BEATTIE V PREMIER EVENTS GROUP LIMITED COA CA865/2011

BEATTIE V PREMIER EVENTS GROUP LIMITED COA CA865/2011 [20 June 2012]IN THE COURT OF APPEAL OF NEW ZEALANDCA865/2011[2012] NZCA 257BETWEEN MALCOLM JAMES BEATTIEFirst AppellantAND ANTHONY JOSEPH REGANSecond AppellantAND CT NZ LIMITEDThird AppellantAND PARNELL PARTNERS GROUP LIMITEDFourth AppellantAND SPORTS HOSPITALITYMANAGEMENT GROUP LIMITEDFifth AppellantAND PARNELL PARTNERS GROUP (NZ)LIMITEDSixth AppellantAND CARTAN GLOBAL LLPSeventh AppellantAND PREMIER EVENTS GROUP LIMITEDRespondentHearing: 24 May 2012Court: Ellen France, Venning and Asher JJCounsel: J Eichelbaum for AppellantsM D Pascariu and M F Clark for RespondentJudgment: 20 June 2012 at 11 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellants must pay the respondent costs on this appeal on a band A basis for a standard appeal together with usual disbursements. In addition, the appellants must pay the respondent costs for a standard application for leave plus usual disbursements.C No order as to costs on the respondent's strike out application.____________________________________________________________________REASONS OF THE COURT(Given by Ellen France J)Table of ContentsPara NoIntroduction [1]Background [5]The High Court judgment [16]Issues on the appeal [19]Was r 4.56 relevant? [21]Should joinder have been refused due to PEG's delay? [27]Our assessment [30]Application of r 6.27 [37]An "originating document"? [39]Was the correct test applied? [42]Result and costs [43]Introduction[1] Premier Events Group Limited (PEG), the respondent, was a specialist provider of travel and hospitality services for major sporting events such as the 2011 World Cup and the 2012 Olympics. The first and second appellants, Malcolm Beattie and Anthony Regan, were directors of PEG.[2] In May 2010, not long after Messrs Beattie and Regan left the company, PEG issued a proceeding against the two men and various corporate interests which they had established. The claims include an allegation that Messrs Beattie and Regan breached fiduciary duties owed by them as directors by negotiating directly withPEG's clients, securing the termination of existing contractual arrangements between those clients and PEG, and establishing substitute contractual arrangements for their own benefit, or for the benefit of the companies in which they have an interest. PEG also alleges that Messrs Beattie and Regan negotiated with two American companies, Cartan Tours Inc (Cartan Tours) and Sportsmark Management Group Limited (Sportsmark), to ensure that a joint venture agreement which PEG was negotiating was not progressed further, and to put in place substitute contractual arrangements for the 2012 Olympic programme for their own benefit or for the benefit of their corporate entities.[3] Some time after the proceeding was filed, on 7 March 2011, PEG made an application seeking joinder of the two overseas companies, Cartan Tours and Sportsmark, to the proceeding. The application, which was opposed by the appellants, was dealt with by Wylie J.1 Wylie J concluded that PEG was entitled to serve the proceeding on Cartan Tours and Sportsmark without leave as provided for under r 6.27(2)(h)(i) of the High Court Rules.2[4] The appellants appeal against Wylie J's decision. The appeal raises issuesabout the relationship between r 4.56 of the High Court Rules, dealing with joinder, and r 6.27, dealing with service out of New Zealand.Background[5] We need to say a little more about Cartan Tours and Sportsmark, the application before Wylie J and the context in which the application had to be assessed.[6] Cartan Tours is a company incorporated in the United States. It is in business as a tour operator, hospitality and ticket provider for sporting events. Sportsmark is also incorporated in the United States. It carries on business as a global corporate events manager and sports marketing company. After Wylie J's decision, both1 Wylie J has been case managing this and another proceeding brought by Mr Regan.2 Premier Events Group Ltd v Beattie HC Auckland CIV-2010-404-3178, 24 June 2011.companies filed a protest to jurisdiction.3 We were advised that the proceeding has, however, since been discontinued as against Sportsmark. The protest to jurisdiction by Cartan Tours has not yet been resolved.[7] The application before Wylie J was brought by PEG as an application to join Cartan Tours and Sportsmark to the proceeding under r 6.27 of the High Court Rules or alternatively to serve the two companies overseas with leave under r 6.28.[8] We adopt Wylie J's description of the context of the application.4 As the Judge notes, PEG says it had obtained contracts relating to the provision of hospitality packages for the 2012 Olympic Games with the New Zealand Olympic Committee (October 2009) and with Australia Post (November 2009). PEG also states that it was in advanced negotiations with Cartan Tours to set up a joint venture company for the purposes of providing elements necessary for the hospitality packages.[9] It is part of PEG's claim that after Messrs Beattie and Regan resigned as directors of PEG, they formed various corporate entities (the third to seventh appellants).[10] Next, PEG says that Australia Post ended its contract with PEG in February 2010, and that the New Zealand Olympic Committee terminated its contract with PEG in December 2009. PEG also says that Cartan Tours refused to continue negotiations over the proposed joint venture agreement.[11] On PEG's account, Messrs Beattie and Regan began discussions with Cartan Tours in February 2010. At some point, Cartan Global LLP, the seventh appellant, entered into negotiations for a joint venture with Cartan Tours and Sportsmark. Wylie J referred to affidavit evidence from Robert Gill on behalf of PEG that matters proceeded to the stage of an unsigned joint venture agreement referring to Cartan Tours, an unidentified New Zealand entity ("XYZ"), and Sportsmark. The joint venture was to be named Cartan Global, LLC. Messrs Beattie3 See rr 5.49 and 6.29 of the High Court Rules.4 At [5]–[16], and [60]–[61].and Regan are referred to in the draft agreement as "members of XYZ". In an appendix to the draft there is a reference to a number of entities as "MB/TRidentified clients" which PEG says were its clients. The initials "MB" coincide withMr Beattie's name and "TR" with Mr Regan's name.[12] PEG also relies on an unsigned memorandum of understanding (MOU) between Cartan Global LLP, Cartan Tours and Sportsmark. The MOU records that the use of the Cartan Global brand is licensed by Cartan Tours and that commercial and marketing opportunities have arisen out of the 2012 Olympics. The interests of the parties to the MOU in any net revenue are split as follows: 33.33 per cent to Cartan Tours; 25 per cent to Sportsmark; and 41.67 per cent to Messrs Beattie and Regan/"(Parnell Partners Group Ltd)".5[13] As to Australia Post, Wylie J records that it appears that a hospitality package and services agreement was entered into between Cartan Global Ltd6 and Australia Post. The agreement records it is to be governed by New Zealand law. PEG says this agreement is essentially the same as the agreement PEG had with Australia Post. Cartan Global Ltd then changed its name to CT NZ Group Ltd. Then, on 28 June 2010, CT NZ Group Ltd assigned its agreement with Australia Post to Cartan Global LLP which, as we have noted, is the seventh appellant.[14] In terms of the New Zealand Olympic Committee, PEG says Cartan Tours has entered into a new contract direct with the Committee. The contract, dated 15 July 2010, relates to the delivery of tickets, travel services and packages for members of the Committee travelling to events including the 2012 Olympics. The agreement records that it is to be governed by New Zealand law.[15] This is a short form description of the events which form the basis of PEG'sclaims against Cartan Tours and Sportsmark of knowing receipt and involvement in an unlawful means conspiracy, and provide the context of its application under r 6.27. We come back later to the detail of r 6.27 but for present purposes we note that the rule provides that an originating document may be served out of5 See the fourth and sixth appellants.6 The third appellant, which later changed its name to CT NZ Group Ltd. This is a differentcompany from the seventh appellant, Cartan Global LLP.New Zealand without leave in a number of cases. Those cases include that when anyperson out of the jurisdiction is "a necessary or proper party" to the proceeding and"there is a real issue between the plaintiff and that defendant that the court ought totry".7The High Court judgment[16] Wylie J treated the application by PEG relating to Cartan Tours and Sportsmark as an application for directions as to the conduct of a proceeding under r 7.9.[17] Wylie J concluded that in terms of the claim alleging unlawful means conspiracy, PEG could serve the overseas companies without leave under r 6.27(2)(a)(ii). That part of the rule provides that an originating document may be served out of New Zealand without leave when a claim is made in tort and the damage was sustained in New Zealand. Wylie J also found that both causes of action met the threshold in r 6.27(2)(h)(i). The Judge's reasoning is as follows:8[71] If the allegations [of unlawful means conspiracy] can be made out, it seems to me that the resulting damage or loss, either in whole or in part, must be sustained in New Zealand. PEG has been denied monies it otherwise would have been entitled to. It follows that PEG is entitled to serve the proceedings on Cartan Tours and Sportsmark under r 6.27(2)(a)(ii).[72] There can be difficulties where proceedings raise more than one cause of action and only part of the proceedings comes within r 6.27.[73] In my judgment, those difficulties do not arise in the present case because both causes of action against Cartan Tours and Sportsmark come under r 6.27(2)(h)(i). On the materials available to date, it seems to me that Cartan Tours and Sportsmark are inextricably intertwined with the allegations made by PEG against Messrs Beattie and Regan and their various corporate entities. The proceedings have been properly brought against those entities, and they have been served within New Zealand pursuant to the relevant rules. There is a real issue between PEG and the first to seventh defendants that the Court ought to try, and Cartan Tours and Sportsmark are necessary or proper parties to the proceedings. Had either or both entities been within New Zealand, they would have been properly sued with theother defendants within jurisdiction. My initial impression is that PEG'scase against Messrs Beattie and Regan, and their various corporate entities, is arguable as a matter of law. It is plausible. It cannot be said that it has no prospect of success. Similarly, the claims against Cartan Tours and7 Rule 6.27(2)(h)(i).8 Footnotes omitted.Sportsmark are arguable. The claims appear to be responsibly based on the documents which have been discovered to date. It cannot be said that they are implausible, or that they are devoid of any prospect of success.[18] Because of the Judge's conclusion on r 6.27, it was not necessary for the Judge to go on and consider r 6.28.Issues on the appeal[19] The appeal raises the following issues:(a) Was r 4.56 of the High Court Rules relating to joinder relevant to the decision under appeal?(b) If it was, should joinder have been refused because of PEG's delay inseeking to serve the overseas parties or for any other reason?(c) Whether PEG's amended statement of claim was an "originatingdocument" so that PEG could make an application under r 6.27? If so, was the correct test applied under r 6.27?[20] We deal with each in turn.Was r 4.56 relevant?[21] Rule 4.56 of the High Court Rules deals with striking out and adding parties. Rule 4.56(1) provides that a Judge may "at any stage of a proceeding" order that:(b) the name of a person be added as a plaintiff or defendant because –(i) the person ought to have been joined; or(ii) the person's presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.[22] On behalf of the appellants, Mr Eichelbaum submits that consideration of r 4.56 is a necessary precondition to consideration of r 6.27. That means the Judgeshould have focused, first, on whether Cartan and Sportsmark "ought to have been joined" or were "necessary" parties.[23] In challenging the relevance of r 4.56 to PEG's application, Mr Pascariu for the respondent says that applications such as the present one for service on an overseas party are governed by r 6.27.[24] We agree that r 6.27 is the primary focus.9 Certainly, absent any particular issue arising under r 4.56, the Judge could assume that r 6.27 considerations alone would cover the matter.10 It is pertinent in this respect that r 4.56 imposes a fairly low threshold. However, it is not necessary to determine whether r 4.56 is relevant when there is an application such as the present relating to an overseas person, for a number of reasons.[25] First, the application relating to the overseas companies expressly made reference to r 4.56. Rule 4.56 was therefore put in the overall mix. Secondly, although the appellants raised a question of delay which may be a relevant factor under r 4.56, they did not base their arguments to Wylie J on r 4.56. Indeed, r 4.56 did not really feature in the appellants' argument until they sought an extension oftime for the appeal to this Court.11 Finally, the issue now pressed by the appellants as a relevant consideration under r 4.56 is delay.12 That aspect was addressed by the Judge. Accordingly, unless the question of delay was not properly considered, nothing turns on the application of r 4.56.[26] We turn then to the question of delay.9 Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754 at[22] and [31]; leave to appeal refused: Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd[2011] NZSC 20; Kuehne + Nagel International AG v Commerce Commission [2012] NZCA221.10 McGechan on Procedure (looseleaf ed, Brookers) at [HR4.56.04] notes that "the currentapproach to joinder in New Zealand is liberal ...".11 Beattie v Premier Events Group Ltd [2011] NZCA 635.12 Mr Eichelbaum for the appellants also referred to the impact of joining Cartan shouldCartan pursue the full range of interlocutory options. That factor loses any impact given there isno fixture date for the trial. An earlier date was not retained.Should joinder have been refused due to PEG's delay?[27] The appellants say that Cartan Tours ought not to have been joined becauseof PEG's delay in making the application for service on the overseas parties. The appellants' submissions on this point are directed to the following assessment byWylie J:[67] ... (g) Nor can it be said that PEG has delayed unduly. The application was brought shortly after the draft joint venture agreement between Messrs Beattie and Regan, Cartan Tours and Sportsmark, became apparent from discovery.[28] The essential proposition for the appellants is that the respondent had sufficient information on which to base the application as at 27 May 2010. The significance of that date is that on 27 May 2010 the respondent obtained some thousands of documents under search orders.[29] The respondent supports the approach taken by Wylie J. The respondent says that it did not have sufficient information to make the application until it received further documents as a result of discovery provided on 23 December 2010.Our assessment[30] We have considered the documentation before the respondent as at 27 May 2010 and that available to it as at 23 December 2010. We think it fair to say that, as at 27 May 2010, the respondent had information showing that the appellants and their interests were in negotiation with Cartan Tours and that those negotiations were at a fairly advanced stage. To illustrate how matters had advanced, the respondent was provided as part of the May search orders with an email from Don Williams of Cartan Tours to Messrs Beattie and Regan attaching a draft joint venture agreement and an agenda for a meeting on 3 May 2010. The draft joint venture agreement is the one we have referred to earlier.13 This draft agreement related to the promotion, marketing and sale of sponsorship packages for the 2012 Olympics. Further, the agenda for the 3 May 2010 meeting included a discussion of the roles and responsibilities of various parties including those for Cartan Tours and for13 At [11], above.Cartan Global LLC. The responsibilities listed included sourcing and managing corporate clients and assisting with the relationship with the New Zealand Olympic Committee.[31] At this point in time, the respondent also had a copy of a draft games ticket and travel services agreement between the New Zealand Olympic Committee, Cartan Tours and Cartan Global Ltd. The latter company was described as a sub- agent. It is one of the entities linked with Messrs Beattie and Regan.[32] Mr Gill, in his affidavit in support of PEG's application for orders joining theoverseas defendants sworn on 7 March 2011, refers to obtaining various documents"under the discovery orders" including the draft joint venture agreement. It wouldhave been better if Mr Gill had made it clear in this affidavit that the respondent did have the draft joint venture agreement following the execution of the search orders. However, it was not until further documents were obtained under discovery that the respondent was made aware that arrangements involving the relevant parties had become contractual. Significantly, it was not until this point that the respondent knew of the signed ticket and travel services agreement between the New Zealand Olympic Committee and Cartan Tours with respect to, amongst other matters, the 2012 Olympics. As we have noted, that agreement recorded that it was to be governed by New Zealand law. In addition, the respondent received a copy of an email dated 9 July 2010 from Terry Daly of the New Zealand Olympic Committee to Mr Regan which stated, "Mate this is great we are good to go. How do you want totreat the side letter between you and [Mr Beattie] and [the New Zealand OlympicCommittee]?"[33] Other significant developments which would only have been within therespondent's knowledge after discovery included the deed of assignment betweenCT NZ Group Ltd (previously Cartan Global Ltd) and Cartan Global LLP of the hospitality package and services agreement between Australia Post and CT NZ Group Ltd. Associated information provided further indications of a business arrangement between Messrs Beattie and Regan and the overseas parties in relation to the 2012 Olympic programme.[34] The case for the appellants is that there was little difference in the respondent's knowledge after obtaining documents under the search orders than thatat the discovery stage. However, we consider it is important that by the later stage matters had advanced to the point of contractual relations. Importantly also, the contractual documentation could be used to advance links to New Zealand.[35] There is one invoice for AUD$300,000.00 on Cartan Tours letterhead to Australia Post which is dated 10 May 2010, that is, prior to the date documents were obtained under the search orders. The invoice asks that payment be made to Cartan Global. This, and the other invoices which were dated after 27 May 2010, assume some significance because of the MOU between Cartan LLP and Cartan Tours, which provided that the use of the Cartan Global brand was licensed by Cartan Tours. Assuming for these purposes that the respondent had this invoice, this information might have raised suspicions. However, there is merit in Mr Pascariu's submission that the significance of the invoices did not becomeapparent until receipt of the deed of assignment. That document, he submits, suggested that the earnings generated under the agreement with Australia Post were going to be retained overseas under the revenue-sharing agreement with Cartan Tours.[36] Our conclusion is that, when all of the documentation is taken into account, it was reasonable for PEG not to have proceeded until it received the later documentation. Accordingly, we agree with Wylie J that it could not be said thatPEG has "delayed unduly".14Application of r 6.27[37] Rule 6.27 relevantly provides as follows:(1) This rule applies to a document that initiates a civil proceeding, or is a notice issued under subpart 4 of Part 4 (Third, fourth and subsequent parties), which under these rules is required to be served but cannot be served in New Zealand under these rules (anoriginating document).14 Premier Events Group Ltd v Beattie, above n 2, at [67](g).(2) An originating document may be served out of New Zealand without leave in the following cases:(h) when any person out of the jurisdiction is—(i) a necessary or proper party to proceedings properly brought against another defendant served or to be served (whether within New Zealand or outside New Zealand under any other provision of these rules), and there is a real issue between the plaintiff and that defendant that the court ought to try; or[38] The document PEG sought to serve on the overseas company was an amended statement of claim. Two issues arise here. The first is whether PEG'samended statement of claim was an originating document and, secondly, whether the Judge applied the correct test in terms of r 6.27(2)(h)(i). We deal with each in turn.An "originating document"?[39] The appellants argue that an originating document does not include an amended statement of claim. Mr Eichelbaum submits that the Court could not read into the definition of originating document, the words "against the overseas party".Accordingly, Mr Eichelbaum says that the only option was for PEG to have applied to the High Court for service on Cartan Tours in reliance on its inherent jurisdiction although he accepts the principles applicable would be those under r 6.27.[40] The respondent submits that an originating document in r 6.27 includes an amended statement of claim that initiates a proceeding against intended overseas defendants. If that were not so, overseas parties could not be joined to an existing proceeding under r 6.27.[41] We agree with the respondent. We do not consider that the respondent'sapproach requires any words to be engrafted on to the rule. Rather, r 6.27(1) defines the originating document as the document which the party is seeking leave to serve on the overseas party, that is, the notice of proceeding and the amended statement of claim. In other words, the rule means what it says. There is support for that view inr 6.27(2)(h)(i), which assumes that a defendant may already have been served, that is, a proceeding is already on foot. Further, the reference in r 6.27(2)(h)(ii) topersons outside of the jurisdiction as a defendant "in a claim for contribution"similarly supports that approach. Finally, this interpretation is consistent with the purpose of the High Court Rules to provide a speedy and inexpensive mechanism for resolving disputes.15 It would be odd for the parties to have to seek to rely on the inherent jurisdiction in these circumstances.Was the correct test applied?[42] The appellants are critical of Wylie J's description of PEG's case as "plausible",16 and contend the Judge should have asked whether there was a good arguable case and whether Cartan Tours was a "necessary or proper" party. TheJudge stated that he considered both that PEG's case against the appellants wasarguable and that was true also for the claims against Cartan Tours and Sportsmark. The short answer to this point is that it is clear from the Judge's reasoning17 that Wylie J focused on whether Cartan Tours is a necessary or proper party and on whether there is a real issue that the Court ought to try. That is the overall test required by the relevant part of r 6.27.18 Given that, as we have noted, Cartan Tours'application to protest jurisdiction is still outstanding, we say no more about this aspect.Result and costs[43] The appeal is dismissed. The effect of that is that the decision of Wylie J that Cartan Tours may be served without leave under r 6.27 stands.[44] The respondent, having succeeded, is entitled to costs on the appeal and on the application for an extension of time. We make an order that the appellants must pay the respondent costs on this appeal on a band A basis for a standard appeal together with usual disbursements. In addition, the appellants must pay the15 Rule 1.2.16 Premier Events Group Ltd v Beattie, above n 2, at [73].17 Set out above, at [17].18 See the discussion in Wing Hung, above n 9, at [32]–[33] and [41].respondent costs for a standard application for leave on the application for an extension of time plus usual disbursements.[45] The respondent made an application to strike out the appeal when it appeared that the appellants had not sought a fixture or filed a case on appeal within the timeframe set by the Court in granting an extension of time to appeal. There appears to have been some confusion over when a fixture date was sought. In the circumstances, costs are to lie where they fall in relation to that application.Solicitors:Franklin Law, Pukekohe for AppellantsMinter Ellison Rudd Watts, Auckland for Respondent