Ayers v Thompson

[2012] NZHC 2807

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-003446 [2012] NZHC 2807

UNDER  Section 72 of the Districts Courts Act 1947

BETWEEN  DANIEL FRANCIS SYDNEY AYERS Appellant

ANDEARL EDWARD GEORGE THOMPSON First Respondent

ANDLORNE CAFE LIMITED Second Respondent

Hearing:         3 October 2012

Counsel:         NMH Whittington and SP Beswick for Appellant

RM Dillon for Respondents

Judgment:      25 October 2012

JUDGMENT OF ASHER J

This judgment was delivered by me on Thursday, 25 October 2012 at 3pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors/Counsel:

Meredith Connell, DX CP 24063, Auckland.

Email:  [email protected] and  [email protected]

Queen City Law, DX CP 24080, Auckland. Email:  [email protected]

AYERS V THOMPSON HC AK CIV-2012-404-003446 [25 October 2012]

Table of Contents

Para No

Introduction  [1] Background  [3] The issues  [13] The rules framework  [17] The validity of the response  [24] The obligation to file the information capsule  [32] Consequences of the failure to file an information capsule in time                  [44] The order as to costs  [46] What orders should be made?  [50] Result  [55] Costs in this Court  [57]

Introduction

[1]      On 21 May 2012 Judge Bouchier in the District Court at Auckland recorded in a minute that civil proceedings filed by the appellant Mr Ayers against the first and second respondents Mr Thompson and Lorne Café Ltd were a nullity, and ordered costs in favour of each respondent in the sum of $1,000.

[2]      The appellant appeals against that decision asserting that the proceedings were not a nullity and that no costs order should have been made.   The essential points are that the Judge’s assumption that the plaintiff had fatally failed to file an information capsule in time was wrong, and that the costs order was in any event excessive.

Background

[3]      Mr Ayers and Mr Thompson are neighbours.  They, or companies associated with  them,  lease  adjoining  premises  in  Lorne  Street.    On  16  December  2011

Mr Ayers became concerned at loud music originating from the café owned by Lorne Café Ltd and run by Mr Thompson.  Mr Ayers decided to submit a complaint to the Auckland Council and entered the café and asked that the noise stop.  He claims that he had a confrontational exchange with Mr Thompson.  Mr Ayers left the premises and lodged a noise complaint with the Auckland Council.

[4]      Mr Ayers asserts that on occasions since then, whenever he walked past the café, if Mr Thompson was seated outside, he began clapping and made others do the same.  He asserts that on one occasion he sat down opposite Mr Thompson with the intention of discussing the situation.  He contends that there was an altercation which amounted to Mr Thompson committing the tort of assault against him.  He asserts that the clapping has since continued when he walks past.  He used his cellphone to take a video of what was happening.   He asserts that on an occasion there was another altercation when Mr Thompson approached him in an aggressive manner and made a threatening statement in relation to the cellphone and his actions.  He has made a complaint to the Police.

[5]      Mr Ayers commenced proceedings in the District Court on 16 January 2012 by notice of claim.  He asserts that Mr Thompson committed the tort of assault on three occasions and the tort of battery twice.   He asserts that Mr Thompson has inflicted emotional distress upon him on seven occasions, and that the second defendant has also committed all those torts through Mr Thompson.

[6]      On  10  February  2012  the  respondents  filed  a  response  through  their solicitors.  The response included a document headed “Statement of defence” which set out something of a narrative about the events in question from Mr Thompson’s perspective.    I  will  return  to  this  document  in  due  course  as  there  have  been extensive submissions made in relation to its ambit and compliance with the rules.

[7]      On 27 April 2012 Mr Ayers applied for a direction that Mr Thompson file and serve upon him a response that was compliant with the rules of the Court, and an unless order.  Costs were sought.  The application was ex parte.  A short affidavit in support was filed.

[8]      On 15 May 2012 a letter was sent by the District Court to Mr Thompson’s

lawyers advising that Judge Bouchier had issued the following minute:

14/5/12 – I have read the Plaintiff’s memorandum.  I consider it appropriate to make an order that the first and second defendant serve a response which fully complies with Form 3.  I give 7 working days from 15/5/12 for them to do so.  I do not consider it appropriate given the type of proceedings to make an “unless order”.  Costs reserved.

[9]     On 16 May 2012 Mr Thompson’s lawyers responded with a letter and memorandum.   That  memorandum  asserted  that  the  application  and  the Court’s direction were each a nullity and that the proceeding had “expired” for want of any step taken by the appellant.  It was submitted that the Court’s direction was a nullity and costs were sought.

[10]     Mr Ayers also wrote on the same day stating that he would have expected any interlocutory application of the respondents to have been served on him.  Mr Ayers advised  the  Court  that  if  it  considered  the  step  on  the  part  of  the  respondents claiming that the proceeding was a nullity and seeking costs as procedurally valid, he would oppose the application.  He asked:

Could you please advise me if this latest correspondence from the defendants will be treated as an application, at which time the Plaintiff will file and serve a Notice of Opposition.

[11]     On the same day he received a responses from the Court:

We will have to refer to Judge, Judge will probably reject it, at worst the

Judge would invite you to be heard on matter.

[12]     On 24 May 2012 Judge Bouchier issued the minute which is the subject of this appeal.  It read as follows:

21/5/12 – I am obliged to defence counsel for pointing out the timing issue. It was not a matter I considered and I should have done so.  I therefore agree the application and direction was a nullity.  I consider the question of costs, which are governed by R4.1 & 4.2 & 4.4.  I consider the question these are category 2 proceedings under R4.2.  Therefore in accordance with R4.2(a) & (d) each defendant is awarded $1,000 in costs being 2/3 of the appropriate daily recovery rate.

The issues

[13]     There are two broad issues that arise in this appeal.   The first is whether Judge Bouchier was correct in assuming that the proceedings issued by Mr Ayers had become a nullity. The second is whether she erred in making the costs order.

[14]     In relation to the first issue, Mr Dillon for Mr Thompson submits that the proceedings were clearly a nullity in terms of the rules.   There having been no

application for extension of time and no order extending the time, the proceedings remained a nullity.  In that regard he submits Judge Bouchier’s observation that the proceeding was a nullity was no more than a recognition of the correct position.

[15]     For the  appellant  Mr Whittington  submits that  the response filed by the respondents was defective and that therefore time did not run against the appellant. Accordingly, the appellants were entitled to proceed to judgment.

[16]     In  relation to the second issue Mr Whittington submits that there was  a breach of natural justice in that Mr Ayers was given no opportunity to be heard in relation to the issue of the proceedings being a nullity and the order as to costs.  It is also submitted that the order for costs is wrong in ordering costs separately in respect of each respondent and that the award is too high.

The rules framework

[17]     The issue of whether the District Court proceeding became a nullity turns on an interpretation of the District Court Rules 2009.  Rule 1.3 sets out the objective of the rules.   Rule 1.3.1 is in all material respects the same as r 4 of the previous District Court Rules 1992 and r 1.2 of the High Court Rules.   Rule 1.3.2 is new. Rule 1.3 provides:

1.3      Objective

1.3.1The objective of these rules is to secure the just, speedy, and inexpensive determination of any proceeding or interlocutory application.

1.3.2    The objective of these rules includes, so far as is practicable,—

(a)     ensuring that all parties are treated equally; and

(b)     saving expense; and

(c)     dealing with the case in ways that are proportionate to—

(i)     the importance of the case; and (ii)    the complexity of the issues; and (iii) the amount of money involved; and

(iv)    the financial position of each party; and

(d)     ensuring that the case is dealt with speedily and fairly; and

(e)     allotting to it an appropriate share of the court's resources, while taking into account the need to allot resources to other cases.

[18]    Under the 2009 Rules, proceedings are initiated by the notice of claim procedure.  Under r 2.10 the plaintiff is to file and serve a notice of claim in form 2. The notice of claim form contains almost four pages of notes for the plaintiff, and in the notes for the defendant, around three pages of instructions.  There is no provision for a statement of claim.  Rather, there is a requirement that the plaintiff must “give a

succinct description of the facts justifying the plaintiff’s claim”.1     The notice of

claim must also contain a signed statement verifying the truth of the facts and setting out the relief sought.2

[19]     Under r 2.12.1 a defendant is to serve a response on the plaintiff within 20 working days. A defendant has the option under r 2.12.2 of applying to the Court for an order requiring the plaintiff to file a statement of claim and continue under r 2.7, under which the Court has a discretion to grant leave to file a statement of claim or originating application.

[20]     The contents of the response are set out in r 2.13.  Given the importance of this rule to the issue in this proceeding it is necessary to set this out in full:

2.13     Contents of response

2.13.1 In a defendant's response, which must be in form 3, the defendant must—

(a)   admit  the  claim  and  immediately  pay  or  comply  with  the requested relief or remedy; or

(b)   admit the claim but offer an alternative remedy to that requested in the notice of claim; or

(c)   deny the claim; or

(d)   partially admit and partially deny the claim.

2.13.2 A response must also indicate whether the defendant intends to make any counterclaims against the plaintiff.  If the defendant does intend to counterclaim, a copy of the filed form 2CC must be attached to the defendant's response when the response is served.

2.13.3  A response that denies or partially denies the claim must also—

(a)   succinctly  state  the  defendant's  version  of  the  facts  (for example, if the defendant denies the claim or part of a claim, or does not know about an event or fact stated in the notice of claim or  could  not  reasonably  have  found  out  about  it,  the defendant must say so and explain why); and

(b)   succinctly state any facts the defendant intends to rely on at the trial that are not stated in the notice of claim; and

(c)   contain a signed statement verifying the truth of those facts; and

(d)   state an address for service.

2.13.4 A response  must  contain the  other  matters (if  any) indicated  by form 3.

[21]     The plaintiff must, after being served with the defendant’s response, then under r 2.14 serve an information capsule on the defendant within 20 working days. The purpose of that information capsule is to inform the defendant of the essential nature of the plaintiff’s case and disclose to the defendant the information on which the plaintiff intends to rely.3   That information capsule must rebut the defences raised by identifying and addressing the essential facts in dispute and explain why any offer

made by the defendant has been rejected.  It must also list the witnesses the plaintiff intends  to  call,  attach will  say statements  for  each  witness,  list  or  describe the essential documents supporting the plaintiff ’s claim and verify the contents on oath or by affirmation.4

[22]     Rules 2.14.4 to 2.14.6 provides:

2.14.4 The plaintiff's proceeding comes to an end if the plaintiff does not serve the plaintiff's information capsule on the defendant within the

20-day period specified in rule 2.14.1.

2.14.5The plaintiff may start the claim again, subject to any relevant limitation period, only by starting afresh under rule 2.10.

2.14.6 A proceeding that comes to an end under this rule is treated as having been discontinued by the plaintiff.

[23]     It is unnecessary to go through the further processes as they are not relevant, save to observe that the information capsule must be served and there are then various processes that may be followed by the litigants.

The validity of the response

[24]     The issue of whether there was a valid response is important, as if there was no valid response within the 20 day period, the time for filing of an information capsule did not start to run, and indeed has still not started to run, and the proceeding remains valid and on foot.

[25]     Mr Ayers took the view that no response was filed, and this was presumably why on 27 April 2012, instead of filing an information capsule, he filed a without notice application for a direction that a response in the correct form be filed.  It is not clear why, if this was his position, he did not file this application more promptly.  It was filed more than two months after the filing and service of the response, which is an inexplicable and unjustifiable delay.  Although the validity of the response was not central to the second minute of Judge Bouchier’s decision where she agreed that the proceeding was a nullity, Mr Whittington continued to press the submission that the response was invalid.

[26]     The basis of this submission was that the respondents under r 2.13.1(a)–(d) were obliged to admit the claim and pay or comply, admit the claim but offer an alternative remedy, deny the claim or partially admit and partially deny the claim. Form 3 in the District Courts Rules reflects this in that at 3A it is stated that the defendant is to choose one of the “following 4 options” which reflect the four factors set out in r 2.13.1 (although there are also extensive explanatory notes).  These notes include requirements for various explanations and legal references.

[27]     The response document was an original typed document prepared by the respondents’ lawyer.  In general terms it followed the form.  When it came to section

3 headed “Your response to the claim” it was stated “see attached statement of

defence”.  The attached statement of defence then quite fully over 12 paragraphs set out what could be seen as the respondents’ story or account of the incidents.

[28]     There is no specific response point by point to the equivalent story or account in the notice of claim.   However, such a specific response is not required by the rules.  The benefit of the previous pleading procedure where a defendant was obliged to respond point by point to the allegations relied on by the plaintiff in accord with the High Court Rules, is not a requirement under the 2009 regime.  So the end result is that there is no specific advice in relation to each detail.

[29]     It is, however, stated in the response at paragraph 9 of the statement of defence that all other allegations in the claim form dated 16 January 2012 “are denied”  and  at  paragraph  10  that  the  proceeding  is  vexatious  and  an  abuse  of process.  On an overview of the statement of defence it falls into the category of a denial of the claim in terms of r 2.13.1(c).  The only failure for which the plaintiff could argue was the failure to specify which of options 1 to 4 was adopted.  In the sample form issued by the Ministry of Justice there are boxes for ticking for options

1 to 4.  In the completion of this form the failure on the respondents’ part was not to tick the option 3 box.  But that is an error of form, not of substance.  It is to be noted that form 3 as set out in the rules does not contain the boxes that are in the Ministry of Justice form.  I do not consider that the failure to fill in the boxes is in fact non- compliance if the requirement of r 2.13.1 is responded to in a different way from that set out in the forms.

[30]     If there is any non-compliance it falls under r 1.10.1 which states that the fact that the rules have not been fully complied with at any stage does not invalidate the proceeding or any step in the proceeding. At worst, this was a technical failure.

[31]     The document is headed “response” and the way in which it was completed in general terms follows form 3.   It is clearly intended to be a response.   The response document is unambiguously a response.   I am satisfied that it was a compliant document.

The obligation to file the information capsule

[32]     There being a valid response, the appellant was obliged to complete and serve the information capsule within 20 working days after the date of service of that response.  It is common ground that there was no information capsule so filed, and indeed none has been filed down to the present time.

[33]     Rule 2.14.4 states that a proceeding comes to an end if such a response is not filed within the 20 day period.

[34]     Mr Whittington argued that if a response had been filed and the 20 days for an information capsule not complied with, that an extension of time could be granted under r 1.18.2. This rule provides:

1.18     Extending and shortening time

...

1.18.2 The court may order an extension of time although the application for the extension is not made until after the expiration of the time allowed or fixed.

[35]     The obvious answer to this submission is that no extension of time had been sought by Mr Ayers.  When I raised this matter with Mr Whittington he suggested that this Court could make an order for extension of time.

[36]     There have been differing views expressed in the District Court as to whether a party can avail itself of r 1.18.2 after the period of time has expired.

[37]     In some decisions an extension of time has been granted.  Allowances have been made when the Rules were new, and it has been said that the end task of the Court is to attempt to do justice between the parties.5     In Wigley v New Zealand

Vegetable Oil Ltd6  in granting an extension of time Judge Neave referred to two

5      Thompson Electrical v Lloyd DC Blenheim CIV-2010-006-27, 27August 2010; J Swap

Contractors Ltd v Houghton and Carmichael DC Hamilton CIV-2010-019-302, 15 November
2010; Radich v O’Neill DC Invercargill CIV-2010-025-287, 2 September 2011; and Wigley v

New Zealand Vegetable Oil Ltd DC Timaru CIV-2010-076-410, 5 December 2011.

6      Wigley v New Zealand Vegetable Oil Ltd, above n 5.

cases7   where  the view  was  taken  that  it  was  not possible to  rely on  r 1.18  to overcome non-compliance with the time set out in r 2.14 relating to information capsules.  In those cases it was noted that the language of r 2.14 was mandatory in nature, and further at r 2.14.5 it was stated that the plaintiff may start again only by starting afresh.  It was considered that such an outcome was consistent with the just, speedy and inexpensive determination of any proceeding.

[38]     While both positions outlined in Wigley v New Zealand Vegetable Oil Ltd can be  justified  in  terms  of  the  Rules,  I  respectfully  agree  with  Wigley  and  those decisions that conclude that leave can be sought after the expiry of the required period.  I accept the comment of Judge Neave in Wigley8 that it is inconsistent with the underlying philosophy of the rules to apply an unduly rigid approach to the issue of time.  A case-by-case analysis involving an examination of the merits of granting

leave is required on every occasion.   Not to allow for extensions of time could produce real unfairness.  For instance, in a situation where a plaintiff has suffered an accident or an illness and has been unable to take action for that reason for some days, it would be most unfortunate if that had then meant that an otherwise meritorious claim had to be restarted.  While the proceeding comes to an end it can be resurrected by a successful application under r 1.18.2.

[39]     This is the most natural conclusion based on the actual words of r 1.18.2.  To conclude that non-compliance with r 2.14 results in there being no ability to extend time would involve in effect the adding of a proviso to r 1.18.2 to the effect that the rule does not apply in relation to non-compliance with the time limits in r 2.14.

[40]     Leave of course will not always be granted.  In all cases the exercise of the discretion will depend on the facts.   The time that has elapsed between the non- compliance and the application for an extension will be relevant.  So also will be any reason given for the non-compliance.  The Court will be mindful of the fact that on occasions it will be the quickest and most expedient solution to allow the proceeding to continue, than to require it to begin again.  The Court will take into account the

fact that it will delay proceedings and make them more expensive to put the clock

7      St Leger Group Ltd v Lau and Fountain DC Nelson CIV-2009-042-585, 25 June 2010; and

Thompson Electrical v Lloyd DC Blenheim CIV-2010-006-36, 27 August 2010.

8 At [72].

back and require a plaintiff to start again.   Equally there will be occasions where, because of the nature of the non-compliance or the length of time that has gone by or a factor relating to the merits, on balance, a new start is a penalty that the plaintiff will have to pay.

[41]     There is now a new rule which  specifically covers the present situation, r 1.18.2A:

To avoid doubt, a proceeding does not come to an end just because the time allowed by rule 2.10, 2.14, 2.17, 2.39A, 2.47, or 3.40 or any other rule for taking any action in that proceeding expires, if that time is later extended under rule 1.18.2.

[42]     This rule, which came into effect on 14 June 2012, was inserted by r 5 of the District  Courts  (General) Amendment  Rules  2012.   Although  it  does  not  apply because the events in question took place prior to 14 June 2012 it confirms what was, in my view, in any event a natural reading of r 1.18.2.  It is to be noted that the new rule was inserted “to avoid doubt”.

[43]     Although I conclude that there is a power to extend time, there had been no extension sought before the hearing and I decline Mr Whittington’s oral invitation to grant such an extension in this appeal.  The issue of extension of time was not fully argued before me and there is no affidavit evidence in relation to it.  Mr Ayers has not explained why he took over two months to file his application for a compliant response.  The delay in seeking an extension is now approaching six months.  The lack of an explanation and the lengthy passage of time are fatal to this informal request for an indulgence.

Consequences of the failure to file an information capsule in time

[44]     The consequences of failing to file an information capsule are spelled out in r 2.14.4.  The proceeding comes to an end.   Rule 2.14.6 states that it is treated as having been discontinued.  Rule 2.14.5 states that the plaintiff must start again.  The regime is quite unambiguous.  When the time expires the proceeding ends and can only be resurrected if started again.  The only way out, already discussed in relation

to this case, is an application for an extension of time and the obtaining of such an order, which, as discussed, has not occurred in this case.

[45]     The time having expired, the proceeding is at an end.   It is not correct to describe it as a nullity as it was a valid proceeding, but it no longer continues and has not been resurrected under r 1.18.2.   The position is the same as if a notice of discontinuance had been filed at the expiration of the 20 days.   The Judge was therefore correct to conclude that the application and direction were a nullity in the sense there was, at that point of time, no extant proceeding in which they could be filed.   Although she made no order or direction I record that her decision in that regard was correct. The appeal fails on this point.

The order as to costs

[46]     This order was made in response to the respondents’ request of 16 May 2011. It  was  made despite Mr Ayers’ letter stating that  he opposed  the memorandum relating to directions and costs, and asking for advice as to whether it was to be treated as an application.  If it was he wished to file and serve a notice of opposition. He was told that the matter would be referred to the Judge, it would probably be rejected, or at worst the Judge would invite him to be heard.  In fact it was referred to the Judge but the Judge did not reject the memorandum.   She upheld the application for costs and awarded costs of $2,000.  Mr Ayers was not invited to be heard.

[47]     This  was  undoubtedly  a  breach  of  the  rules  of  natural  justice.    Indeed, Mr Dillon was unable to support any argument to the contrary.  The common law right  to  natural  justice exists  with  the  specific provision  at  s 27(1) of the New Zealand Bill of Rights Act 1990 that every person has a right to the observance of the principles of natural justice.  It is fundamental that parties to civil litigation must

be given adequate notice and an opportunity to be heard.9

9      Combined Beneficiaries Union Inc v Auckland City COGS Committee [2008] NZCA 423, [2009]

2 NZLR 56 at [11].

[48]     I have no doubt that the failure to accord Mr Ayers an opportunity to be heard was an oversight by the Court.  However, it is fatal to any order made.  The orders as to costs are therefore quashed.

[49]     Mr Dillon had acted for both respondents.  A separate order for costs should not have been made in favour of each of the respondents.  Under r 4.14 the Court could not allow more than one set of costs unless it appeared to the Court that there was good reason to do so if several defendants defended the proceeding separately. Given the single representation and the fact that Mr Thompson controlled Lorne Café Ltd there is no good reason to award more than one set of costs.

What orders should be made?

[50]     Both the appellant and respondents have asked me to settle the issue as to costs in the District Court in this appeal.  I have jurisdiction to do so.10

[51]     There  is  no  doubt  that  a  costs  order  was  warranted.     Mr  Ayers  had commenced a proceeding.  Through his error in not filing the information capsule within time it had come to an end. The position in relation to costs is the same as if a plaintiff had filed a notice of discontinuance.  A successful defendant is entitled to costs on a principled basis as a defendant who has gone to the cost of defending a proceeding where the plaintiff has failed entirely to obtain its objective. A defendant is entitled to costs under the Rules up to the point of a discontinuance, and in this case, the successful defendants are entitled to costs up to the time the proceeding came to an end under r 2.14.

[52]     The only attendance involved on the part of the defendants was the filing of the response.  This involved following the reasonably complex directions in the form and also involved drafting some 12 paragraphs of narrative in the “statement of

defence” extending over a page and a half.

10     District Courts Act 1947, s 76.

[53]     Mr Dillon was not able to ascribe any particular actual charge in respect of this   attendance,   acknowledging   fairly  that   his   firm’s   fees   records   included attendances involving other matters as well.

[54]     I propose to apply the scale at the lowest level of category 1 under r 4.3 of the District Courts Rules.  I consider the proceeding to be of a straightforward nature. For filing a response, the scale allows for 0.75 of a day under category A, which in my view is the correct category.  This step falls under the rate then applicable of the category 1 proceedings of $1,000 per day.   If $1,000 is multiplied by 0.75 the net cost result is $750. That is the order I make in respect of costs.

Result

[55]     The  appeal  against  the  proceedings  being  declared  to  be  at  an  end  is dismissed.

[56]     The appeal against the cost orders is allowed.  The order of $1,000 in favour of each respondent is quashed and substituted by a single order for costs in favour of the respondents of $750.

Costs in this Court

[57]     Both parties have had a measure of success, the appellant failing in respect of the proceedings coming to an end, but succeeding on costs.  In those circumstances it is fair for costs to lie where they fall. There will be no order as to costs.

……………………………..

Asher J