Hornsby v Haines - [2013] NZHC 2477

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-006914 [2013] NZHC 2477

BETWEEN
EDWARD THOMAS HORNSBY

Appellant

AND

RODNEY DAVID HAINES

Respondent

Hearing:

4 June 2013

Counsel:

GP Denholm for Appellant

ER Briggs and GP Muller for Respondent

Judgment:

20 September 2013

JUDGMENT OF KATZ J

Thisjudgment was delivered by me on 20 September 2013 at 4:00 pm Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: Foy & Halse, Auckland
Smith & Partners, Auckland

Counsel: GP Denholm, Auckland

HORNSBY v HAINES [2013] NZHC 2477 [20 September 2013]

Introduction

[1] On 3 November 2011, Mr Haines obtained a default judgment of $102,080.90 in the District Court against Mr Hornsby and Okura Developments Limited (“Okura Developments”). Mr Hornsby is a shareholder and director of Okura Developments. The judgment related to three distinct, but inter-related, debts.

[2] Mr Hornsby and Okura Developments applied to the District Court to set aside the default judgment. Mr Haines accepted that he had overlooked that one of the three debts had in fact been paid. He accordingly did not oppose the default judgment being varied to reflect that. He did, however, oppose the default judgment being set aside in relation to the other two debts. The parties referred to the first debt as the “default interest/rental shortfall debt” and the second debt as the “property purchase/price reduction” debt. I will adopt that terminology.

[3] Judge HM Taumaunu found that there was no basis to set aside the default judgment in relation to the two disputed debts. He concluded that there was no substantial ground of defence in relation to either of them.

[4] Mr Hornsby appeals to this Court against the Judge’s decision not to set aside the default judgment. The key issue on appeal is whether Mr Hornsby has a substantial defence in relation to the two debts, on the basis that Mr Hornsby was acting solely on behalf of Okura Developments, and not in a personal capacity. (I note that this ground of defence was not advanced before Judge Taumaunu in any meaningful way). Mr Hornsby also alleges that the quantum of one of the debts is overstated, as credit has not been allowed for certain payments that he made.

Setting aside a default judgment – legal principles

[5] Under r 12.34 of the District Court Rules 2009 any judgment obtained by default may be set aside or varied by the Court on any terms it thinks fit, if it appears to the Court that there has been, or may have been, a miscarriage of justice.

[6] In Patterson v Wellington Free Kindergarten Association Inc1 the Court of Appeal identified three factors that were of key importance in approaching an application to set aside a judgment regularly obtained. They are as follows:

(a)That the defendant has a substantial ground of defence.

(b)That the delay is reasonably explained.

(c)That the plaintiff will not suffer irreparable injury if the judgment is set aside.

[7] The Patterson factors were subsequently referred to in Russell…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] NZHC 2477
Decision Date: 20 September 2013

CaseChat Overview and Summary

In Hornsby v Haines, the High Court of New Zealand reviewed an appeal by Edward Thomas Hornsby against the District Court's refusal to set aside a default judgment. The default judgment, obtained by Rodney David Haines, was for $102,080.90, related to three debts, and involved Hornsby and Okura Developments Limited, a company of which Hornsby was a shareholder and director. The appeal focused on whether Hornsby had a substantial defence in relation to two of the debts, namely the default interest/rental shortfall debt and the property purchase/price reduction debt, on the basis that he was acting solely on behalf of Okura Developments and not in a personal capacity. Hornsby also argued that the quantum of one of the debts was overstated.

The court examined the legal principles governing the setting aside of a default judgment, emphasising the importance of a substantial ground of defence, reasonable explanation for delay, and the absence of irreparable injury to the plaintiff if the judgment is set aside. The court also considered the capacity in which Hornsby signed the relevant agreements, noting that a single signature alone is generally insufficient to establish an intention to sign in a dual capacity, and that objective evidence is needed to determine the signatory's intention. The court found that it was reasonably arguable that Hornsby signed the agreements solely in his capacity as a director of Okura Developments, establishing a substantial defence in relation to both debts. The court also noted that the alleged calculation error in the default interest/rental shortfall debt should be determined in the District Court.

Ultimately, the High Court set aside the default judgment of 3 November 2011, finding that Hornsby had substantial defences in relation to both debts. The court emphasised that the defences were not meaningfully argued before the District Court, attributing any failure to address such issues to counsel rather than the Judge.

Orders