Clode v Sullivan [2016] NZHC 529 (24 March 2016)

Last Updated: 6 June 2017

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-2717 [2016] NZHC 529

BETWEEN	BRENT DOUGLAS CLODE First Plaintiff
AND	SYNERGY MANAGEMENT LIMITED Second Plaintiff
AND	MICHAEL GRANT SULLIVAN AND DUTHCO TRUSTEES (SULLIVAN) LIMITED AS TRUSTEES OF THE SULLIVAN FAMILY TRUST NO 1 First Defendants
AND	DAVID ROBERTS JANS Second Defendant
AND	THOMPSON PARK TRUST LIMITED AS TRUSTEE OF THE THOMPSON PARK TRUST Third Defendant

Hearing:	23 March 2016
Counsel:	B Clode, First Plaintiff, in person M Pascariu and J M Embling for First and Third Defendants P Finnigan for Second Defendant
Judgment:	24 March 2016

_{JUDGMENT OF PALMER J}

This judgment was delivered by me on 24 March 2016 at 10.30 am, pursuant to Rule 11.5 of the High Court Rules.

_{Registrar/Deputy Registrar}

Solicitors:

MinterEllisonRuddWatts: M Piscariu

Duthie Whyte Solicitors: N Harrison

Date...............

CLODE & ANOR v SULLIVAN FAMILY TRUST NO 1 & ORS [2016] NZHC 529 [24 March 2016]

Summary

[1] Mr Brent Clode, the first plaintiff, seeks leave to amend his Statement of Claim. The first and third defendants oppose leave. I consider that allowing the amendment is in the interests of justice and will not significantly prejudice the defendants or cause significant delay. I grant leave for the plaintiffs to file an Amended Statement of Claim by a strict deadline of 5 pm Wednesday 30 March

2016. I vary the timetable for the defendants’ evidence to be served by 5 pm

Sunday 3 April 2016 and filed by 9 am Monday 4 April 2016.

The Parties

[2] Mr Clode appeared, in this hearing, as a litigant in person. He assured the court that he would have counsel representing him at the trial of this matter which is to begin on Monday 4 April 2016. He requested leave to represent the second plaintiff - which is a company, for the purposes of this application. He advised that there is no difference in the interests of the first and second plaintiffs. Other counsel did not object, for that purpose. I granted the leave requested.

[3] Mr Finnigan, for the second defendant, noted that his client’s interest in this application related only to part of the third cause of action and the whole of the fourth cause of action against his client. In response, Mr Clode indicated that he is now proposing to discontinue the proceedings against Mr Jans. In view of that, I excused Mr Finnigan from appearance for the rest of the hearing.

The Proceedings

[4] The substantive case concerns a property development at 8 Thompson Park Rd, Mt Wellington, Auckland. The plaintiffs and the first defendants entered into a Settlement Agreement (the Agreement) dated 3 July 2014 which had the trustees paying Mr Clode $450,000 in two payments and Mr Clode buying Unit 80 in the development, either for no cost or for $505,000. The third defendant owns the property and the second defendant, another property developer involved in the development, is a shareholder and director of a related company.

[5] In September 2014 the second payment did not occur resulting in Mr Clode issuing proceedings and a statutory demand and giving notice of cancellation of the Agreement. On 20 November 2014 the first defendants also gave notice of cancellation of the Agreement and on 21 November Mr Clode withdrew his notice.

[6] In the current Statement of Claim, dated 24 March 2015, the plaintiffs seek:

(a) payments from the first and third defendants under s 9 of the Contractual Remedies Act 1979 (CRA), or in equity, including for $5 million for intellectual property and other benefits Mr Clode claims to have provided to the development;

(b) damages from Mr Jans for breach of contract; (c) transfer of shares by Mr Jans to Mr Clode

[7] In her judgment of 29 September 2015, Peters J observed that there were difficulties with the plaintiff’s pleadings:¹ they hadn’t pleaded cancellation although they were relying on it in their claim under s 9 of the CRA; and the pleading does not establish the basis for the $5 million claimed from the first and third defendants.

[8] The close of pleadings date was 4 December 2015. The proceedings are to go to trial on 4 April 2016. Mr Clode and counsel for the first and third defendants advised me that everything is on track for that. The plaintiff’s evidence includes evidence that would support the amendments sought to be made to the Statement of Claim. Briefs of evidence are due from the first and third defendants by 12 pm Friday 1 April 2016.

[9] On 10 March 2016 the plaintiffs applied for leave to amend the Statement of Claim. In her minute of 11 March 2016, timetabling the application, Peters J requested the plaintiffs review their pleading having regard to her observations in the

_{judgment of 29 September 2015.}

¹ Clode v Sullivan & Ors [2015] NZHC 2364 at [30]- [33].

[10] The first and third defendants oppose the application.

Application

[11] The plaintiffs apply for leave to file a draft Third Amended Statement of

Claim:

(a) to simplify the pleading;

(b) to respond to the observations of Peters J in her judgment of

29 September 2015, in particular to remove the intellectual property claim;

(c) to add a new cause of action, for rectification of the Agreement; and

(d) as became apparent at the hearing, also to remove the claims against the second defendant.

[12] Mr Clode says he would be substantively prejudiced by not being able to argue the rectification cause of action which would increase the value of his potential redress. Mr Clode says the basis for claiming rectification only arose with discovery of emails from the defendants’ prior solicitors that he says show the defendants deliberately neglected to raise the failure of the Agreement to record that transfer would be at no value (rather than at $505,000). He also says that this amendment was foreshadowed in his affidavit of 10 September 2015. Mr Clode’s explanation for the delay in amending the Statement of Claim, since then and the 29 September

2015 judgment, is that financial pressures forced him to act without legal representation until he recently obtained assistance. He fully expects to have legal representation for the 4 April trial. He says he expects the Amended Statement of Claim could be filed and served within two days of leave being granted.

[13] The first and third defendants oppose the amendments which would add a new cause of action for rectification. Their primary submission concerns the merits of the new cause of action. First, they say the cause of action would likely be dismissed by the Court as the Agreement had been either cancelled, either by

Mr Clode or by the first defendant. Either way they say it is no longer capable of being rectified. Second, they say they will be prejudiced in having to amend their own pleadings in response and in having to file additional evidence in a very limited time period. They add that the proposed amended pleading does not address the first problem identified by Peters J (that the plaintiffs have not pleaded cancellation). The first and third defendants do want to keep the trial date of 4 April 2016, as does the Court.

Decision on Amendment

Law

[14] Rule 7.7 of the High Court Rules (“Steps after close of pleadings date

restricted”) provides that:

(1) No statement of defence or amended pleading or affidavit may be filed, and no interlocutory application may be made or step taken, after the close of pleadings date without the leave of a Judge.

(2) Subclause (1) does not apply to—

(a) an application for leave under that subclause; or

(b) a pleading or an affidavit that merely brings up to date the information before the court; or

(c) an application for amendment of a defect or an error under rule 1.9.

[15] Based on the authorities, I summarise the considerations relevant to obtaining leave to amend pleadings after the close of pleadings date as:²

(a) the merits of the proposed amended pleading;

(b) whether irreparable damage would be suffered by the applicant.

_{(c) the timing of the application and magnitude of, and reasons for, delay;}

² Drawing on: Elders Pastoral v Marr [1987] NZCA 18; (1987) 2 PRNZ 383 (CA) at 385; Fordham v Xcentrix Communications Ltd (1996) 9 PRNZ 682 (HC); Body Corporate 325261 v McDonough [2014] NZHC 1821 at [12].

(d) the effect on public resources reflected in the impact on case management and the timetable to trial;

[16] The Court of Appeal has also noted the importance of the principle that the parties should have every opportunity to ensure that the real controversy goes to trial so as to secure the just determination of the proceeding.³ The overarching requirement is to exercise the discretion in the interests of justice.

Decision

[17] The primary argument against leave made by Mr Pascariu, for the first and third defendants, concerned the merits of the rectification cause of action. Their analysis of the case law involved examination of commentary on an 1864 English case and distinguishing a 1992 Australian case.⁴ Mr Pascariu may well be correct in his analysis that rectification is not possible since the Agreement was cancelled by either one side or the other. But that is not something I am prepared to prejudge on

the basis of one hour of argument, before trial and without the benefit of argument from counsel on the other side.

[18] If Mr Pascariu is correct then amending the Statement of Claim to allow it to be argued will not affect the outcome. If he is not correct, then there would be weight to the plaintiffs’ argument that they would suffer irreparable prejudice in the amount of their claim if the amendment were not able to be made.

[19] In relation to the other considerations, I regard lack of access to legal advisers as a reasonable explanation for the delay in filing the application for amendment. I also take into account that the issue was raised in the plaintiff’s affidavit of

10 September 2015 so the defendants cannot be said to be completely taken by surprise.

[20] The tightness of the timetable is a problem. But I meet that by extending the time for the defendants to serve their Amended Statement of Defence and their

³ Thornton Hall Manufacturing Ltd v Shanton Apparel Ltd [1989] NZCA 159; [1989] 3 NZLR 304, (1989) 3 TCLR

_{249 (CA) at 309, 252.}

⁴ Borrowman v Rossel [1864] EngR 229; (1864) 16 CB (NS) 58; 143 ER 1045 at 1050; Trawl Industries of Australia

Pty ltd v EFFEM Foods Ptd Ltd (1992) 27 NSWLR 326 (CA) at 345, 346.

evidence on the plaintiffs from noon Friday 1 April to 5pm Sunday 3 April and to file them in court by 9am Monday 4 April – the morning of the trial. That will not be beneficial to the plaintiffs but that is the price for being able to make their proposed amendments. Mr Clode indicated at the hearing that he would not oppose the defendants having a few additional days.

[21] Accordingly, I grant leave for the Statement of Claim to be amended and served and filed in accordance with that timetable and in accordance with the draft that was filed with the Court with the application of 10 March 2016 (amended as is necessary to discontinue the claims against the second defendant).

[22] I also request that the plaintiffs ensure that the amended Statement of Claim is clear about their position on the matters stated at paragraphs 15(a) and 18(b) of the “Points for hearing on 23 March 2016” handed up to the Court, regarding the plaintiff’s position on cancellation and the alternative relief sought. This clarification will benefit both parties and the Court.

[23] My grant of leave is conditional on the plaintiffs filing and serving the

Amended Statement of Claim by a strict deadline of 5 pm Wednesday 30 March

2016. The leave expires then and amendments after that will not be accepted.

[24] I would be inclined to award costs for this application to the defendants but I leave that to be determined in the context of the awarding of costs for the substantive proceeding.

Palmer J