Riccarton Construction Limited v Coljon Limited [2010] NZCA 430 (21 September 2010)

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Riccarton Construction Limited v Coljon Limited [2010] NZCA 430 (21 September 2010)

Last Updated: 5 October 2010

IN THE COURT OF APPEAL OF NEW ZEALAND

CA124/2010 [2010] NZCA 430

BETWEEN RICCARTON CONSTRUCTION LIMITED
Appellant

AND COLJON LIMITED
Respondent

Hearing: 14 September 2010

Court: Glazebrook, Hammond and Ellen France JJ

Counsel: R P Harley for Appellant
S W Rollo for Respondent

Judgment: 21 September 2010 at 11 am

JUDGMENT OF THE COURT

A The application by the respondent to strike out the appeal is granted.

2. The respondent will have costs as on a standard application for leave to appeal, that being the nearest analogy in the rules, Band A, and usual disbursements.
   

REASONS OF THE COURT
(Given by Hammond J)

Introduction

[1] This is an application by the respondent, Coljon Ltd (Coljon), to strike out this appeal on the basis that the appellant, Riccarton Construction Ltd (Riccarton), has failed to pay security for costs.
[2] The application is made in reliance on r 37(1) of the Court of Appeal (Civil) Rules 2005 (the Rules). Rule 37(1) provides:

Consequences of failure to comply with requirement to pay security for costs

(1) The Court may, on application, make an order striking out an appeal if security for costs is not paid by the time payment is due.

...

[3] Security for costs is due within 20 working days of the notice of appeal being filed.[1] The Notice of Appeal was filed on 11 March 2010 (it is incorrectly dated 11 March 2009). As is standard practice, a letter was sent on 12 March by the Registry case officer to the parties acknowledging receipt of the Notice of Appeal, and, inter alia, bringing to the appellant’s attention r 35 regarding security for costs.
[4] There was then an application under r 35(6) by the respondent to the Registrar to increase security for costs on the grounds that the appellant was, it claimed, insolvent and had not satisfied the costs awarded in the High Court despite demand being made. The appellant failed to respond to the application. On 30 April the Registrar granted the application and increased security for costs, noting that the purpose of security is to protect the respondent in the event of an unsuccessful appeal, and gave the appellant a further 20 working days from that date to pay security. That period expired on 28 May without payment being made.
[5] On 22 June, this Court received an application by the appellant to defer payment for security for costs. It was out of time. The Acting Registrar conferred with the President and then by letter dated 3 August informed the parties that:

At this time I am not inclined [to] grant an extension of time to the 20 working day period. The issue is to be before the Court for consideration on 14 September 2010. Unless further directed by the Court, a decision will not be made on the deferral application at this time.

In other words, it was considered appropriate to get on with the merits of the strike-out application, rather than have further unnecessary procedural complications.

[6] This attenuated history demonstrates serial non-compliance with the security requirements and belated applications to avoid the requirements for security by Riccarton.

The law

[7] As Glazebrook J said in Williamson v Selwyn District Council,[2] “[p]ayment of security is not optional. It is a requirement.” Security for costs may be waived or reduced only if the Registrar is satisfied that the circumstances warrant it.[3]
[8] Applications under r 37(1) to strike out may be granted where the appeal “has no realistic prospect of success”.[4] In Oraka Technologies Ltd v Geostel Vision Ltd[5] this Court suggested there were similarities between the jurisdiction under r 37(1) and that under r 29A regarding applications for extension of time to appeal insofar as the merits of the appeal itself were a critical relevant consideration. Thus, under r 29A applications it is also the case that a hopeless appeal will not be allowed to proceed to hearing.
[9] This approach reflects the concern that by the time a case reaches the appellate jurisdiction, it will have already been heard at least once. As a matter of policy, unmeritorious appeals should not put respondents to unnecessary expense and consume scarce judicial resources. But where it does appear that the appeal is arguable, access to justice should not lightly be denied.

Discussion

Further background

[10] Some further background is necessary in order to properly consider the merits of this appeal.
[11] The appeal is against a decision of Associate Judge Osborne in the High Court dismissing an application to set aside a statutory demand. The decision covers two judgments, delivered on 4 March 2010 and 19 March 2010 respectively.[6]
[12] That application arose out of Riccarton’s failure to pay a deposit of $300,000 due on 21 August 2009, time being of the essence, under a contract with Coljon Ltd to buy a Christchurch motor lodge. The standard terms of the REINZ/ADLS Eighth Edition 2006(2) standard sale and purchase agreement governing the deposit (cl 2) were crossed out and replaced with the following provisions:

2.0 Deposit

2.1 The purchaser shall pay the deposit to the vendor on or before the date reserved on the front page of this contract ; time being of the essence.

2.3 The deposit shall be in part payment of the purchase price.

[13] The provision on the front page read “Deposit (clause 2.0): $300,000.00 payable on 21 August 2009 time being of the essence”.
[14] Riccarton failed to pay the deposit at all. It remains unpaid.
[15] On 1 September 2009, the solicitors for Coljon sent a letter of demand to Riccarton’s solicitors in the following terms:

We refer to our facsimile of 21 August last. We note that your client has continued in its default to pay the deposit under the Agreement. We now give notice that unless the deposit is paid by 5.00 pm Friday 4 September 2009 our client will cancel the Agreement without prejudice to its rights thereunder.

[16] Coljon did not take any further steps to “cancel” the agreement, notwithstanding that Riccarton failed to pay the deposit by 5.00 pm Friday 4 September. Instead, it issued a statutory demand on 11 September for $300,320.
[17] Riccarton thereupon applied for an order setting aside the demand on the grounds that interest on the deposit amount was the only remedy available for such a default; that there was a substantial dispute that the debt was owing and due; that Coljon had repudiated the agreement by purporting to cancel it; and that Riccarton would suffer hardship and injustice if the demand was not set aside.[7]
[18] The Associate Judge dismissed the application, for reasons which are considered below. Submissions were called for on whether the Court should exercise its additional powers under s 291(1) of the Companies Act 1993 in declining an application to set aside. That led to the second judgment.
[19] Under the judgment of 19 March 2010, Riccarton was given until 20 April to pay the deposit with the consequence of failure to pay being that Coljon could apply to put Riccarton into liquidation.[8] Increased costs were awarded in Coljon’s favour for the unnecessary time and expense incurred. A demand was issued for those costs on 25 March 2010.
[20] At the time of the second judgment the Court also had before it an application by Riccarton to restrain Coljon’s application for an order to appoint a liquidator. It was set down for 19 April 2010. That proceeding was discontinued on 16 April 2010. Increased costs were again awarded to Coljon.
[21] A further application by Riccarton to stay proceedings taken by Coljon to appoint a liquidator was dismissed by Associate Judge Doherty on 6 July 2010. The Associate Judge considered that:[9]

It cannot be said that there is a real and genuine dispute in relation to the judgment funds. There is an order of this Court both as to the judgment sum and costs on that judgment. The dispute has been determined.

[22] There remains to be determined by this Court an appeal against a decision of the High Court declining Riccarton judicial review of a decision of the Commissioner of Inland Revenue.[10] One ground of opposition to the application for strike-out is that an injustice would result because Riccarton would not then be able to continue its proceedings against the Commissioner. By agreement, that appeal will not be heard until the Supreme Court has determined Contract Pacific Ltd v Commissioner of Inland Revenue.[11] But, as Associate Judge Doherty noted, it would be up to the liquidator to consider whether to continue this proceeding.[12] It is difficult to see how that unrelated proceeding can have any bearing on the matters before this Court presently.

Judgment of 4 March 2010

[23] The bulk of the proposed grounds of appeal relate to the judgment of 4 March 2010. We now consider the merits of those grounds.
[24] In the Associate Judge’s view, the submission that interest was the sole remedy contemplated under the agreement for default as to the deposit was untenable. It cut across the unequivocal provisions of the contract that was of the essence for payment of the deposit. As to the same proposition made with reference to s 5 of the Contractual Remedies Act,[13] the Associate Judge noted in addition the established principle that a vendor could sue for the deposit under a contract for sale and purchase as a stand-alone cause of action.[14] In any event, there is nothing in the terms of the contract to suggest that interest on the deposit in the event of default was to be the only remedy, to the exclusion of remedies under the Contractual Remedies Act. The Associate Judge was correct in law. He rightly considered there was no substantial dispute as to whether the deposit was owing. It was owing, in fact and in law.
[25] There was a good deal of argument about who had cancelled the agreement and what the effect of that might be. It is however, unnecessary to traverse that issue. That is because, even assuming (for the sake of argument) an effective cancellation, the authorities referred to earlier in support of the proposition that recovery of the deposit due constitutes a separate action to performance of the contract,[15] are also clear authority for the proposition that unconditional rights accrued under the contract prior to cancellation (here the payment of the deposit) remain enforceable notwithstanding cancellation.[16]
[26] Ms Harley orally raised before us, for the first time, a completely new argument: that the deposit was not payable until settlement (prospectively almost a year later). It is sufficient to note that the argument is completely untenable: again, it flies in the face of the express provision of the agreement for sale and purchase.
[27] A further ground relied on by Riccarton, namely that certain evidence was not read into the record – it had inadvertently not been attached to Mr McGoverne’s 12 February affidavit – related to a counterclaim for damages based on Coljon’s repudiation. The Associate Judge determined that there was no evidential foundation for Riccarton’s counterclaim for damages, even if it were to be accepted that Coljon had repudiated the contract. This is somewhat academic, as Coljon was not in breach of its obligations under the contract. It had an election, and whether it affirmed the contract or not, it was due the deposit.
[28] There has been no indication from the appellant that it is able to pay even an ordinary or reduced amount of security; instead it has filed, out of time, an application for security to be deferred or dispensed with. Moreover, there is every indication the company is incapable of paying security. The only way the company might be able to pay is if it came into funds as a result of the decision of the Supreme Court in the Contract Pacific litigation at some future time.

Conclusion

[29] Riccarton is endeavouring to keep its appeal alive for two reasons. First, as Ms Harley frankly recognised, it sees the $300,000 deposit as being a “windfall” to Coljon after the deal went off in the events which have happened. That is irrelevant: an earnest is an earnest and was meant to see that Riccarton got on with the transaction. It did not, and Riccarton has, in law, a present stand-alone claim for the unpaid deposit, which the Associate Judge correctly recognised.
[30] Secondly, Riccarton is trying to preserve its position in relation to collateral litigation. There may occasionally be a good and sufficient reason for such a stance. But there is no such reason here. The liquidator could still carry on that litigation, if he considered it meritorious, and worth powder and shot.
[31] The proposed grounds of appeal in this appeal are an attempt to re-launch the same very arguments that were put to and correctly rejected by Associate Judge Osborne. There is nothing in the fresh ground added before us.
[32] In our view, security for costs not having been paid, and the proposed grounds of appeal being without any merit whatsoever, the application by the respondent to strike out the appeal should be, and is, granted.
[33] The respondent will have costs as on a standard application for leave to appeal, that being the nearest analogy in the rules, Band A, and usual disbursements.

Solicitors:
Cousins & Associates, Christchurch for Appellant
Lane Neave Lawyers, Christchurch for Respondent

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[1] Rule 35(3).
[2] Williamson v Selwyn District Council [2008] NZCA 147.
[3] Rule 35(6).
[4] Reihana v Taupo District Court Registry [2006] NZCA 133; (2006) 18 PRNZ 736 (CA) at [9].
[5] Oraka Technologies Ltd v Geostel Vision Ltd [2009] NZCA 411.

[6] Riccarton Construction Ltd v Coljon Ltd HC Christchurch CIV 2009-409-2301, 4 March 2010; Riccarton Construction Ltd v Coljon Ltd HC Christchurch CIV 2009-409-2301, 19 March 2010.
[7] At [3].
[8] At [9].

[9] Riccarton Construction Ltd v Coljon Ltd HC Christchurch CIV 2010-409-848, 6 July 2010 at [37].

[10] Riccarton Construction Ltd v Commissioner of Inland Revenue HC Wellington CIV 2009-485-1930, 20 April 2010.

[11] Leave to appeal to the Supreme Court was granted in Contract Pacific Ltd v Commissioner of Inland Revenue [2010] NZSC 16, (2010) 24 NZTC 24,095. Judgment was reserved on 3 August 2010.
[12] At [35].

[13] Which provides that a contract may by express terms modify the remedies available under that Act.

[14] At [43] citing Prendergast v Chapman [1988] 2 NZLR 177 (HC); Brown v Langwoods Photo Stores Limited [1991] 1 NZLR 173 (CA); and Garrat v Ikeda [2002] 1 NZLR 577 (CA).
[15] Prendergast v Chapman; Brown v Langwoods Photo Stores Limited; and Garrat v Ikeda.

[16] See further, McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457 at 476-477 per Dixon J; Johnson v Agnew [1980] AC 367 (HL); Photo Production Ltd v Securicor Transport Ltd [1980] UKHL 2; [1980] AC 827 (HL).