Hi-Gene Limited v Swisher Hygiene Franchise Corporation [2010] NZCA 220 (28 May 2010)

Last Updated: 3 June 2010

IN THE COURT OF APPEAL OF NEW ZEALAND

CA158/2010 [2010] NZCA 220

BETWEEN HI-GENE LIMITED
Applicant

AND SWISHER HYGIENE FRANCHISE CORPORATION
Respondent

Hearing: 18 May 2010

Court: Arnold, Ellen France and Baragwanath JJ

Counsel: J B Orpin for Applicant
A C H Clemow and N P Tetzlaff for Respondent

Judgment: 28 May 2010 at 3 pm

JUDGMENT OF THE COURT

1. The application for an extension of time to appeal is granted on the conditions set out in [25](a) of the reasons of the Court.
2. The stay granted by Duffy J on 31 March 2010 is extended until the 26 July 2010 or until further order of the Court. The conditions of the stay are otherwise varied as set out in [25](b) to (e) of the reasons of the Court.

100. The appeal is set down for hearing on 26 July 2010.

4. No order as to costs.
   

REASONS OF THE COURT
(Given by Ellen France J)

Introduction

[1] This is an application for an extension of time to appeal under r 29A of the Court of Appeal (Civil) Rules 2005 (the Rules) and for a variation of the conditions of a stay under r 12(6) of the Rules. The parties are agreed that an extension of time is appropriate so the only issues relate to the conditions of the extension of time and of the stay and to costs on this application.

Background

[2] Swisher Hygiene Franchise Corporation (Swisher), the respondent, is based in the United States. It runs an international franchise cleaning system. Hi-Gene Limited (Hi-Gene), the applicant, is the master franchisee in Australasia.
[3] Disputes arose between the parties which led to Swisher initiating arbitration in North Carolina. The arbitration proceeded in the absence of Hi-Gene. The arbitral panel made an award on 6 February 2009 and ordered Hi-Gene to pay some US$515,000 in damages and costs.
[4] Swisher successfully sought an order in the High Court for recognition and enforcement of the arbitral award. Hi-Gene had opposed Swisher’s application and unsuccessfully sought an order refusing recognition and enforcement on the basis to do so was contrary to public policy because Hi-Gene’s right to natural justice had been breached.[1]
[5] Hi-Gene considered leave of the High Court was necessary to appeal to this Court. A leave application was filed in a timely manner. However, the parties subsequently came to the view there was a right of appeal to this Court under s 66 of the Judicature Act 1908. This led to the filing in this Court of the application for an extension of time.
[6] Hi-Gene then sought a stay of judgment pending determination of the application for an extension of time. Duffy J on 31 March 2010 granted a stay for three months on conditions.

The current application

[7] As we have noted, the parties are agreed that an extension of time should be granted. We deal with the remaining issues in dispute in turn.

The conditions on the stay

[8] The stay granted by Duffy J was subject to the following conditions:[2]

1. The stay of execution is for a period of three months, or whenever the Court of Appeal determines Hi-Gene’s application for leave to appeal out of time;
2. The parties are to liaise with the Registry to ensure that if the leave application is not likely to be determined within the three month period, the stay of execution is brought back before the Court in the form of a telephone conference before me, at which time the need for an extension of the stay of execution will be considered;

100. All monies that the sub-franchisees are currently paying to Hi-Gene are to be paid into the trust account of a neutral solicitor, and held there until such time as the Court of Appeal determines the application for leave to appeal, or for any other reason the stay of execution comes to an end;

4. If the parties are unable to agree on a neutral solicitor, that person is to be determined by the Registrar of this Court;
5. When it comes to resolving how the monies which the sub-franchisees pay to the neutral solicitor are to be ultimately disbursed, the parties are to agree a process for resolving any dispute over how this is to be achieved;
6. If the parties are unable to agree on a process, the matter is to be resolved by a neutral umpire into the form of an Associate Judge of this Court, or a Queen’s Counsel to be appointed by a Registrar of this Court; and
7. Leave is reserved to the parties to return to Court should any matter relating to the stay require re-consideration, or there is a change of circumstance.

[9] The Judge said that the grant of the stay was conditional on Hi-Gene agreeing to all of these conditions. Hi-Gene sought to have condition c) reviewed in the High Court but Duffy J indicated in a minute that other fixtures prevented her from hearing the review application before the matter was to come before this Court.
[10] The issue before us was whether condition c) should be set aside or varied as Hi-Gene contends.
[11] Hi-Gene says that if it is required to pay over the monies it receives from the sub-franchisees it will be forced into liquidation and its appeal thereby rendered nugatory. Hi-Gene submits the condition should be set aside. As an alternative, Hi-Gene proposes that instead of paying $1,900 a week (the amount it receives from the sub-franchisees) it should be required to pay $250 a week. The $250 figure represents Hi-Gene’s profit over what it costs Hi-Gene to provide services to the sub-franchisees.
[12] We can deal with this aspect fairly briefly.
[13] In terms of Hi-Gene’s argument the condition should be set aside, Hi-Gene is seeking an indulgence in various respects against a background of delay. The latter factors tell against setting aside the condition altogether.
[14] We turn then to Hi-Gene’s alternative proposition, that is, that condition c) should be varied. In our view, given Swisher agrees an extension of time is appropriate, it would make no sense to impose on Hi-Gene a condition which is likely, in a practical sense, to render the appeal nugatory. While the fact an appeal will be rendered nugatory is not invariably decisive,[3] it is highly relevant here.
[15] Further, Swisher accepts Hi-Gene incurs costs in providing services. Swisher also accepts there is some benefit to the sub-franchisees from the continuation of these services although there is debate about the level of services provided. Nor is Swisher in a position to challenge Hi-Gene’s claim that payment at $1,900 a week is beyond it. While not consenting to any variation, Mr Clemow acknowledged that, when compared with the arbitral award, there was not a big difference in the scale of things between the original figure of $1,900 per week and the proposed adjustment of $250 per week. Finally, the importance of the principle of finality in relation to arbitral awards can be met by the imposition of conditions on the extension of time.
[16] The other relevant factor is that a fixture is available on 26 July 2010. At the hearing before us, Mr Clemow said that date was suitable to Swisher. Mr Orpin for Hi-Gene said he would obtain instructions on the point. Senior counsel for Hi-Gene, Mr Templeton, subsequently has suggested that more time will be needed than the half-day then available on 26 July and that hearing before the permanent Court is appropriate. Nothing in the material before us supports the proposition that hearing before the permanent Court is necessary. However, it now transpires that a full day is available on 26 July, so that will meet Mr Templeton’s concern about hearing time.[4]
[17] In these circumstances we consider condition c) should be varied in the way contended for by Hi-Gene. The parties are agreed that Sellar Bone will be the stakeholder referred to in c). The parties also agree Hi-Gene should pay the $250 per week from 31 March 2010 (the date of the stay judgment). The duration of the stay will need to be extended.

The conditions to be imposed on the extension of time

[18] Swisher proposes that, as a condition of the grant of an extension of time. Hi-Gene should be directed to, within ten days:

(a) File its notice of appeal;

(b) Pay the filing fee;

(c) Provide security for costs;

(d) Apply for the allocation of a hearing date;

(e) File a case on appeal;

(f) Pay all previous costs awards in the High Court proceedings;

(g) Specify that Sellar Bone is the neutral stakeholder; and

(h) Agree that the monies shall be ultimately disbursed to the party who wins the appeal, within seven days of this Court issuing its decision by email, and there shall be no challenge in any forum to such payment.

[19] Hi-Gene agrees conditions (a) to (e) are appropriate. As we have noted, the parties are agreed Sellar Bone will be the stakeholder.[5]
[20] That means the only issues are whether this Court should direct Hi-Gene to pay all previous costs awards and the scope of the provision for the ultimate disbursement of the monies paid to Sellar Bone.[6]
[21] We agree with Hi-Gene that it would not be appropriate for us to order Hi-Gene to pay the previous costs awards. Mr Clemow could not point us to any authority for this proposition. Further, the position in terms of costs on the appeal will be dealt with by the payment of security for costs. Finally, the bulk of the costs ($9,015.00) are potentially affected by the outcome of the appeal. (The remaining amount, $5,120.00, relates to the aborted application for leave from the High Court to appeal to this Court.) If Swisher nonetheless wishes to enforce the High Court costs awards, it should use the appropriate High Court mechanisms.
[22] Hi-Gene’s concern about the condition relating to disbursement of the monies was primarily directed to the requirement “there shall be no challenge in any forum to such payment”. We consider it is sufficient at this stage to record agreement as to the recipient of the monies but not to seek to proscribe any further challenges Hi-Gene may have.

Costs on the present application

[23] Both parties seek costs on the present application. Swisher does so on the basis that granting an extension of time is an indulgence and that Swisher has acted reasonably. Hi-Gene submits the matters between the parties are those which the High Court was not in a position to deal with and so costs should follow the event in the usual way.
[24] There is some force in the arguments of both parties on costs. On balance, we consider costs should lie where they fall. Both parties have had some success and the matter comes before this Court because the High Court could not deal with it at the relevant time.

Disposition

[25] We make the following orders accordingly:

(a) An extension of time to appeal is granted on the basis that Hi-Gene will within seven days:

(i) File its notice of appeal;

(ii) Pay the filing fee;

(iii) Provide security for costs;

(iv) File a case on appeal;

(v) Agree that the monies paid to Sellar Bone under condition c) of the stay shall be ultimately disbursed to the party who wins the appeal within seven days of this Court issuing its judgment; and

(vi) Make a payment of $2,000 to Sellar Bone. This payment is the $250 a week owing for the period from 31 March 2010 to 26 May 2010 under condition c) as varied in order (d) below.

(b) The stay granted by Duffy J on 31 March 2010 is extended until 26 July 2010 or until further order of the Court.

(c) Conditions a), b) and d) – f) of the stay are rescinded.

(d) Condition c) is varied to read:

$250 of the monies that the sub-franchisees are currently paying to Hi-Gene is to be paid each week to the trust account of Sellar Bone, and held there until such time as the Court of Appeal determines the appeal, or until such time as for any other reason the stay of execution comes to an end.

(e) The reference in condition g) to “Court” is to be read as a reference to this Court.

(f) The appeal is set down for hearing on 26 July 2010.

(g) No order as to costs on this application.

Solicitors:
Foley & Hughes, Auckland for Applicant
Gaze Burt, Auckland for Respondent

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[1] Swisher Hygiene Franchise Corporation v Hi-Gene Ltd HC Auckland CIV-2009-404-1573, 2 December 2009.
[2] At [37].
[3] Cousins v Heslop [2007] NZCA 377, (2007) 18 PRNZ 677 at [10].

[4] We add that counsel may need to consider whether the appeal will raise issues about the correspondence with which they are associated: Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5 at [51] per Tipping J, at [99] per McGrath J, and at [147] and ff per Wilson J.
[5] [18](g), above.
[6] [18](f) and (h), above.