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Merj Holdings Limited v Sipka Holdings Limited [2016] NZCA 521 (4 November 2016)

Last Updated: 11 November 2016


IN THE COURT OF APPEAL OF NEW ZEALAND
BETWEEN
 Applicant
AND
 First Respondent
Second Respondent
Hearing:
20 September 2016
Court:
Wild, French and Miller JJ
Counsel:
J A Farmer QC and S R G Judd for Applicant T J Rainey for Respondents
Judgment:


JUDGMENT OF THE COURT

  1. The application for leave to appeal under s 67 of the Judicature Act 1908 is declined.
  2. The applicant must pay one set of costs to the respondents for the application on a band A basis together with usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by French J)

Introduction

[1] Merj Holdings Ltd (Merj) wishes to appeal a decision of Wylie J in the High Court at Auckland.[1] In the decision Wylie J purported to exercise his powers under s 76(1)(b) of the District Courts Act 1947 and remit the question of damages to the District Court for a rehearing involving the calling of further evidence. Merj contends the Judge had no jurisdiction to do that.
[2] The issues for consideration are:

Factual Background

[3] Merj sold a commercial property to the respondents. During the sale negotiations Merj represented that the property was not earthquake prone because its structure was rated at 43 per cent of the new building standard. Merj did not disclose it had obtained an engineering report stating the building was rated below 33 per cent and required strengthening.
[4] The respondents issued a proceeding in the District Court alleging misrepresentation under the Contractual Remedies Act 1979 and misleading and deceptive conduct under the Fair Trading Act 1986. They sought damages of $191,300 being the cost they had incurred of bringing the building up to 100 per cent of the new building standard and the loss of rental income.[2]
[5] Judge Blackie found the representation was a misrepresentation actionable under both statutes.[3] He was not, however, prepared to award the respondents the full amount of the damages sought. In his view, all the respondents were entitled to was the cost of bringing the building up to 43 per cent, which (relying on evidence from an engineer called by Merj) he fixed at $37,000. To award the full amount sought would, he considered, constitute betterment.[4]
[6] The respondents appealed to the High Court against the damages award. Merj cross-appealed against Judge Blackie’s finding of liability. In the alternative, Merj contended the damages award should be “varied” to an award of no damages, for want of a causal link between the alleged misrepresentation and the loss claimed by the respondents.
[7] Justice Wylie upheld the District Court’s findings of liability but disagreed with the approach Judge Blackie had taken to quantum.[5] In Wylie J’s view, the cost of upgrading the building was not the correct measure of damages. That was because the costs were not attributable to the misrepresentation. Rather, they were, he found, attributable to a decision the respondents themselves had made after buying the property to change the use of the building. That decision triggered s 115 of the Building Act 2004, which required the respondents to upgrade to 100 per cent compliance with the building code. In other words, the costs would have been incurred anyway, regardless of any misrepresentation.[6] There was no evidence that the cost of earthquake strengthening would have been less had the starting point been higher (that is, 43 per cent instead of below 33 per cent).[7]
[8] Justice Wylie accepted the respondents might have been entitled to recover damages on the basis they had paid too much for the building. However, although there was evidence the respondents were induced to pay the price they did because of the representation and considered that in its true state it was worth much less, they had not adduced any expert valuation evidence. In the absence of valuation evidence, Wylie J said he was not prepared to pluck a figure out of the air.[8]
[9] On the other hand, the Judge did not consider it would be just to award the respondents only nominal damages given the blatant nature of Merj’s misrepresentation and deceptive conduct.[9] In all the circumstances, Wylie J considered the most just outcome was to vacate the damages award but remit the matter back to the District Court for the issue of quantum to be retried on proper evidence.
[10] Merj does not now challenge the findings on liability. It does, however, wish to challenge the Judge’s decision to remit the matter back to the District Court to allow the respondents to call further evidence. Merj submits the power of the High Court to remit matters to the District Court for rehearing is subject to the same limitations that apply to the District Court’s own powers to order a rehearing. Under the District Court Rules 2014 the District Court can only order a rehearing if satisfied there has been a miscarriage of justice.[10]
[11] Merj sought leave from Wylie J to appeal to this Court. But the Judge declined to grant leave.[11] Merj then filed an application for leave in this Court but since then has also raised an argument that leave is not required. We therefore address this latter argument first.

Is leave required?

[12] Under s 67 of the Judicature Act 1908 leave is required to bring a second appeal. Merj submits that although this proceeding commenced in the District Court, nevertheless leave may not be required because the appeal is not against Wylie J’s findings on the issues that were appealed from the District Court. What Merj is appealing is a matter determined for the first time in the High Court and that could only be determined by the High Court; that is, the decision to remit the case to the District Court for rehearing. Therefore it follows, in Merj’s submission, that this is a first appeal and Merj is entitled to appeal as of right under s 66 of the Judicature Act.[12]
[13] We do not accept that submission. It is necessary in every appeal brought under s 72 of the District Courts Act for the High Court to make a disposition of some sort, exercising the powers conferred on it by s 76. To suggest that the exercise of that dispositive power somehow constitutes a separate judgment distinct from the rest of the appeal is unsustainable. There is no authority for such a proposition and it would undermine the policy reasons for having a leave requirement in relation to second appeals.
[14] We conclude it is necessary for Merj to obtain leave.

Should leave be granted?

[15] This Court will only grant leave to bring a second appeal if the proposed appeal raises a question of law or fact capable of bona fide and serious argument involving some interest public or private of sufficient importance to outweigh the cost and delay of a further appeal.[13]
[16] In support of the application, Mr Farmer QC identified the key question for determination as being whether the High Court can on appeal do what the District Court could not do and direct a rehearing to enable a party to “have another go” and call evidence it could have called at trial but chose not to.[14]
[17] He submitted this was undoubtedly a question of general and public importance that extended beyond the facts of this case. He argued Wylie J’s decision was potentially far-reaching, and highly problematic. It was in the public interest for the decision to be corrected.
[18] Section 76 states:

Powers of High Court on appeal

(1) Having heard an appeal under section 72, the High Court may—
(2) The High Court must state its reasons for giving a direction under subsection (1)(b).
(3) The High Court may give the District Court any direction it thinks fit relating to—
(4) The High Court may act under subsection (1) in respect of a whole decision, even if the appeal is against only part of it.

...

(6) The powers given by this section may be exercised in favour of any respondent or party to the proceedings concerned, even if the respondent or party did not appeal against the decision concerned.

[19] Mr Farmer submitted s 76(1)(b) and indeed the power of any appellate court to remit a case back for rehearing must be circumscribed by the principle of finality of litigation. He emphasised the core nature of this principle, which finds expression in a number of well-established rules. These include the doctrine of res judicata,[15] the rule enshrined in s 98 of the Evidence Act 2006 preventing parties from calling evidence after closing their case, the limited circumstances in which judgments can be recalled, the restrictions on parties being allowed to adduce further evidence on appeal and the rules relating to the District Court’s own power to order a rehearing. In Mr Farmer’s submission, any interpretation of s 76 had to be consistent with those fundamental principles, which Parliament is deemed to have been aware of when enacting s 76. He contended that by allowing the respondents to improve their case after trial, Wylie J had arrogated to himself a power he simply did not have. The order made offended basic principles and was outside the scope of the sort of rehearings contemplated by s 76(1)(b).
[20] We accept the jurisdiction of the High Court under s 76 is a question of general and public importance. However, we do not consider it tenable to argue that Wylie J lacked jurisdiction to make the order he did. We know of no authority, principle or policy reason why the power of an appellate court should be coextensive with that of the court whose decision is under appeal.[16] Section 76 imposes no such limitation. It is a remedial provision and its wording is deliberately broad. Significantly, s 76(1)(b)(ii) expressly contemplates an order that will have the effect of the District Court considering a matter for the first time. Contrary to a submission made by Mr Farmer, we see no reason why those words should be limited solely to a situation where the District Court has deliberately chosen in its decision not to address a particular issue because it considered it unnecessary to do so.
[21] We note too that this Court in determining appeals has never considered itself unable to remit a case back for rehearing that might involve the calling of further evidence available at the time of trial. For obvious reasons it is a power that is exercised sparingly, but the power undoubtedly exists and has been exercised.[17] The fact a party has made a tactical choice at trial it now regrets might be a good reason not to exercise the discretion in a particular case, but that is a different matter from saying there is no jurisdiction at all.
[22] For completeness we confirm the doctrine of res judicata has no application to the rehearing directed by Wylie J. The appeal against the original District Court decision has been allowed and the damages award vacated. Accordingly, there has been no final decision on quantum. This is not a situation of a litigant attempting to relitigate issues already decided.
[23] The other proposed grounds of appeal (that is, other than the jurisdictional argument) relate to the Judge’s exercise of his discretion, which is case-specific, and do not justify granting leave. We make two observations. The first is that, in our view, there were good reasons for granting a rehearing, having regard to the strength of the findings about the misrepresentation and deceptive conduct and the fact the legal analysis appears to have changed between trial and the High Court appeal.
[24] The relevant local authority responsible for administering building standards had adopted a policy under which a change of use would not have required any earthquake strengthening if the building had been as represented by Merj. Under the policy, a change of use only triggered the requirement to upgrade if the building was below 33 per cent. It appears to have been assumed by everyone at the District Court hearing that the policy was valid. The suggestion the policy was inconsistent with s 115 of the Building Act and therefore unlawful appears to have been raised for the first time in the High Court.
[25] The second point is that arguably Merj should consider itself fortunate the Judge made the order he did. On the material before Wylie J, we consider it would have been open to him to find that the full cost of the earthquake strengthening was equivalent to the difference in value between the building as represented and the building as it actually was, and enter judgment accordingly.
[26] We conclude the proposed appeal does not satisfy the threshold test for granting leave to appeal. The application for leave is accordingly declined.
[27] There is no reason why costs should not follow the event. We accordingly order that Merj is to pay the respondents one set of costs for the application on a band A basis together with usual disbursements.

Outcome

[28] The application for leave to appeal under s 67 of the Judicature Act is declined.
[29] The applicant must pay the respondents one set of costs for a standard application on a band A basis together with usual disbursements.






Solicitors:
J V Imperatrice, Auckland for Applicant
Rainey Law, Auckland for Respondents

[1] Sipka Holdings Ltd v Merj Holdings Ltd [2016] NZHC 279.

[2] They also sought damages for loss of profit but that claim is no longer relevant. In both the District Court and High Court a figure of $156,185.17 was referred to as the building costs incurred, but this appears to differ from the statement of claim.

[3] Sipka Holdings Ltd v Merj Holdings Ltd DC Papakura CIV-2003-055-557, 19 December 2014 [District Court judgment].

[4] At [87].

[5] Sipka Holdings Ltd v Merj Holdings Ltd [2015] NZHC 1980 [Substantive High Court judgment].

[6] At [71]–[73].

[7] At [78]–[79].

[8] Substantive High Court judgment, above n 5 at [80].

[9] At [82].

[10] District Court Rules 2014, r 11.24. The provision that was applicable at the time of the hearing, r 12.15 of the District Court Rules 2009, was identical to the current provision.

[11] Merj Holdings Ltd v Sipka Holdings Ltd [2016] NZHC 931.

[12] Section 66 empowers the Court of Appeal to hear and determine appeals from any judgment, decree, or order of the High Court, subject to other provisions of the Judicature Act 1908.

[13] Waller v Hider [1997] NZCA 221; [1998] 1 NZLR 412 (CA) at 413; Snee v Snee [1999] NZCA 252; [2000] NZFLR 120 (CA) at [22].

[14] In the District Court judgment, above n 3, at [54], the respondents are noted as having submitted it was not possible to use the “difference in value method as there is insufficient information and certainty of values”.

[15] The principle of estoppel per rem judicatam provides that where a final judicial decision has been pronounced by a New Zealand judicial tribunal of competent jurisdiction over the parties to and subject matter of any litigation, any party to that litigation is estopped as against any other party to the decision from disputing the decision on the merits in any subsequent litigation: Shiels v Blakeley [1986] 2 NZLR 262 (CA) at 266.

[16] There are dicta about the scope of s 76 in B & D Holdings Ltd v Warren HC Auckland CIV2010-404-6194, 17 February 2011 at [13] (not cited to us by counsel) that might at first blush appear to lend some support to the applicant’s submission. But the decision is not directly on point, it was an oral judgment and the dicta are not supported by any reasoning or authority.

[17] For example, in McLean v Marshall [2015] NZCA 370; and James v Wellington City [1972] NZLR 978 (CA).

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