment.[6] This application was filed by Mr Wells, acting for himself, and on behalf of the company.3 The grounds for admission of further evidence are as follows:(a) The evidence addresses errors in fact that Her Honour Judge Mathers relied on in her decision dated 16 December 2015.(b) The grounds for admission are compelling and the circumstances exceptional.(c) The evidence is cogent and credible.(d) It is in the interests of justice and a fair and balanced hearing that the evidence is admitted.(e) The evidence is relevant to the determination of the appeal.(f) The evidence balances the interests of the appellant.(g) The evidence will provide the Court with the full facts with which to make a decision.(h) The evidence will help the appellants put their best case as the appeal hearing.(i) Not all the evidence was not readily available at the time of the hearing.[7] Mr Wells wants to place before the High Court:3 Wylie J has granted leave for Mr Wells to speak on behalf of the company, Artworks. 2008 Ltd. Minute of Wylie J dated 1 March 2016.(a) A copy of the sale and purchase agreement;(b) Further evidence as to there being no distinction made between the moulds in the sales and purchase agreement;(c) It is acknowledged that these two items of evidence were available at the time of the hearing but were not admitted as it was thought they were more relevant to a defended hearing than an application to dismiss the default judgment;(d) They wished to admit evidence proving to the contrary the finding ofthe Court that Mr Wells' address was 155 Marua Road in order to prove that it was 153 Marua Road;(e) To argue against the finding by the District Court that Mr Wells and his company were made aware of the proceedings, the appellants wish to produce further evidence that refutes this, including an invoice issued by the company to K & J Kendall Limited, showing there is outstanding money due between them;(f) An affidavit from a Ms Beattie to the effect that she did not pass on any documents she was given so that there was no completed substituted service;(g) Photographs of apartment doors on a street to a set of three apartments, in order to show that the substituted service order was not properly carried out;(h) An email from Mr John Ropati (counsel at the time before the District Court) to a solicitor, Mr Logan, said to be the instructing solicitor for Kendall stating he acts for me, saying that the substituted service should have been on Mr Ropati in the first instance; and(i) Finally, Mr Wells wants to introduce some diary notes of the late Mr Kendall utilising those to argue that Mr Kendall knew he did not own the moulds.[8] The submissions accept that some of the above material was available at the time of the hearing but argues that the evidence was not knowingly withheld. It should now be admitted to correct errors of fact that were relied on in the Court'sdecision. Much of the other evidence is new, comprising sworn affidavits, legal contracts, emails and photographic evidence and it is in the interests of justice in a fair and balanced hearing to adduce the further evidence.The test for admitting new evidence on appeal[9] The High Court Rules constrain the ability to lead further evidence.4 There must be special reasons for hearing the evidence. There is a well established principle that the interests of justice require the parties to put their best case forwardat the trial in order to avoid wasting the Court's limited time and resources.5[10] The conventional requirement is that the further evidence must be fresh, credible and cogent. That it is not fresh if it could, with reasonable diligence, had been produced at the trial.6 This is not an absolute criterion but there have to be compelling grounds to admit further evidence.7The relative interests of Artworks and Mr Wells[11] Mr Wells thinks he owns the moulds because Artworks owns the moulds and he owns Artworks. He was obviously joined as a party because he is, in fact, in possession of the moulds.[12] It is very material that he did not produce the agreement for sale and purchase of Artworks at the hearing to set aside the judgment before Judge Mathers. It is silent on the moulds. His argument that he owns the moulds is that he would not4 See High Court Rules, r 20.16.5 Hodgson v Hodgson [2015] NZCA 404 at [44]. See also my own comments in Dean Selak Carrying Company v Lonergan [2015] NZHC 2230 at [27].6 Rae v International Insurance Brokers Ltd [1998] 3 NZLR 190 (CA) at page 192-193.7 Rae v International Insurance Brokers, above n 5.have paid as much for the business unless he got the moulds of Mr Kendall. Mr Kendall is a sculpter. The moulds are used to cast Mr Kendall's sculptures. Eachmould is a unique mould, producing a different sculpture.[13] It is inherently unlikely that Mr Kendall or his estate would surrender the moulds upon the sale of the foundry, Artworks. In doing so they would surrender the worth of the sculptures that can be case from the moulds. The more probable inference is that there could be a general expectation that Artworks would likely get future commissions to cast from moulds, should Mr Kendall or his successors wish more sculptures to be cast from them. This would follow from the acquisition of the goodwill of the business in the usual way.[14] Judge Mathers found it very significant in the context of her examining whether there was a strong argument for ownership of the moulds, that the written agreement for sale and purchase was not produced.Service on Artworks.[15] The principal argument for the appeal is that Mr Wells and Artworks were not served, so therefore there was no basis for the original default judgment by Judge Sharp.[16] Artworks, as a limited liability company, is registered with the Companies Office. It has a registered office and an address for service. They are different. The address for service was at the address of a firm of solicitors. The proceedings were served on that firm. Some weeks later, those solicitors contacted the solicitors for Kendall to advise that they did not have instructions to accept service. In her judgment, Judge Mathers held:8[11] As to the company, I accept that service was effected at the office of Mr Donovan, solicitor. I note that the firm subsequently advised theplaintiff's solicitors that they had no instructions to act in the matter. It isvery unlikely that the firm of solicitors would not have first spoken to or raised the matter with Mr Wells and there is no affidavit from the solicitors confirming what they did or did not do. Nevertheless in all the circumstances I am satisfied that the proceedings were drawn to thecompany's attention. In addition, of course, Mr Ward not only established8 K & J Kendall Ltd v Artworks 2008 Ltd, above n 1 at [11].the residential address of Mr Wells, but also that of his family at 155 Marua Road, Ellerslie. Exhibits E, F and G to his affidavit are very telling including the message to the postie to deliver any mail next door to 153 Marua Road.[17] It is telling that, in the proceedings before this Court, it is not proposed to admit any further evidence countering the inference of Judge Mathers.[18] Even more telling is that no evidence was led before the District Court by affidavit from the firm explaining the circumstances of their advice that they had no instructions. In this Court before me, Mr Wells said he did not call evidence from Mr Donovan, who is now an elderly solicitor, as he did not want to put any pressure on him. I found that a very weak submission.[19] There is nothing in the additional evidence sought to be admitted on consideration on appeal which could in any way undermine the conclusion of Judge Mathers. By that I mean that none of the evidence sought to be advanced can be admitted on the grounds that it is relevant to the service on Artworks, let alone could not have been anticipated as relevant to the issue of service on Artworks.Service on Mr Wells[20] In her judgment, Judge Mathers found in [11]: In addition, of course, Mr Ward [the respondent's service agent] not onlyestablished the residential address of Mr Wells, but also that of his family at 155 Marua Road, Ellerslie.[21] This was a partial mistake. The submissions that were made to the District Court at the time were as follows:On 21 November 2014, the [respondent's] process server visited 155 MaruaRoad, where he understood Artworks had its premises. On the metal link fence outside 155 Marua Road, the process server observed a sign with Artworks and 155. Adjacent to the sign was a further sign that said:Dear Postie. Please deliver any mail for 155 Marua Road, Artworks or Wells to Seaboard Joinery next door at 153 Marua Road. Thank you.[22] This is what Mr Ward, a professional process server, did. A Ms Beattie resided at Seaboard Joinery. Before Judge Mathers, Mr Ward had advised that fivedays after he had delivered the documents to Ms Beattie, he received at his post office the envelope containing the documents with a typewritten letter from Ms Beattie attached to the front of the envelope which said:I am returning the documents you dropped to my office this morning. I am unable to serve these documents on your behalf. My company is not agent for Richard Wells. Further, you are not welcome in my offices in future.[23] Ms Beattie was plainly available to be called in the hearing before Judge Mathers.[24] Mr Wells had come down to Court but had been sent away by his counsel, Mr Ropati. Neither side sought cross-examination of each other's affidavits. I find it surprising that Mr Wells was told by Mr Ropati, either that he was not needed or to go away (it was not clear which). I consider it more likely than not that Mr Ropati did not think his argument would be assisted by Mr Wells being present in Court.[25] Judge Mathers made some strong findings of fact inferring Mr Wells wasbeing "cute in evading personal service", "playing games to avoid service" and raising technicalities "as to the exact order for substituted service". Her conclusionwas she was satisfied the service was sufficiently carried out in terms of the order and that both Mr Wells and his company were made aware of the proceeding.Conclusion[26] I am satisfied that there is nothing in the reasoning of the judgment of Judge Mathers which could not have been anticipated prior to the hearing before her. I am satisfied that there are no special reasons or risk of any miscarriage of justice by refusing the application to admit further documents on appeal. To the contrary, it would appear that tactical decisions were made by counsel prior to the hearing before Judge Mathers, and the thinking behind this application to admit newevidence is to have "another go" using evidence which could have been put beforeJudge Mathers previously.[27] The application to lead further evidence on appeal is dismissed. The respondent is entitled to costs on a 2B basis.