PAE (NEW ZEALAND) LIMITED V MARK DAVID BROSNAHAN AND ORS CA CA616/2008

PAE (NEW ZEALAND) LIMITED V MARK DAVID BROSNAHAN AND ORS CA CA616/2008 1 April 2009IN THE COURT OF APPEAL OF NEW ZEALAND CA616/2008 [2009] NZCA 105BETWEEN PAE (NEW ZEALAND) LIMITED Appellant AND MARK DAVID BROSNAHAN First Respondent AND MICHAEL RALPH CARTER Second Respondent AND WAYNE ALBANY PATTINSON Third Respondent Hearing: 17 March 2009 Court: O'Regan, Arnold and Ellen France JJ Counsel: P O'Neil for Appellant (Respondent in the present application) J D Every-Palmer for Respondents (Applicants in the present application) Judgment: 1 April 2009 at 11.30 amJUDGMENT OF THE COURT A We grant to the respondents an extension of time to file a memorandum setting out the grounds upon which the respondents intend to support the judgment appealed against. B We make no award of costs.REASONS OF THE COURT(Given by O'Regan J) [1] PAE (New Zealand) Limited (PAE) purchased shares in Central Property Services Limited (CPS), of which Messrs Brosnahan, Carter and Pattinson were directors and shareholders (we will call them "the directors"). PAE alleged that the financial and accounting information supplied to PAE during negotiations was inaccurate. PAE sought damages of approximately $960,000 for the overstatement of CPS's assets. The directors counter-claimed for payment of $350,000 under the sale and purchase agreement. [2] In the High Court, the directors were for the most part successful: PAE (New Zealand) Ltd v Brosnahan HC WN CIV-2005-485-843 10 September 2008. PAE's causes of action based on fraudulent misrepresentation, innocent or negligent misrepresentation, and misleading and deceptive conduct failed, although it did establish a breach of warranty and was awarded approximately $202,000. The directors' counterclaim was successful. [3] In her judgment, Mallon J made a number of adverse findings as to the behaviour of one of the directors, Mr Carter, after the sale. At [249] of the judgment, for example, she concluded that the evidence pointed "strongly to the deliberate concealing of information" by Mr Carter. In a subsequent costs judgment issued on 7 November 2008, the Judge relied on this conduct (at [17]) in reaching the conclusion that costs should lie where they fell. [4] On 6 October 2008, PAE appealed against the substantive judgment. The directors now seek an extension of time to file a memorandum supporting the judgment on other grounds, namely that: (a) Mr Carter's post-sale conduct was not improper;(b) the Judge incorrectly assessed the value of CPS; and (c) the Judge incorrectly held each director jointly liable for all of the misrepresentations made by his fellow directors. [5] This application was filed on 18 December, approximately eight weeks out of time (the time for filing under r 33 of the Court of Appeal (Civil) Rules 2005 having expired on 20 October). [6] Counsel for the directors, Mr Every-Palmer, submitted that the application to file the memorandum supporting the judgment on other grounds was filed as soon as practicable in the circumstances. In particular, he said that it was only when the costs judgment was issued that it became apparent, due to the weight the Judge gave to Mr Carter's conduct, that the directors' interests could possibly diverge. It was only after this potential conflict was resolved, during the course of preparing advice on appealing the costs judgment, that it became apparent to the directors' counsel that the substantive judgment was supportable on the further grounds listed above. The directors therefore contend that it is in the interests of justice for this Court to grant their application. [7] Counsel for PAE, Mr O'Neil, opposed any extension of time. He submitted that the only relevance of the first of the grounds for supporting the judgment is to the issue of costs and that this ground should be advanced in the appeal against the costs judgment. With respect to the second and third grounds, PAE's broad point was that no adequate reason had been advanced for the delay in filing the memorandum, given both issues were unrelated to, and unaffected by, the subsequent costs judgment. In addition, PAE submitted that the proposed grounds were without merit. PAE said that if the application were granted, this would widen the scope of the appeal, which would be detrimental to them. [8] Mr O'Neil's arguments were predicated on the basis that the Court should treat an application for an extension of time to file a memorandum supporting a judgment on other grounds in the same way as it would treat an application for an extension of time to appeal. We do not agree with that approach. A memorandumsupporting a judgment on other grounds does not expose the opposing party to the need to participate in a court process which would otherwise not happen. Rather, it expands or refines the issues in respect of an appeal that is already before the Court, and in that respect is not markedly different in effect from an amendment to the grounds of appeal filed by an appellant. As Mr Every-Palmer pointed out, an appellant may amend the grounds of appeal for an appeal brought as of right if the hearing date has not been set. In those circumstances, we see it as appropriate to take a relatively lenient approach to the late filing of a memorandum supporting a judgment on other grounds, which can be seen as the respondent's equivalent to an appellant widening the scope of an appeal by amending its grounds of appeal. [9] We found it surprising that counsel were unable to agree to an extension of time in these circumstances. We do not see the directors' memorandum as a substantial expansion of the scope of the appeal. Even if it does lead to additional hearing time, that could, in appropriate circumstances, be relevant when the Court determines costs. Nor do we believe the grounds specified at [4] above can be fairly characterised at this stage as being without merit. Of course, whether they are ultimately found to have merit will be for the Court which hears the appeal to determine. [10] We do not accept that the granting of an extension of time to file a memorandum supporting the judgment on another ground will cause any real prejudice to PAE, given that the hearing of the appeal is some time away and counsel have not yet committed themselves to preparation of submissions. In the absence of any prejudice to PAE, we see no reason to prevent the directors from raising matters which they consider relevant to their interests in the hearing of the appeal. As Mr Every-Palmer pointed out to us, if we were to prevent them doing so, that would not prevent those same matters being raised on a further appeal to the Supreme Court, if that Court gave leave to appeal. It would obviously be unsatisfactory if the Supreme Court were required to deal with issues without this Court having addressed them first. [11] We grant the extension of time sought by the directors.[12] The directors have been successful in their application but were seeking an indulgence from the Court. PAE did not succeed in its objection, but would not have been required to make the objection if the memorandum supporting the judgment on other grounds had been filed in time. We therefore make no award of costs. However, we signal that in future cases where an opposition is based on similarly flimsy grounds, we may well award costs to an applicant, even though it is seeking the Court's indulgence.Solicitors: LeeSalmonLong, Auckland for Appellant Russell McVeagh, Wellington for Respondents