Andrews v Grant - [2015] NZHC 2934

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-1249 [2015] NZHC 2934

IN THE MATTER
of the liquidation of NZNet Services

Limited (in Liquidation)

BETWEEN

STEPHEN ANDREWS First Applicant

TRUSTEE ADVISORS LTD Second Applicant

AND

DAMIEN GRANT AND STEVEN KHOV

Respondent

Hearing: 11 November 2015

Appearances:

A R Nicholls for Applicants
B J Norling and A Cherkashina for Respondent

Judgment:

24 November 2015

JUDGMENT OF PALMER J

This judgment was delivered by me on 24 November 2015 at 2:30 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors: Edwards Clark Dickie, Auckland
Waterstone Insolvency, Auckland

ANDREWS & TAL v GRANT AND KHOV [2015] NZHC 2934 [24 November 2015]

Summary

[1] Mr Andrews and Trustee Advisors Limited (TAL) apply to set aside a judgment by default obtained against them by Mr Grant and Mr Khov. I find there are insufficient grounds to do so. In particular, I adopt a purposive interpretation of rr 15.8 and 15.9 of the High Court Rules (the Rules) that allows the plaintiff to seal judgment by default in relation to recovery of land or chattels rather than requiring a formal proof hearing. I do not consider there would be a miscarriage of justice if the default judgment remains. My reasons follow.

Facts

[2] Mr Andrews is the director of NZNet Internet Services Ltd (NZNet). NZNet went into liquidation on 17 November 2011.1 TAL is the trustee of a trust settled by Mr Andrews. Mr Grant and Mr Khov were jointly appointed as liquidators of NZNet.2

[3] On 4 June 2015 the liquidators filed a Statement of Claim and Notice of Proceeding against Mr Andrews and TAL. They alleged that Mr Andrews transferred 25,082 shares in Engini Ltd to TAL with intent to prejudice Mr Andrews’ creditors. They sought orders under s 348 of the Property Law Act 2007 vesting the shares in Mr Andrews and requiring TAL to restore the shares to him.

[4] The proceedings were served on 11 and 10 June 2015 respectively. The

Notice of Proceeding was clear that if no Statement of Defence was filed within

25 working days of service “the Plaintiffs may at once proceed to judgment on the

Plaintiff’s claim, and judgment may be given in your absence.”3

[5] The 25 days expired on 15 and 16 July 2015. No Statement of Defence was filed by then. The liquidators requested judgment by default on 17 July 2015. On
5 August 2015 the Registrar of the High Court granted judgment by default for recovery of a chattel – the shares (r 1.3(1)). Apparently the order was not served on
Mr Andrews or TAL until 28 August 2015.

1 NZNet Internet Services Ltd (in liq) v Engini Ltd [2015] NZHC 2713 at [3].
2 At [22].
3 The Notice of Proceeding was in form G2 as set out in sch 1 of the High Court Rules.

[6] In the meantime, on 7 August 2015, Mr Andrews and TAL each filed a Statement of Defence. Mr Andrews’ two paragraph…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NZHC 2934
Decision Date: 24 November 2015

CaseChat Overview and Summary

Mr Andrews and Trustee Advisors Limited (TAL) applied to set aside a judgment by default obtained against them by the liquidators of NZNet Internet Services Ltd (NZNet), Mr Grant and Mr Khov. The application was dismissed. The liquidators filed a Statement of Claim and Notice of Proceeding against Mr Andrews and TAL seeking orders to vest 25,082 shares in Engini Ltd in Mr Andrews and require TAL to restore the shares to him. No Statement of Defence was filed within the required timeframe. The liquidators sought judgment by default, which was granted. Mr Andrews and TAL subsequently filed Statements of Defence and applied to set aside the default judgment. The court held that the default judgment was not irregularly obtained, as the Rules allow the plaintiff to seal judgment by default in relation to recovery of land or chattels. The court also held that there would be no miscarriage of justice if the default judgment remained, as Mr Andrews and TAL did not show a substantial ground of defence, provided a reasonable explanation for the delay, or show that the liquidators would not suffer irreparable prejudice. The court dismissed the application and awarded costs to the liquidators on a 2B basis.

This case highlights the importance of timely filing of Statements of Defence and the potential consequences of failing to do so. The court adopted a purposive interpretation of the Rules to allow the plaintiff to seal judgment by default in relation to recovery of land or chattels, rather than requiring a formal proof hearing. The court also considered the relevant factors in determining whether there would be a miscarriage of justice if the default judgment remained. The outcome of this case may have implications for future cases involving default judgments and the recovery of land or chattels.

Orders