Borg v 9 Chamberlain Road Limited
[2022] NZHC 281
•25 February 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-530
[2022] NZHC 281
BETWEEN GEORGE JOSEPH BORG and ROSEMARY CLAIRE BORG
First Plaintiffs
RAYMOND BRUCE CHAPMAN MOORE and GLENYS DOROTHY MOORE
Second Plaintiffs(Plaintiffs continued over page)
AND
9 CHAMBERLAIN ROAD LIMITED
First Defendant
ROSS DALLIMORE
Second Defendant
Hearing: 21 February 2022 Appearances:
MJF Taylor and J Trezise for the Plaintiffs D W Grove for the Defendants
Judgment:
25 February 2022
JUDGMENT OF HINTON J
This judgment was delivered by me on Friday 25 February 2022 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:…………………………
Counsel/Solicitors:
Russell McVeagh, Auckland.
D W Grove, Barrister, Auckland Julie Xu Lawyers, Newmarket
BORG v 9 CHAMBERLAIN ROAD LIMITED [2022] NZHC 281 [25 February 2022]
ADAM JOHN KERNOT and HEATHER FRANCES BRONWYN BELL
Third Plaintiffs
XUNJUN LOW
Fourth Plaintiff
ANTHONY JAMES SPIERS, JOANNE MAREE WILLIAMS and DALLAS WOODS
Fifth Plaintiffs
ARUN ANANAD KUMAR and SURILA DEVI
Sixth Plaintiffs
GARY DAVID GRAHAM MORRIS
Seventh Plaintiff
LISA GAYE WALKER and JEANNINE ELLEN WALKER
Eighth Plaintiffs
TANIKA KOHLI and AMIT KOHLI
Nineth PlaintiffsXIOWEI JI and MAN QIN
Tenth Plaintiffs
MIAO SHANG
Eleventh Plaintiff
Introduction
[1] Consequent upon an unless order taking effect, Associate Judge Bell ordered that this matter proceed on an undefended basis. The defendants have applied for leave to file statements of defence out of time. They also seek orders granting leave to issue third party notices and consolidating this proceeding with a parallel proceeding CIV-2021-404-537 (537).
[2]The key issue is over the application for leave to file defences.
Background
[3] The dispute relates to excavation earthworks performed round 2015 in respect of which there were two slips, one in May 2015 and the second in May 2016.
[4] The plaintiffs filed this proceeding on 26 March 2021 pleading nuisance and negligence on the part of the defendants, being the developer and the project manager in relation to the 2015 works.1 The defendants were served on 8 April 2021.
[5] The defendants sought extensions of time from the plaintiffs for filing of statements of defence, which were agreed, amongst other things because of COVID- 19 lockdowns.
[6] On 4 June and 6 June 2021 the defendants filed statements of defence. These documents were non-compliant. They did not plead to the statement of claim. But they did disclose the essence of the defences, arguably in greater detail than compliant statements of defence would. Bell AJ observed that the documents filed could meet the requirements for initial disclosure.
[7] The non-compliant “statements of defence” were prepared and filed by Mr Dallimore who is not a lawyer and was not eligible to represent the first defendant, 9 Chamberlain Road Limited (9CRL). That was made clear to him and 9CRL at or around the time the documents were filed.
1 The parallel proceeding (537) was filed on 24 March 2021. I refer to it again later.
[8] On 16 June 2021 the plaintiffs applied for unless orders against the defendants, seeking that the defendants file compliant statements of defence within a time specified by the Court or that the proceeding be set down for formal proof.
[9] On 27 July 2021 Bell AJ directed a face to face case management conference for Friday 6 August 2021. His Minute of 27 July said that both defendants were expected to appear at the conference, being in the case of the first defendant the company director. He recorded that both defendants should also appoint lawyers, and that a company can only be represented by a lawyer. He emphasised to the defendants the importance of their having lawyers to act and the disadvantage they would be at without legal advice, given proceedings of this nature require specialised knowledge and skills. He said the defendants should not count on allowances being made for them if they were not prepared to engage professionals with those skills.
[10] The defendants did not appear at the conference on 6 August 2021. Mr Dallimore sent an email saying he had a serious respiratory condition that prevented him attending Court. He attached a report from Auckland Hospital which referred to a lung condition, and a medical certificate from a GP. Bell AJ was not persuaded by these. He extended the time for the defendants to file and serve statements of defence but said if they did not do so by 5 pm on Friday 3 September 2021, the case would continue as an undefended proceeding. He directed a call in the Chambers List on 10 September 2021 and repeated that failure to file defences by 3 September would result in directions for a formal proof hearing.
[11] Mr Dallimore appeared in the Chambers List on 10 September 2021. 9CRL did not. Neither defendant filed a statement of defence by 3 September 2021. Over the weekend before the Chambers List on 10 September, Mr Dallimore sent statements of defence to the Court but the Court refused to accept them for filing because he had not paid the filing fees. When he was advised by the Registrar of refusal to accept the statements for filing Mr Dallimore sent a copy of his June receipt for the documents filed then.
[12] At the conference on 10 September 2021 Mr Dallimore advised Bell AJ that 9CRL could not afford a lawyer and he wanted to apply for legal aid on its behalf. The
Associate Judge noted in his Minute of the same date that legal aid was not available to a company. Mr Dallimore also said he wished to defend the case against himself and expressed surprise that he was required to pay a filing fee for the statements of defence sent in September.
[13] Bell AJ recorded that it might be thought unduly severe to take the point that Mr Dallimore had not filed a statement of defence when he had tendered one only shortly after the deadline of 3 September 2021, and that the failure to pay filing fees was not of itself serious. But the Associate Judge judged it symptomatic of Mr Dallimore’s behaviour in the proceedings. He considered Mr Dallimore had failed to come to grips with the practice and procedure of the Court and he had no confidence he would do so, which would lead to continuing and mounting costs on the part of the plaintiffs.
[14] Bell AJ therefore directed that the plaintiffs were entitled to proceed against both defendants by default.
[15] The proceeding was set down for a formal proof hearing on 17 November 2021 but it was adjourned to 16 February 2022 on the plaintiffs’ application because their evidence was not ready.
[16] On 14 December 2021, before any evidence was filed, the defendants filed the present application and affidavits in support by Mr Dallimore and Mr Song, the director of 9CRL. Mr Song’s affidavit annexes draft statements of defence and third party notices.
[17] The reasons given for the delay/default are in essence that Mr Dallimore is 75 years old. He says he has a poor understanding of litigation procedure. He explains that he attempted to fight the proceeding on behalf of both himself and 9CRL without hiring a lawyer because he is retired with no income to pay for one. He admits this was a mistake and has since agreed with the director of 9CRLto hire counsel, ultimately resulting in this application.
[18] The 16 February 2022 formal proof hearing was vacated to enable this application to first be heard.
Relevant principles
[19] The defendants frame their application as one for relief from the consequences of an unless order, seeking an order rescinding Bell AJ’s order that the plaintiffs are entitled to proceed against the defendants by default and granting leave for the defendants to file statements of defence. The defendants rely on the High Court Rules 2016 (HCR) rr 1.19 and 7.48 and submit that “the overarching principle is one of benevolence”.2
[20] The plaintiffs say that r 7.48 is not applicable because it is “subject to any express provision of the rules” and r 15.9(3) is such an express provision. Rule 15.9(3) states that after a proceeding has been listed for a formal proof hearing no statement of defence may be filed without leave of a judge, who must first be satisfied there may be a miscarriage of justice if judgment by default is entered. Rule 15.9(3) further provides that leave can be granted on such terms as to time or otherwise as the Judge thinks just.
[21] The defendants contend that, even if r 15.9(3) is an overriding provision, it is not applicable here because the proceeding is no longer listed for formal proof. I disagree. The first formal proof hearing was to take place before this application was filed. The second hearing was allocated before this application was filed. It was only vacated in order to timetable the present application. That was a matter of procedural necessity. The proceeding has nonetheless “been listed for formal proof”.
[22] I consider that r 15.9(3) is applicable here for the reasons the plaintiffs submit. Mr Taylor contends that the test under r 15.9(3) is more stringent than under r 7.48. I am not so sure that is correct bearing in mind authorities such as SM v LFDB.3 Correspondingly, I do not consider Mr Grove’s “principle of benevolence” is applicable in this context. However, for the purposes of this case nothing turns on the
2 Andrew Beck and others (eds) McGechan on Procedure (online ed. Thomson Reuters) at [HR 7.48.02] and [HR 7.48.03].
3 SM v LFDB [2014] NZCA 326.
argument and I proceed on the basis that I have to be persuaded there would be a miscarriage of justice if I did not allow the application for leave. Ironically the judgment on which Mr Grove places most reliance, that of Kόs J in Neumayer v Kapiti Coast District Council, was a case under r 15.9(3).4
[23] Drawing from the decision of the Court of Appeal in Russell v Cox5 and subsequent case law6 the plaintiffs say the correct approach to r 15.9(3) is as follows:
(a)The key enquiry required by HCR 15.9(3) is whether there will or may be a miscarriage of justice if judgment by default is entered. The Court is not limited in the considerations to which it may have regard.
(b)Three factors which are generally regarded as important are:
(i)whether the defendant has a substantial ground of defence;
(ii)whether the defendant’s delay is reasonably explained; and
(iii)whether the plaintiff will suffer irreparable injury if leave to defend is belatedly granted.
(c)These three factors are not intended to be exhaustive. The relative importance of the various factors will vary from case to case.
[24] Neumayer also involved a failure to file defences, resulting in a listing for formal proof. The default was somewhat worse than here. Kόs J considered only the three main factors listed in Russell v Cox. He found that the defendants had a substantial defence. The delay (about a year) was “atrocious” and there was no good excuse for it, but the plaintiffs would not suffer irreparable injury, which in his view was “the trump card”.7
[25] I agree with Mr Taylor that Kόs J’s “trump card” reference was based on the facts of that case and is not a statement of general principle. I prefer the somewhat broader approach summarised above.
4 Neumayer v Kapiti Coast District Council [2014] NZHC 417.
5 Russell v Cox [1983] NZLR 654.
6 Neumayer v Kapiti Coast District Council, above n 4; and Shoye Venture Ltd v Wilson [2013] NZHC 2339.
7 At [4], [11] and [12].
Will there be a miscarriage of justice if judgment by default is entered?
[26]Beginning with the three factors generally regarded as important:
(a)I am satisfied the defendants have a substantial ground of defence. The defences are not evidenced as such, and I am inclined to agree with the plaintiffs it would be preferable if they were. However I am advised, and it is clear on the face of the record, that the defendants’ key arguments are as to causation and as to the quantum of damages. In their draft statements of defence tendered to the court the defendants deny that they caused the slips. The statements that were filed by the defendants in May 2021 state that the site has historical stability issues and that parties other than the defendants are liable for the slips. I accept Mr Grove’s submission that in a case of this nature the defendants cannot realistically go further than the statements of defence now tendered, until there has been discovery and expert evidence obtained. Relevant in this regard is that the defendants also seek to join the Council and others who they say are the liable parties.
(b)I accept the plaintiffs’ proposition that the defendants’ delay in filing compliant statements of defence is not reasonably explained, but at the same time it is clearly not the worst delay this Court has been faced with. It seems, from Bell AJ’s Minute, that he saw little prospect of the default being remedied and that this influenced his making of the unless order.
(c)Turning to the third of the points generally regarded as important, I am not persuaded that the plaintiffs will suffer irreparable injury if leave to defend is belatedly granted. I accept the land slips will have been enormously significant for the plaintiffs and that the procedural default on the part of the defendants in this proceeding will have added to the plaintiffs’ stress and anxiety. But the increased stress from the defendants’ default would not be material in the big picture of the case,
and the additional costs incurred can be remedied by appropriate conditions.
[27]Other factors that I consider to be relevant are as follows:
(a)Without being critical, time does not seem to have been of the essence for the plaintiffs, even recognising that this is no doubt a very complex proceeding. I understand from Mr Taylor that the true plaintiff may be the named plaintiffs’ insurer. (Likewise in the parallel proceeding which is the result of a second level of insurance cover available to two plaintiffs only.) The two slips were in 2015 and 2016 and this proceeding was filed in late March 2021. I imagine there are good reasons for the six year gap but I was not advised of them.
(b)I note the plaintiffs’ point that the defendants can still sue the third parties whom they seek to join to this proceeding, regardless of judgment being entered against them. However I consider that to be unfair, or at least an outcome to be avoided unless really justified.
(c)There is a substantial amount at stake for which the defendants would otherwise likely be facing judgment by formal proof, namely $3.5 million.
(d)Last but by no means least, there is the second proceeding (537) arising out of the same facts and raising the same issues. The second proceeding was filed two days before this one. The plaintiffs in (537) are two of the named plaintiffs in this proceeding (that is a subset of the present plaintiffs). The defendants in (537) include Mr Dallimore and 9CRL but also include at least three out of four of the parties the defendants seek to join to this proceeding. It seems that in proceeding (537), defences have been filed by all defendants including Mr Dallimore and 9CRL. It has been set down for a second case management conference on 15 March 2022. Mr Grove submits there would very likely be conflicting results from the two judgments if this
case proceeds by formal proof. I agree that could be problematic. But I also consider it unfair that in similar cases, one proceeding will in any event go through the normal course, when this matter could be tagged to it, whether by consolidation or continued case management, and all relevant parties will be present before the Court.
[28] Weighing up all of these matters I am satisfied that there would be a miscarriage of justice if judgment by default were entered and I make the following orders:
(a)The defendants are to pay costs on a 2B scale for the steps set out at 5.25(a)(i)-(vi) of the plaintiffs’ synopsis. I note here that the plaintiffs sought costs on an indemnity basis in respect of those steps, but I consider the documents filed are reasonably pro forma. As “unless orders” go, this was a short and straightforward process. In my view scale costs are appropriate in those circumstances.
(b) The costs referred to in (a) are to be paid by 5 pm Monday 7 March 2022.
(c)The defendants are also to pay the plaintiffs’ reasonable wasted costs incurred between 13 September 2021 and 14 December 2021 for preparation of evidence for the formal proof hearing. The sum is to be assessed on the basis of what is truly wasted costs or double-up costs and must avoid costs that would have been incurred in any event. I emphasise to the plaintiffs in particular the need for fairness in this regard. I note that costs incurred after the date this application was filed are not recoverable because I consider the application to have been reasonable and comprehensive. (The defendants’ affidavits and relevant draft documents were all filed on 14 December 2021.) The parties should have engaged with each other following service of the application.
(d) The costs referred to in (c) are to be agreed between counsel within three working days of their being submitted to the defendants and then paid within a further five working days. If not agreed, that aspect will have to be referred back to me for resolution. I stress the desirability of agreement.
(e)On the above conditions, the defendants have leave to file the statements of defence and issue the third party notices in the form exhibited to Mr Song’s affidavit.
(f)Subject to the above, this matter is to be listed along with (537) at the case management conference on 15 March 2022. The defendants’ application for consolidation and any other outstanding matters can be addressed at that point.
(g)Leave is reserved to both parties to make application with regard to implementation of these orders.
(h)The Registrar is to refund the filing fee for the formal proof hearing, if that has not already occurred.
(i)The parties to (537) are to be served with these orders and a copy of this judgment.
[29] I make no costs order in respect of the present application. The defendants have substantially succeeded but would not normally obtain costs on an indulgence. In fact it is not uncommon for defendants in such a situation to have to pay costs despite their success. I do not consider it appropriate that the defendants pay costs because, as noted, I consider counsel should have engaged with each other, and resolved this matter. They did not engage, beyond an email written by Mr Grove one working day before this hearing.
Hinton J
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