DONOVAN V NIXON & ORS HC HAM CIV 2006-419-505

DONOVAN V NIXON & ORS HC HAM CIV 2006-419-505 6 December 2006IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY CIV 2006-419-505BETWEEN MICHAEL PHILIP DONOVAN Plaintiff AND CLANCY NIXON First Defendant AND MONEY MANAGERS LIMITED Second Defendant AND EDGAR HOLDINGS LIMITED Third Defendant Hearing: 5 December 2006 Counsel: D Taylor for plaintiff K Davenport for defendants Judgment: 6 December 2006 at 16:00JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]Solicitors: Keam & Associates, PO Box 998, Tauranga for plaintiff Andrew Stokes, PO Box 31 361, Milford for defendantsThe application[1] The plaintiff applies for summary judgment in respect of part of his claim. The application is made against the second and third defendants only. It seeks summary judgment for: a) $5,000.00 plus interest on $46,497.56 from 19 February 2003 to 31 July 2006 and interest on $5,000.00 from 1 August 2006 to the date of judgment. Both interest claims are to be calculated in accordance with s 87 of the Judicature Act 1908; and b) $287,778.23. The basis for the summary judgment claim will be referred to later in this judgment.The general nature of the proceeding[2] This proceeding relates to two Money Managers franchises. Money Managers is a business owned by Money Managers Limited and Edgar Holdings Limited, the second and third defendants respectively. Its chairman, Mr Somers- Edgar describes the services provided by Money Managers as follows:Money Managers offers investment advice and a financial planning service for clients. Its income is earned from a mixture of commission fees for advice and fees for financial planning advice. It offers a range of investments including a number of managed share and property funds. These are not, however, the only investments that are offered and this was particularly the position in 2001. Commission was split between the regional franchise owner and Money Managers Limited. The percentage split depended on the agreement reached.[3] The second and third defendants entered into a franchise agreement with the plaintiff on 27 April 1995. That agreement permitted the plaintiff to operate a Money Managers franchise in the Thames and Tauranga areas. This proceeding concerns the sale by the plaintiff of the Thames franchise and the termination of the 27 April 1995 franchise agreement in respect of Tauranga.Procedural history[4] The plaintiff filed this proceeding, which includes an application for summary judgment, on 18 April 2006. [5] At the first call of this proceeding on 6 June 2006 I ordered that the plaintiff file and serve affidavits in reply to those filed by the defendants by 27 June 2006. I adjourned the proceeding to 3 July 2006. [6] The plaintiff did not meet the timetable ordered on 6 June 2006. In addition, the plaintiff claimed that he had not understood the basis for the defendants' refusal to pay his claim. With those matters in mind, and by consent, I made the following order on 3 July 2006:a. Time for the plaintiff to file and serve affidavits by Kerry Donovan in reply is extended to 17 July 2006; b. Time for the defendants to file and serve an affidavit in opposition limited to explaining the circumstances relating to an alleged payment of $60,000 is extended until 17 July 2006; c. A reply affidavit on the $60,000 issue shall be filed and served by 12 noon on 28 June 2006; d. Any amended statement of claim and verifying affidavit shall be filed and served by 7 July 2006. Whether leave should be granted to read such document will be the subject of further orders at a later date. Adjourned for a telephone conference with counsel at 12.30pm on 31 July 2006.[7] At the telephone conference on 31 July 2006, I recorded as follows:a. the application for summary judgment against the first defendant is dismissed. Costs are reserved; b. the application for summary judgment against the remaining defendants is adjourned for a ½ day fixture to 2.15pm on 5 December 2006. In variation of r251A, the plaintiff's synopsis shall be filed and served by 17.November 2006, and the defendants' synopsis shall be filed and served by 30 November 2006;In addition, I dealt with an issue concerning the content of an affidavit. That aspect has been resolved and therefore I deal with it no further.[8] On 2 August 2006, and following a memorandum from Mr Taylor, which resolved the evidence problem, I vacated the conference and simply added, with respect to the first defendant where the application summary judgment had been dismissed, that that part of the proceeding would be adjourned also to the fixture so that appropriate directions could be given to determine issues which involved the plaintiff and the first defendant. [9] The plaintiff did not comply with the directions to file synopsis made in the minute of 31 July 2006. Indeed, despite contact from the Court staff and a memorandum from counsel for the defendant, the synopsis was not finally provided until 1 December 2006 and at some embarrassment to defendants' counsel because of its late service.Amendment of statement of claim[10] The statement of claim originally filed in this proceeding contained two causes of action. The first alleged a breach of the sale and purchase agreement between the plaintiff and the first defendant in respect of the Thames franchise. It sought the alleged unpaid portions of the purchase price under that agreement and interest. The second cause of action alleged cancellation of the 7 April 1995 franchise agreement. It is not entirely clear whether the claim is one for common law damages or for relief under s 9 of the Contractual Remedies Act 1979. [11] The plaintiff sought relief as follows: a) The unpaid balance of the sale proceeds of the Thames franchise – a claim against the first defendant only; b) An inquiry as to damages as a result of an alleged repudiation of the agreement relating to the Tauranga franchise – a claim against the second and third defendants; and c) The nett sale proceeds of the Tauranga franchise of $287,778.23 which, by implication, would seem to be part of the damagesreference to in (b) – also a claim against the second and third defendants only. The statement of claim confuses terminology because the prayer for relief refers to relief arising from a repudiation whereas paragraph 17 of the statement of claim pleads that the plaintiff had cancelled the agreement. [12] Summary judgment was sought: a) in respect of the unpaid balance of the proceeds of the sale of the Thames franchise business, or that which is set out in [11]a) above; and b) the nett sale proceeds of the Tauranga franchise which is part of the relief sought in respect of the repudiation/cancellation of the franchise agreement. [13] The plaintiff filed an amended statement of claim on 5 July 2006. The plaintiff requires leave. The Court of Appeal in Cegami Investments Limited v AMP (NZ) Financial Corp Limited [1990] 2 NZLR 308 confirmed that amendments to the proceedings were possible in the summary judgment jurisdiction. [14] Generally, there are three hurdles which an applicant for an amendment must meet before an amendment is granted, namely: a) That the amendment is in the interests of justice; b) That it will not significantly prejudice the defendant; and c) That it will not cause significant delay.Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 at 385 [15] The first cause of action in the amended statement of claim alleges breach of the sale and purchase contract between the plaintiff and the first defendant in respect of the Thames franchise.[16] The first cause of action is no longer the subject of the summary judgment. On that basis, it is analysed no further. [17] The second cause of action in the amended statement of claim alleges that the second and third defendants are holding money on behalf of the plaintiff in respect of the sale and purchase contract relating to the Thames franchise. [18] The third, fourth and fifth causes of action all relate to the determination, to use a neutral term, of the 27 April 1995 franchise agreement with particular reference to the Tauranga operation. [19] The third cause of action seeks judgment against the second and third defendants. It pleads, in paragraph 20 of the amended statement of claim, the cancellation of the April 1995 franchise agreement. Mr Taylor confirmed that common law damages were sought here. That remedy is preserved by ss 8(4) and 10 of the Contractual Remedies Act 1979. I questioned Mr Taylor, however, as to whether the way the remedy was framed in the statement of claim was really a claim for relief pursuant to s 9 of the Contractual Remedies Act 1979. Because of the range of remedies available when a case comes to be considered under s 9 of the Contractual Remedies Act 1979, it will most often not be appropriate to deal with the matter in a summary judgment context. For example, see the judgment of Master Anne Gambrill N v B HC AK CP 572-96 8 August 1997 at [24]. [20] In the course of his submissions, Mr Taylor advised the Court that his instructions had been varied and that he no longer sought summary judgment in respect of the third, fourth and fifth causes of action. In short, the dispute relating to the termination of the 7 April 1995 franchise agreement and the subsequent sale of the Tauranga franchise were no longer to be considered in terms of the summary judgment jurisdiction and would simply proceed, as with the cause of action against the first defendant, to trial in the ordinary way.The remaining cause of action on which summary judgment is sought[21] The remaining matters relates to the sale and purchase contract involving the Thames franchise. [22] The claim, as originally pleaded, made no claim against the second and third defendants in respect of this matter. The claim relating to the Thames franchise was pleaded as a straightforward breach of contract claim against the first defendant alleging breach of the sale and purchase contract by a failure to pay the consideration provided for in that contract. [23] The first defendant filed an affidavit in opposition to the application for summary judgment. In it he alleges that: a) he paid $60,000 provided for in the sale and purchase agreement directly to the plaintiff on 23 March 2001; and b) the balance of approximately $46,000, later confirmed at $46,497.56, was paid to Money Managers and that that was pursuant to a discussion between the first defendant and the plaintiff on 23 March 2001. I will not, in this judgment, detail the formula by which that sum was made up. It will clearly be the subject of further examination at the trial when the specific issue involving the plaintiff and the first defendant is examined. [24] The plaintiff's response, in relation to this aspect of the claim, was the filing of the amended statement of claim on 4 July 2006 and, in particular, by the addition of a cause of action, being paragraphs 13, 14 and 15 of that document, which alleged that the second defendant had received the moneys due and owing under the sale and purchase contract relating to the Thames franchise as money had and received and held for the benefit of the plaintiff. [25] The matter developed still further, however. The solicitors acting for the second defendant wrote to the plaintiff's solicitors on 24 July 2006 and enclosed atrust account cheque for $41,497.50. The letter disclosed a calculation as to how it is alleged on behalf of the first and second defendants that the full consideration due under the sale and purchase contract in respect of the Thames franchise was arrived at. [26] The calculation referred to makes reference to a payment to a Mr Kerry Donovan, the brother of the plaintiff, of $5,000.00. The cheque enclosed could not be immediately receipted because it was tendered subject to the condition that it be received in full and final settlement of all claims by the plaintiff against the first defendant. That requirement was lifted apparently on or about 31 July and, as a result, the cheque for $41,497.50 was banked. Coincidentally, at about the same time, an affidavit was sworn by Mr Kerry Donovan, the plaintiff's brother, which described the circumstances surrounding the payment of $5,000 to him and, in simple terms, alleged that it had nothing whatsoever to do with the plaintiff's obligations to Mr Kerry Donovan and therefore provided no reason for deduction of a sum of $5,000 in respect of the payment to him. [27] I made reference earlier in this judgment to the fact that the plaintiff requires leave to proceed with the amended statement of claim. The way the evidence has been produced to the Court indicates to me that it would be unfair on the second and third defendants to allow the amendment to support the application for summary judgment, particularly in respect of the now second cause of action pleaded in that statement of claim. None of the evidence has been specifically tendered to deal with the allegation made in the second cause of action in the amended statement of claim. Indeed, when I asked Mr Taylor whether he could confirm precisely that the paymnts which were due to be made to various individuals under the sale and purchase contract and provided for in the statement attached to it headed Distribution of capital payment he could not provide me with clear evidence on the matter. Indeed, there is an implication in Mr Kerry Donovan's affidavit that he may have received his payment due under this provision not from the plaintiff but from the second defendant. That problem arises because, as I have already mentioned, the evidence has not been directed to the specific cause of action which is now pleaded in the amended statement of claim.[28] The principles applicable when an application for summary judgment is being sought are well-established. Rule 136 of the High Court Rules requires that the plaintiff satisfy the Court that the defendant has no defence. That was explained by the Court of Appeal in Pemberton v Chappell [1987] 1 NZLR 1 at 3 as follows:In this context the words "no defence" have reference to the absence of any real question to be tried. That notion has been expressed in a variety of ways, as for example, no bona fide defence, no reasonable ground of defence, no fairly arguable defence.[29] The Court added at 4:Satisfaction here indicates that the Court is confident, sure, convinced, is persuaded to the point of belief, is left without any real doubt or uncertainty. ...[30] Rule 136 does create a residual discretion although as expressed by Casey J in Pemberton v Chappell at 5 it is difficult to conceive:Of circumstances where the Court should not give judgment for the plaintiff It can only be a discretion of the most residual kind.[31] I conclude that it would be unjust to allow the amendment in relation to this application for summary judgment. In addition, however, I have sufficient doubt as to the state of the evidence that judgment for what is a relatively small sum, having regard to the claims that are made, should be entered in isolation to the determination of the full dispute between these parties. Further, because the claim does involve an aspect of interest, the relevant circumstances to the exercise of the discretion under s 87 of the Judicature Act 1908 also require consideration. There is simply not enough material available to me to satisfy me that there is no bona fide defence to this aspect of the case.Order[32] Accordingly, the application for summary judgment is dismissed. [33] Ms Davenport made application for costs. I see no reason, in this case, to depart from the normal position which is that costs be reserved in line with the approach approved by the Court of Appeal in NZI Bank Ltd v Philpott [1990]2 NZLR 403. There is the additional factor in this case: that the issue of the proceedings undoubtedly was the cause of a substantial payment being made to the plaintiff by the second defendant after the proceedings were issued and after the affidavits in opposition were filed. Accordingly, I order that costs in relation to the summary judgment application be reserved.Orders and directions in relation to the proceeding[34] I order as follows: a) A statement of defence to the amended statement of claim, dated 4 July 2006, shall be filed and served by 26 January 2007; b) All parties shall file and serve affidavits of documents by 16 March 2007. Counsel are reminded of the obligation to have documents available for inspection as from the filing and service of the affidavit of documents; c) Any party wishing to file an interlocutory application shall file and serve same by 5 April 2007 and it shall have as its date of hearing the first conference for this proceeding, namely at 9.30am on 8 May 2007. Counsel are reminded of the obligation to comply with rr241, 243, 244, 245 and 246 of the High Court Rules in respect of such application; d) A case management conference shall be held at 9.30am on 8 May 2007. It will consider the following: i) the pleadings and any further amendments thereto; ii) disposal of, or the allocation of a fixture for, any outstanding interlocutory application;iii) settlement and whether a mediation or a Judicial settlement conference should be ordered; iv) trial duration, the fixing of a trial date and the making of any special trial directions that are required. Counsel shall file and serve memoranda dealing with these items two working days before the conference. _____________________ JA Faire Associate Judge