First Gas Limited v Gibbs

[2021] NZHC 2423

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

I TE KŌTI MATUA O AOTEAROA NGĀMOTU ROHE

CIV-2021-443-16

[2021] NZHC 2423

BETWEEN

FIRST GAS LIMITED

Plaintiff

AND

RUSSELL VICTOR GIBBS, PARANI JOSEPHINE GIBBS AND LEIGH JOSEPH HORTON

Defendants

Hearing:	On the papers
Counsel:	L P Wallace for Plaintiff S J Grey for Defendants
Judgment:	15 September 2021

JUDGMENT OF ISAC J

[Leave to defend and adjournment]

Introduction

[1]This judgment addresses two procedural issues:

(a)an application by the defendants for leave to defend the proceeding under r 15.9(3) of the High Court Rules 2016; and

(b)an application by the defendants of 6 September 2021 to adjourn the trial scheduled to commence on 20 September 2021.

FIRST GAS LIMITED v GIBBS, GIBBS AND HORTON [2021] NZHC 2423 [15 September 2021]

[2]        On 7 September 2021 I advised the parties that it was not appropriate to adjourn the fixture if leave was granted.1 On 8 September 2021 I granted leave to defend the proceeding.2

[3]This judgment sets out my reasons for both orders.

Background

[4]        On 22 April 2021, the plaintiff, First Gas, commenced proceedings against the Gibbs Family Trust. First Gas advances one cause of action in nuisance. It seeks declarations, and a permanent injunction, relating to various claimed rights of access to and use of land owned by the Gibbs Family Trust. Those rights are said to arise from pipeline easement certificates issued under the Petroleum Act 1937.

[5]        In addition to a permanent injunction, First Gas sought an interim injunction enabling it to commence exploratory works intended to effect a repair to a buckle in the Maui gas pipeline. I granted First Gas an interim injunction on 9 July 2021.3

Defendants’ application for leave to file a defence

Background

[6]        The early procedural history of the case is set out in the appendix to the interim injunction decision. As noted in the appendix, there has been something of a history of non-compliance by the defendants with the requirements of the Rules. First, there were difficulties effecting personal service of proceedings on Mr Russell Gibbs, one of the three defendant trustees.4

[7]        Then, six weeks after proceedings had been served on the other two defendants (Ms Gibbs and Mr Horton), Mr Russell Gibbs filed a notice of opposition. He also

1      Minute (No 4), 7 September 2021.

2      Minute (No 5), 8 September 2021 at [4]–[6].

3      First Gas Ltd v Gibbs & Ors [2021] NZHC 1722 [interim injunction decision].

4      In a recent memorandum Mr Gibbs takes issue with First Gas’s attempts to effect personal service on him, and suggests the Court has been misled on that question. It is unnecessary to consider that issue further because, without doubt, two of the three trustees, one of whom appears to be a family member of Mr Gibbs, was served personally on 4 May 2021. Mr Gibbs has never alleged that he was unaware of the proceedings due to a lack of personal service.

filed a memorandum seeking an extension of time to file evidence in support of that opposition to 23 June 2021. The failure to file evidence at the same time as the notice of opposition was contrary to the requirements of r 7.25.5

[8]        The defendants did not file any evidence on 23 June. Instead, on that date they sought an adjournment of the interlocutory hearing scheduled for 2 July 2021. The ground advanced in support of the adjournment was that First Gas’ proceeding lacked merit. The defendants did not suggest that they had been unable to prepare or file evidence in opposition in time.

[9]        I dismissed the application for an adjournment in a minute of 28 June 2021. I provided the defendants with a final opportunity to file evidence in opposition. That evidence was received (unsworn) on 28 June, only three working days prior to the fixture.

[10]      Despite the defendants’ own failure to comply with the requirements of the Rules, at the hearing they made sustained criticisms of what they said was First Gas’ failure to provide its submissions within the time prescribed by the Rules. They alleged that the failure to do so was a breach of natural justice affecting their ability to be heard. I rejected that submission for the reasons set out at [13]-[16] of the appendix to the interim injunction decision.

[11]      Time moved on. First Gas was able to complete the preliminary site investigations in order to ascertain whether and how the buckle might be repaired.

[12]      On 23 August 2021 First Gas sought a priority hearing in relation to its application for a permanent injunction and declarations. It noted that the works timetable for the pipeline and associated regulatory requirements required the allocation of a hearing before the end of September. First Gas also noted that as at  23 August, the defendants had failed to file a statement of defence. First Gas submitted that the defence was due on or before 9 June 2021. Accordingly, it sought a formal proof hearing under r 15.9 and, in the alternative, if the Court was not prepared to list

5      Which requires any affidavit setting out evidence in support of a notice of opposition to be filed and served with the notice of opposition.

the proceeding for formal proof, it requested an urgent case management conference so that a fixture could be allocated before the beginning of October 2021.

[13]      Three days later, on 26 August, the defendants responded with a brief memorandum. Although the defendants had not filed an application for leave to appeal, or an application to rescind the interim injunction, Mr Gibbs asked for both informally. Most of his memorandum sought to contest the merits of the proceeding and the correctness of the Court’s interim injunction decision.

[14]In Minute No 3 of 27 August 2021, I made the following orders:

(a)The proceeding was listed for formal proof on 20 September 2021 and I directed First Gas to file any affidavits in support by 6 September 2021.

(b)I indicated that if the defendants wished to seek leave to file a statement of defence, they should do so urgently. I also indicated that if they wished to seek leave to appeal, they should also file a properly formulated application.6

(c)I indicated that, if leave to file a defence was sought and granted, it was likely the fixture on 20 September 2021 would proceed as a defended hearing with a truncated timetable.7

[15]      On 31 August 2021 the defendants filed a further memorandum seeking leave to file a defence, accompanied by a proposed statement of defence. The memorandum in support of the application for leave was extremely brief. It was unsupported by any evidence or a notice of interlocutory application. It did not address all of the criteria relevant to the grant of leave. Mr Gibbs’ memorandum stated that the reason for the defendants’ failure to file a defence over the preceding three months was due to:

The interlocutory application, subsequent entries and other works have impacted on our capacity to comply with all of the deadlines and we have been

6      At [8]–[9].

7 At [10].

working through weekends and evenings to try and catch up. The covid issue has caused further delays.

[16]      No further explanation was advanced in relation to the reasons for the delay in filing a statement of defence.

[17]      First Gas opposed the grant of leave, highlighting that there was no reasonable explanation for the delay. It submitted that it would suffer irreparable injury if leave to defend was belatedly granted, and certainly if the result of leave was deferral of the hearing of its claim beyond the end of September 2021.

[18]      On 6 September 2021 I convened a teleconference with counsel and Ms and Mr Gibbs. Ms Grey appeared for the defendants but, having only recently been instructed, was unable to deal with all of the matters discussed, and as a result I gave both Ms Gibbs and Mr Gibbs an opportunity to make submissions as well.

[19]      Not long before the teleconference Mr Gibbs had filed a nine-page memorandum which unfortunately had not made its way to me before the call. I gave Ms Gibbs an opportunity to provide submissions in relation to the matters covered by the memorandum. The primary point raised was an application to adjourn the formal proof hearing (and, I took it to be an application to adjourn a trial, if leave were granted).

[20]Having heard from the parties, in Minute No 4 I did two things:

(a)I made timetabling directions to ensure the matter could proceed to a trial on 20 September if leave was granted. A timetable was necessary because the proposed trial date was only two weeks away;8 and

(b)I provided the defendants with a further and final opportunity to provide any additional evidence and submissions they wished to advance in support of their application for leave. I directed that any further material in support needed to be filed and served by 5 pm the following day,    7 September 2021.

8      At [11]-[16].

[21]      At 5.03 pm on 7 September Ms Grey filed submissions for the defendants and indicated that “an affidavit in support will follow shortly”. The brief affidavit of    Mr Gibbs was not received by the registry until the afternoon of 8 September.

[22]      On 8 September 2021, following an inquiry by counsel for the plaintiff, I indicated that if leave were granted, I was not persuaded that an adjournment of a trial starting 20 September was appropriate.

[23]      The following day, in Minute No 5, I granted, by a narrow margin, leave to file a defence on conditions. Those conditions required a trial to proceed in place of the formal proof hearing on 20 September 2021. I also directed that the defendants were to comply strictly with the timetable set out in Minute No 4. Finally, I indicated that leave was reserved for the plaintiff to revisit the grant of leave and the conditions of leave, in the event of non-compliance by the defendants.

Criteria for grant of leave

[24]      In considering whether to grant leave under r 15.9(3), there are three relevant considerations:9

(a)whether the defendant has a substantial ground of defence;

(b)whether the delay is reasonably explained; and

(c)whether the plaintiff will suffer irreparable injury if leave to defend is belatedly granted, or the judgment set aside.

Do the defendants have a substantial ground of defence?

[25]      Without expressing a view of the merits of the proposed defence, I was satisfied that there was a substantial ground of defence. The defendants claim, amongst other things, that First Gas’ rights under the petroleum easements have been qualified as a result of a “collaborative process” they say was imposed as a result of this Court’s

9      Neumayer v Kapiti Coast District Council [2014] NZHC 417, [2015] NZAR 1185 at [8], referring to Russell v Cox [1983] NZLR 654 and Shoye Venture Ltd v Wilson & Anor [2013] NZHC 2339 at [13].

judgment in Gibbs v Vector Gas.10 They also appear to argue that First Gas has entered into an agreement restricting its rights as a consequence of understandings reached as part of stage one of the Pariroa project.11 And, First Gas did not seek to argue that the defendants did not have a substantial ground of defence.

Is the defendants’ delay reasonably explained?

[26]      As noted above, the defendants’ compliance with the timetabling requirements of the Rules and the Court’s timetabling directions has been poor. They have also sought to adjourn both the hearing of First Gas’ application for an interim injunction, as well as the trial itself.

[27]      The defendants were provided with more than one opportunity to regularise their application for leave to file a defence. Despite that, they did not comply with the timetable. The late and unsworn affidavit of Mr Russell Gibbs in support provided no explanation for the failure to file the defence in time, or the subsequent delay in making the application for leave. And while Ms Grey’s submissions contained extensive factual assertions, they were almost entirely unsupported by evidence. More importantly, even if accepted, the submissions imply that the Gibbs’ failure to file a defence was due to the time and energy required to engage with First Gas’ efforts to maintain and repair the Maui pipeline, and this litigation.

[28]      I am unable to accept the explanation advanced by the defendants in submissions. The defendants have, both before and after they retained Ms Grey, demonstrated a capacity to oppose steps taken by First Gas in the proceeding. This has included the preparation and filing of affidavits, memoranda, and detailed submissions on matters of law. Given their demonstrated ability to engage with the proceeding when they choose to do so, I am unable to accept that they were prevented from preparing and filing a statement of defence in accordance with the Rules. And while the defendants did not claim that their previous lack of legal representation was a factor in their failure to comply with the Rules, I would not have accepted the

10     Gibbs v Vector Gas HC New Plymouth CIV-2008-043-000545, 27 April 2009.

11     See interim injunction decision, above n 3, at [46].

submission had it been made. That is because the defendants have also shown they are sophisticated lay litigants familiar with the requirements of the Rules.12

[29]      The problem for the Court in all of this is that the defendants undoubtedly oppose the proceeding and wish to be heard. Against that, a delay to the trial as a result of a grant of leave would, as noted in Minute No 3,13 create a very real risk that First Gas would be deprived of the benefit of the rights it asserts even if successful. That in turn could affect the security of gas supply to the North Island. Those factors (and others) led me to conclude that a priority fixture was necessary.

[30]      Overall, I considered that despite the failure of the defendants to provide a reasonable explanation for their delay, and notwithstanding a pattern of procedural non-compliance, the Court could nevertheless balance the competing interests of the parties by granting leave subject to strict conditions. Those conditions would require a priority fixture commencing on 20 September 2021 with a truncated timetable for the completion of discovery and the exchange of evidence.

[31]      That is why I observed in Minute No 514 that leave was granted “by a narrow margin”.

Will First Gas suffer irreparable injury if leave to defend is belatedly granted?

[32]      For the reasons noted, I was satisfied that if leave were belatedly granted and the matter proceeded to trial in the usual way, First Gas and its customers could suffer irreparable injury. However, the risk of irreparable harm could be addressed though the allocation of a priority fixture and a truncated timetable.

[33]      For those reasons, I concluded that the grant of leave was only appropriate if accompanied by conditions addressing the position of the plaintiff and avoiding the risk of delay to a trial on 20 September.

12     For instance, at the hearing of the interim injunction application Ms Gibbs made written and oral submissions based on what was said to have been a breach by First Gas of r 7.39(2).

13 At [7].

14 At [6].

Conclusion

[34]      For these reasons, and subject to the conditions noted in Minute No 5,15 I granted the defendants’ application for leave.

Application for adjournment

Background

[35]      Despite the listing of the proceeding for formal proof and the absence of leave to file a defence, the Gibbs Family Trust sought to adjourn the 20 September 2021 hearing on the grounds set out in the memorandum of 6 September 2021. The memorandum addressed 11 issues, most of which were irrelevant to their request to adjourn the fixture. While acknowledging a relevant factor for consideration is the risk of security of gas supply to the North Island, the defendants submitted that any insecurity was caused by First Gas’ repudiation of the collaborative approach; its ability to repair the buckle was not impeded because access remained available subject to that process.

[36]      The defendants also sought, without any adequate explanation, to have the fixture on 20 September 2021 vacated, “and that the allocation of the substantive fixture provide for standard timetabling to allow both parties to properly respond and put our cases”. They again sought to have the interim injunction rescinded and, alternatively, they sought its modification to include a condition to provide for “Poutama and Te Ahuru kaitiakitanga, including participation and decision-making consistent with Judge Williams order”.

Analysis

[37]      Apart from a very generalised complaint that the abridged timetable would cause unspecified prejudice and affect their ability to present their case, the defendants failed to advance any persuasive argument in favour of an adjournment.

15 At [6].

[38]      In addition, as this judgment records, the grant of leave to file a defence was very much contingent on preserving a trial commencing on 20 September. Were it otherwise the risk of irreparable harm to the plaintiff is such that leave ought not be granted. So, the defendants’ ability to obtain leave was intimately linked to their willing participation in a priority fixture.

[39]      Finally, the defendants have been on notice of this proceeding since early May 2021. The legal and factual issues for consideration are narrow. And the defendants have demonstrated themselves to be capable litigants when representing their interests. In light of these factors, I do not consider there can be any credible suggestion  that  a  miscarriage  could  be  occasioned  if  the  trial  proceeds  on     20 September.

Conclusion

[40]      For these reasons, the defendants were granted leave to file a defence subject to conditions, and their application to adjourn the trial was declined.

Isac J