TEAM CLAVEL MOTORSPORT V NEIL ALLPORT MOTORSPORTS LTD HC AK CIV 2010-404-2823

TEAM CLAVEL MOTORSPORT V NEIL ALLPORT MOTORSPORTS LTD HC AK CIV 2010-404-2823 1 June 2010IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2010-404-2823BETWEEN TEAM CLAVEL MOTORSPORT Plaintiff AND NEIL ALLPORT MOTORSPORTS LTD Defendant Hearing: 26 May 2010 Counsel: J Goodall for Plaintiff S Foote for Defendant Judgment: 1 June 2010JUDGMENT OF MILLER J[1] On 7 May 2010 Venning J granted an injunction, ex parte, a) restraining the defendant from making a 2008 Mitsubishi Lancer Evolution 9, registered in New Zealand as EQK867, available to participate in the rally in New Zealand which had begun on that date, b) requiring the defendant to take all necessary steps to recover possession of the car immediately, and c) restraining the defendant from making any further use of the car that was not first authorised by the plaintiff. [2] The plaintiff had agreed to buy the car from the defendant for $95,000, and paid the purchase price by instalments over a period of some months, beginning in December. Later instalments were delayed, but on 29 April the plaintiff advised that the last payment had been made and it would collect the car on 5 May. It appears the defendant received the payment in cleared funds on 3 May.[3] Around the end of March, however, the defendant had leased the car to a team from Ralliart Spain to race in the Rally of New Zealand, planning to deliver it to the plaintiff about 21 May. [4] The order as sealed on 7 May described the registration number of the vehicle as EAK8667, an obvious mistake and one apparently attributable to a typographical error in the defendant's own invoice for the car. Seeing that, and thinking himself bound to honour the lease, the defendant's principal, Neil Allport, pronounced the injunction invalid and did nothing to recover the car. Mr Foote did not dispute that this breach was flagrant and apparently contumelious. [5] The car was crashed and badly damaged in the Rally. It was insured, and the defendant has been rebuilding it. It is now due for delivery to the plaintiff on 28 May. [6] No attempt has been made, on either side, to cancel the contract for sale. The issue is whether the lease was agreed between plaintiff and defendant. [7] Pursuant to orders granted by Asher J on 12 May, the plaintiff and its agents have been permitted to inspect the car. However, the plaintiff is not yet satisfied that it will be in proper condition on 28 May. If it is, the plaintiff will take possession. Its intention was always to use the car in a rally in July which is one of the Pacific Cup series. Possession was wanted earlier so that its principal, Claude Clavel, a resident of New Caledonia, could train using it. The plaintiff also has a claim for damages for conversion. [8] The matter came before me on an application seeking rescission of the ex parte injunction. At the end of the hearing I dismissed the application, recorded that order c) above, directing that the defendant not make any use of the vehicle without the plaintiff's consent, remains in effect, and awarded costs against the defendant on a 2B basis. My reasons follow. [9] The only order that remained in effect at the hearing before me is order c). The defendant did not seek rescission of that order, wisely given its breach of theinjunctions, but pursued rescission of the spent orders, maintaining that it is at risk of sanctions for breach and has properly anticipated any such claim by moving promptly to have the orders rescinded. [10] Two issues were hotly contested in the affidavits and submissions. The first is whether the plaintiff and defendant agreed on 23 March that the vehicle would be leased to another competitor for the Rally of New Zealand. The defendant says not only that such a lease was agreed but also that it was highly advantageous to the plaintiff; under the lease the car was to be brought up to full rally condition at no cost to the plaintiff and the car would be fully insured against any damage during the rally. The second is whether then counsel for the plaintiff, Michael Phillipps, misled the Court on 7 May by failing to disclose that he and the solicitor for the defendant, Bruce Dell, had settled the threatened proceedings on the afternoon of 6 May, agreeing that the lease would proceed. [11] Notwithstanding the second of these issues, Mr Foote did not invoke r 7.51, which allows the Court to set aside an injunction that has been fraudulently or improperly obtained. The application rests on r 7.49, which provides so far as relevant:7.49 Order may be varied or rescinded if shown to be wrong (1) A party affected by an interlocutory order (whether made on a Judge's own initiative or on an interlocutory application) or by a decision given on an interlocutory application may, instead of appealing against the order or decision, apply to the court to vary or rescind the order or decision, if that party considers that the order or decision is wrong. (4) The application does not operate as a stay unless a Judge so orders. (5) Unless a Judge otherwise directs, the application must be heard by the Judge who made the order or gave the decision.1[12] Mr Goodall eventually accepted that the defendant is a person "affected" by the orders, notwithstanding that they are now spent, but he argued that the Court will not ordinarily use its jurisdiction under r 7.49(1) to rescind a spent injunction.1 Venning J was unavailable, and I agreed to hear the application.[13] I accept this submission. The Court will ordinarily leave the question whether an injunction was properly granted for trial, when any claim resting on the plaintiff's undertaking as to damages can be determined. The defendant need not apply for rescission of an interlocutory injunction at an earlier date merely to preserve a claim that it was wrongly granted. In D B Baverstock Ltd v Haycock, the Court was asked to rescind an Anton Piller order for nondisclosure of material facts.2The order had been executed. Henry J held that the question was not whether the order ought never have been made, but whether it ought continue to stand. He relied on the judgment of the English Court of Appeal in WEA Records Ltd v Visions Channel 4 Ltd, in which Sir John Donaldson MR held: 3In the instance case the Anton Piller order is spent in the sense that it has been executed. However, the defendants seek to go back to the beginning of the action saying that regardless of whether the fruits of the order are such as to show that it was abundantly justified, the Judge had insufficient material to justify his action at the ex parte stage. They therefore invite us to set the ex parte order aside and to order the return of the affidavits to the two personal defendants and the seized material to the defendant's solicitors. I regard this as wholly absurd. The Courts are concerned with the administration of justice, not with playing a game of snakes and ladders. If it were now clear that the defendants had suffered any injustice by the making of the order, taking account of all relevant evidence including the affidavits of the personal defendants and the fruits of the search, the defendants would have their remedy in the counter-undertaking as to damages. But this is a matter to be investigated by the High Court Judge who is seised of the matter, and only when he has reached a decision can this Court be concerned.[14] Mr Foote pointed out that in Hallmark Cards Inc v Image Arts Ltd the Court of Appeal had recognised that a party who breached an improperly obtained order might still be liable for non-compliance, and that the Court might rescind the order on that ground. 4 It is true that Buckley LJ recognised that possibility, but he appears to have been contemplating an order that remained to be executed. [15] Although it is not strictly necessary to do so, I will say something about the merits in deference to the thorough arguments of counsel. I bear in mind that although the defendant seek rescission, the plaintiff bears the burden of showing that2 D B Baverstock Ltd v Haycock [1986] 1 NZLR 342.3 WEA Records Ltd v Visions Channel 4 Ltd [1983] 1 WLR 721 (CA).4 Hallmark Cards Inc v Image Arts Ltd [1977] FSR 150 (CA).an ex parte order ought to be maintained. Accordingly, I heard from Mr Goodall first. [16] The first issue concerns the alleged agreement of 23 March to lease the car for the Rally of New Zealand. As at 6 March, the parties had agreed provisionally on a lease (apparently to a Chinese team) subject to agreement on the insurance cover, on terms that substantial work would be done to the car. However, that proposal was abandoned, and Mr Allport continued to press for payment of the balance of $28,834.44 by 20 March. Mr Clavel delayed. Not until 29 April did he email confirmation of the final payment, advising that he would collect the car on 5 May. [17] Mr Allport did not protest that the car would not be available on 5 May because he and Mr Clavel had but recently agreed another lease. Rather, he responded on 30 April:Thank you for your e-mail, I have to say Claude I am very disappointed in the amount of time it has taken to pay for the car, you have given me three dates over the last three months that you have stated that you would pay the balance and have not met any of these dates, so as you still have not paid for the car in full it remains the property of my company. As a result of this we are using the car on Rally New Zealand and therefore the car is not available to be picked up until 21 st of May which will give us time to rebuild the car after the event, if we have received full and final payment by this time you may pick up the car.[18] On 5 May Mr Clavel arrived at the defendant's premises, with lawyer in tow, and demanded the car. He was refused, and the litigation was put in train. [19] Mr Allport maintains that a lease was agreed. Produced in evidence is a diary note of his dated 23 March in which he recorded that Mr Clavel had called re payment and "agreed lease". This diary note is of course a prior consistent statement but there is no objection to its admission for present purposes. Mr Allport says the terms were the same as the previous agreement. He accordingly arranged for the car to be brought up to rally specifications. Mr Foote acknowledged that this evidence is inconsistent with the email of 30 April. His argument was simply that had VenningJ appreciated there was an arguable defence he might have focused more on the balance of convenience. [20] Venning J appears to have assumed that the car had been leased for the reasons given by Mr Allport in his email of 30 April. He observed that an earlier lease proposal had been abandoned. He had before him a letter of 7 May from Mr Dell, but that letter said only that Mr Clavel had breached the agreement for sale and knew the car could be used for the Rally of New Zealand. Venning J reasoned that property had passed with the final payment and the defendant was not free to lease the car. [21] With respect to the balance of convenience, Mr Foote pointed out that the defendant had entered a commitment to Ralliart Spain, which had approached Mr Allport on 20 March and completed the work on the car, which cost some $35,000 and benefited the plaintiff. The lease had been entered while the plaintiff was still in default. (The exact date of the lease is unclear but I assume it was around the end of March. The work on the car was completed by 27 April.) By early May Ralliart Spain had a crew in New Zealand for the rally, and €27,000 had been paid for the lease. The rally began about 6am on 7 May. If the team withdrew they would incur a fine of about €20,000. Much reputational damage would result if the defendant reneged on the lease. The car might be damaged in the Rally but it was comprehensively insured, and it would be available to the plaintiff by late May. The most that the plaintiff could say was that had it taken possession on 5 May the car would have been used for training. It does not appear that Venning J was made aware of this information. [22] I accept that the balance of convenience appears to have favoured the defendant in the unusual circumstances of this case. A different decision might have been reached had Venning J been aware of these matters. But it does not follow that the injunction was wrongly granted. Balance of convenience had to be assessed against the plaintiff's apparently strong case that no lease had been agreed, payment having been made, and the defendant was in default of an obligation to deliver the car. Nor could the plaintiff be criticised for non-disclosure of the financial details ofthe lease; all that it apparently knew of the lease was set out in the emails that were in evidence. [23] With respect to the second issue, there is a striking conflict of evidence between the two lawyers, both of whom have sworn affidavits. I am told that both are experienced and respected practitioners. Mr Dell maintains that a deal was done late in the afternoon of 6 May, after both men had taken instructions. Proceedings were to issue, but not for an injunction. [24] Mr Phillipps responds that he took a proposal from Mr Dell by phone early in the afternoon of 6 May and said he would take instructions. The proposal was that the plaintiff agree to the car continuing in the rally. He spoke to Mr Dell at 4.30pm and again at 4.45pm and 5.03pm. The outline of an agreement was reached, but from Mr Phillipps' perspective it was subject to instructions, and he told Mr Dell at the end of the last call that he would set out his client's position in writing. If agreement was not reached an injunction would still be sought. Mr Dell responded that the two of them "can sort this out". An offer was put through Mr Phillipps' instructing solicitors. The proposal was faxed to Mr Dell later that evening. He expected that it would be signed. [25] The documents tend to support Mr Phillipps' view that a settlement was not finally concluded and was to be documented before it took effect. The written proposal was sent to Mr Dell under cover of a letter which contemplated that agreement had not yet been reached and an injunction would be sought if there was no agreement. The proposal was not the same as the original lease of 6 March; it contained added terms which I assume were not acceptable to the defendant, notably an obligation to provide a permanent replacement car should this one be damaged and not repaired by 21 May. And Mr Dell says that he did not know that his letter of 7 May was to be given to the Court, but there are two versions in existence, one written 'without prejudice', the other not. That is consistent with Mr Phillipps' explanation that he asked Mr Dell to remove the 'without prejudice' banner on 7 May because the letter was to go to a Judge.[26] However, I am in no position to determine this question on the affidavit evidence. I record only that it cannot be said on the information before me that the Court was misled. Venning J was told of the conflict between counsel. [27] In the end, there is no reason to revisit - in this context - the granting of the spent orders, especially when there is only a potential risk of sanctions and such risk arises from the defendant's decision to flout the orders. If sanctions are sought, the merits of the orders would be a relevant consideration. If the proceeding goes to trial and the Court finds that the orders were unwarranted, damages may be obtained against the plaintiff's undertaking. Miller JSolicitors:ASCO Lawyers, Auckland for Plaintiff Bruce Dell Law, Auckland for Defendant