AAM Limited v Exotica Enterprise Limited [2018] NZHC 1399 (13 June 2018)

Last Updated: 4 July 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2016-404-2850 [2018] NZHC 1399

BETWEEN	AAM LIMITED Plaintiff MUMTAJ YUNUS AGARBATTIWALA Second Plaintiff
AND	EXOTICA ENTERPRISE LIMITED First Defendant DARIUS KARANI Second Defendant MANUKA MASTERS LIMITED Third Defendant

Hearing:	on the papers
Counsel:	Second Plaintiff in person
Judgment:	13 June 2018

JUDGMENT OF ASSOCIATE JUDGE SMITH

[1] The second plaintiff applies without notice for an order directing that she be permitted to represent the first plaintiff (AAM) in this proceeding.

[2] The plaintiffs were originally represented by Mr Vincent Naidu of Vinci Law, Auckland, but on 21 March 2018 the second plaintiff caused a memorandum to be filed stating that the plaintiffs were now acting in person.

AAM LTD v EXOTICA ENTERPRISE LTD [2018] NZHC 1399 [13 June 2018]

[3] The case was called before me in the chambers list on 27 March 2018, and I advised the second plaintiff that, while she may represent herself as second plaintiff, she is not entitled to appear or file documents on behalf of AAM, which is a limited liability company.

[4] A fixture was made for the hearing of an application by the defendants for further discovery, further particulars of the plaintiffs' statement of claim, and security for costs, and those applications were heard by Associate Judge Bell on 16 April 2018.

[5] In the meantime, a four-day fixture had been allocated for the trial of the proceeding, commencing on 11 June 2018.

[6] In an oral judgment given by the Associate Judge on 16 April 2018, the plaintiffs were ordered to give the particulars sought by 28 May 2018. They were also ordered to file and serve an affidavit of documents, disclosing the documents in the schedule to an application the defendants had filed. His Honour vacated the fixture for 11 June 2018, and allocated a new fixture, for five days commencing on 29 April 2019.

[7] On the topic of representation of AAM, Associate Judge Bell said:

[18] A company can appear in the High Court only through counsel.¹ On the other hand in the District Court a company may be represented by its directors.² If the plaintiffs' claims were for $350,000 or less, this case could be transferred to the District Court so that Ms Agarbattiwala could appear for the company without a lawyer. As I understand the plaintiffs' claims, their losses are said to be more than

$350,000 even though they have not been fully calculated at this stage.

[19] Ms Agarbattiwala says that she has been talking to lawyers with a view to their acting for the plaintiffs. The lawyers made it clear that they would not act if the fixture for 11 June were maintained. They did not consider they would have enough time to prepare. As it happens, I am adjourning the matter but I am not adjourning for that reason. I expect Ms Agarbattiwala to have arranged legal representation for the plaintiffs by 30 April 2018 and that, once instructed, the lawyers will move promptly to address my directions for particulars and discovery.

1. Re G J Mannix Ltd [1984] 1 NZLR 309 (CA); Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679.

² District Court Act 2016, s 107(2)(a).

...

[38] I expect the plaintiffs to have legal representation by 30 April 2018. If not, the plaintiffs should understand that more rigorous orders may be made against them in the future.

[8] No application has been made to review the judgment of Associate Judge Bell, to the extent that it directed that AAM could appear in this Court only through counsel.

The grounds relied upon for the representation order

[9] The application states that AAM is a family-owned company. Ms Agarbattiwala and her son, Raphael are the two directors, and Ms Agarbattiwala holds 95 per cent of the shares in AAM. The application states that AAM, which was incorporated in May 2017, was operating smoothly until it made the alleged agreement to purchase from the first defendant the business then described as "Gift Shop Manuka Honey, Food and Beverage & Wine Products from New Zealand" which is the subject of this proceeding.

[10] The plaintiffs allege that the agreement was never successful, due to allegedly unfair business practices of the defendants which led to AAM's failure and the incurring of huge losses.

[11] Between April 2016 and March 2018, Ms Agarbattiwala says that the plaintiffs have paid $99,000 in legal costs for the proceeding, $95,000 of which has gone on counsel's fees. Ms Agarbattiwala says that she has exhausted all her life earnings in the purchase of the defendants' business, in the subsequent operations of AAM, and in the conduct of this litigation. She says that AAM is now unable to borrow any more.

[12] Ms Agarbattiwala submits that she is competent to represent AAM in the proceeding. She says that she has personal knowledge about the case and is well versed with all facts, events, documents and circumstances that are relevant. She is a graduate of Auckland University's business management program, and she says that she has been raised by an uncle who is a well-known lawyer who has been practising in the Courts for 35 years. She also has cousins who she describes as well-known lawyers.
[13] The application says that these family members have provided some support for AAM, but they are not New Zealand residents, and cannot appear in the New Zealand Courts.

[14] Ms Agarbattiwala described the general nature of the proceeding, including the plaintiffs' various claims. Under a subheading "the complexity of the factual and legal issues", the application says that the complexity is dependent solely on documentary evidence – hence, facts and evidence can be presented by Ms Agarbattiwala. A forensic accountant has been engaged to address the quantum of the plaintiffs' claims. Ms Agarbattiwala says that she will abide by the rules and regulations of the Court, and maintain the decorum of the Court, with the assistance of an approved McKenzie Friend who will guide her in the Court processes.

[15] The application states that the following exceptional circumstances exist which justify the representation order sought:

1. Board of Directors perused the estimate of legal representation fees of various lawyers which was about estimated $75,000 to $100,000 plus GST. ...

2. If the case is represented by Counsel, the family home will have to be sold in order to pay lawyer's fees or kept as securities by the lawyer. Further there is no guarantee of accurate estimation of the lawyer's quoted fees and may go over the estimates.

3. The estimated quote does not include court fees or forensic accountant's fees and other expenses as and when required which will have to be borrowed, approximate $50,000 to support other litigation fees.

4. Considering deflation in particularly movement and decreased property value 7-9% in the area, the family will have to bear another huge loss in the process of sale of the family home.

[16] The application also refers to a serious illness suffered by one of the minor shareholders in AAM.

[17] Having regard to all of those factors, the directors of AAM resolved unanimously to appoint Ms Agarbattiwala to act, appear and plead for AAM. The application states that the shareholders of AAM have no objection to that appointment.
[18] The application asserts that the defendants will not be disadvantaged if leave is given to Ms Agarbattiwala to represent AAM. Further, Ms Agarbattiwala will remain a plaintiff in the proceeding in her personal capacity, and she will remain good for any order for costs that might be made against AAM.

[19] More generally, the application says that the circumstances are "exceptionally beyond AAM's [control]," and if an application for leave to be represented by Ms Agarbattiwala is not granted she will be forced to sell the family home to arrange counsel's fees. While no loss would be caused to the defendants if the representation order sought were made, Ms Agarbattiwala's family would suffer considerably. That would be a miscarriage of justice.

[20] Finally, the application refers to a party's right to a fair trial and to justice. It states that those rights cannot be taken away from Ms Agarbattiwala "because AAM is incapacitated in engaging legal representation", and is not able to borrow funds to engage legal representation. In those circumstances, Ms Agarbattiwala's right to plead the case cannot be taken away.

[21] In support of the application, reference is made to the judgment of the Court of Appeal in Re G J Mannix Ltd,³ to Draft Rules on Company Representation 2011, and to s 27 of the New Zealand Bill of Rights Act 1990.

[22] The application is supported by an affidavit sworn by Ms Agarbattiwala. In her affidavit, she produces various documents relating to the proceeding, and confirms that, to the best of her knowledge and belief, all of the grounds on which the orders are sought are correct.

Discussion and conclusions

[23] In a very recent judgment on the question of representation of companies before the higher Courts in New Zealand, Jagose J summarised the law in the following terms:⁴

³ Re G J Mannix Ltd [1984] 1 NZLR 309 (CA).

⁴ Oceanic Palms Limited v KiwiRail Limited [2018] NZHC 679, [23]-[24].

[23] It is a well-established rule a company has no right to be represented in Court by other than a practising lawyer. The benefits of securing limited liability carry with them a range of obligations, of which the requirement to obtain legal representation in Court proceedings is one. The rule's rationale is to ensure proceedings are appropriately pleaded and managed, including by counsel with primary obligations to this Court. That is in part to ensure the company's and shareholders' interests are properly represented in any decision to participate in litigation.

[24] The Court retains discretion nonetheless to allow non-lawyers to appear on behalf of companies in exceptional circumstances.⁵ But those exceptional circumstances are generally to be regarded:⁶

... as a reserve or occasional expedient, for use primarily in emergency situations when counsel is not available or in straightforward matters where the assistance of counsel is not needed by the court or where it would be unduly technical or burdensome to insist on counsel.

[24] As noted by Jagose J in Oceanic Palms Ltd, the principle in Re G J Mannix Ltd has been confirmed by the Court of Appeal and the Supreme Court in more recent cases. In Commissioner of Inland Revenue v Chesterfields Preschools Ltd, the Court of Appeal concluded that it was not necessary to review the rule that a company has no right to be represented in the conduct of a case in Court except by a barrister, or by a solicitor in Courts or proceedings where solicitors have the right of audience. In Chesterfields, the Court of Appeal noted that "there is no doubt that the Mannix rule is still in operation". The Court declined to review the question of whether the Mannix rule should be maintained.

[25] The Court in Chesterfields in fact granted leave to Mr Hampton, an officer of the respondent, to represent all of the respondents, including himself on the hearing of the appeal, but it did so "reluctantly". As the Court noted, to have declined Mr Hampton's application to act not only for himself but also for two corporate respondents to the appeal would have resulted in the fixture being adjourned.

5. Re G J Mannix Ltd, above n 3, at 311. See also Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [25]- [34]; Kai Iwi Tavern Ltd v New Zealand Guardian Trust Company Ltd [2013] NZCA 199 at [6]- [8]; and Dreamtech Designs & Productions Pty Ltd v Clownfish Entertainment Ltd [2015] NZCA 491 at [8]- [10].

⁶ Re G J Mannix, above n 3, at 314.

[26] In Dreamtech Designs & Productions Pty Ltd v Clownfish Entertainment Ltd,⁷ the Court of Appeal adopted the following statement of Stevens J in Kai Iwi Tavern Ltd v New Zealand Guardian Trust Company Ltd:⁸

Applicable legal principles

[6] In Re G J Mannix Ltd this Court held that it is "well settled" that "a company has no right to be represented in the conduct of a case in Court except by a barrister or a solicitor in Courts or proceedings where solicitors have the right of audience ...". Cooke J continued:

There is a cognate rule that, apart from statutory exceptions, a corporation has no right to bring or carry on proceedings in a Court except by a solicitor. This refers to the filing of documents – writs, statements of defence, notices of appeal, etc.

[7] This principle has recently been affirmed by this Court in New Zealand Cards Ltd v Ramsay and Commissioner of Inland Revenue v Chesterfields Preschools Ltd. The policy reasons behind this principle are set out at [34] of Chesterfields. Briefly stated, the rule ensures that proper consideration is given to the validity of proceedings, decreases the likelihood that appellants will require indulgences in the rules of procedure, and ensures that those who appear before the Court are cognisant of the duties and responsibilities that are owed to the Court.

[8] The Court has a discretion to allow non-lawyers to appear on behalf of companies where appropriate. As Cooke J stated:

In general and without attempting to work out hard-and-fast rules, discretionary audience should be regarded, in my opinion, as a reserve or occasional expedient, for use primarily in emergency situations when counsel is not available or in straightforward matters where the assistance of counsel is not needed by the Court or where it would be unduly technical or burdensome to insist on counsel. Especially in minor matters, cost-saving could also be a relevant factor. A "one-man" company might be allowed to be represented by its owner if the Judge saw fit in a particular case. But it could not be right, for instance, to issue some sort of tacit continuing or general licence to an unqualified agent to appear in winding up or any other class of proceedings.

[Citations omitted].

[27] In a recent decision dismissing an application for leave to appeal, the Supreme Court in New Zealand Cards Ltd v Ramsay reaffirmed the general rule that companies are to be represented in the High Court by counsel rather than an officer of the company.⁹ The Supreme Court noted that, while the Courts are prepared to make exceptions to the general rule from time to time, the Court of Appeal in the case before

⁷ Above n 5, at [8].

⁸ Above n 5, at [6]-[8].

⁹ New Zealand Cards Ltd v Ramsay [2015] NZSC 45 at [4].

it had taken the view that New Zealand Cards should be represented by counsel, and the Court of Appeal was entitled to make that direction.

[28] As was the case in Oceanic Palms Ltd, the present situation is not an emergency situation, and nor can the circumstances be regarded as exceptional. The trial is not now scheduled to take place until 29 April 2019, and the simple fact of the matter appears to be that AAM cannot afford to retain a lawyer to conduct the litigation.¹⁰ Unfortunately there is nothing exceptional or unusual about that – companies facing financial difficulties frequently find it difficult, if not impossible, to pay solicitors to represent them in litigation.

[29] To grant Ms Agarbattiwala's application in this case would be effectively to convert the "emergency", or "occasional", situation where a director may be permitted to represent his or her company in this Court, to something close to a rule for every company experiencing financial difficulties. That in my view would go beyond the "exceptional circumstances" required to justify departing from the Mannix rule, and this is not a case where Ms Agarbattiwala seeks to rely on the "reserve or occasional expedient" basis on which the rule is sometimes relaxed.¹¹ In this case, Ms Agarbattiwala is seeking leave to represent AAM through to the end of a five day trial, including through all remaining interlocutory steps in the proceeding. This is in sharp contrast to other cases in which leave has been granted for particular urgent steps taken in a proceeding by the director of a company.¹²

[30] Nor do I consider this case can be described as simple, or lacking in complexity, as Ms Agarbattiwala submits. The case is a commercial one, and as Associate Judge Bell noted in his April 2018 judgment, there were recently 14 causes of action pleaded. The relief sought includes an injunction and substantial damages, although the damages do not yet appear to have been quantified. The Associate Judge referred to "deficiencies in the pleadings and the plaintiff's discovery", which His Honour considered would have been apparent from early 2017. While I do not doubt that Ms Agarbattiwala is intelligent and would do her best to represent AAM's

10. Although it appears to be able to afford the services of a chartered accountant to provide it with expert advice on the claims.

¹¹ Dreamtech Designs & Productions Pty Ltd v Clownfish Entertainment Ltd, above n 5, at [9].

¹² See for example, Commissioner of Inland Revenue v Giovanni Holdings Ltd (2010) 20 PRNZ 402.

interests, in my view the case is one that clearly calls for AAM to be represented by a qualified New Zealand solicitor, so that it can be properly and independently advised.

[31] I note also that when the case was called before Associate Judge Bell on 16 April 2018 Ms Agarbattiwala told the Associate Judge that she had been talking to lawyers with a view to their acting for the plaintiffs. It appears that it was only on 25 April 2018 that AAM's directors resolved that Ms Agarbattiwala be appointed to represent AAM.

[32] For the reasons set out above, I am not prepared to grant the leave Ms Agarbattiwala seeks. The application appears to be based substantially on the financial difficulties of AAM, but that alone is not in my view sufficient to justify granting the leave sought. Nor can reference to draft rules on company representation, or to s 27 of the New Zealand Bill of Rights Act 1990, assist. I am bound by the decisions of the Court of Appeal to which I have referred, and in my view the application of the principles enunciated in the Court of Appeal in this case is clear. The interlocutory application dated 2 May 2018 is refused accordingly.




Associate Judge Smith