Clark v Central Lakes Homes Ltd
[2016] NZHC 2164
•13 September 2016
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CIV-2016-425-25 [2016] NZHC 2164
BETWEEN PETER JOHN CLARK
Appellant
AND
CENTRAL LAKES HOMES LIMITED Respondent
Hearing: 13 September 2016
(On the papers)
Counsel:
T M Braun for Appellant
H C Matthews for RespondentJudgment:
13 September 2016
JUDGMENT OF MANDER J
[1] The appellant, Mr Peter Clark, appealed the entry of summary judgment against him for a sum of money the Building Disputes Tribunal (the Tribunal) ruled he owed to the respondent, Central Lakes Homes Limited (CLH). I dismissed the appeal on 25 July 2016.1 CLH sought recall of my judgment on the basis the issue of whether interest was payable by Mr Clark from the date of the District Court judgment to the date of my judgment had not been determined. CLH seeks interest for that period at the contractual interest rate contained in the building contract.
Background
[2] CLH raised the interest issue in its written submissions and at the conclusion of the hearing of the appeal requested to be heard on the question of interest. Both parties agreed to reserve further argument until the result of the appeal was known.
[3] When I issued my judgment, I did not address whether interest was payable between the date of the District Court judgment and the date of the High Court
1 Clark v Central Lakes Homes Ltd [2016] NZHC 1694.
CLARK v CENTRAL LAKES HOMES LIMITED [2016] NZHC 2164 [13 September 2016]
judgment and beyond. CLH has filed a memorandum addressing the issue of both recall and the payment of contractual interest for the period between the District Court and High Court judgments. CLH’s memorandum was referred to Mr Clark who advised that he did not intend to reply to CLH’s application.
[4] Mr Clark paid the funds the subject of the District Court judgment in to the District Court, pursuant to s 84 of the District Courts Act 1947, to place a stay of proceeding. I understand that since the delivering of my judgment those monies have now been disbursed to CLH.
Should the judgment be recalled?
[5] CLH submitted the judgment should be recalled under r 11.9 of the High
Court Rules. Rule 11.9 provides:
11.9 Recalling judgment
A Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed.
[6] In Horowhenua County v Nash (No 2) three categories of cases were identified where a judgment could be recalled:2
Generally speaking, a judgment once delivered must stand for better or worse subject, of course, to appeal. Were it otherwise there would be great inconvenience and uncertainty. There are, I think, three categories of cases in which a judgment not perfected may be recalled — first, where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the Court's attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled.
[7] This approach was applied and endorsed by the Court of Appeal in Rainbow
Corporation Ltd v Ryde Holdings Ltd.3
[8] The respondent submitted the present case falls into the third category; there is a very special reason justice requires that the judgment be recalled.
2 Horowhenua County v Nash (No 2) [1968] NZLR 632 (SC) at 633.
3 Rainbow Corporation Ltd v Ryde Holdings Ltd (1992) 5 PRNZ 493 (CA).
[9] In support of its submission CLH referred to Brake v Boote, where Holland J ordered the defendants to pay interest on unpaid purchase money payable under an agreement for sale and purchase.4 Holland J acknowledged he had omitted to address the second cause of action in the plaintiff ’s claim seeking interest from the date of settlement to the date of judgment in accordance with the provisions of the Judicature Act 1908. His Honour held the case came within the third category:5
I am satisfied that within the words of Wild CJ this is a case where for [a] “very special reason justice requires that the judgment be recalled”. One would hope that it would be a very special occasion when a Judge failed to determine an issue that was properly put before him. I am satisfied that it is, and I am satisfied that justice requires that error to be corrected.
[10] In Hobson v Harding, the Court of Appeal, after referring to Brake v Boote, held that an example of a very special reason is where a judge fails to direct his or her mind to a matter.6 In Roc Mac Ltd v Buxton, Associate Judge Doogue observed of the need to distinguish between the situation where a judge does not advert himself to a matter at all and one where the judge adverts his mind to the matter but makes an erroneous determination.7 The former situation lends itself to recall but the latter situation does not. Finally, in Unison Networks Ltd v Commerce Commission the Court of Appeal observed that the basis for recall articulated in Brake v Boote was intended to be a narrow one.8
[11] Prima facie therefore CLH’s case for recall has been established. There is no dispute that the issue of interest was raised by CLH for consideration by this Court and that judgment was delivered without addressing the issue. However, it is also necessary before determining whether recall is appropriate in the present situation to consider the merits of the issue in respect of which a ruling is sought. CLH has
addressed its claim for interest in the memorandum it has filed.
4 Brake v Boote (1991) 4 PRNZ 86 (HC).
5 At 87.
6 Hobson v Harding CA50/95, 30 June 1997 at 5.
7 Roc Mac Ltd v Buxton HC Christchurch CIV-2006-409-2062, 12 October 2007.
8 Unison Networks Ltd v Commerce Commission [2007] NZCA 49 at [23].
Should interest be granted on appeal?
[12] CLH has sought interest at the contractual interest rate of 29.25 per cent.9
That rate of interest is provided by clause 55 of the contract, which states:
The owner shall pay the Registered Master Builder interest compounding monthly on all monies due and payable and remaining unpaid after the expiry of the time provided for payment from the date of default until actual payment. The rate of interest shall be equal to 1.5 times the average interest rate, as certified by the Registered Master Builders’ bank manager, which is currently payable or which would be payable by the Registered Master Builder for overdraft facilities. The right to penalty interest shall be additional to any other remedy to which the Registered Master Builder may be entitled at law.
[13] The original proceeding was initiated under the Construction Contracts Act
2002 and taken to adjudication. On 6 October 2014 the adjudicator made his determination, finding in favour of CLH.10 The adjudicator found Mr Clark liable to pay CLH $66,532.66 comprising:
(a) claim for costs and losses - $57,499.98;
(b)interest calculated at the contractual rate of 25.95 per cent compounding monthly from and including 20 March 2014 to the date of determination - $5,282.68;
(c) adjudicator’s expenses - $3,750.
[14] Mr Clark did not pay the adjudicated amount by the set date. CLH sought to enforce the adjudicator’s determination in the District Court by applying for summary judgment. Section 59(2)(a) of the Construction Contracts Act provides that a party who is owed an amount determined by an adjudicator under s 48(1)(a) may recover from the liable party in any court the unpaid portion of the amount and
any actual and reasonable costs of recovery as a “due debt”.
9 It appears both the adjudicator and the District Court Judge imposed interest at 25.95 per cent.
10 Central Lakes Homes Ltd v Clark BDT 2014-08568LVC50, 6 October 2014.
[15] Mr Clark resisted entry of summary judgment, however, Judge Callaghan granted the application and summary judgment was entered. The District Court did not initially grant interest. However, after receiving a memorandum seeking recall of the judgment on the basis interest had not been considered, Judge Callaghan reissued the judgment with an addendum granting interest at the contractual rate. The appeal brought to this Court was from the entry of summary judgment in respect of the debt created by the award made by the adjudicator and the interest awarded by
Judge Callaghan, in the following terms:11
[46] The judgment will be amended to record that interest will be payable by the defendant pursuant to the contractual rate of 25.95 per cent compounding monthly from two days after the date of adjudication until the date of judgment. The reason for the two days after the date of adjudication is that the law prescribes that the payment has to be made within two days and when it was not made within those two days, then the interest should start to accrue from that time.
Should interest be awarded on recall?
[16] Two issues arise, the first is whether cl 55 of the contract, as set out at [12], is a non-merger clause? Secondly, whether the procedural course followed by CLH allows me to address the issue of interest on the appeal.
Whether cl 55 is a non-merger clause?
[17] Generally where there is a contractual obligation to pay interest the contractual obligation will merge in the judgment under the doctrine of merger. This is because on judgment the principal sum becomes owing under the judgment rather than under the contract. Therefore the contractual right to interest also ceases on judgment being given and any subsequent right to interest flows from the application of r 11.27(2) of the High Court Rules or r 11.2 of the District Court Rules, whatever
the case may be.12
11 Central Lakes Homes Ltd v Clark [2016] NZDC 396.
12 Watson v Whitehead [2015] NZHC 739; Nottingham v Registered Securities Ltd (in liq) (1998)
[18] Parties can, however, contract out of the doctrine of merger.13 Where a contractual provision clearly preserves the right to contractual interest at a specified rate after the delivery of judgment and until payment, then that provision will be enforced by the Courts unless it would otherwise be unconscionable to do so.14 To exclude the doctrine of merger the agreement to pay interest must be clearly expressed. This will be the case where a contract provides for the payment of interest as long as any part of the principal sum remains due, either under the contract or on the judgment, or where the contract contains words to the effect that
interest is payable after as well as before any judgment. The position was summarised in McGechan on Procedure in the following terms:15
According to the doctrine of merger, a contractual obligation to pay interest becomes merged in the judgment and the principal becomes owed under the judgment rather than under the contract. Similarly, a contractual right to interest ordinarily ceases on judgment being given and any subsequent right to interest is given by provisions such as r 11.27 of the High Court Rules…Parties can contract out of the doctrine of merger…If a contractual provision clearly entitles a party to interest at a contract rate from the date of judgment until payment, then that provision will be enforced by the Court, in lieu of reliance on r 11.27, by virtue of a contractual entitlement to interest up to the date of judgment, and interest on the whole judgment sum (including interest to that time) thereafter, unless to do so would be unconscionable…
[19] The clause in the construction contract the subject of this case sets the interest rate “until actual payment”. A similar clause was considered by Wylie J in Watson v Whitehead where interest was to run at 18 per cent on overdue sums from the due date “until the date of actual payment”.16 Wylie J observed:17
[42] Words to the effect that interest at the contractual rate runs “until payment” are usually considered insufficient to exclude the doctrine of merger, as they do not expressly refer to the effect of the judgment.
13 Economic Life Assurance Society v Usborne [1902] AC 147 (HL).
14 Watson v Whitehead, above n 12, at [40]; IFC Securities Ltd v Sewell [1990] 1 NZLR 177 (HC) at 184; F M Custodians Ltd v Patullo, above n 12 at [30]; A C Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR11.27.04]; in re Sneyd, ex parte Fewings (1883) 25 Ch D 338 (CA) at 355.
15 Beck, above n 14, at [HR11.27.04].
16 Watson v Whitehead, above n 12, at [41].
17 At [42], citing Nottingham v Registered Securities Ltd (in liq), above n 12; Millbrook Country Club Ltd v SFM Investments [2014] NZHC 380 at [13]; F M Custodians Ltd v Patullo, above n 12; BFMG Ltd v Speirs [2014] NZHC 2503, (2014) 15 NZCPR 518 at [50]. See also Jessica Young (ed) Sim’s Court Practice (online looseleaf ed, LexisNexis) at [HCR 11.27.4].
[20] However, Wylie J went on to consider the implication of the use of the word
“actual” in the clause:
[43] Here the agreement uses the words “until the date of actual payment”. The provision focuses on payment - not judgment. However, use of the word “actual” can only mean the date on which JRWT receives payment for honey delivered. Otherwise the word is otiose. …
[21] Whether cl 55 can properly be considered a non-merger clause is perhaps moot. Under earlier authority it is doubtful the wording of the clause would be considered to be explicit enough to exclude the doctrine of merger, and therefore only the Judicature Act rate of interest would potentially be available under r 11.27 post judgment. However, Mr Clark did not raise the issue on his appeal from Judge Callaghan’s judgment, and on the authority of Watson v Whitehead it appears the need to expressly refer to interest on the principal after judgment is no longer required. I note that approach appears consistent with the position to be taken in the
new Judicature Modernisation Bill.18
Requirement for cross-appeal
[22] As I have acknowledged, CLH reserved to it the right to be heard in respect of the question of interest post the District Court judgment. It has submitted it is entitled to an award of interest for the period the appeal has been pending until receipt of the judgment debt.
[23] In my view, however, the present position is no different from the situation faced by the Court of Appeal in Manning v Manning.19 In that case the appellant husband appealed against the High Court decision that his agreement to pay his respondent wife $200,000 subsisted under the terms of the parties relationship property agreement.20 Under the separation agreement, Mr Manning had agreed to pay his wife $200,000 within five years of the agreement with interest of 15 per cent
per annum calculated on a daily basis if he defaulted.
18 Judicature Modernisation Bill 2013 (178-1) at cls 462 and 463.
19 Manning v Manning [2013] NZCA 671, (2013) 29 FRNZ 586.
20 At [46].
[24] Although the appeal was taken by Mr Manning, Mrs Manning also argued she was entitled to the 15 per cent interest set out in the original relationship property agreement until the date of actual payment, in accordance with the terms of that agreement. Mr Manning, in a submission which was ultimately accepted by the Court of Appeal, observed the High Court had not, in fact, ordered post-judgment interest. Because Mrs Manning had not cross-appealed, the Court of Appeal considered itself unable to determine the issue of post judgment interest. It held:
[66] In the absence of a cross-appeal, we consider the latter point means that we can take this matter no further. The sealed judgment (submitted for sealing by Mrs Manning) records that Venning J awarded interest at the rate of 15 per cent per annum on the balance of the $200,000 from the date it was due under the variation agreement (30 June 2011) to 1 October 2012, the date of judgment in the High Court.
[25] The position does not appear to be any different in the present case. Judge Callaghan awarded interest at 25.95 per cent “until the date of judgment”. CLH has expressed itself as seeking a further award of interest “from the date of judgment in the District Court to the date of judgment in the High Court and…on until the date of payment”. However, the proceeding before me was an appeal from the District Court decision and the resulting orders. In effect, what CLH is seeking is a variation of the District Court order as it relates to the payment of interest. Judge Callaghan’s order as it relates to interest is limited to the period between the adjudication and his judgment, and does not address the question of Mr Clark’s ongoing obligation (if any) in terms of the contract to continue to pay interest on the judgment debt.
[26] If CLH was to challenge the terms of Judge Callaghan’s order, it should have filed a cross-appeal. In my view, in the absence of doing so the issue of ongoing interest from the date of the entry of judgment is not appropriately before this Court sitting in its appellate jurisdiction to vary Judge Callaghan’s order.
Conclusion
[27] It follows therefore that because of the conclusion I have reached regarding the issue of interest, it is not necessary for me to recall my judgment of 25 July 2016. I therefore dismiss the application for recall. No issue of costs arises on the application.
Solicitors:
White Fox & Jones, Christchurch
Whitfield Braun, Hamilton
4
5
0