Vienna Group Limited (in liquidation) v Kerry Logistics (Oceania) Limited [2023] NZHC 846 (19 April 2023)

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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2021-485-336

[2023] NZHC 846

BETWEEN	VIENNA GROUP LIMITED (in liquidation) Plaintiff/Respondent
AND	KERRY LOGISTICS (OCEANIA) LIMITED Defendant/Applicant

Hearing:	21 November 2022 (further submissions filed 3 and 10 March 2023)
Counsel:	D J Cooper KC and S M Lee for the Defendant/Applicant P Murray for the Plaintiff/Respondent
Judgment:	19 April 2023
Reissued:	4 May 2023

This judgment was delivered by me on 19 April 2023 at 4pm pursuant to r 11.5 of the High Court Rules

VIENNA GROUP LTD (in liq) v KERRY LOGISTICS (OCEANIA) LTD [2023] NZHC 846 [19 April 2023]

[1] The defendant has applied for leave to appeal my judgment dismissing its interlocutory applications for strike out and summary judgment (Judgment)¹on the following issues:

[2] The plaintiff did not oppose the granting of leave in respect of the Limitation Point and the hearing proceeded on the basis that leave on the Limitation Point could be granted by consent pursuant to r 1.8 of the High Court Rules 2016.

[3] On further consideration following the hearing, it appeared that r 1.8 of the High Court Rules may not be able to be relied on where leave is required by the Senior Courts Act 2016 rather than the High Court Rules 2016. I therefore asked the parties to file submissions as to why leave ought to be granted in respect of the Limitation Point as I had not heard from the parties on that issue at the hearing.

[4] In submissions then filed, counsel for Vienna recorded that, rather than consenting, Vienna did not oppose the granting of leave on the Limitation Point. In Vienna’s submission, the procedure under r 1.8 is not therefore engaged.

[5] Although not consenting, counsel for Vienna went on to submit that the phrase “act or omission on which the claim is based” in s 11 of the Limitation Act 2010 has not previously been considered by the Court of Appeal and that Vienna recognises that the interpretation of that phrase is of general or public importance and that it is in the interests of justice that leave be granted to appeal that point so that the high threshold for leave is met.

¹Vienna Group Ltd (in liq) v Kerry Logistics (Oceania) Ltd [2022] NZHC 1473 [Judgment].

[6] The submissions filed on behalf of Kerry Logistics setting out the reasons why leave to appeal can be granted by consent no longer need to be considered given Vienna’s clarification that, rather than consenting, Vienna does not oppose.

[7] The requirement for leave has been described as a “filtering mechanism” ²with the Court of Appeal holding in Sandle v Stewart this filtering mechanism has the object of admitting “the cases which may go on appeal in the interests of finality of litigation and the work load of the [appellate] court while preserving the integrity of the law and the interests of justice”.³

[8] I therefore need to determine whether leave ought to be granted in respect of both the Limitation Point and the Exclusion Point.

[9] Section 56(3) of the Senior Courts Act 2016 requires a party to apply for leave to appeal any decision of the High Court made on an interlocutory application except a successful summary judgment or strike out.⁴

[10] In Greendrake v District Court of New Zealand, the Court of Appeal approved the following statement of principles:⁵

[7] This Court in Ngai Te Hapu Inc v Bay of Plenty Regional Council indicated that considerations similar to the principles applicable to applications under the former s 24G of the Judicature Act 1908, as explained in Meates v Taylor [Leave], apply to applications under s 56(5), stating:

We agree that leave to appeal should only be granted where the significance or implications of an arguable error of fact or law, either for the particular case or for the applicant or as a matter of precedent, warrants the further delay which the appeal process would involve.

[11] These principles have since been confirmed by the Court of Appeal in Tomar v Tomar and Smith v Plowman.⁶

[12] Kerry Logistics relies on Yu v Bradley which counsel submits is useful for its focus on the factors particularly relevant in the context of a summary judgment application which has been declined.⁷

[13] In Yu v Bradley, Moore J relied on Palmer J’s summary of principles in Li v Chief Executive, Ministry of Business, Innovation and Employment.⁸Palmer J held leave to appeal an interlocutory decision under s 56(3) is likely to be granted if:⁹

⁹Li v Chief Executive, Ministry of Business, Innovation and Employment, above n 8, at [21].

[14] Palmer J concluded that an application for leave is likely to be granted where, “more pithily”:¹⁰

[15] In Yu v Bradley Moore J held that in the ordinary course of applications for leave to appeal a summary judgment, the first limb of Palmer J’s short form test will always be satisfied because determination of the appeal may be dispositive of the case in law, and ordinarily postponement to the substantive appeal will be likely to prejudice the appellant.¹¹

[16] In my view the second limb of the short form test is a shorthand way of stating the questions set out in Finewood but without reference to a high threshold. This threshold has however been endorsed by the Court of Appeal in Greendrake and cases following. I note that the requirement for a high threshold appears only likely to affect the decision to grant leave where the decision is marginal.

[17] I therefore consider the application in terms of the principles approved in Greendrake, bearing the factors relied on in Li v Chief Executive, Ministry of Business, Innovation and Employment and Yu v Bradley in mind.

[18] The issues are as follows in respect of each of the Limitation and Exclusion Points:

¹⁰Li v Chief Executive, Ministry of Business, Innovation and Employment, above n 8, at [22].

[19] I set out below a short factual summary before considering the above issues.

[20] Vienna has brought claims for breach of contract and in negligence relating to the completion of New Zealand Customs Service (Customs) import entries by Kerry Logistics as Vienna’s customs agent for importing European beer into New Zealand.

[21] The contract between Kerry Logistics and Vienna is in the form of an application form for a credit account. When the contract was first entered into on 12 September 2011, Kerry Logistics was known as Lead Logistics Limited. The application form is signed by Vienna and says that Vienna has read, understands and agrees to the terms and conditions supplied with the application. Kerry Logistics’ standard terms and conditions of trade were attached. It is common ground that these terms were not negotiated, and Vienna’s director has given evidence he did not read them at the time.

[22] Kerry Logistics made the import entries between September 2011 and January 2015. Customs conducted an audit of the import entries and found that multiple entries understated the alcoholic strength of the imported beer. As a result, on 5 June 2015 Customs issued an Assessment Notice to Vienna amending the duty upwards by

[23] Vienna was required either to pay this amount or to file an appeal by 3 July 2015. Vienna did not appeal and was unable to pay the extra duties. Vienna’s shareholders therefore resolved to appoint liquidators on 23 July 2015.

[24] In addition, on 11 May 2016, Customs imposed an administrative penalty on Kerry Logistics of $67,702.21 pursuant to s 128A of the Customs and Excise Act 1996.

[25] In correspondence relating to the imposition of the penalty, Kerry Logistics advised Customs that it had relied on alcohol strength information from Vienna’s director. A penalty was still imposed with Customs advising Kerry Logistics that the relevant regulation required:

... the person making the entry to specify the volume of alcohol in accordance with the alcohol strength stated by the manufacturer in the invoice, or on the label of the product concerned.¹²

[26] Vienna filed its claim against Kerry on or around 29 June 2021. The claim alleges that Kerry Logistics failed to exercise the required care and skill when performing its duties under the contract and pleads a concurrent duty in negligence.

[27] Vienna is seeking damages of over $2 million for losses arising as a result of being unable to sell its products at a higher price to meet the higher entry costs and for the losses arising from its liquidation.

[28] As referred to in the Judgment, the settled test for strike out on the basis of limitation requires the outcome of the defence to be “obvious or inevitable” or “so clearly statute-barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process”.¹³

[29] In addition, I referred to the fact that it is not usually appropriate to strike out a claim or grant summary judgment to a defendant in a developing area of the law. I considered this was an apt description of the limitation defence in this case with so little discussion on the appropriate interpretation of the start date for the primary period in s 11(1) of the Limitation Act 2010.¹⁴

¹³Trustees Executors Ltd v Murray [2007] NZSC 27, [2007] 3 NZLR 721 at [33]; see also Lendlease Capital Services Pty Ltd v Arena Living Holdings Ltd [2021] NZCA 386, (2021) 22 NZCPR 498 at [7]; citing Matai Industries Ltd v Jensen [1988] NZHC 205; [1989] 1 NZLR 525 (HC) at 532.

[30] Having considered the arguments available to Vienna, I concluded that the answer on the Limitation Act defence was not so obvious or inevitable that it was appropriate to strike out or grant summary judgment to Kerry Logistics. I recorded that following a full substantive hearing a limitation defence may be able to be established, but held I was not prepared to do so without the benefit of full evidence and argument on the issue.

[31] The primary ground of appeal relied on by Kerry Logistics is that the reasoning in the Judgment is inconsistent with the outcome. Kerry Logistics submits that the Judgment erred in finding that the Limitation Point was arguable on the basis that “there is a reasonable argument that ... the act of Customs in issuing the Assessment Notice is one of the acts on which the claim is based.¹⁵As the Assessment Notice was issued on 5 June 2015, Kerry Logistics submits that, even on my reasoning, the last possible date for the filing of a claim would have been 5 June 2021. As the claim was not filed until 29 June 2021, outside the six-year limitation period, it ought to have been struck out.

[32] In the Judgment, after finding that the act of Customs in issuing the Assessment Notice is arguably one of the acts on which the claim is based, I went on to discuss Duthie v Roose¹⁶where the Court considered that the settlement date under the sale and purchase agreement, rather that the date of the agreement itself, was the start date for limitation as it was the date when the tax could no longer be avoided or appealed.¹⁷

[33] Kerry Logistics submitted that the duty assessed on 5 June 2015 was always the correct duty payable so Duthie v Roose could be distinguished.¹⁸

[34] After discussing the operation of the Customs and Excise Act 1996, I concluded that until the Assessment Notice was issued, it appeared there was no obligation on Vienna to pay the increased duty.¹⁹Duthie v Roose could not therefore

[35] Although the Judgment could have been more clearly expressed, the point I was making was that it was reasonably arguable that the start date for limitation was the date that the duty payable in the Assessment Notice was due or the appeal period had expired, as Vienna had submitted based on Duthie v Roose.²¹This date was not until 3 July 2015²²and so it was therefore reasonably arguable the proceedings filed by Vienna on 29 June 2021 were within the six-year limitation period.

[36] As set out above, to strike out the claim or grant summary judgment, the outcome of the Limitation Act defence needed to be “obvious and inevitable” or “so clearly statute-barred” that the claim could properly be regarded as frivolous, vexatious or an abuse of process. I concluded that it was not and so declined the application.

[37] Counsel for Kerry Logistics submits that my finding that the act of Customs in issuing the Assessment Notice on 5 June 2015 then leads to the conclusion that “omissions by Kerry [Logistics] in failing to correct the errors could be said to have occurred right up until the date of the reassessment”.

[38] Contrary to that submission, the discussion in the Judgment of omissions by Kerry Logistics was considered as a possible alternative route to a later start date for limitation.²³It was not part of my reasoning based on the issue of the Assessment Notice by Customs.

[39] However, having considered the issue further in the context of this application for leave, the fact that Duthie v Roose was decided under the previous Limitation Act 1950, where the start date for a negligence claim depended on the date loss occurred,²⁴

[40] In addition, Kerry Logistics submits that I erred in my interpretation of s 11 of the Limitation Act as s 11(1) is clear that the primary limitation period runs from “the date of the act or omission on which the claim is based” and that the disjunctive statutory language is such that there must be a single foundational act or omission, with later or continuing acts or omissions causing loss encapsulated in the “late knowledge” aspect of the statutory regime.

[41] Kerry Logistics further submits I erred in concluding that the “act or omission” referred to in s 11 of the Limitation Act does not have to be an act or omission of the defendant alleged to be liable as a matter of law (thereby distinguishing Gedye v South).²⁵Kerry submits that it will challenge this proposition on appeal and that this is a purely legal issue capable of determination by the Court of Appeal. If the Court of Appeal agrees with the analysis, then Kerry Logistics submits it would be dispositive of the proceeding.

[42] I agree that these issues are questions that do not appear to have been previously considered by the Court of Appeal. However, they may be issues the Court of Appeal would prefer to determine following full argument rather than on a strike out and summary judgment application.

[43] Finally, Kerry Logistics submits that the Judgment failed to consider the application for strike out on the basis of the pleaded claim and instead considered issues of limitation on the basis of speculative and unpleaded possible omissions by Kerry Logistics.

[44] It is settled law that when considering strike out applications, the Court is entitled to consider possible amendments to the claim. These proceedings are at a very early stage with no statement of defence having yet been filed. The pleadings are in relatively general terms that would not necessarily require the pleading of a new cause of action for the pleading to extend to Kerry Logistics’ omissions.

[45] For the reasons discussed above, however, I accept that there may be arguable errors of law and so now consider the remaining questions relevant to granting leave in respect of the Limitation Point.

Is the alleged error of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value?

[46] Kerry Logistics submits that inherent in Vienna’s lack of opposition to leave on the Limitation Point is that the appeal is:

[47] Vienna similarly recognises that the interpretation of the phrase “act or omission on which the claim is based” in s 11 of the Limitation Act is of general or public importance so that the high threshold for leave is met.

[48] I agree that the interpretation of the phrase in s 11 is of general or public importance. However, as noted above, the Court of Appeal may prefer to consider the interpretation of that phrase in the context of an appeal following a full substantive hearing rather than on strike out or summary judgment.

[49] If the appeal is successful, it will bring the proceedings to an end. The alleged errors are therefore of sufficient importance to the parties to justify an appeal even if the fact that the Limitation Point will be considered in the context of a strike out and summary judgment application reduces the likely general or public importance of such an appeal.

[50] It appears from the lack of opposition by Vienna that it may prefer this question to be considered by the Court of Appeal now.

[51] For Vienna to avoid the limitation defence, the start date for limitation purposes needs to be the due date under the Assessment Notice, 3 July 2015, rather than the date of the Assessment Notice itself, 5 June 2015, as the claim was filed on 29 June 2021.

[52] The potential argument that the start date for limitation could be extended to the date that the duty was payable in reliance on Duthie v Roose appears less strong on reflection. If it cannot be extended to the due date, then the answer on the Limitation Point may be “obvious and inevitable” so that the strike out application or summary judgment application ought to succeed. The circumstances therefore warrant the further delay of an appeal.

Are the interests of justice served by granting leave and has the high threshold been met?

[53] I consider that it is clear from the above that the interests of justice support leave being granted on the Limitation Point and that the high threshold for leave has been met.

[54] I now consider the question of leave in relation to the refusal to strike out the claim or grant summary judgment on the basis the claim is contractually excluded, referred to as the Exclusion Point. Vienna opposes leave being granted for this issue.

[55] In the Judgment I held that the approach to the interpretation of exclusion clauses should be the same as that applying to interpretation of contracts generally, referring to Dorchester Finance Limited v Deloitte.²⁶Clause 13 of Kerry Logistics’ terms and conditions of trade set out limitations of liability and clause 14 excluded liability unless there is both written notice within 14 days after delivery of the goods

[56] I held that, perhaps in an effort to be comprehensive, the exclusion clauses may have introduced doubt. After considering relevant cases, I concluded that the clauses needed to be understood in their commercial context to be properly interpreted, as held in both DHL International (NZ) Ltd v Richmond Ltd²⁷and Dorchester Finance v Deloitte.²⁸This required a full hearing following discovery and so strike out or summary judgment were declined.

[57] Kerry Logistics submits that I erred by failing to give effect to the plain words of the contractual exclusion in clause 13, saying that the exclusion is couched in the broadest terms and that liability in contract and negligence is expressly identified and excluded. Kerry Logistics says that any reasonable person in Vienna’s shoes would have understood the clause to exclude liability.

[58] Kerry Logistics further submits that I erred in concluding that the tiered nature of the exclusions creates a potential ambiguity.²⁹Instead, Kerry Logistics says they represent an intention to create a comprehensive exclusion so that any claim not excluded by clause 13.2 is nonetheless subject to the liability and timing limits specified in the later clauses. Kerry Logistics’ submission is that in doing so there is an element of “belt and braces” in the drafting but that does not create ambiguity, rather indicating an abundance of caution in ensuring that the exclusions are comprehensive.

[59] Kerry Logistics continues that in this case the liability alleged by Vienna falls squarely within the category of claim contemplated and excluded by clause 13.2(c) and the losses alleged fall squarely within the category excluded by clause 13.2(d).

[60] Kerry Logistics further submits that the Judgment errs in finding that clause 14 of the contract did not apply to exclude liability in circumstances of non-compliance with the notification and limitation regime. In Kerry’s submission the wording of clause 14 shows a clear and unambiguous intention of the parties to exclude all liability “whatsoever” unless the notification provisions are met, which they are not.

[61] As I set out in the Judgment, to order strike out or summary judgment I had to be satisfied that Vienna’s interpretation of the exclusion clauses was clearly untenable and that extrinsic evidence would not alter that conclusion. By declining strike-out and summary judgment I was not saying that the arguments raised by Kerry Logistics were not available but simply that they were not so clear that strike out or summary judgment was appropriate.

[62] Kerry Logistics submits that Vienna provided no evidential basis for an alternative interpretation of the clauses and that there is no further evidence that would be produced in discovery that would assist in the interpretation of the clauses, noting that Vienna has not pointed to any potential category of such evidence. Kerry Logistics says therefore the trial Judge will be in no better position to determine the issues of law than the Judge hearing the application for strike out and summary judgment.

[63] Vienna’s director has given evidence that he signed the contract without considering the exclusion clauses and so there will not be evidence of any negotiation of those clauses between the parties. At the hearing, counsel for Vienna struggled to identify further categories of extrinsic evidence that may be relevant to interpretation of the exclusion clauses but submitted that he was struggling because of the stage the proceedings have reached.

[64] I accept that the proceedings are still at an early stage and so I am cautious about requiring the parties to identify potential evidence in advance of discovery. This is particularly the case here given Kerry Logistics’ obligations under the Customs and

Excise Act. This is an additional layer to the usual context in goods delivery cases such as DHL International (NZ) Ltd v Richmond Ltd.³⁰

[65] Vienna says that Kerry Logistics cannot rely on clause 13(2)(c), which excludes liability for any service provided, because it does not clearly exclude liability in connection with Kerry Logistics’ failure to comply with its own statutory obligations imposed under the Customs and Excise Act. Furthermore, Vienna says that the indemnity clause can only sensibly be interpreted as meaning that Vienna indemnifies Kerry Logistics against claims by any person other than Vienna.

[66] Finally, Vienna submits if clause 14 operates as Kerry Logistics submits, no claim could ever have been brought by Vienna through no fault of its own because the Customs Assessment Notice was not issued until after the clause 14 timeframes had passed. Vienna says such a clause flouts commercial common sense and given that Vienna could not have been aware of the claims, had not suffered any loss and no causes of action had arisen within the timeframes specified, the clause should not be construed to defeat Vienna’s current claims.

[67] I continue to consider that further evidence of the commercial context is necessary before interpreting the clauses. This could include evidence in relation to Kerry Logistics’ obligations under the Customs and Excise Act as well as other extrinsic evidence such as subsequent conduct. I may have erred in this approach however and so go on to ask the remaining questions.

Is the alleged error of general or public importance warranting determination or otherwise of sufficient importance to the applicant to outweigh the lack of general or precedential value?

[68] Counsel for Vienna refers to Kahala Holdings Ltd v C & F Fishing Ltd where the applicant sought leave to appeal findings relating to the application of terms of trade and limitation of liability clauses. In declining the application for leave, the Supreme Court held:³¹

... We do not see that the decisions of those Courts bear in any way on the general principles of law applicable to incorporation of exclusion clauses. Nor do we see that any point of law of general or public importance arises in the appeal. Essentially the proposed appeal would relate to what the parties should be taken to have intended would be the terms of their bargain.

[69] Vienna submits that this is the case here; the proposed appeal does not bear in any way on the general principles of law applicable to exclusion clauses, relating entirely to the factual circumstances of this case.

[70] I agree that the law on the interpretation of exclusion clauses is settled and so the appeal will turn on the particular factual circumstances of this case. The appeal is therefore unlikely to be of general or public importance.

[71] On the other hand, if the appeal is successful, it would save significant time and cost for Kerry Logistics. In these circumstances I consider that the importance to Kerry Logistics of the outcome would outweigh the lack of general or precedential value. This factor therefore supports granting leave.

[72] Vienna submits than an appeal of the Limitation Point will be focussed on a single issue and that adding an appeal on the Exclusion Point will double the scope of the appeal and double the hearing time required. Counsel submits that this is likely to increase the delay given the scarcity of hearing time before the Court of Appeal.

[73] I accept that there may be some additional delay if both points are appealed but it is unlikely to be significant in the context of a proceeding that relates to matters that happened in 2015 and before.

[74] As I have already concluded above that leave ought to be granted in respect of the Limitation Point, I consider the circumstances warrant incurring the further delay that granting leave in respect of the Exclusion Point will cause.

Are the interests of justice served by granting leave and has the high threshold for leave been met?

[75] Weighing all of these factors up, the interests of justice appear to be served by leave being granted in respect of the Exclusion Point and the high threshold appears to be met.

[76] In addition Kerry Logistics applied for a stay of the order to pay costs to Vienna on the strike out and summary judgment application brought by Kerry Logistics (Application) pursuant to r 20.10 of the High Court Rules.

[77] Counsel filed a joint memorandum on 6 December 2022 confirming that counsel had conferred and resolved the stay application by consent.

[79] The parties request that judgment be entered on this basis. I therefore make the orders as sought below.

[80] Kerry Logistics’ application for leave to appeal the Judgment dismissing Kerry Logistics’ interlocutory applications for strike out and summary judgment is granted in respect of both the Limitation Point and Exclusion Point.

[81] Kerry Logistics’ application for a stay of the order to pay costs on the strike out and summary judgment applications is resolved by consent as follows:

[82] Kerry Logistics has succeeded in its application for leave to appeal and an agreement has been reached in respect of its application for a stay of the order to pay costs. If agreement is unable to be reached, memoranda may be filed on behalf of

Kerry Logistics within 20 working days of this judgment and on behalf of Vienna within a further 10 working days.

High Court of New Zealand Decisions

Vienna Group Limited (in liquidation) v Kerry Logistics (Oceania) Limited [2023] NZHC 846 (19 April 2023)