Davern v QBE Insurance (Australia) Limited

[2023] NZHC 3543

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-390

[2023] NZHC 3543

BETWEEN

JOHN TIMOTHY DAVERN and MARITA DAVERN

First Plaintiffs

IAG NEW ZEALAND LIMITED

Second Plaintiff

AND

QBE INSURANCE (AUSTRALIA) LIMITED

Defendant

Hearing:	(Determined on the papers)
Counsel:	D J Cooper KC and V A Ma for Plaintiffs A J Peat and S D Galloway for Defendant
Judgment:	6 December 2023

JUDGMENT OF OSBORNE J

This judgment was delivered by me on 6 December 2023 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

DAVERN v QBE Insurance (Australia) Ltd [2023] NZHC 3543 [6 December 2023]

Introduction

[1]I recently gave judgment for the plaintiffs in the sum of $1,593,484.54.1

[2]        Having regard to the wording of the plaintiffs’ claim for interest on the judgment sum, I reserved the determination of the claim for interest, recording:2

I will be reserving questions of interest. The plaintiffs’ [third amended statement of claim] simply recorded the plaintiffs sought judgment for “Interest”. Submissions were not directed to that prayer. It does not appear  to comply with the strict requirements of s 25 Interest on Money Claims Act 2016. It is appropriate the parties have the opportunity to present submissions in that regard.

[3]The plaintiffs now apply for leave to amend their statement of claim.

[4]The defendant abides the Court’s decision.

The requirements of the Interest on Money Claims Act 2016

[5]        As identified above, the plaintiffs, by their pleading, sought judgment for “Interest”.

[6]        Such a pleading does not meet the requirements of s 25(1) Interest on Money Claims Act 2016 (the Act), which provides:

25 Court may not award interest unless procedural requirements complied with

(1)A court may not award interest under a section of this Act for a period unless the party who claims interest under the section for that period specifies the section and, as far as possible, the period in that party’s statement or notice of claim or counterclaim.

…

(2)If a party claims interest under section 17, 18, 22, or 24,—

(a)      the party must specify in that party’s statement or notice of claim or counterclaim the amount or rate of interest claimed; and

(b)      the court may not award interest—

1      Davern v QBE Insurance (Australia) Limited [2023] NZHC 2146.

2 At [443].

(i)exceeding the amount claimed under paragraph (a); or

(ii)at a rate exceeding the rate claimed under paragraph (a).

(3)Nothing in this section prevents interest being claimed in a statement or notice of claim or counterclaim in the alternative.

(4)Nothing in this section prevents a court from making an award of interest where the court has at any time made or accepted an amendment to a statement or notice of claim or counterclaim in accordance with the rules of court and where that statement or notice of claim or counterclaim, as amended, complies with the requirements in subsections (1) and (2).

[7]        The relevant “rules of court” referred to in s 25(4) are set out in r 1.9 High Court Rules 2016, which provides:

1.9      Amendment of defects and errors

(1)The court may, before, at, or after the trial of any proceeding, amend any defects and errors in the pleadings or procedure in the proceeding, whether or not there is anything in writing to amend, and whether or not the defect or error is that of the party (if any) applying to amend.

(2)The court may, at any stage of a proceeding, make, either on its own initiative or on the application of a party to the proceedings, any amendments to any pleading or the procedure in the proceeding that are necessary for determining the real controversy between the parties.

…

[8]        The Act applies to all money judgments in civil proceedings commenced from 1 January 2018 (which the plaintiffs’ proceeding was).3 I interpolate that the Act is not a complete code as, pursuant to s 26, claims for interest may still be brought at common law and in equity (as would apply where a contract makes provision for interest).4

[9]        By the amended statement of claim, for which the plaintiffs seek leave to file, the plaintiffs would be seeking interest under two provisions of the Act:

3      Interest on Money Claims Act 2016, s 5.

4      Senior Trust Capital Ltd v Holmes [2023] NZHC 3108 at fn 19.

(a)under s 24 of the Act (and pursuant to the Interest on Money Claims Regulations 2019), interest at the prescribed rate on costs incurred from the date incurred to the date of judgment; and

(b)under s 10 of the Act interest from the date of judgment to the date of payment in full.

Amendment of pleadings

[10]      The well-settled principles applying to late amendment of pleadings require an applicant to surmount the “three formidable hurdles” identified by the Court of Appeal in Elders Pastoral Ltd v Marr (Elders Pastoral).5 The applicant must show:

(a)the order sought will be in the interests of justice (enabling the Court to determine the real controversy between the parties);

(b)it will not significantly prejudice the other party; and

(c)it will not cause significant delay.

If those hurdles are surmounted, any concept of denunciation of the applicant for its late application has little part to play.6

The need for amendment — the requirements of s 25 of the Act

[11]      The pleading requirements introduced by the Act are not new, having been enacted in 2016 and in operation from 1 January 2018. That said, it is clear from subsequent cases involving amendment, and the occurrences in this proceeding, that the fundamentally important requirements under s 25 of the Act (to specify the details of interest claims in pleadings) has yet to be universally known to or understood by those practising civil litigation.

5      Elders Pastoral Ltd v Marr (1987) 1 NZPC 91, (1987) 2 PRNZ 383 at 385.

6      At 385.

[12]      Old-fashioned prayers such as those for “interest for such period and at such rate as the court deems just” or, very simply, “interest”, can no longer form the platform for a judgment for interest.

[13]      It is another fact that may not be universally understood amongst the profession that the previous provision in the High Court Rules that provided for interest to accrue on judgment debts (the superseded version of r 11.27) is no longer in existence — interest does not automatically (without order of the Court) accrue on a judgment debt. What r 11.27 High Court Rules provides:

11.27   Interest as part of judgment debt

Interest must be awarded in a money judgment in accordance with the Interest on Money Claims Act 2016.

[14]      If the plaintiffs are to obtain an award of interest for any period (either before or after the date of judgment) they will need to have filed (with leave) an amended statement of claim identifying a claim for interest under the appropriate provisions, namely ss 10 and 24 of the Act. The draft amended statement of claim attached to their application properly specifies those sections and the periods for which such interest is sought.

The legislative history of the Act

[15]      The approach the courts should adopt to any application to amend a pleading to comply with the procedural requirements of the Act is appropriately informed by the text of s 25 and its purpose as evidenced by the legislative history of the Act.

[16]      Section 25(4) of the Act (set out above at [6]) expressly provides that the Court may make or accept an amendment (that meets the Act’s procedural requirements) at any time. That contemplates the possibility of very late amendment, including after the trial of the proceeding. That is directly in line with the amendment provisions found in r 1.9(1) and r 1.9(2) of the Rules (set out above at [7]). The breadth of the power accommodates the fact that issues in relation to an interest claim are most likely to arise (with costs) consequentially upon a substantive judgment.

[17]      I turn then to the legislative history which Mr Cooper KC submits indicates an intention by Parliament to ameliorate the otherwise strict consequences of s 25(1) and

(2) of the Act, by expressly permitting such late amendment to remedy non- compliance.

[18]      The overarching legislative reform, initiated through the Judicature Modernisation Bill, aimed to modernise the principal statutes governing the courts and to ensure the justice system kept up with the demands of the 21st century.7 The Interest on Money Claims Act was one of five new statutes arising from the Judicature Modernisation Bill.

[19]      The Act provided a statutory framework to mandate the awarding of interest in civil proceedings. It replaced the provisions of the Judicature Act 1908 (s 87) and the District Courts Act 1947 (ss 62B and 65A), which left the courts with substantial discretion in relation to pre-judgment interest. The Act introduced standard provisions for calculating interest on amounts of money payable under certain enactments, using the Internet site calculator.8 A primary purpose is to compensate claimants for the delay in payment of sums awarded as damages.9

[20]      The provisions of s 25 of the Act were first envisioned in the Law Commission’s 1994 Report Aspects of Damages: The Award of Interest on Money Claims.10 Section 16 in the Commission’s draft Act, foreshadowing s 25(1), would have introduced a requirement for a person claiming interest to specify the section under which and period for which interest was claimed. The draft Act did not contain a provision equivalent to what was subsequently enacted s 25(4) but the Commission in 1994 commented that, under the general law of procedure, the Court may allow amendments to pleadings during the course of the hearing if the other side is not prejudiced by them.11

7      Third Readings (11 October 2016) NZPD 717 at 14121–14122.

8      Interest on Money Claims Act 2016, s 4.

9      Section 3(1).

10     Law Commission Aspects of Damages:The Award of Interest on Money Claims (NZLC R28, 1994).

11     At 119.

[21]      When the Judicature Modernisation Bill was introduced to Parliament in 2016, cl 465(1) of the Bill was in the terms that came to be enacted in s 25(1) of the Act.

[22]      It was when the Bill was reported back to Parliament by the Justice and Electoral Committee that there was a recommendation to introduce a provision which subsequently came to be s 25(4) of the Act. The Committee recommended the insertion of that provision so the Court would not be precluded from awarding interest if a non-compliant claim was later remedied according to the rules of the court.

Previous cases involving amendments to claim interest

[23]      Mr Cooper has identified four previous cases in which a plaintiff failed to comply with s 25 of the Act and subsequently successfully applied (either formally or informally) for leave to amend the pleading so as to comply. Those cases were:

(a)Harvey v Harvey12 — the successful plaintiff in her pleading had referred simply to “interest” — Gordon J, following her substantive judgment, granted an unopposed application for leave to amend the pleading and awarded the interest sought;

(b)Leondale Ltd v Boyd13 — the successful plaintiff in its pleading had sought interest at a contractual penalty rate but had not referred to the Act — Associate Judge Lester, in the context of a summary judgment hearing, granted leave on an unopposed oral application to amend the pleadings to comply with the Act, and awarded the interest sought;

(c)Plumbco New Zealand Ltd v Plumbco Commercial and Civil Ltd14— the successful plaintiff in its pleadings had specified a claim for interest under the Act but had omitted to specify the interest rate (as required by s 25(2)(a)). Following judgment, Edwards J, without expressly granting leave to amend the pleadings, found the omission had “since

12     Harvey v Harvey [2021] NZHC 2405 (substantive judgment) at [362]–[365]; Harvey v Harvey (No 2) [2021] NZHC 3508 (interest judgment) at [5], [44], [49].

13     Leondale Ltd v Boyd [2021] NZHC 470 at [55], [57]–[58].

14     Plumbco New Zealand Ltd v Plumbco Commercial and Civil Ltd [2023] NZHC 690 (substantive judgment), [2023] NZHC 1819 (interest judgment) at [13]–[16].

been remedied by the memoranda filed after the hearing” and awarded interest at the prescribed maximum interest rate;15

(d)Swenson v Lawton16 — the successful plaintiff had specified a claim for interest under the Act but failed to specify a commencement date (as required by s 25(1)). On an opposed interlocutory application apparently filed after the hearing but before judgment, Isac J granted leave to amend the pleading to include interest for a now-specified period and awarded the interest sought.

[24]      While the Court did not, in these four cases, refer to the Elders Pastoral principles (above at [10]), the circumstances and outcome of each of the four cases can readily be identified as meeting those principles:

(a)In terms of the interests of justice, the plaintiff in each case had expressly made a claim for interest, albeit not complying with the strict requirements of the Act. The Court, by permitting amendment, could then consider whether the interest regimes considered appropriate under the Act should apply to the plaintiff’s claim and, if so, to what extent.

(b)There was no apparent prejudice in any of the cases, as expressly identified by the Court in two of the cases.

(c)Through the need for amendment to the pleadings being recognised and/or dealt with in the course of the substantive hearing or immediately following judgment (when the Court was in any event dealing with other consequential issues and/or costs), and was dealing with such matters on the papers, there was no significant delay involved.

15 At [16].

16     Swenson v Lawton [2022] NZHC 3544 at [49]–[51].

[25]      In the two cases in which there was expressly no opposition to the amendment application, the Court was entitled to infer that the defendant had not identified any injustice, prejudice or significant delay that would arise if the Court allowed the amendment.

[26]      Mr Cooper referred to a fifth case, Body Corporate 81012 v Memelink (Memelink), in which this Court awarded interest under the Act.17 That occurred notwithstanding that the plaintiffs, while claiming interest pursuant to the Act for a specified period, had failed (in terms of s 25(1)) to specify the section under which the interest was claimed. Upon the non-compliance being raised in the course of the hearing of the substantive proceedings and counsel for the defendants’ submissions that s 25 of the Act precluded an award of interest, the Court nevertheless, and without an application for leave to amend, awarded interest to the plaintiffs under s 9 of the Act. The Judge reasoned that, because the defendants had not in their statement of defence relied on s 25 of the Act, the defendants should not be allowed to “raise this defence belatedly” — he awarded interest for the period claimed.18

[27] In line with the outcome in the earlier four cases referred to (at [23] above), the plaintiffs in Memelink would almost inevitably have been granted leave to amend the pleading to correctly refer to s 9 of the Act. On the other hand, the reason adopted for the outcome in Memelink is inconsistent with the provisions of s 25 of the Act —     s 25(1) precludes the Court from awarding interest where there has been relevant non- compliance in the pleading unless the Court has (pursuant to s 25(4)) made or accepted an amendment.

[28]      Mr Cooper also referred to two cases in which this Court applied s 25(1) of the Act to refuse an award of interest. In Remnant v Mills (Remnant), the statement of claim referred only to “Interest pursuant to the Interest on Money Claims Act 2016”.19 In TPD 2018 Ltd v Godfrey and Company Ltd (TPD 2018), the plaintiff in its pleading claimed interest under s 10 of the Act, whereas at trial it sought interest under s 24 of the Act (reflecting an acceptance that the Court could not award interest under s 10 for

17     Body Corporate 81012 v Memelink [2022] NZHC 1244.

18 At [146].

19     Remnant v Mills [2020] NZHC 3414 at [90].

the period before the date of judgment because of the provisions of s 24).20 The Court held there was no jurisdiction to award interest under s 24 for the period before the date of judgment because s 25(1) precluded such an award.21 The Court further held that, even had jurisdiction existed, interest for the period before judgment would not have been granted having regard to the facts of the case.22

[29]      I do not view Remnant or TPD 2018 as cutting across what may otherwise be considered the recognition of a liberal approach to amendment as shown in the other cases referred to. The Court, faced with the strict operation of the provisions of s 25(1) will normally, when amendment would validate an interest claim the plaintiff is pursuing, see fit, either at the request of the plaintiff or of its own motion, to grant the plaintiff time to bring an application for leave to amend under s 25(4). Or, in an unusual case, the Court may itself amend the pleading pursuant to the Court’s power under r 1.9(2) High Court Rules to make amendments on its own initiative — such is likely to be appropriate only when the defendant was on clear notice and did not wish to be heard. The fact the plaintiff in TPD 2018 was not offered an opportunity to seek leave is explicable by the fact the Court would have refused to award interest for the claimed period even had s 25(1) of the Act not applied.

[30]Against the background of these authorities, I turn to the present application.

Discussion

[31]      I acknowledge the comprehensive submissions filed by Mr Cooper both as to the purpose and application of s 25 of the Act and as to the circumstances of this case.

[32]      The plaintiffs recognise their claim for interest did not meet the requirements of s 25 of the Act. They say that non-compliance was an error. It was clear from the pleading that the plaintiffs intended to claim interest. Their amended pleading would specify both the relevant sections of the Act under which the claim was made (ss 10 and 24) and the periods of claim.

20     TPD 2018 Ltd v Godfrey and Company Ltd [2021] NZHC 1584.

21 At [8].

22 At [9].

[33]      I find the proposed amendments satisfy the three “hurdles” identified in Elders Pastoral (and applicable to this application made under r 1.9 of the Rules) because:

(a)it is in the interests of justice to allow the amendment — the defendant was always on notice that the plaintiffs sought interest and the awarding of interest, if found appropriate, will accord with the primary purpose of the Act, by providing compensation for the delay in payment of sums awarded as damages;

(b)with costs also yet to be determined following the substantive judgment, there will not be significant delay occasioned by the grant of leave to amend the interest claim;

(c)the defendant is not otherwise relevantly prejudiced — the amendment does not raise a new matter but instead particularises an existing claim; and

(d)there is no suggestion the defendant would have responded in any different way (whether with evidence or otherwise) had amendment been made prior to the close of pleadings.

[34]      I also take into account the fact the defendant does not oppose the leave application as supporting the inference that it accepts the conclusions in the preceding paragraph.

[35]      On this basis,  the Court  has a discretion to permit amendment both under     r 1.9(1) (because of the plaintiffs’ error in their pleadings) and under r 1.9(2) (because the amendments are necessary to determine the real controversy between the parties).

[36]      I am satisfied, as a matter of discretion, that the plaintiffs’ application should be granted.

[37]      This outcome being in the nature of an indulgence, it is appropriate there be no order as to costs.

Result

[38]There will be orders:

(a)the plaintiffs are granted leave to amend their claim in accordance with the draft fourth amended statement of claim filed on 6 October 2023; and

(b)there is no order as to the costs or disbursements of the plaintiffs’ application.

Osborne J

Solicitors:

Duncan Cotterill, Auckland for the Plaintiffs Hazelton Law, Wellington for the Defendant