Adtraction Marketing Limited (in liquidation) v Ehrenfeld
[2018] NZHC 2085
•15 August 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2016-404-3217
[2018] NZHC 2085
BETWEEN ADTRACTION MARKETING LIMITED (IN LIQUIDATION)
Plaintiff
AND
GABRIEL EHRENFELD
Defendant
Hearing: 18 June 2018 Appearances:
N F D Moffatt and R A Morris for Plaintiff Defendant in person
Judgment:
15 August 2018
JUDGMENT OF VAN BOHEMEN J
This judgment was delivered by me on 15 August 2018 at 2.00pm Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors/Parties:
Bell Gully, Auckland G Ehrenfeld, Auckland
ADTRACTION MARKETING LIMITED (in liquidation) v EHRENFELD [2018] NZHC 2085 [15 August 2018]
[1] The plaintiff, Adtraction Marketing Ltd (in liquidation), seeks costs against the defendant, Gabriel Ehrenfeld, for the hearing adjourned by agreement on 18 June 2018 to 21 September 2018.
Proceeding to date
[2] In the proceeding in which costs are sought, Adtraction seeks judgment against Mr Ehrenfeld, who was formerly a director of Adtraction, in the sum of $228,559.27 plus interest and costs.
[3] In its statement of claim dated 20 December 2016, the plaintiff alleged Mr Ehrenfeld had authorised payments totalling $228,559.27 by Adtraction to Reeltime Media Ltd, another company of which Mr Ehrenfeld was a director and shareholder, in circumstances where:
(a)Adtraction was insolvent;
(b)Adtraction had no contractual obligation to make payments to Reeltime;
(c)Reeltime provided no value to Adtraction;
(d)Mr Ehrenfeld had a financial interest in Reeltime as shareholder.
[4] Mr Ehrenfeld took no steps in the proceeding until 9 November 2017, the day before the formal proof hearing set down two and a half months earlier for 10 November 2017. The reasons for Mr Ehrenfeld’s inaction are not relevant to the present application but are canvassed in my minute of 10 November 2017.
[5] On 9 November 2017, Mr Ehrenfeld filed and served a statement of defence by email. In his statement of defence, Mr Ehrenfeld denied the plaintiff’s allegation that Adtraction had made payments to Reeltime.
[6] On 10 November 2017, Mr Ehrenfeld appeared in person at the hearing and stated his intention to defend the claim and to join third parties. As recorded in my
minute of that date, the hearing was adjourned and orders made to enable Mr Ehrenfeld to serve the proceeding on third parties and to make any further application.
[7] By minute dated 14 February 2018, Muir J made timetable orders as agreed by the parties. Under the agreed timetable, the close of pleadings date was Friday, 16 March 2018. The timetable contained no steps with regard to third parties.
[8]The hearing was set down for 18 June 2018.
[9] In its amended statement of claim dated 13 March 2018, the plaintiff amended its claim to allege that all but one of the payments for which recovery was sought had been made to a Tohil Pty Ltd, a wholly owned subsidiary of Reeltime, rather than to Reeltime itself. The remaining payment, for $5,821.75, had been made to Tandem Capital Pty Ltd.
[10] On 14 June 2018, Mr Ehrenfeld sought to file by email a memorandum, together with an affidavit affirmed on 13 June 2018, in support of an application to vacate the hearing set down for 18 June 2108, and asking for leave to file an amended statement of defence, leave for the issue of subpoenas against third parties and leave to file the evidence of the defence six weeks following compliance with the subpoenas. Mr Ehrenfeld also applied for notices requiring the production of three of the plaintiff’s witnesses for cross-examination at the hearing on 18 June 2018.
[11] Also on 14 June 2018, the plaintiff filed memoranda opposing the adjournment of the hearing and the application for the production of witnesses. The plaintiff also filed an affidavit by Craig Sanson, sworn on 13 June 2013, responding to matters raised in Mr Ehrenfeld’s affidavit of 13 June 2018.
[12] As I recorded in my minute dated 15 June 2018, I had intended to hear Mr Ehrenfeld’s applications before the hearing set down for 18 June 2018 and, if I did not grant the applications, to proceed with the hearing that day. However, on the hearing of Mr Ehrenfeld’s applications, Mr Moffatt for the plaintiff said the plaintiff would be in some difficulty if the hearing proceeded that day. This was because it was only upon reading the amended statement of defence dated 17 June 2018 that
Mr Ehrenfeld was seeking leave to file that the plaintiff had learned Mr Ehrenfeld’s explanation of why Adtraction had made payments to Tohill and Tandem Capital. Given that Mr Ehrenfeld was likely to address these matters when giving evidence, the plaintiff sought an opportunity to respond to that evidence.
[13] As a consequence and as set out in my minute of 18 June 2018, I made a number of orders by agreement including orders:
(a)Adjourning the hearing set down for 18 June 2018 to 21 September 2018;
(b)Granting leave to Mr Ehrenfeld to file and serve his amended statement of defence dated 17 June 2018.
[14] As recorded in my minute of 18 June 2018, the plaintiff’s application for costs in relation to the adjourned hearing was reserved.
Positions of parties
[15] In support of the plaintiff’s application for costs, Mr Moffatt said the hearing set down for 18 June 2018 was lost because of Mr Ehrenfeld’s failure to respond until just before the hearing to the plaintiff’s amended statement of claim which had been filed and served on 13 March 2018 some three months previously. Mr Moffatt said Mr Ehrenfeld had thereby failed to address in a timely manner matters he was now saying were important to his defence.
[16] Mr Ehrenfeld said the plaintiff contributed to the delay. He said the plaintiff, as claimant, must have known of the position regarding the payments well before it filed its amended statement of claim on 13 March 2018. Despite that knowledge, the plaintiff had chosen to file its amended claim just three days before the close of pleadings, thereby depriving him of an adequate opportunity to respond.
[17] Mr Ehrenfeld also said that his defence to the original claim – that he had authorised payments by Adtraction to Reeltime – was straightforward; he knew there were no records of any such payments. But defending the amended statement of claim
alleging the authorisation of payments to Tohil and Tandem Capital was a different matter and would require him to challenge the evidence put up by the plaintiff.
Other relevant matters
[18] Mr Ehrenfeld’s memorandum and affidavit of 13 June 2018 and Mr Sanson’s affidavit of the same date show there was email correspondence between Mr Ehrenfeld and the plaintiff’s solicitors following the filing of the amended statement of claim:
(a)On Friday, 6 April 2018, some three and a half weeks after the filing of the amended statement of claim, Mr Ehrenfeld wrote to Mr Moffatt saying that no leave had been obtained for the amended claim to be filed and that he objected.
(b)On Monday, 9 April 2018, Mr Moffatt replied saying leave was not required because the pleadings had not closed when the amended statement of claim had been filed.
(c)On 10 April 2018, Mr Ehrenfeld replied to Mr Moffatt asserting that the plaintiff had “… proceeded by total ambush in circumstances where you had previously advised the court that you were ready to proceed.”
(d)On 10 April 2018, Mr Moffatt replied to Mr Ehrenfeld advising that the plaintiff was willing to consent to Mr Ehrenfeld filing and serving an amended statement of defence if he did so by Friday, 13 April 2018.
(e)There was a further exchange of emails on 10 April 2018 that did not advance matters.
[19] On 10 April 2018, Mr Ehrenfeld also wrote by email to the High Court Registrar stating his intention to make an interlocutory application to strike out the plaintiff’s amended statement of claim or, in the alternative, for leave to file an amended statement of defence.
[20] On 12 April 2018, the Deputy Registrar replied to Mr Ehrenfeld. She referred to Muir J’s minute of 14 February 2018 which set the close of pleadings date at 16 March 2018 and noted that under r 7.7 of the High Court Rules, no interlocutory application could be made after the close of pleadings without the leave of a judge. The Deputy Registrar strongly recommended that Mr Ehrenfeld seek legal advice.
[21] Despite these exchanges, Mr Ehrenfeld took no further steps regarding the filing of an amended statement of defence until 13 June 2018.
Discussion
[22] While the amended statement of claim should have been filed earlier, I do not accept that Mr Ehrenfeld suffered any real prejudice by the filing and serving of the amended statement of claim on 13 March 2018, three clear months before the hearing set down for 18 June 2018.
[23] It is clear that at least by early April 2018 Mr Ehrenfeld was aware the amended statement of claim had been filed and he knew from his correspondence with Mr Moffatt and the Deputy Registrar the steps he would need to take if he wished to file an amended statement of defence.
[24] The plaintiff’s attempt to impose a tight deadline on Mr Ehrenfeld for filing an amended statement of defence was not helpful but it was not determinative. As the Deputy Registrar had pointed out, Mr Ehrenfeld would need the leave of a judge in accordance with the High Court Rules to file an amended statement of defence after the close of pleadings. Had Mr Ehrenfeld sought such leave in a timely manner, it is likely leave would have been granted, irrespective of whether or not the plaintiff had consented. The short time between the filing of the amended statement of claim and the importance of ensuring Mr Ehrenfeld had a fair opportunity to respond would have been relevant considerations.
[25] Moreover, I consider it unlikely that Mr Ehrenfeld would have considered himself precluded from responding to the amended statement of claim just because it was filed three days before the date for the close of pleadings or just because the plaintiff’s solicitor sought to impose a confined timetable for the filing of an amended
statement of defence. Mr Ehrenfeld’s last minute filings of statements of defence before the hearings set down for 10 November 2017 and 18 June 2018 show he has little fear of court-ordered deadlines.
[26] In the event, Mr Ehrenfeld chose not to act until just before the hearing on 18 June 2018. He then sought not only to change the basis of his defence but to broaden the proceeding to secure third party participation and to further delay resolution of the proceeding. While the actions of the plaintiff’s solicitors may have left something to be desired in terms of timeliness and courtesy, it was Mr Ehrenfeld's lack of action that led to the loss of the fixture.
Conclusion
[27] Mr Ehrenfeld was principally responsible for the costs incurred in relation to the adjournment of the hearing on 18 June 2018.
Result
[28] I order that Mr Ehrenfeld pay the plaintiff’s costs for the hearing of 18 June 2018 on a 2B basis.
G J van Bohemen J
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