TAVENDALE & PARTNERS LTD v DINEEN [2023] NZHC 157

TAVENDALE & PARTNERS LTD v DINEEN [2023] NZHC 157 [9 February 2023]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2021-409-000586[2023] NZHC 157BETWEEN TAVENDALE & PARTNERS LIMITEDPlaintiffAND MARK JOHN DINEENDefendantHearing: On the papersCounsel: A S Butler KC and J A Tocher for PlaintiffP F Whiteside KC and J R Pullar for DefendantJudgment: 9 February 2023JUDGMENT OF ASSOCIATE JUDGE PAULSENThis judgment was delivered by me on 9 February 2023 at 4.00 pmpursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:[1] The plaintiff (Tavendale) is an incorporated law firm. Mr Dineen was formerlya director and practising lawyer with Tavendale. He now practises law at another lawfirm.[2] Tavendale commenced this proceeding against Mr Dineen alleging breach offiduciary duties in respect of certain transactions he entered into with clients of thefirm and that he had breached a personal undertaking in respect of Tavendale'selectronic data.[3] Mr Dineen applied for a stay of this proceeding and referral of the disputes toarbitration under art 8(1) of sch 1 of the Arbitration Act 1996. Tavendale opposed theapplication.[4] In a judgment dated 30 June 2022, I granted Mr Dineen's application.1 I heldthere was at least a prima facie case that the claims brought against Mr Dineen byTavendale were the subject of an arbitration agreement between the parties andcapable of resolution by arbitration. I stayed this proceeding pending a determinationby the arbitral tribunal as to whether it has jurisdiction to determine the disputes.2[5] Tavendale now seeks leave to appeal from my judgment. It argues that it hasreasonably arguable grounds of appeal and that it is in the interests of justice to grantleave to appeal in all the circumstances of the case.[6] Counsel filed comprehensive submissions in relation to the application andasked that it be decided on the papers.Legal principles[7] There appears to be no dispute that Tavendale requires leave to appeal from thejudgment.[8] Section 56(3) and (4) of the Senior Courts Act 2016 relevantly provide:1 Tavendale & Partners Ltd v Dineen [2022] NZHC 1530.2 At [94].56 Jurisdiction(3) No appeal, except an appeal under subsection (4), lies from any orderor decision of the High Court made on an interlocutory application inrespect of any civil proceeding unless leave to appeal to the Court ofAppeal is given by the High Court on application made within20 working days after the date of that order or decision or within anyfurther time that the High Court may allow.(4) Any party to any proceedings may appeal without leave to the Courtof Appeal against any order or decision of the High Court---(a) striking out or dismissing the whole or part of a proceeding,claim, or defence; or(b) granting summary judgment.[9] The principles that apply to an application for leave to appeal under s 56(3) arealso not in dispute. They were set out by the Court of Appeal in Greendrake v DistrictCourt of New Zealand.3 The Court of Appeal stated:4[6] In Finewood Upholstery Ltd v Vaughan, to which Dunningham Jreferred to in the leave decision, Fitzgerald J appropriately observed that therequirement for leave to appeal should serve as a filtering mechanism toensure that unmeritorious appeals of interlocutory orders, or appeals ofinterlocutory orders of no great significance to either the parties or moregenerally, do not unnecessarily delay the proceedings in which the orders weremade.5 The following considerations were recognised as relevant on anapplication for leave to appeal:(a) a high threshold exists;(b) the applicant must identify an arguable error of law or fact;(c) the alleged error should be of general or public importancewarranting determination or otherwise of sufficientimportance to the applicant to outweigh the lack of general orprecedential value;(d) the circumstances must warrant incurring further delay; and(e) the ultimate question is whether the interests of justice areserved by granting leave.[7] This Court in Ngai Te Hapu Inc v Bay of Plenty Regional Council6indicated that considerations similar to the principles applicable to3 Greendrake v District Court of New Zealand [2020] NZCA 122. See also Lobb v Ryan [2021]NZCA 224 at [2].4 Greendrake v District Court of New Zealand, above n 3.5 Finewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13].6 Ngai Te Hapu Inc v Bay of Plenty Regional Council [2018] NZCA 291.applications under the former s 24G of the Judicature Act 1908, as explainedin Meates v Taylor [Leave],7 apply to applications under s 56(5) stating:We agree that leave to appeal should only be granted where thesignificance or implications of an arguable error of fact or law, either forthe particular case or for the applicant or as a matter of precedent,warrants the further delay which the appeal process would involve.Proposed grounds of appeal[10] Tavendale wishes to advance four grounds of appeal. The first ground is thatin finding in favour of Mr Dineen I relied upon an arbitration clause found in cl 7.3 ofa Heads of Agreement between the parties which had not been invoked by Mr Dineenin his application for stay or at any stage prior to being raised by me at the hearing. Itis argued that by granting a stay on the basis of an unpleaded arbitration clause, I hadoverruled the autonomy of the parties to choose their forum of dispute, and thatTavendale was prejudiced in being unable to advance evidence with a bearing on thematter.[11] The second ground is that I adopted the incorrect standard of review. As Inoted in my judgment, when faced with a stay application under art 8(1) on groundschallenging the existence or validity of an arbitration agreement and/or its scope, thecourts have generally adopted either a prima facie assessment or full review approach.8I considered the prima facie assessment standard was appropriate in this case.[12] The third ground is that although the judgment concluded there was at least aprima facie case that there was a legally binding arbitration agreement between theparties, the language used to dismiss Tavendale's arguments was more absolute andthe conclusions reached were wrong having regard to all of the evidence andarguments presented by Tavendale.[13] The fourth ground is that the scope of the arbitration agreement that I foundwas binding between the parties did not extend to the conduct of Mr Dineen that is thesubject of Tavendale's claim.7 Meates v Taylor (1992) 5 PRNZ 524 (CA) at 526.8 Tavendale & Partners Ltd v Dineen, above n 1, at [35]-[41].[14] Tavendale also argues it is in the interests of justice that it be granted leave toappeal. Six reasons are advanced. First, it is said the judgment has effectively broughtTavendale's claim before the Court to an end and given the effective finality of thedecision, it should be permitted an appeal where one is reasonably arguable. Second,it is said the appeal will not cause any delay in this proceeding because it has beenstayed. Third, the appeal is unlikely to cause any delay to related arbitral proceedingsas Tavendale has not sought a stay of such proceedings. Fourth, that as a matter offairness, Tavendale should be permitted to challenge my findings in an appellate court,otherwise there is a risk that an arbitrator might be influenced or feel bound by theconclusions reached in the judgment. Fifth, that at least two of the proposed groundsof appeal raise issues of public importance such that the benefits of achieving clarityin law outweigh any possible delay. Finally, it is submitted the appeal is of sufficientimportance to Tavendale to outweigh any concerns about delay because it has alwaysmade it clear that the choice of forum is important to it and it considers that Mr Dineenis attempting to hide his misconduct behind a veil of secrecy that arbitration willprovide him.[15] Mr Dineen emphasised the high threshold for granting leave to appeal andargues that there are no errors of fact or law as asserted by Tavendale, nor are thereany issues of public importance such that the outcome of an appeal will have littlesignificance beyond this case. He argues that to grant leave to appeal will cause delaysin resolving the dispute and will prejudice him. It is said also that Tavendale's desirein pursuing its application for leave to appeal is to embarrass Mr Dineen and gaintactical advantage contrary to the wider purpose of s 56(3) of the Senior Courts Act.9Are the grounds of appeal arguable?[16] I do not consider the first proposed ground of appeal has sufficient merit tojustify the granting of leave to appeal. While it is correct that the relevance of cl 7.3of the Heads of Agreement had not been identified by counsel prior to the hearing, myreliance upon it was entirely consistent with the approach Mr Butler advanced forTavendale that the real question was the legal effect of the Heads of Agreement.9 Li v Chief Executive, Ministry of Business, Innovation and Employment [2018] NZHC 1171 at[20].Further, while Tavendale submits it could have provided further evidence as to whetherthe Heads of Agreement had been abandoned, it had already filed evidence in supportof that position and has not identified what further evidence could have been provided.[17] I accept that the second ground of appeal is arguable and raises an issue ofgeneral importance. There have been different approaches to the question of theappropriate standard of review in decisions of this Court and I am not aware of anyappellate authority as to the proper approach in a case such as this. I note that veryrecently in HWD NZ Investment Co Ltd v Body Corporate 392418 Associate JudgeBrittain considered authorities on the point and held that a full review was justified inthe circumstances of that case. I accept the submission for Tavendale that given theprevalence of arbitration clauses in commercial contracts and the growing importanceof arbitration as a means of settling disputes, an appellate precedent on the issue isdesirable.[18] The third and fourth grounds of appeal challenge both my factual findings andinterpretation of the Heads of Agreement and the 2014 draft shareholders agreement.I accept that these grounds are arguable. I do not, however, accept that they raiseissues of public interest. The facts of this case are plainly unique and any findingsmade on these issues will have little significance beyond the parties.The importance of the alleged errors[19] I do not accept Tavendale's submission that Mr Dineen seeks to hidemisconduct "behind a veil of secrecy". It was plainly the case, in my view, that theexpectation of the parties, as reflected in the various iterations of shareholdersagreements and the Heads of Agreement was that disputes would be resolved byarbitration. However, I accept there are good reasons, related to costs and procedures,why Tavendale may wish to pursue its claim before the High Court rather than byarbitration and that the choice of forum is a matter of importance to it.Delay[20] I do not consider the issue of delay significant in this case. It is only theresolution of Tavendale's claim that will be delayed while it pursues its appeal.Further, this is not the only dispute between these parties. Mr Dineen wishes to pursueclaims against Tavendale by way of arbitration and is not precluded from doing so. Asit appears Tavendale will object to the arbitrator's jurisdiction to determine such otherclaims, it may in fact assist the parties and result in a quicker resolution of the disputesbetween them to have a ruling from the Court of Appeal.Interests of justice[21] Ultimately the issue for me is whether the interests of justice require that leaveto appeal be granted. I do not accept several arguments advanced by Tavendale onthis issue. For instance, I do not accept that my judgment brings its claim before thisCourt to an end. The effect of the judgment is to stay proceedings until the issue ofjurisdiction is determined by the arbitral tribunal. If it is found such jurisdiction doesnot exist, the stay would be lifted. I also do not accept the submission that Tavendaleshould be allowed to challenge my findings due to the risk that an arbitrator might beinfluenced or feel bound by my conclusions reached in the judgment. Such concernsappear fanciful.[22] That said, as noted, I accept that several grounds of appeal are arguable andthat one of them raises an issue of public interest and that delay is not an importantfactor in this case. On balance I consider the interests of justice weigh in favour ofgranting leave to appeal.Result[23] Under s 56(3) of the Senior Court Act 2016, Tavendale is granted leave toappeal my decision of 30 June 2022._______________________O G PaulsenAssociate JudgeSolicitors:Woods Fletcher (R Fletcher), Wellington. Counsel: A S Butler KC, Wellington.Taylor Shaw (J Pullar), Christchurch. Counsel: P F Whiteside KC, Christchurch.