Hornsby v Haines
[2017] NZHC 1347
•19 June 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-003126 [2017] NZHC 1347
BETWEEN EDWARD THOMAS HORNSBY
Applicant
AND
RODNEY DAVID HAINES Respondent
Hearing: 11 May 2017 Appearances:
S Bryers for the Applicant
R Mark for the RespondentJudgment:
19 June 2017
JUDGMENT OF HINTON J
This judgment was delivered by me on 19 June 2017 at 3.30 pm pursuant to Rule 11.5 of the High Court Rules
……………………………………………………………………
Registrar/Deputy Registrar
Counsel/Solicitors:
Stephen Bryers, Barrister, Auckland
Richard Mark, Kerikeri
HORNSBY v HAINES [2017] NZHC 1347 [19 June 2017]
Introduction
[1] The applicant, Mr Hornsby, seeks special leave to extend the time for appealing a decision of Judge Gibson in the District Court, dated 4 August 2016.
[2] Mr Hornsby’s case is that leave should be granted because he has a proper explanation for the delay in appealing, the length of the delay is not great, there is no significant prejudice to the respondent if the appeal is allowed to proceed, he has good grounds for his appeal and it is in the interests of justice to grant the extension of time sought.
Facts
[3] Mr Haines, the respondent, owned a commercial property at Duke Street, Riverhead (“Duke Street”). On 1 September 2003, he leased that property to a company owned by Mr Hornsby, Amalgamated Building Removals & Contracting Limited.
[4] In about May 2004, another company owned by Mr Hornsby, Okura Developments Limited (“Okura”) agreed to buy Duke Street and to lease part of it back to a company owned by Mr Haines, Haines House Haulage Limited, which I refer to as “Haines” because that is the description used by Mr Haines in later documents. There was also an option for Mr Haines to purchase shares in Okura, which was driven by Mr Haines being interested in acquiring significant tax losses sitting in Okura.
[5] The purchase price of Duke Street was recorded as $820,000, which was funded solely by way of two mortgages, the first for $510,000 from Rice Craig Solicitors and the second for $310,000 from Mr Haines. Mr Hornsby guaranteed the mortgage from Mr Haines. The terms of the mortgage from Mr Haines required that
$100,000 was to be repaid on or before 31 July 2004 and the balance on 5 May 2009. Mr Hornsby said the early payment of $100,000 was only to apply if Mr Haines exercised the share option, so that no funds were required on his part. He says the interest under the second mortgage and the rent were also to be off-set.
[6] Both Okura/Mr Hornsby and Mr Haines accepted that the purchase price of Duke Street had been reduced by $30,000 from its true market value. The basis for that was, however, a point of difference between them. Mr Hornsby said the
$30,000 was the non-refundable price of the option given to Mr Haines. Mr Haines said it was a loan to Mr Hornsby personally, or a “payment” in advance for the Okura shares.
[7] Nothing was recorded about the share option or the deal regarding the
$30,000 that had been deducted from the purchase price of Duke Street, including if it was repayable, by whom, and when.
[8] Mr Haines served a Property Law Act notice on 5 June 2008, asserting that
Okura had defaulted on the $100,000 principal payment due to Mr Haines on 31 July
2004.
[9] On 3 July 2008, Mr Haines/”Haines” and Mr Hornsby/Okura agreed in writing that the Property Law Act notice would be withdrawn and the second mortgage would be “paid on or before the end of July”. The 3 July 2008 agreement also provided that Mr Hornsby would pay what appeared to be a shortfall of
$25,286.21 between “rent and other” and “interest and other debts”, if Mr Haines did not elect “to retain” shares in Okura. The agreement was a one-page document apparently drawn up by Mr Haines. It is headed up: “Agreement made between Tucker Hornsby (Okura) and Rod Haines (Haines)”. (Mr Haines/”Haines” did not have any shares in Okura, so presumably “retain” meant “purchase”.)
[10] On 7 August 2008, Mr Hornsby/Okura and Mr Haines signed another written agreement which recorded amendments and clarifications to the first. It provided under the subheading of “Okura”, that the $30,000 “already paid to Tucker” (presumably referring to the amount deducted from the purchase price Okura had to pay for Duke Street, i.e. an amount “already paid to Okura”), would become due on or before 5 May 2009 if Mr Haines did not wish to proceed with the purchase of Okura pursuant to the option, and “will bear interest up until the date of repayment”. This document was apparently also drawn up by Mr Haines. It is headed up, “Tucker Hornsby - Okura Developments Ltd - R D Haines”.
[11] In December 2008, Okura repaid $280,000 to Mr Haines, and Mr Haines agreed to discharge the second mortgage.
[12] In March 2009, Okura paid a further $30,000 to Mr Haines, completing repayment of the full sum of the second mortgage. (This is a different $30,000 to the
$30,000 that it is agreed was deducted from the purchase price of Duke Street.)
[13] In August 2011, Mr Haines sought judgment in the District Court against
Mr Hornsby and Okura in relation to three distinct debts. These were:
(a) $38,697.20 claimed to be an amount short-paid under the second mortgage, plus interest;
(b)$21,465.53 claimed to be the sum of the interest (and other costs) owed to Mr Haines by the defendants, less the rental (and other costs) owed by “Haines”, plus interest; and
(c) $30,000 plus interest (totalling $38,967.20) being the amount Mr Haines claimed he lent on the sale of Duke Street which was repayable because he decided not to exercise his right to purchase the shares in Okura.
[14] On 3 November 2011, Mr Haines obtained judgment by default for the three debts.
[15] Mr Hornsby applied to have the judgment set aside. On 19 October 2012, the District Court dismissed the application, but varied the default judgment by removing the first claimed debt as it had already been paid and should not have been included in the claim. The judgment was therefore, in effect, set aside in material part.
[16] Mr Hornsby appealed that decision of the District Court. On 20 September
2013, Katz J allowed the appeal on the basis that Mr Hornsby may have substantial
defences in relation to both remaining limbs of the judgment debt.1 Katz J therefore ordered that it was in the interests of justice for the decision of 3 November 2011 to be set aside.
[17] The matter was heard once again in the District Court before Judge Gibson. On 4 August 2016, Judge Gibson issued a judgment allowing Mr Haines’ claim.2
The total judgment sum, including interest and costs as at 30 September 2016, was
$96,024.03.
[18] The period in which Judge Gibson’s decision could be appealed ended on
1 September 2016. The notice of Mr Hornsby’s application to seek special leave to extend the time for appealing is dated 9 December 2016.
Analysis
[19] Under r 20.4(3) of the High Court Rules 2016, the Court may, by special leave, extend the time prescribed for appealing if the enactment that confers the right of appeal permits the extension, or does not limit the time prescribed for bringing the appeal. The relevant enactment here is s 72 of the District Courts Act 1947,3 which does not limit the time prescribed for bringing an appeal, so special leave can be sought.
[20] When deciding whether to allow an extension, the relevant considerations are:4
(a) The length of the delay and the reasons for it; (b) The parties’ conduct;
(c) The extent of any prejudice caused by the delay;
(d)The prospective merits of the appeal. If the appeal is of no merit, leave will not be granted.
1 Hornsby v Haines [2013] NZHC 2477.
2 Haines v Hornsby [2016] NZDC 13624.
3 The District Courts Act 1947 as it was at the time the appeal was filed. Schedule 3 clause 5(1) of
the District Courts Act 2016 states that “all proceedings pending or in progress in a court operating under the former Act immediately before the commencement of this clause may be continued, completed, and enforced only under the former Act (including the relevant rules of Court) as if that Act had not been repealed by this Act.” The District Courts Act 2016 came into force on 1 March 2017, after the present proceeding began.
4 My Noodle Ltd v Queenstown-Lakes District Council [2009] NZCA 224, (2009) 19 PRNZ 518.
(e) Whether the appeal raises any issue of public importance.
[21] The overlying test is whether granting the extension would “meet the overall
interests of justice”.5
[22] It is not contended that there is any issue of public importance. [23] I turn to the remaining considerations.
[24] Mr Mark, counsel for the respondent, submits that Mr Hornsby has only
provided an explanation for one month’s delay, namely to the end of September
2016. He says that there has been no explanation for the further delay from the end of September 2016 to the filing of the application for leave on 9 December 2016. Mr Mark submits that this unexplained delay is excessive, and coupled with the fact that these proceedings arose in 2011, the excessive delay has resulted in prejudice to all of the parties.
[25] The decision of Judge Gibson was issued on 4 August 2016, but not received by Mr Hornsby’s counsel until 8 August 2016. Mr Hornsby underwent lung surgery on 7 August 2016. He was not discharged until around 21 August 2016. After that time, Mr Hornsby was in recovery and remained on strong pain medication for a period of two months or so, i.e. until early October 2016. Mr Hornsby then decided to seek a second opinion regarding the decision and he could not obtain a transcript of the evidence until 24 November 2016. I accept that where the facts are as confusing as here, it would be reasonable to review the evidence.
[26] In all the circumstances, I consider Mr Hornsby has provided acceptable reasons for the delay.
[27] I am not satisfied that there is any prejudice other than that which necessarily follows a delay. I recognise Mr Mark’s point that this matter has continued for a long time, but his client did err by obtaining judgment by default for an inflated
amount in the first place, and there was a one-year gap in the last District Court
5 At [19].
hearing through no fault of either party, (nor the Judge). In such a context, without reference to particular prejudice, I do not consider a delay of three months to be unfairly prejudicial in itself.
[28] Mr Mark also submits that the grounds for appeal lack merit. Mr Bryers submits there are good grounds for appeal.
[29] Mr Bryers submits that Mr Hornsby/Okura made the agreements of July and August 2008 with Mr Haines/”Haines” as a result of economic duress. The claim is that the duress arose as a result of improper economic pressure from an illegitimate Property Law Act notice. The issue of the Property Law Act notice was contrary to the promise Mr Hornsby says was made by Mr Haines that the $100,000 recorded as due on 31 April 2004 would only be called up in the event of the exercise of Mr Haines’ share option. The $100,000 has been repaid, so the principal sum is not in issue, but Mr Bryers says the interest shortfall represents effectively the difference between the penalty interest actually claimed on the $100,000 and standard interest. He says the latter is all that should have been paid.
[30] As a sequel to the duress argument, Mr Bryers submits that Mr Haines was also not owed $30,000 by way of loan because it was in fact consideration for the option to purchase shares in Okura. It had not been agreed that Mr Haines would be entitled to a refund of the consideration for the option.
[31] Mr Bryers also submits that in any event, the July and August 2008 agreements were signed by Mr Hornsby on behalf of Okura and not in his personal capacity, and any liability in respect of the $30,000 (and interest, which must be material in this case) should be Okura’s only. It was Okura that purchased Duke Street, not Mr Hornsby.
[32] As to the claim of duress, Mr Mark says that Mr Hornsby attended two meetings, one month apart, and signed separate agreements at both of those meetings which contradict the allegations made. Further, he says the July and August 2008 agreements actually reflected what had previously been agreed. Mr Hornsby was an experienced businessman. He did not appear to raise the issue of duress until the
proceedings were issued. Mr Hornsby had also obtained legal advice regarding the Property Law Act notice, and spent significant amounts of money on it, so there was full opportunity to raise duress if it existed.
[33] In respect of Mr Bryers’ point regarding the capacity in which Mr Hornsby signed, Mr Mark relies on the findings by the District Court Judge that the July and August 2008 agreements were signed by Mr Hornsby in his personal capacity, and the facts and authorities relied on. He says the District Court Judge saw and heard the witnesses.
[34] I note that there is already a decision of this Court that there is a reasonably arguable case in respect of this last point. The fact that Judge Gibson found against Mr Hornsby on that point is not determinative, even if Judge Gibson had considered the points Katz J made. It seems from his judgment that he did not consider a number of points she raised. For example, Katz J noted the argument that, in previous dealings between the parties where personal guarantees were required, they were clearly identified in the relevant documentation. If Mr Hornsby was intended to be personally liable for what would appear to be the balance of a purchase price of a property bought by Okura, (not by him), it is arguable that would have been made clear in the relevant documentation.
[35] The facts of this case are very messy. The full agreement between the parties was either not recorded and/or was other than as recorded. The later documents drawn by Mr Haines are far from clear, illustrated by the second document itself which records that it clarifies and amends the first. It is still far from clear. For example, the second document under a paragraph that begins “Okura” says the
$30,000 will “become due to be paid” in May 2009 and will bear interest up until date of repayment. It is not clear who is to pay. It is not clear from what date interest was to run.
[36] While the duress argument does not appear to be strong, it does merit reconsideration, which would seem to turn on whether the underlying debts (and the term and quantum of interest claimed on them) were legitimate.
[37] I agree there are obvious difficulties with the duress argument, but I cannot say that there is no merit in the appeal. There are arguable points.
[38] Having had regard to the considerations relevant to determining whether special leave to extend the time to appeal should be granted, I consider that an extension would meet the interests of justice.
Result
[39] The application for special leave to extend the time to appeal is allowed.
[40] The applicant is to bring his appeal within 20 working days of the date of this judgment, on which date leave expires.
[41] The costs of this application will lie where they fall.
--------------------------------------------------------- Hinton J
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