Cunningham v Johnson
[2022] NZHC 3182
•1 December 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-002553
[2022] NZHC 3182
BETWEEN BRUCE STEWART CUNNINGHAM
Applicant / Plaintiff
AND
CLIVE ASHLEY JOHNSON
Respondent / Defendant
ROSKILL NOMINEES LIMITED
Respondent / Second Defendant
Hearing: 24 November 2022 Appearances:
P Hoskins for the Applicant / Plaintiff
G Bogiatto for the Respondents / Defendants
Judgment:
1 December 2022
JUDGMENT OF ASSOCIATE JUDGE GARDINER
This judgment was delivered by me on 1 December 2022 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date.......................................
Solicitors:
Corban Revell, Auckland G Bogiatto, Auckland
CUNNINGHAM v JOHNSON [2022] NZHC 3182 [1 December 2022]
Introduction
[1] The applicant and plaintiff, Bruce Cunningham, applies for orders that the respondents and defendants, Clive Johnson and Roskill Nominees Limited, file and serve a more explicit statement of defence. Mr Cunningham’s essential complaint is that their existing statement of defence contains a series of bare denials that are evasive, and therefore in breach of r 5.48(2) of the High Court Rules 2016.
[2] The defendants opposed the application but, at the hearing, agreed to re-plead certain paragraphs of their statement of defence. Mostly, they did so without conceding that their statement of defence did not in fact comply with the Rules.
Legal principles
[3] Rule 5.48 of the High Court Rules 2016 sets out the requirements of the statement of defence, namely that:
5.48 Requirements of statement of defence
(1) The statement of defence must either admit or deny the allegations of fact in the statement of claim, but a defendant does not have to plead to an allegation that does not affect that defendant.
(2) A denial of an allegation of fact in the statement of claim must not be evasive. Points must be answered in substance. If for example, it is alleged that the defendant received a sum of money, it is not sufficient to deny receipt of the particular amount. Rather, the defendant must deny receipt of that sum or any part of it, or set out how much was received. When a matter is alleged with circumstances it is not sufficient to deny it as alleged with those circumstances. In all cases a fair and substantial answer must be given.
(3) An allegation not denied is treated as being admitted.
(4) An affirmative defence must be pleaded.
(5) The statement of defence must give particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances sufficient to inform the court, the plaintiff, and any other parties of the defendant’s defence.
[4] In Body Corporate 384825 v Queenstown Lakes District Council the Court said:1
1 Body Corporate 384825 v Queenstown Lakes District Council [2021] NZHC 1157.
[9] The primary functions of pleadings are to define the issues, limit the matters to be put in issue at trial, inform the parties in advance of the hearing of the case they have to meet, and enable the parties to take steps to deal with the case they are facing by beginning preparation ahead of the formal exchange of evidence. The pleadings also provide a basis for pre-trial settlement discussion.
[10] In Price Waterhouse v Fortex Group Limited, the Court of Appeal noted pleadings are an essential roadmap for the Court, and the parties that establish the parameters of the case against which the briefs of evidence should be prepared. The Court and opposite parties are entitled to be advised of the essential basis of the claim or defence, and all necessary ingredients of it, so that subsequent processes and the trial itself can be conducted against recognisable boundaries.
[11] The modern approach to pleading emphasises full disclosure of each party’s case to secure the just, speedy and inexpensive determination of any proceeding, consistent with r 1.6 High Court Rules. Litigation is to be conducted fairly, openly, without surprises, and in a way which reduces hearing time and saves costs.
[5]In Marley New Zealand Ltd v Skellerup Rubber Services Ltd, Wylie J said:2
It has been noted that the modern approach to pleading requires a proper disclosure of the defendant’s case and all the avenues it intends to pursue. Further, if a defendant is denying an allegation, the denial should answer the substance of the allegation without evasion. It should be clear as to how far the allegation has been admitted or denied. Evasive answers, as a result of which uncertainty exists as to what extent allegations in the statement of claim have been admitted, frustrate the object of this rule, and are prohibited by r 5.48(2). A defendant is required to expressly answer each point in substance.
[6] However, pleading is not an area for mechanical approaches or pedantry.3 Ultimately the question to be asked is: in the circumstances of the claim, is the statement sufficiently detailed to state a clear issue and inform the opposite party of the case to be met?
[7] Similarly, in Body Corporate 78246 v QBE Insurance (International) Ltd, the Court of Appeal observed that the questions which the Court can usefully ask itself are:4
(a)Has sufficient information been provided to inform the other party of the case they have to meet, and to enable them to take steps to respond?
2 Marley New Zealand Ltd v Skellerup Rubber Services Ltd [2013] NZHC 1653 at [19].
3 Price Waterhouse v Fortex Group Ltd CA179/98, 30 October 1998 at 19.
4 Body Corporate 78246 v QBE Insurance (International) Ltd [2015] NZHC 1360 at [18(h)].
(b)Is there a real risk that the other party may face a trial by ambush if further particulars are not provided?
(c)Is the request oppressive or an unreasonable burden upon the party concerned?
The statement of defence
[8] Applying these legal principles to the paragraphs of the statements of defence under challenge, the following outcomes were discussed and largely agreed with counsel during the hearing.
Paragraph 27
[9]The plaintiff pleads:
In or about July 2010, and prior to Bruce entering the BC and JNL ASP, CAJ represented to Bruce that this company, JNL, owned the Cable Bay Property.
[10] The defendants’ bare denial of this paragraph is adequate to inform Mr Cunningham that they deny making the alleged representation to him. This denial must be read alongside paragraph 29 of the statement of defence. There, the defendants admit that Johnson Nominees (No 7) Limited (JNL) never was a registered proprietor of the Cable Bay property but say that JNL anticipated being the registered proprietor of the Cable Bay property as at the proposed settlement date.
Paragraph 33
[11] In terms of sub-paragraph 33.1, Mr Hoskins submits that the denial is confusing, given the defendants’ admission at paragraph 28 of the statement of defence. I agree that it is unclear from the bare denial of sub-paragraph 33.1 specifically what is denied by the defendants. Mr Bogiatto undertook to clarify the statement of defence at sub-paragraph 33.1.
[12] With respect to paragraph 33.2, Mr Bogiatto clarified that the defendants admit part of the sub-paragraph, that the sale of the Cable Bay property to Mr Cunningham did not occur. They deny that Mr Cunningham did not receive the $162,500 deposit
from Roskill Nominees Ltd (RNL). He submits that the defendants have clearly pleaded their version of the agreements at sub-paragraph 3.5 of the statement of defence, and this answers sub-paragraph 33.2 of the statement of claim. Despite that, Mr Bogiatto agreed to re-plead sub-paragraph 33.2 to make it clear which aspects of that sub-paragraph the defendants admit, and which aspects they deny.
[13] As to sub-paragraph 33.3, Mr Bogiatto made the same submission. For the sake of clarity, the defendants are required to re-plead sub-paragraphs 33.3, 33.5 and
33.7 to state the basis more clearly for their denial, with reference to their version of the agreements at paragraph 3.5 of the statement of defence.
[14] Mr Bogiatto clarified that the denial of sub-paragraph 33.4 of the statement of claim is an error and it is admitted.
[15] As to the claims at sub-paragraphs 33.6, 33.8 and 33.9, that Mr Cunningham’s equity in the property was appropriated by RNL, that Mr Johnson caused this appropriation, and that Mr Johnson intentionally or recklessly failed to carry out due diligence, these are not allegations of fact, but propositions or conclusions pleaded based on the earlier pleaded facts. The defendants are not required to re-plead their defence to these sub-paragraphs.
Sub-paragraph 34.2
[16] Here, Mr Cunningham pleads that RNL was in a loss situation and lacked sufficient funds to make refinancing the property viable. The defendants deny that RNL was in a loss situation and lacking in funds. It is not required to say more in its defence. It is for the plaintiff to seek to prove this allegation at trial.
Sub-paragraph 34.5
[17]The plaintiff alleges that:
Dating from 1 February 2011, RNL made written threats to Bruce to evict Bruce from the Property and list the Property for a short-notice auction.
[18] Mr Bogiatto makes the valid point that this allegation is not particularised with dates of the alleged written threats, or particular words attributed to RNL.
[19] Despite that, as a constructive solution, Mr Bogiatto agreed to re-plead the denial of this sub-paragraph after Mr Hoskins has provided him with the 2011 letter relied on.
Sub-paragraph 34.12
[20]Here, the plaintiff pleads:
CAJ caused RNL to obtain loan funds from, among others, Langley Trust a.k.a Langley Factors (Langley), in which CAJ has an ownership interest.
[21]The difficulty with this pleading is that it contains three separate facts:
(a)RNL obtained loan funds from Langley Trust and others;
(b)CAJ caused RNL to obtain the loan funds; and
(c)CAJ has an ownership interest in Langley.
[22] Therefore, some responsibility for the defendants’ bare denial rests with the plaintiff. Mr Bogiatto agreed to re-plead the response to this sub-paragraph to specify whether the defendants accept or deny each of the three separate factual propositions.
Sub-paragraph 34.13
[23]The plaintiff pleads:
CAJ charged and/or caused Langley to charge to RNL unauthorised fees including administration fees, setup fees, valuation fees, loan application fees, and accounting fees (Fees).
[24] This sub-paragraph of the statement of claim suffers from the same problem. It contains three factual propositions and a conclusion. Mr Bogiatto agreed to take the same approach to the previous sub-paragraph and plead to each of the following separate parts of the pleading:
(a)Langley charged RNL fees (including administration fees, set-up fees, valuation fees, loan application fees, and accounting fees);
(b)Mr Johnson charged RNL those fees;
(c)Mr Johnson caused Langley to charge RNL the fees; and
(d)the fees were unauthorised.
Sub-paragraph 34.13
[25] The plaintiff alleges that Mr Johnson paid some of the fees from the RNL bank account. The defendants deny this. The defendants are not required to do more to make it clear that they deny this allegation.
Sub-paragraph 34.18
[26] The plaintiffs plead that Mr Johnson failed to notify Mr Cunningham of the fees and/or seek relevant reimbursement from him. In my view, if the defendants deny failing to notify Mr Cunningham, or seeking reimbursement, it is incumbent on them to plead particulars of when they say they did notify Mr Cunningham and/or seek relevant reimbursement. Mr Bogiatto agreed to revisit sub-paragraph 34.18 of the statement of defence.
Sub-paragraph 34.19
[27] Here, Mr Cunningham pleads that Mr Johnson and/or RNL and/or Langley and/or CAJ Limited profited from the property being a trust property.
[28] This is not an allegation of fact, but rather a proposition based on the earlier factual allegations. The defendants’ position (that they did not make a profit from the arrangement) is sufficiently clear from other parts of the statement of defence. The allegation that the property is trust property is a matter of law. The defendants are not required to re-plead their defence to this sub-paragraph.
Sub-paragraph 34.23
[29]Mr Cunningham pleads:
CAJ caused RNL to obtain and pay for legal services that were charged to the Property which legal services were for the benefit of CAJ and/or RNL and opposed to Bruce’s interests (RNL Legal Expenses).
[30] Again, this sub-paragraph of the statement of claim contains multiple assertions of fact:
(a)that RNL obtained and paid for legal services that were charged to the Property;
(b)that Mr Johnson caused RNL to obtain and pay for the legal services;
(c)that the legal services were for the benefit of Mr Johnson and/or RNL; and
(d)that the legal services were opposed to Bruce’s interests.
[31] Mr Bogiatto undertook to re-plead the defence as if the statement of claim was broken down into these separate parts.
Paragraph 44
[32] The allegation is that Mr Johnson caused RNL to enter into the RNL mortgages, including the CAJ mortgage.
[33] I consider it sufficiently clear, bearing in mind the defence pleaded to sub- paragraph 34.20 of the statement of claim, that the defendants admit that RNL mortgaged the property on a number of occasions during the RNL ownership period but deny that Mr Johnson caused RNL to enter into the RNL mortgages, including the CAJ mortgage.
Sub-paragraph 48.1
[34] Here the plaintiff pleads that he was in a vulnerable position regarding Mr Johnson and/or RNL exercising control over the Property, and then goes on to set out at 48.1(a) to (g) reasons why he says he was in a vulnerable position. Mr Hoskins submits that as those allegations are statements of fact, the defendants must provide a clear and substantial answer to each.
[35] The defendants deny that Mr Cunningham was in a vulnerable position and say that sub-paragraphs 48.1(a) to (g) are merely particulars of the allegation of vulnerability, which the defendants deny. I agree. If Mr Cunningham wants the defendants to respond to the factual allegations in 48.1(a) to (g), they need to be pleaded as objective allegations of fact on a standalone basis, and not as particulars of his vulnerability.
Sub-paragraphs 48.2 and 48.3
[36] Mr Cunningham claims that he was entitled to repose trust and confidence in Mr Johnson, and in RNL, a company incorporated by Mr Johnson to hold the property on trust for him. This pleading is a mixed allegation of fact and law and is an issue for the Court to resolve. However, the defendants should properly plead to the factual aspect (namely that RNL was formed by Mr Johnson to hold the property).
Paragraph 54
[37]This paragraph states:
CAJ and RNL have used the Property during the RNL ownership period (being a period when the Property rose significantly in value) for their own financial benefit, including via the RNL Mortgages.
[38] This is the critical issue that the Court will be required to determine. The defendants deny that they benefitted financially. It will be for the plaintiff to prove that they did. The defence is sufficiently clear, but for the avoidance of doubt the defendants are to re-plead their response to paragraph 54 to make it clear that they deny any financial benefit and connecting that denial to the relevant parts of their statement of defence where they set out their version of events.
Result
[39] The defendants are to re-plead their statement of defence according to the above paragraphs by 23 December 2022. They have leave to apply, by memorandum, for an extension if this timeframe is unachievable.
[40] I consider that costs in relation to this application should lie where they fall. While the plaintiff has had some measure of success in the sense that the defendants will file and serve an amended statement of defence, many of his objections were not sustained. The plaintiff contributed to the defendants’ denials by pleading paragraphs containing multiple facts, and in some cases fact and law and conclusions based on the pleaded facts.
[41] Further, as noted earlier, many of the amendments to the defence were agreed by Mr Bogiatto as the most efficient way of dealing with the application, but without necessarily conceding that the existing statement of defence is defective.
Associate Judge Gardiner
0
3
0