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High Court of New Zealand Decisions |
Last Updated: 26 January 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2010-404-3074
BETWEEN GODFREY WATERHOUSE First Plaintiff
AND ROBERT JOHN WATERHOUSE Second Plaintiff
AND CONTRACTORS BONDING LIMITED Defendant
Hearing: 17 September 2010
Appearances: S Grant and K Dawson for plaintiffs
R E Harrison QC and C Robertson for defendant
Judgment: 13 December 2010
JUDGMENT OF ALLAN J
In accordance with r 11.5 I direct that the Registrar endorse this judgment with the delivery time of 3.30 pm on Monday 13 December 2010.
Solicitors/counsel :
Harmos Horton Lusk Ltd, Auckland
S Grant, Auckland, sgrant@shortlandchambers.co.nz
Dr R E Harrison QC rehqc@xtra.co.nz
Fortune Manning Geoff.turner@fortunemanning.co.nz
G WATERHOUSE AND ANOR V CONTRACTORS BONDING LIMITED HC AK CIV 2010-404-3074 13
December 2010
[1] These are applications by the defendant for orders:
b) Removing the proceeding from the Commercial List.
Background
[2] The plaintiffs, who are father and son, were formerly associated with insurance businesses in Georgia, USA. The first plaintiff was a director and sole shareholder of Phoenix Brokers Inc (Phoenix). The second plaintiff owned a business known as Main Street Brokers. These entities specialised in shuttle limousine and taxi cab insurance.
[3] In late 2000, Phoenix entered into an agreement with the defendant, whereby the defendant was to underwrite insurance policies for Phoenix in Georgia. The appropriate licences having been obtained, Phoenix commenced placing business with the defendant in December 2000. Between that date and March 2005, Phoenix issued the policies, collected the premiums and/or claims, issued endorsements and carried out other incidental activities. It accounted to the defendant in New Zealand for an agreed portion of the premiums. An agreed sum was paid into a trust account by Phoenix in order to meet claims. All claims were met out of that account.
[4] In 2002, Georgia changed its laws relating to the eligibility of insurers. The defendant became ineligible to underwrite further business unless and until it qualified under the new regime. Shortly thereafter, the defendant advised the plaintiffs it was in a position to continue to underwrite business placed by the defendants, in that it had established a sufficient financial base and had acquired an insurer in American Samoa, which qualified as an underwriter under the amended Georgia law.
[5] The defendant thereafter continued to carry on business in association with the plaintiffs until 2005, when the authorities in Georgia took steps against both the plaintiffs and the defendant. It was contended that the parties were carrying on business unlawfully, because the defendant was not qualified to operate as an underwriter in Georgia. The second plaintiff was arrested. A warrant was issued for the arrest of the first plaintiff. The assets of Phoenix and Main Street Brokers were seized and the business closed down.
[6] Criminal charges were laid against the plaintiffs. It seems that they did not proceed to trial.
[7] In 2007 a class action was commenced against the defendant and Phoenix. It was alleged in that proceeding that the defendant had sold non-existent commercial automobile insurance policies.
[8] Ultimately it appears that both civil and criminal proceedings were compromised, although the precise detail of those arrangements is not before the Court. Phoenix has been struck off the register in Georgia. The plaintiffs say they have suffered significant losses, both personal and financial. At the heart of the present proceeding is the claim that the defendant misled the plaintiffs as to the defendant’s acquisition of a qualifying insurance entity in American Samoa. The plaintiffs allege that no such acquisition occurred, with the result that the parties were not, as the plaintiffs had thought, qualified to conduct insurance business in Georgia.
[9] The defendant for its part denies the plaintiffs’ allegations. It says that the problems encountered by the parties were the result of a mistake on the part of the Georgian authorities. It is however not possible to determine the precise ambit of the proposed defence because no statement of defence has yet been filed.
[10] The plaintiffs allege deceit, breach of fiduciary duty and negligence. They are unable to rely directly on the contractual arrangements with the defendant because the contracting party was Phoenix, which no longer exists. The plaintiffs
claim special damages of $4.3 million, together with general damages of $50,000 each and exemplary damages of $50,000 each. There is also a claim for interest.
The stay application
[11] This proceeding was commenced on 21 May 2010. It was preceded by a letter of claim delivered to the defendant some days earlier. But prior to that there had been no contact between the parties for a considerable time. The Court is told that the plaintiffs were unable to pursue their claim against the defendant until now by reason of impecuniosity. But earlier this year, they concluded arrangements with an independent litigation funder. The existence of that agreement was voluntarily disclosed by the plaintiffs to the defendant’s solicitors, but the agreement itself has not been supplied. The defendant contends that it is entitled to a stay pending approval of the funding arrangements by the Court, and that it is entitled both to a copy of the funding agreement and to be heard by the Court in respect of the terms of that agreement.
[12] The plaintiffs say that they have no obligation either to seek the Court’s approval of their funding agreement, or to disclose anything further to the defendant about it. Ms Grant argues that any legitimate concerns of the defendant can be resolved by the provision of suitable security for costs, a matter not yet before the Court.
[13] The defendant places significant reliance on the recent judgment of the Court of Appeal in Saunders v Houghton.[1] There, the Court of Appeal considered a challenge to a representative action (on behalf of shareholders suing the Feltex directors) and to an associated litigation funding agreement. Whilst acknowledging that the case was “not the occasion ... to detail the legitimate scope of litigation funding” in New Zealand,[2] the Court nevertheless carefully set out certain applicable principles. The judgment of Baragwanath J, writing for the Court, engaged in a detailed discussion and analysis of the cases on litigation funding, which in broad terms have tended to move away from a strict enforcement of the torts of
maintenance and champerty.[3] The Court of Appeal acknowledged that there is a beneficial aspect of litigation funding, in that it facilitates access to justice. But the Court also recognised the mischief that might arise from litigation funding, especially in the context of representative actions:
[31] Recent Australian decisions have taken into account in favour of a representation order that a responsible professional funder has assessed that the case has sufficient merits to warrant putting money and effort into it. But a more sinister element is conceivable. The United States text by Hensler at
79–80 recounts the temptation of plaintiff attorneys in class actions, unfettered as are the New Zealand and Australian professions by stringent legislation prohibiting champerty, lacking any real control by clients and subject to the attractions of large fee awards, not only to fail to prosecute meritorious claims fully but to bring unmeritorious suits, expecting to benefit from them. Hensler records that it may be in the attorney’s interests to pursue a case to maximum advantage, thus serving his or her interests and those of the class members. It goes on to speak of another risk, of defendants’ deciding it is cheaper to settle rather than incur the costs of defending. It is thus conceivable that, unless there is a suitable order for security for costs, an unscrupulous funder might orchestrate a class action on an insubstantial basis with a view to extorting an unjustified settlement from the defence.
[14] The problem identified by the Court was that in representative actions where clients have no real control over the conduct of the litigation, and where legal fees and litigation funding profits are dependent on the outcome, lawyers and/or funders might have an incentive to conduct proceedings in a manner that will maximise their likely returns, rather than in a manner which necessarily benefits the clients.
[15] The Court considered that one way in which to guard against a possible abuse of process of that sort was to order security for costs directly against the funder, and that in representative proceedings, such orders will generally be appropriate.[4]
[16] The Court noted also that although the torts of maintenance and champerty have been formally abolished in Australia and elsewhere, they remain part of our law, so funding arrangements need to be scrutinised with circumspection. But, the Court concluded, in general it will not be appropriate to bar litigation simply by reason of the existence of third party funding:
[77] The common law torts of maintenance and champerty were created in an era before the courts had the capacity to deal with unruly nobles. By the time of Trendtex there had not emerged the fact, or perhaps the appreciation, now so evident, that access to justice may not be available without the assistance of funders prepared to fund the litigation in exchange for a cut of the proceeds. The modern Australian approach, seen also in Canada, is to face these realities directly and make a judgment according to the merits of each case. In New Zealand also, funding arrangements have been approved by Anderson, Glazebrook and Heath JJ in Re Nautilus Developments Ltd (in liq) [2000] 2 NZLR 505 (HC); Re Gellert Developments Ltd (in liq) (2001) 9 NZCLC 262,714 (HC); and Auckland City Council as Assignee of Body Corporate 16113 v Auckland City Council [2008] 1 NZLR 838 (HC) respectively, albeit with control of the proceedings remaining with the litigants. There remains cause for anxious care in assessing them. But like the majority in Jeffery & Katauskas[5] we are not deterred by Heydon J’s dissenting comment at [111]:
[111] The court’s procedure exists primarily to serve the function of enabling rights to be vindicated rather than profits to be made.
Such a binary test overlooks the fact that its application is likely to ensure that rights are not vindicated. A more nuanced approach is required. We should add that the appellants did not argue otherwise.
[78] We have concluded that the common law in other jurisdictions has moved on and access to justice and comity with other states mean we should follow. We already have decisions at High Court level (see cases at [77]) approving funding arrangements and Parliament must be assumed to have passed the Lawyers and Conveyancers Act in knowledge of that trend. Moreover, the context of that legislation was very different from non-lawyer cases: lawyers are officers of the court and when arguing a case they owe what may be conflicting duties to clients as well as to the court. Parliament could well have thought that the sort of objectivity needed to fulfil their role could be compromised by a financial stake in the outcome.
[79] We have concluded that, like the common law of Australia and that of Canada, the common law of New Zealand should refrain from condemning as tortious or otherwise unlawful maintenance and champerty where:
(a) the court is satisfied there is an arguable case for rights that warrant vindicating;
(b) there is no abuse of process; and
(c) the proposal is approved by the court.
We have discussed the need for proper controls, appropriate to the nature of the case and the particular funder and funding terms proposed.
[17] Mr Harrison argues that the judgment of the Court of Appeal in Saunders v
Houghton is binding on this Court. Ms Grant maintains it is simply obiter.
[18] With respect to litigation funding in non-representative cases, it is difficult to know precisely what the Court of Appeal intended. Despite the disclaimer at [22] of the judgment the passage set out above[6] suggests that the Court did indeed intend to lay down guidelines that extend beyond representative proceedings.
[19] Litigation funding cases may conveniently be classified into four separate categories:
b) Proceedings brought by liquidators;
c) Cases involving the assignment of a cause of action to a third party;
[20] The liquidation cases include Re Nautilus Developments Ltd (in liq)[7] and Re Gellert Developments Ltd (in liq).[8] In the former case, the defendants asserted that the litigation was being maintained champertously and sought an order staying the proceeding until the agreement had been cancelled and the funder stood aside.
Anderson J rejected the application but stayed the proceeding until the plaintiff had provided security for costs. He held the agreement was not champertous because it did not by its terms inhibit the liquidator or the direction of the liquidation and the determination of the proceeding.[9] Nevertheless, he noted that it might be appropriate for the Court to supervise the operation of the agreement throughout the proceeding, in order to ensure that the liquidator conducted the liquidation independently. He
went on to suggest that it would be preferable for liquidators and liquidation funders
to seek Court approval of funding agreements at the commencement of the proceedings, in order to ensure that the funder did not have undue control over the course of the litigation:
[27] I make the observation that it would be prudent for liquidators and litigation funders who may be contemplating a funding arrangement to obtain a Court's assessment of a proposed arrangement by way of an application by the liquidator for directions. That is the course taken by the liquidator in Re Tosich and could have been taken in this case if the liquidator had not commenced proceedings without apparently securing funding for them in advance. On any such application the Court would want to be satisfied that litigation was justified by reference to the merits of the claim and the prospects of recovery. In the present case the Court can express no provisional view as to the justification for commencing or continuing the proceedings. Any risk in that respect lies with the liquidator and the funder and justifies periodic review of the security position.
[21] For present purposes it is important to note that there was in that case no question about the confidentiality of the funding agreement, which had been voluntarily disclosed to the defendants. Indeed, the main terms of the agreement are set out in the judgment.[10]
[22] In Re Gellert Developments Ltd the liquidator brought an action against the directors and shareholders of the company, and then applied to the Court for approval of an independent funding agreement, and the fixing of the liquidator’s remuneration rate. The defendants sought security for costs and objected to the funding agreement on the basis that the single creditor should fund the litigation. Glazebrook J followed Nautilus and approved the liquidator’s funding agreement, noting that it is “the legal rather than de facto ability to control the litigation that was important. In particular, an obligation to consult did not give the funder the right (in
a legal sense) to control the proceeding”.[11]
[23] In Re Gellert the liquidator had chosen to apply to the Court for approval of the funding agreement. Glazebrook J observed that, while it was open to a liquidator or funder to obtain the comfort of a Court direction, there is no legal obligation to do so.[12]
[24] Cases involving the assignment of a cause of action to a third party fall into a somewhat different category. The danger in such cases is that a party with no legitimate standing in the proceeding might usurp control over the litigation: Citic New Zealand Ltd v Fletcher Challenge Forests Industries Ltd.[13] There, Potter J observed that:
[T]he absence of a right to control the litigation and the presence of a genuine commercial interest [are] two separate factors which may legitimise an otherwise champertous arrangement.[14]
[25] In that case Potter J held that the relevant assignment was in breach of a partnership agreement, and moreover, was champertous for want of a genuine commercial interest on the part of the assignee.
[26] By contrast, in Auckland City Council as Assignee of Body Corporate 16113 v Auckland City Council,[15] a leaky building case, the Body Corporate and individual unit owners settled with the Council, which took an assignment of the original plaintiff’s causes of action against the remaining defendants. Heath J held that the Council had a genuine commercial interest in completing the settlement and in taking an assignment of the claims, there being no rule of public policy that ought to prevent a settlement of that type.
[27] An example of a New Zealand case involving a sole litigation funded plaintiff is Jupiter Air Ltd (in liq) v Australian Aviation Underwriting Pool Pty Ltd.[16]
There, the plaintiffs sued an insurer, which had declined to indemnify following the loss of an aircraft. The insured was placed in liquidation as a result. Three shareholders, backed by a litigation funder, brought proceedings against the insurer. The defendant applied for security for costs against the plaintiffs (but not the funder) and for disclosure of the funding agreement. The defendant did not seek a stay of proceedings.
[28] Rodney Hansen J held that there was no principled basis upon which disclosure could be ordered pre-trial. He placed significant reliance upon the decision of the English Court of Appeal in Abraham v Thompson,[17] holding that:
[25] ... The defendant sought disclosure on the basis that they had a legitimate interest in knowing whether third parties were funding the plaintiff’s claim, and to what extent, in order that they might subsequently pursue security for costs, or costs, against those parties. As the Abraham v Thompson decision on appeal explains, there is no principled basis on which disclosure can be ordered pretrial for those purposes. The decision in Chisholm is in a different category because disclosure was ordered for the purpose of an order for security for costs.
[29] Rodney Hansen J held that, because the defendant was seeking security for costs against the plaintiff only, and not the non-party funder, the identity of that funder and the nature of the funding arrangements were not in issue in the proceeding. Accordingly, he held that:
[32] Unless directly authorised by the rules, the jurisdiction to order disclosure by discovery or otherwise, appears only to exist when it is necessary to make a Court ordered remedy effective. That is the principle which unifies those cases in which disclosure has been ordered.
[33] It is not a principle which can be applied in this case, at least not at this stage for the purpose of the application for security for costs. The Court will not be precluded from dealing with the application. The liquidator is free to decide what he will disclose for the purpose of the application. He, and those standing behind him, will wear the consequences of an election not to provide information about the identity and worth of those funding or standing to benefit from the litigation. The absence of that information will, however, not prevent the Court from exercising its discretion under r 60.
[30] It appears that the argument in Jupiter Air was confined to questions of disclosure for the purpose of securing the defendant’s entitlement to costs if successful. The judgment does not rest on questions relating to maintenance and champerty at all, and is therefore in my view of only limited assistance.
[31] But in R & Everything Else Inc v Hallenstein Bros Ltd,[18] Laurenson J did deal directly with an application for a stay, sought by the defendant in consequence of the involvement of a litigation funder in the conduct of the plaintiff’s case. That was a proceeding arising out of a trademark dispute. There, as here, the defendant
argued that the funding agreement ought to be produced in order to ensure that the terms of the agreement were not champertous, and in particular, that the plaintiff retained sufficient control over the conduct of the proceeding to justify the conclusion that the claim did not amount to an abuse of process.
[32] Laurenson J noted that:
a) The fact that the proceeding was being maintained by another is not by itself a defence, and the Court will not on that ground alone grant a stay of the suit of the other party to the proceeding:[19]
b) The same principle applies in cases where the agreement is alleged to be champertous;
c) The Courts will be reluctant to embark upon a consideration of whether a funding agreement might amount to an abuse of process until it becomes absolutely necessary to do so. Generally, the occasion would arise upon an application for security for costs pre- trial.
[33] In that case, having considered several authorities, Laurenson J concluded that the appropriate course was to direct the plaintiff to produce the funding agreement for inspection by the Court alone in the first instance. The production was to be accompanied by a memorandum from the producing party, setting out the reasons why some or all of the agreement ought to be withheld from production to the opposing party.
[34] In some cases the Courts appear to have endorsed the proposition that disclosure (if at all) should be confined to the point in time at which it becomes necessary to consider whether the funder ought to be responsible, wholly or in part, for the costs of a successful opposing party. Examples are Arkin v Borchard Lines
Ltd[20] and Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No.2).[21] Neither case
was concerned with the issue of maintenance and champerty, or with questions related to the production to the Court of the funding agreement itself. Indeed, in Dymocks, the Court had before it a great deal of evidence as to the detail of the funding arrangements concerned.
[35] Again, such cases, while of plain relevance to the possible liability of a third party funder for costs, are of limited help for present purposes.
[36] Against that background I return to the Court of Appeal judgment in Saunders v Houghton. While that judgment may not technically be binding on this Court because the relevant passages are obiter, it seems to me nevertheless, that at [79] the Court was intending to articulate an approach of general application. The Court is told that this is the first occasion upon which the scope of the Court of Appeal judgment and in particular [79] has arisen since that judgment was delivered. The plaintiffs rely on certain Australian authorities, notably Campbells Cash and
Carry Pty Ltd v Fostif Pty Ltd[22] and Jeffery & Katauskas Pty Ltd v SST Consulting
Pty Ltd[23] as justifying a relaxed approach by the Courts save in cases where an abuse of process can be demonstrated. Such cases are authority for the proposition that the mere existence of a litigation funding agreement does not of itself constitute an abuse of process.
[37] But of course, it has to be borne in mind that the torts of maintenance and champerty have been abolished in Australia, but not here.
[38] In my view, the proper course is to follow the implied direction of the Court of Appeal in Houghton at [79] and to direct production of the litigation funding agreement in question. But production is to be made to the Court alone, and not to the defendant, at least in the first instance. The purpose of a production order limited in that way is to enable the Court to ensure that the litigation funder concerned is not legally able to usurp control over the proceeding.
[39] It is not necessary for that purpose to direct production to the defendant. There are dual concerns in that regard. First, champerty and maintenance would not, even if present, amount to a defence to the substantive proceeding. It is for the Court and not the defendant to supervise the operation of any litigation funding agreement affecting the plaintiff.
[40] Second, issues arise in my view concerning confidentiality and privilege. In Kingsheath Club of the Clubs Ltd (in liq),[24] the Court refused production to creditors of the whole of a funding agreement entered into by a liquidator, on the grounds that the financial details were confidential to the liquidator. In particular, knowledge of the extent of the “war chest” would confer upon opposing parties a tactical and strategic advantage which they ought not to have. Further, although Mr Harrison strongly contends that a plaintiff’s arrangements with its funders (and in particular the funding agreement itself), could not properly be the subject of a claim for
litigation privilege, I consider, without expressly deciding the point, that there is a strong argument that the agreement itself is so privileged. It is certainly confidential.
[41] That was the conclusion reached by Santow J in Re Global Medical Imaging
Management Ltd (in liq).[25] There, it was said
[7] ...To deny legal privilege to a funding agreement of this sort would fail to give proper weight to its inextricable connection with the very subject matter of the legal advice that might be given and the nature of the professional legal services to be rendered. It has the potential to reveal the litigant's likely legal strategy. The funding agreement in a literal and substantive sense, fulfils the purpose of providing legal services in terms not only of the overall capacity to have them at all, but also their availability at critical junctures in the case. While it may not reveal the content of legal advice, it reveals the confidential circumstances of its availability and throws oblique light on the confidential circumstances to which the advice is directed.
[8] One could, for example, infer from a funding agreement the likelihood of tactical advice being given of a particular kind at different stages of the litigation or, for that matter, of the likelihood of an appeal being advised or not advised. I consider this funding agreement could do so.
[42] As Mr Harrison points out, there are differences between the language of s 119 of the Evidence Act 1995 (NSW) and s 56 of our Evidence Act 2006. But I
am not persuaded that they deprive the decision in Global Medical of persuasive effect.
[43] More recently, in Houghton v Saunders,[26] French J at first instance accepted[27] that there was an evidential basis for a claim to privilege in respect of communications sent to a proposed litigation funder, for the purpose of enabling the funder to determine whether it would, and in what terms, provide litigation funding to the plaintiffs.
[44] These considerations, taken together, support the conclusion that production ought to be restricted to the Court, at least in the first instance. There will therefore be an order directing production of the litigation funding agreement to the Court for inspection within 15 working days of the date of this judgment. The agreement may be submitted in a sealed envelope marked for my attention. It will not be disclosed to the defendant unless and until counsel have been given an opportunity to make further submissions on the topic of such disclosure.
[45] There will also be an order in the exercise of the Court’s jurisdiction staying the proceeding until the agreement is so produced.
Removal from the commercial list
[46] Where a proceeding has been entered on the commercial list by a plaintiff, any party may apply to a commercial list judge to remove that proceeding from the commercial list.[28] Proceedings will be eligible for entry upon the commercial list in the first place if they fall within s 24B(1) of the Judicature Act 1908:
24B Proceedings eligible for commercial list
(1) The classes of proceedings eligible for entry on a commercial list are as follows:
(a) Any proceedings arising out of or otherwise relating to:
(i) The ordinary transactions of persons engaged in commerce or trade or of shippers:
(ii) The carriage of goods for the purpose of trade or commerce:
(iii) The construction of commercial, shipping, or transport documents:
(iv) The export or import of merchandise:
(v) Insurance, banking, finance, guarantee, commercial agency, or commercial usages:
(vi) Disputes arising out of intellectual property rights between parties engaged in commerce:
(b) Applications to the Court under the Arbitration Act 1908:
(c) Appeals against determinations of the Commerce
Commission:
(d) Proceedings under any of the provisions of sections 80, 81,
82, and 89 of the Commerce Act 1986:
(e) Cases stated by the Securities Commission and civil proceedings under the Securities Act 1978 [[or the Securities Markets Act 1988]]:
(f) The following proceedings in relation to companies registered under the Companies Act 1955 or the Companies Act 1993, as the case may be:
(i) Applications for directions by liquidators and receivers:
(ii) Defended applications under section 209ZG of the Companies Act 1955 or section 174 of the Companies Act 1993:
(iii) Disputes relating to takeovers:
(iv) Disputes between shareholders or classes of shareholders of companies (other than companies registered under Part 8 of the Companies Act 1955 and companies registered under the Companies Act
1993 and having not more than 25 shareholders):]]
(g) Proceedings of a commercial nature required or permitted to be entered on a commercial list by or under any Act or by or under the High Court Rules or any rules made under section
51C of this Act.
[47] The defendant applies for the removal of the proceeding from the Commercial List on three separate grounds. First, it is argued that although the proceeding has its genesis in the insurance underwriting arrangements entered into between Phoenix and the defendant, the plaintiffs were not a party in their own right to that agreement. Accordingly, the plaintiffs seek to sue derivatively, asserting breaches of duty claimed to be owed to them personally. Mr Harrison submits this is not truly commercial litigation in the sense contemplated by s 24B.
[48] The defendant’s second contention is that the plaintiff’s claim is contrived by reason of the derivative character of their relationship with the defendant, and that in consequence it cannot properly be said that the proceeding arises out of, or otherwise relates to, insurance usages for the purposes of s 24B(1)(a)(v).
[49] Finally, the defendant contends that the proceeding is not suitable for Commercial List style case management for several inter-related reasons. One is the involvement of a litigation funder. It is contended that that circumstance is likely to give rise to a number of interlocutory applications and possible appeals.
[50] There is a further layer of asserted complexity. Mr Harrison points out that this proceeding is largely concerned with events in the state of Georgia; that the factual background is relatively complex, and that there will be a need for wide ranging discovery and for the calling of evidence from witnesses residing overseas. All of these considerations suggest, Mr Harrison argues, that this is a proceeding which ought to be conventionally managed under the orthodox case management system, rather than under the Commercial List, which is better suited for expediting cases which can be brought to an early conclusion.
[51] Mr Harrison also refers to s 24G of the Judicature Act, which requires a party desiring to appeal to the Court of Appeal from an interlocutory ruling of a case in the Commercial List to obtain the leave of this Court, or if that is refused, the leave of the Court of Appeal, in each case within strict time limits. Mr Harrison says that the defendant strenuously objects to any curtailment of its ordinary rights of interlocutory appeal.
[52] For the plaintiff Mrs Grant submits that:
a) The case is plainly eligible for the list because it relates both to the ordinary transactions of a person engaged in commerce or trade, and to insurance or commercial agency usages;
b) It has a distinctly commercial flavour;
c) The sum at stake is significant;
d) Claims founded on causes of action in tort have been permitted to remain on the list despite applications for removal.[29] Likewise, cases involving claims of fraud and deceit have been dealt with in the list.[30]
e) The case requires careful and consistent management to ensure a fair and timely trial. Most of the factors identified by Mr Harrison support retention of the case on the list, rather than removal. Delays to date are not the fault of the plaintiffs; the fact that the case is complex, or that discovery may be lengthy are not reasons for removing it from the list:[31];
f) Although there may well be a number of interlocutory applications, there is nothing to suggest that they will be so numerous and so complex that they will tend to bog down the Commercial List, that being a factor sometimes taken into account by the Court;
g) The plaintiffs accept that there has been a delay in bringing the proceeding by reason of earlier impecuniosity, but now that funding arrangements have been made, delays on that ground will not recur.
Retention on the Commercial List will assist in ensuring that the proceeding is managed expeditiously from now on:[32]
[53] Counsel are agreed that an application for removal from the Commercial List involves “a simple balancing exercise ... with no onus either way”.[33]
[54] Ultimately, the application must turn on a balancing of all of the relevant factors. I am satisfied that the case was eligible for entry in the first place. Of the other factors relied upon by Mr Harrison, the most substantial are the number and complexity of likely interlocutory matters, and restrictions on rights of appeal on such matters.
[55] In my view, the current state of the Commercial List is such that the Court is easily able to accommodate successive interlocutory applications in cases on the list, and to resolve those applications more expeditiously than under the conventional case management regime.
[56] The restriction on rights of appeal to the Court of Appeal is intended to weed out appeals on relatively minor (especially procedural) matters so as to ensure that the substance of the dispute reaches the Court at the earliest reasonable time. It is not intended to preclude a party from taking to the Court of Appeal significant interlocutory issues, not obviously devoid of merit. The Court has not routinely accorded significant weight in the context of removal applications to appeal right restrictions.
[57] Having weighed the competing considerations I am satisfied that it is appropriate that this case remain in the Commercial List. The manifest advantages of doing so outweigh the defendant’s concerns.
[58] The application for removal is accordingly declined.
Conclusions
Summary
[59] In summary, I make an order that the plaintiffs produce to the Court the litigation funding agreement for inspection within 15 working days of the date of this judgment. There will be a stay of the proceeding until the agreement is so produced. The agreement will not be disclosed to the defendant without counsel first having an opportunity to make further submissions.
[60] The defendant’s application to remove the proceeding from the commercial list is declined.
Costs
[61] Costs are reserved. Each party has enjoyed a measure of success. It may be that counsel will agree that costs ought to lie where they fall. But if counsel are unable to agree they may file memoranda in the usual way.
C J Allan J
[1] Saunders v
Houghton [2010] 3 NZLR 331
(CA).
[2] At
[22].
[3] At [21]-[34], [67]-[79].
[4] At [36].
[5] Jeffery &
Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75
(HCA).
[6] At
[77]-[79].
[7]
Re Nautilus Developments Ltd (in liq) [2000] 2 NZLR 505
(HC).
[8] Re
Gellert Developments Ltd (in liq) (2001) 9 NZCLC 262,714 (HC).
[9] At
[23].
[10]
At
[12]-[15].
[11]
At
[21].
[12] At
[25].
[13] Citic
New Zealand Ltd v Fletcher Challenge Forests Industries Ltd HC Auckland CP
583- SW99, 1 March
2002.
[14] At
[128].
[15]
Auckland City Council as Assignee of Body Corporate 16113 v Auckland City
Council [2008] 1 NZLR 838 (HC).
[16] Jupiter
Air Ltd (in liq) v Australian Aviation Underwriting Pool Pty Ltd (2002) 16
PRNZ 702 (HC).
[17]
Abraham v Thompson [1997] 4 All ER
362.
[18]
R & Everything Else Inc v Hallenstein Bros Ltd HC Hamilton CP17/98, 9
February 2001.
[19]
Martell v Consett Iron Co Ltd [1955] Ch
363.
[20]
Arkin v Borchard Lines Ltd [2005] 3 All ER 613
(CA).
[21]
Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2005] 1 NZLR 145
(PC).
[22] Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; [2006] 229 CLR 386 (HCA).
[23] Jeffery
& Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; [2009] 239 CLR
75.
[24]
Kingsheath Club of the Clubs Ltd (in liq) [2003] FCA
1034.
[25]
Re Global Medical Imaging Management Ltd (in liq) [2001] NSWSC
476.
[26]
Houghton v Saunders [2009] NZHC 878; (2009) 19 PRNZ 476
(HC).
[27]
At
[72].
[28]
High Court Rules
29.13(1).
[29]
Taspac Oysters Ltd v James Hardie & Co Pty Ltd [1990] 1 NZLR 442
(HC).
[30]
Ports of Auckland Ltd v NZ Seafarers IOUW (1998) 11 PRNZ 696 (HC);
Giltrap v McNeill (1987) 1 PRNZ 212 (HC) and Jagwar Holdings Ltd v
Fullers Corp Ltd (1989) 3 PRNZ 276 (HC).
[31] Taspac Oysters at 444-445.
[32] Ariadne Australia Ltd v Kupe Group Ltd (1991) 4 PRNZ 563 (HC) at 565.
[33] Cadbury Ltd v Effem Foods Ltd (2003) 16 PRNZ 991 at [17].
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