EVAN RAYMOND BIRCHFIELD and GARY PAUL BIRCHFIELD s AND ALLAN JOHN BIRCHFIELD
[2024] NZHC 2940
•10 October 2024
IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA MĀWHERA ROHE
CIV-2024-418-005
[2024] NZHC 2940
BETWEEN EVAN RAYMOND BIRCHFIELD and GARY PAUL BIRCHFIELD
Plaintiffs
AND
ALLAN JOHN BIRCHFIELD
Defendant
Hearing: 7 October 2024 Appearances:
G K Riach for Plaintiffs
P A Cowey and V A Reid for Defendant
A L Davidson for Birchfield Coal Mines LtdJudgment:
10 October 2024
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 10 October 2024 at 2.30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
BIRCHFIELD v BIRCHFIELD [2024] NZHC 2940 [10 October 2024]
[1] The plaintiffs and the defendant are co-owners of a large yard located at Kaiata, Greymouth (the yard) which is occupied by a related company Birchfield Coal Mines Ltd (BCM).
[2] The relationship between the plaintiffs and the defendant has broken down. The plaintiffs apply for an order under s 339 of the Property Law Act 2007 requiring the defendant to sell his interest in the yard to them. The defendant counterclaims for an order that the yard be subdivided to reflect the parties’ respective ownership interests.
[3] The application before me is made by the plaintiffs seeking an order joining BCM as a second defendant. This is because it is said that BCM’s rights in respect to the yard, including the right to occupy and conduct its business there, will be directly affected by the defendant’s counterclaim. The defendant opposes the making of the order sought.
[4]The issues before me are whether:
(a)the Court has jurisdiction to make an order for joinder of BCM under r 4.56 of the High Court Rules 2016 (the Rules); and
(b)if jurisdiction exists, the Court should exercise its discretion in favour or against the making of such an order.
Background
[5] The plaintiffs and the defendant are brothers. The plaintiffs own a 75 per cent undivided share and the defendant a 25 per cent undivided share in the yard.
[6] BCM occupies the yard for coal mining and associated operations. The plaintiffs and the defendant, along with their sister, are either personally or through family trusts the owners of Birchfield Holdings Ltd, which is the sole shareholder of BCM. The plaintiffs and their sister are the directors of BCM; the defendant is not a director.
[7] Given the breakdown in their relationship the plaintiffs and defendant are agreed that something must be done to bring an end to their joint ownership of the yard, but they agree on little else. As noted above, the plaintiffs want the Court to order the defendant to sell to them his interest in the yard, intending BCM will continue to operate from it, while the defendant wants the yard to be subdivided.
[8] The plaintiffs are of the view that the subdivision option is impractical and unworkable because the yard is, and has for decades, been subject to an exclusive licence to use and occupy in favour of BCM. They say BCM occupies the entire yard and has for the last 20 years or more paid all the expenses in relation to it, including improvements to the buildings and infrastructure. They also say subdivision of the yard would not serve to relieve the acrimony between the parties and would interfere with and constrain BCM because it would give rise to access issues, reduce the availability of covered storage, require separation of the power supply, require new staff facilities to be provided, and reduce parking and the manoeuvrability area for coal and freight trucks.
[9] The defendant says that since around 1978 an undivided portion of the yard, comprising approximately 25 per cent of the site, has been continuously and exclusively used by him. He says as he continues to operate from the yard BCM can have no licence in respect to that part he occupies. He also says that even if BCM has a licence it is revocable at will.
[10] If the Court is not prepared to order a subdivision, the defendant seeks in the alternative an order that they must pay sufficient to enable him to purchase an equivalent site and the actual and reasonable costs of relocation.
[11] Initially the plaintiffs sought leave to bring this proceeding by originating application under pt 19 of the Rules and naming BCM as an interested party. Subsequently consent directions were made that the proceeding be commenced as an ordinary action under pt 5 of the Rules.
[12] The plaintiffs filed their statement of claim on 12 April 2024. The defendant’s statement of defence and counterclaim was filed on 1 May 2024. Notably, the
defendant denied that BCM had an exclusive licence for possession and use of the yard or that it had been in continuous possession of the entire yard since 1978 as the plaintiffs alleged. The plaintiffs’ reply and defence to counterclaim was filed on 16 May 2024, and by way of an affirmative defence to the counterclaim they pleaded the defendant was estopped from denying that BCM enjoyed exclusive possession of the yard.
[13] In a memorandum dated 14 June 2024 for a telephone conference on 17 June 2024, the defendant’s position was that if the plaintiffs consider BCM should be joined as a defendant then they would need to make an application to the Court, that the plaintiffs “cannot plead on behalf of a non-party”, and that if BCM wished to intervene it too would need to make an application to the Court.
[14] At a telephone conference on 17 June 2024 Harland J made a direction that the plaintiffs serve BCM with the proceeding, and that applications to join BCM as a party or for it be granted leave to intervene were to be filed by 28 June 2024.
[15] The plaintiffs subsequently filed this application to join BCM as the second defendant. BCM did not take any steps until shortly before the hearing, when it filed a memorandum by its counsel stating it consents to the plaintiffs’ application that it be joined as a second defendant.
The law
[16]Rule 4.56 of the Rules provides:
4.56 Striking out and adding parties
(1)A Judge may, at any stage of a proceeding, order that—
(a)the name of a party be struck out as a plaintiff or defendant because the party was improperly or mistakenly joined; or
(b)the name of a person be added as a plaintiff or defendant because—
(i)the person ought to have been joined; or
(ii)the person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
(2)An order does not require an application and may be made on terms the court considers just.
(3)Despite subclause (1)(b), no person may be added as a plaintiff without that person’s consent.
[17] The object of the rule is to provide for the inclusion of necessary parties. The current approach in New Zealand to joinder is a liberal one.1 The position of a plaintiff seeking joinder of a defendant is in the most favourable position, and once jurisdiction is established joinder is usual.2
[18] Rule 4.56(1)(b)(i) allows a person to be added because that person ought to have been joined. However, I understand counsel to agree that it is r 4.56(1)(b)(ii) that is in issue in this case. The effect of r 4.56(1)(b)(ii) is summarised in McGechan on Procedure as follows:3
(a)The question is: will the proposed defendant’s rights against or liabilities to any party to the action in respect of the subject-matter of the proceeding be directly affected by any order which may be made in the action? ...
(b)It is not necessary that monetary relief be claimed against the proposed defendant. Indirect legal interest such as that arising upon an accounting between the parties will suffice ...
(c)Interest divorced from the subject-matter of the proceeding, for example merely as a creditor, will not suffice ...
(d)Jurisdiction does not exist simply on the basis of justice or convenience ...
[19] In McGregor v McGregor, Fitzgerald J considered the principles that apply to an application for joinder under r 4.56(1)(b)(ii) and said:4
[19] ... In short, the test is whether an applicant’s legal rights or liabilities in relation to the subject matter of the proceeding will be directly affected by the proceeding. I do not take the reference in the authorities to “legal” rights as limiting the type of rights that may be directly affected by the proceeding to legal, as opposed to equitable, rights. Rather, the context in which the phrase “legal rights” is used in the authorities is to distinguish “legal rights” from mere commercial, financial or reputational rights. The authorities also
1 Westfield Freezing Co Ltd v Sayer & Co (NZ) Ltd [1972] NZLR 137 (CA).
2 NZI Insurance Ltd v Hinton Hill & Coles Ltd (1996) 9 PRNZ 615.
3 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR4.56.09].
4 McGregor v McGregor [2016] NZHC 3142, citing Capital and Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd [2014] NZHC 3205, [2015] NZAR 228.
confirm that the existence of a cause of action between the plaintiff and a proposed further defendant is not a necessary prerequisite. ...
(footnotes omitted)
The plaintiffs’ submissions
[20] While acknowledging the precise nature of BCM’s rights in respect to the yard are disputed, the plaintiffs say BCM enjoys an indefinite licence to occupy which was jointly granted by all co-owners and requires the agreement of all co-owners to terminate. They argue BCM’s right of occupation is a legal right but subject to equities in favour of BCM and that it will be directly affected by subdivision of the yard.
[21] In response to the defendant’s position that BCM’s rights will in fact be unaffected by any order the Court may make under s 339, the plaintiffs say that is only true if the plaintiffs are successful in obtaining an order for sale of the defendant’s interest to them but not if the Court orders subdivision of the land. It is said a subdivision will remove BCM’s right to occupy the area the defendant says has been set aside for his use and that the disturbance to its occupation and use may not be limited to the area that is subdivided because there will be other issues arising from the subdivision to further constrain BCM’s business, such as the need to provide access to the subdivided land.
[22] The plaintiffs also argue that if BCM is not made a party and subdivision ordered then further litigation will follow. As a result the Court will not have effectually and completely adjudicated on all the questions involved in the proceeding.
The defendant’s submissions
[23]Mr Cowey referred to r 4.1 of the Rules which provides:
4.1 Limit on parties
The number of persons named or joined as parties to a proceeding must be limited, as far as practicable, to—
(a) persons whose presence before the court is necessary to justly determine the issues arising; and
(b)persons who ought to be bound by any judgment given.
[24] He submits r 4.1 reflects an underlying policy of the Rules limiting the parties joined to a proceeding and the correct approach requires the Court to first identify the extent to which the matters in dispute between the plaintiffs and defendant “require BCM’s presence as a defendant in order to be effectively and completely determined”.
[25] Mr Cowey then submits that the matters in issue in this proceeding concern only ownership of the yard. He submits BCM is not an owner of the yard and is a mere licensee, which does not confer upon BCM a proprietary interest. To the extent it has any rights, they are personal rights against the licensors and BCM’s presence is not necessary to adjudicate on the substantive dispute between the co-owners.
[26] The defendant argues that the extent to which BCM has a commercial interest in the outcome of the litigation is an insufficient basis for it to be joined as a second defendant and the Court has no jurisdiction to do so.
[27] However, he also argues that regardless of what the Court orders as between the plaintiffs and defendant, BCM’s rights will be unaffected because if the defendant is required to sell his interest to the plaintiffs, the plaintiffs will continue to recognise BCM’s right to occupy. However, if the Court orders a subdivision that will be because it accepts the defendant occupies the yard, and the division will simply reflect its ownership and historic use.
[28] At the hearing, I understood Mr Cowey to go further and submit that even if the Court did not accept the defendant was occupying the yard, upon a subdivision of the land BCM would be able to take steps to enforce any rights it may have against the defendant (although I also understand the defendant’s position is that such rights as BCM has are terminable at will).
[29] The defendant also argues that the plaintiffs cannot seek to join BCM on the basis he is estopped from denying BCM’s rights, as the plaintiffs cannot seek to enforce the rights of another.
[30] In submissions directed to the Court’s discretion to refuse to make an order for joinder, the defendant submits that participation of BCM in the proceeding would not
improve the quality of information before the Court,5 making an order for joinder would create an impression of partiality,6 BCM can rely on the plaintiffs to protect its rights and obligations,7 and to the extent the Court considers BCM should participate in the proceeding that could be accomplished as an interested party without elevating its status to that of a defendant.8
Analysis
[31] As Fitzgerald J recognised in McGregor v McGregor, the Court has a wide discretion as to the orders that may be made under s 339 of the Property Law Act and is not constrained by the relief sought by the parties.9
[32] The fact that orders made by the Court under s 339 may affect the interests of persons other than the co-owners of a property the subject of an application, and that such persons may be heard in relation to such an application including as a party to the proceeding, is reflected in several ways. There is, for instance, the requirement under s 341(2) for service “if not already a party to the proceeding” on a person with an estate or interest in the property that may be affected by the granting of the application. Also, one of the considerations the Court must have regard to under s 342(d) includes hardship that would be caused to “any other person by the making of the order”.
[33] While Mr Cowey relied upon r 4.1, it appears to me that it simply reflects the requirements of r 4.56. It does not impose an onerous threshold upon the party applying for joinder, and it is well recognised that the threshold is quite low.10
[34] I do not accept the defendant’s contention that such rights as BCM has as a licensee do not create any direct interest in the yard sufficient for it to be joined as a party. It does not matter whether BCM’s rights are personal or create an estate or interest in the land. What matters is whether and the extent to which its rights in
5 Capital and Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd, above n 4, at [41(b)].
6 At [41(d)].
7 McGregor v McGregor, above n 4, at [50].
8 Referring to Wilson v Attorney-General [2010] NZAR 509 (HC).
9 McGregor v McGregor, above n 4, at [50]; and Bayly v Hicks [2012] NZCA 589, [2013] 2 NZLR 401 at [32]-[33].
10 Newhaven Waldorf Management Ltd v Allen [2015] NZCA 204, [2015] NZAR 1173 at [46].
relation to the subject matter of this proceeding may be directly affected by an order made by the Court.
[35] Despite all Mr Cowey had to say on the matter, I consider BCM’s rights in respect to its occupancy and use of the yard may be directly and very significantly affected by the Court’s judgment in this proceeding. The position from the plaintiffs’ perspective (which BCM supports) is that BCM has been in occupation of the yard for 46 years and has made substantial improvements and paid all the costs on the basis it has an indefinite licence to occupy that requires the agreement of all co-owners to terminate. Because of the orders sought by the defendant, what is at stake is BCM’s right to occupy and enjoy the entire yard on an indefinite basis.
[36] I accept BCM’s rights will not be affected in the event the plaintiffs are successful. However, the same will not be the case if the Court were to order the yard to be subdivided. In that instance, BCM would be excluded from the use of a large area it says it currently operates from. It appears the defendant does not, and would not, accept that he must recognise BCM’s rights. BCM’s right to use the balance of the yard would also undoubtedly be impacted because accommodations would need to be reached between the parties as owners and occupiers of adjoining properties.
[37] I also do not accept the submission that a subdivision would not affect BCM’s ability to enforce any rights it might have against the defendant. Even if that was the case, further litigation between the parties would be very likely during which BCM’s business could be significantly impacted. Such an outcome would be contrary to the spirit of the Rules. As North P said in Westfield Freezing Co Ltd v Sayer & Co (New Zealand) Ltd:11
... Once the real dispute is before the Court, then it is in the interests of the parties, and indeed in the public interest, that that dispute should be resolved as soon as possible. Accordingly, the failure by a plaintiff to select the right parties should not stand in the way of the Court bringing the dispute to a conclusion by joining additional persons either as plaintiffs or defendants “who ought to have been joined” in the first instance, or “whose presence before the Court may be necessary to enable the Court effectually and completely to adjudicate upon and settle all the questions involved in the action.”
11 Westfield Freezing Co Ltd v Sayer & Co (New Zealand) Ltd, above n 1, at 143.
[38] For those reasons I am satisfied the Court has jurisdiction to join BCM as a second defendant under r 4.56(1)(b)(ii).
[39] Turning to the question of whether the Court should exercise its discretion to refuse to make an order for joinder, Mr Cowey argues that BCM has not taken any steps to be involved in the litigation. As I have noted earlier, it has now done so.
[40] He then submits that to allow BCM to be joined would create an impression of partiality in favour of the plaintiffs. This was a factor referred to by Thomas J in Capital and Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd in relation to whether the Court should allow a third party to intervene in a proceeding.12 I do not see what relevance it can have here.
[41] Mr Cowey then submits that joining BCM would not improve the quality of the information to be put before the Court. Given the plaintiffs are two of the three directors of BCM, I accept that is the case. However, I do not see that is a sufficient reason to refuse to allow BCM to enjoy the rights and status of a party when its interests are directly at stake in relation to the subject property.
[42] The authorities indicate that whether the plaintiffs wish to join a person as a defendant is a factor to be considered in support of making an order for joinder, albeit it that it may be overridden where the interests of justice dictate another outcome.13 Here the plaintiffs seek joinder.
[43] A further factor in favour of joinder is that it cannot be suggested that the making of an order will cause delay in the proceeding, nor has any prejudice to the defendant been identified.
[44] Another important factor in my view is that BCM should be joined so that all affected parties are bound by any judgment of the Court. In that way the potential for ongoing litigation following any determination in this proceeding will be reduced. Such litigation could otherwise arise in several ways. If it was not a party BCM could
12 Capital and Merchant Finance Ltd (in rec and in liq) v Perpetual Trust Ltd, above n 4, at [41(d)].
13 Robin v IAG New Zealand Ltd [2018] NZHC 204 at [13]; referred to in Brooker v IAG New Zealand Ltd [2019] NZHC 1225 at [34].
for instance seek to prevent the subdivision or, as I have foreshadowed earlier, enforce its rights directly against the defendant. These parties have already been involved in litigation on other matters. It is in everyone’s interests that, to the extent it can, the Court should bring an end to the litigation and not adopt processes that may foster it in the future.
Result
[45] The plaintiffs’ application is granted. There shall be an order joining Birchfield Coal Mines Ltd as a second defendant.
[46] I can see no reason why the plaintiffs would not be entitled to costs against the defendant on a category 2 basis, but if there is any dispute about that counsel may submit memoranda within 10 working days.
[47] Counsel are to confer and file a joint memorandum within 10 working days with timetable directions to take the case to a hearing.
O G Paulsen Associate Judge
Solicitors:
Harmans, Christchurch Parry Field, Christchurch
Anderson Lloyd, Christchurch
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