Houghton v Saunders [2019] NZCA 506

This was an interlocutory appeal in the “Feltex” litigation against a judgment of Dobson J[1].  The appeal was dismissed and the appellant ordered to pay costs to the respondents.

The background of these proceedings dates to 2004 when there was an initial public offering of shares in Feltex Carpets Ltd (Feltex).  The combined investment statement and prospectus contained a revenue forecast for the financial year ending 30 June 2004, and projection for the financial year ending 30 June 2005.  The appellant brought proceedings under the Securities Act 1978 and the Fair Trading Act 1986 which included allegations that the revenue forecast and projection were untrue statements, and misleading and deceptive conduct.  

In 2012 it was ordered that the issues raised should be dealt with in two stages.  The first stage was to determine the appellant’s own claim, together with the issues that were common to the claims of all the other shareholders whom he represented.  The second stage was to determine the issues arising for the other shareholders who had opted in.  

After the first trial stage, and prior to the second, Dobson J issued a judgment which was the subject of this appeal.  He made orders for discovery and security for costs, and ruled inadmissible parts of the evidence which the appellant proposed to lead from an economist. The admissibility discussion was interesting, however I will not address this aspect of the decision as it is fact-specific.

What is of more significance is the Court of Appeal’s approach to the arguments made by the appellant regarding Dobson J’s orders for discovery and security for costs.

With regards to the discovery orders, the appellant effectively argued that those orders were unnecessary or inapplicable.  The respondents’ position was that the appellant’s submissions had not addressed the concerns previously identified with the discovery.  The respondents also emphasised that the orders made should be viewed as an appropriate exercise of case management by an experienced judge highly familiar with the case.

The Court of Appeal cited a decision from the House of Lords[2], as well as an earlier decision of the Court of Appeal[3], indicating that the parties should respect interlocutory decisions or decisions made in the course of a trial, unless the judge was plainly wrong.  Appellate courts should be, and will be, reluctant to interfere with interlocutory decisions.  

In this case, given the discovery orders were crafted in the interval between two trial phases, and by a judge who had been involved throughout this litigation, the Court considered it proper to treat this aspect of the appeal with the usual restraint.  They did not perceive any error in the nature and scope of the orders, and did not allow this aspect of the appeal.

Similarly in relation to the orders for security for costs, the Court considered this to be a matter of trial management and declined to intervene.

This decision seems to be a clear indication that the courts will not welcome appeals that challenge the reasonableness of orders that effectively amount to trial management issues.  Parties should simply get on with them, unless the orders are plainly wrong.

[1] Houghton v Saunders [2019] NZHC 2007.

[2] Ashmore v Corp of Lloyd’s [1992] 1 WLR 446 (HL) at [453]-[454].

[3] Knauf Insulation Ltd v Tasman Isulation New Zealand Ltd [2013] NZCA 427 at [10].

Copyright Steve Keall, all rights reserved, 2020.

Written by Steve Keall & Katy Barker