Huh v Korea Deposit Insurance Corporation
[2024] NZCA 294
•4 July 2024 at 11.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA750/2023 [2024] NZCA 294 |
| BETWEEN | JAE HO HUH |
| AND | KOREA DEPOSIT INSURANCE CORPORATION, AS TRUSTEE IN BANKRUPTCY FOR JEIL SAVINGS BANK, JINHEUNG SAVINGS BANK, GYEONGGI SAVINGS BANK, AND YOUNGNAM SAVINGS BANK |
| Hearing: | 10 June 2024 |
Court: | Goddard, Cooke and Palmer JJ |
Counsel: | M S S Khan for Applicant |
Judgment: | 4 July 2024 at 11.00 am |
JUDGMENT OF THE COURT
AThe application for an extension of time to appeal is declined.
BThe applicant must pay costs to the respondent for a standard application on a band A basis, with usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by Goddard J)
The application before this Court
Mr Huh applies under r 29A of the Court of Appeal (Civil) Rules 2005 (Rules) for an extension of time to bring an appeal against a judgment of the High Court delivered on 17 August 2023.[1] That High Court judgment declined Mr Huh’s application to set aside a default judgment entered against Mr Huh in the High Court on 19 July 2017.[2]
Background
[1]Korea Deposit Insurance Corp v Huh [2023] NZHC 2197 [High Court judgment].
[2]At [45].
The relevant facts are set out in detail in the High Court judgment. We need only provide a brief summary for present purposes.
The claims against Mr Huh
Mr Huh has lived in New Zealand more or less permanently since 2009. Before that, he ran a group of companies in Korea known as the Dae Joo Group, which were involved in the construction industry. Those companies failed. Mr Huh had guaranteed advances made to four of those companies by four different banks. The respondent, Korea Deposit Insurance Corporation (KDIC), pleads that it is the trustee in bankruptcy of those four banks and has acquired all the rights and obligations of the banks. In late 2014, KDIC obtained four judgments in Korea against Mr Huh in relation to the debts which he had guaranteed. Those judgments were not satisfied, and it appears Mr Huh has since been bankrupted in Korea.
In December 2014, KDIC brought proceedings against Mr Huh in the High Court of New Zealand claiming approximately NZD 9,000,000 on two alternative bases:
(a)the first cause of action sought to enforce the four Korean judgments; and
(b)the second cause of action claimed the same amount as a debt payable by Mr Huh under the guarantees he had given.
In July 2015, KDIC applied for substituted service of those proceedings. An order for substituted service was made, requiring the proceedings to be served through various means including sending them by post and courier to certain people and addresses thought to be associated with Mr Huh in New Zealand.
Entry of judgment by default in 2017
In November 2015, KDIC sought judgment by default against Mr Huh under r 15.7 of the High Court Rules.[3] That application was referred to Katz J, who issued a minute dated 10 December 2015 declining to enter default judgment. Katz J raised a number of concerns about the pleading in relation to the claim to enforce the Korean judgments. Katz J also observed that it was insufficiently clear from the documents before the Court how the sums claimed had been calculated.
[3]At this time, the High Court Rules were contained in the Judicature Act 1908, sch 2.
In December 2016, KDIC filed an amended statement of claim together with a memorandum seeking judgment by default on the second cause of action — the debt cause of action — under r 15.7. The amended statement of claim was much more detailed than the original statement of claim. A number of differences between the original statement of claim and the amended statement of claim are set out in the High Court judgment.[4] The total amount claimed was greater by some $65,000.
[4]High Court judgment, above n 1, at [14].
The High Court entered judgment by default in July 2017.
Engagement between KDIC and Mr Huh in relation to the default judgment
In August 2017, KDIC entered into negotiations with Mr Huh in relation to payment of the judgment sum. KDIC provided the pleadings, supporting affidavits, the minute of Katz J, the loan documentation, and the default judgment to counsel for Mr Huh, including senior counsel engaged by him in September 2017.
In July 2018, Mr Huh was examined before Associate Judge Bell in relation to his means to satisfy the judgment. He was represented by counsel at that examination.
Mr Huh did not challenge the default judgment at any point during these negotiations, or in the context of the examination before the High Court in 2018.
It appears that no payments were made by Mr Huh as a result of these steps. KDIC then commenced bankruptcy proceedings against Mr Huh in October 2022 and, following difficulties with service, again in May 2023.
Application in 2023 to set aside the default judgment
On 27 July 2023 Mr Huh, represented by new lawyers instructed after the bankruptcy proceedings were served on him, applied to set aside the default judgment. As is apparent from the brief chronology above, that application was made some six years after the default judgment was entered and Mr Huh had become aware of that judgment.
High Court judgment
Mr Huh’s application to set aside the default judgment was heard by Whata J. The Judge set out the background to the application in some detail. He then set out the rules governing the entry of default judgments, and summarised the principles that govern applications to set aside a default judgment.[5] Rule 15.10 of the High Court Rules provides that a default judgment may be set aside or varied, on such terms as the court thinks just, if it appears to the court that there has been, or may have been, a miscarriage of justice. As this Court said in EA v Rennie Cox Lawyers:[6]
[20] In summary, where a judgment has been irregularly obtained, there will almost always be a miscarriage of justice such that the judgment should be set aside without considering the merits. However, that is not an inflexible rule that must be applied in every case, regardless of the circumstances. There may be cases where the irregularity in obtaining the judgment was so minor and inconsequential that it could not have caused prejudice and there is no arguable defence. If the court can safely conclude that there is no risk of a miscarriage of justice, it might properly decline to set aside the judgment.
[5]At [19]–[27].
[6]EA v Rennie Cox Lawyers [2018] NZCA 33, [2018] 3 NZLR 202 at [20].
Mr Huh’s application was made on two primary grounds:
(a)the amended statement of claim, upon which the default judgment was based, was not served on him; and
(b)the claims were of a nature such that judgment could only be entered by formal proof, which did not occur.
The Judge accepted that failure to serve an amended statement of claim may mean that a default judgment is irregularly obtained.[7] However, the Judge considered that amendments to a statement of claim that do not materially change the nature or quantum of the claim do not demand further service of the pleadings on a defendant who has failed to provide an address for service. Provided the defendant has been properly put on notice of the nature of the claim and the quantum in issue, they cannot complain if judgment is issued in respect of that claim even if minor amendments were subsequently made to the pleadings.[8] Nor did the Judge accept that failure to serve amended pleadings automatically means the corresponding default judgment must be set aside. A minor inconsequential irregularity will not give rise to a miscarriage of justice.[9]
[7]High Court judgment, above n 1, at [34].
[8]At [35].
[9]At [36].
In this case, the nature and substance of the claim did not change. The additional sum claimed (some $65,000, as noted above) did raise the prospect of irregularity. But the Judge considered there was a simple and proportionate response to this concern, which was to reduce the judgment sum by $65,000, thus removing any material disadvantage to Mr Huh caused by the amendment.[10] The Judge was satisfied that failure to serve the amended pleading on Mr Huh did not give rise to any miscarriage of justice provided that the default judgment sum was reduced in this manner.[11]
[10]At [38].
[11]At [39].
The Judge was not persuaded that Mr Huh had shown that it was seriously arguable that a formal proof process was required in relation to the claim by KDIC under the guarantees.[12]
[12]At [41]–[42].
The Judge went on to note that even if he had found irregularity, he would have been minded to find that this was one of the rare cases where there was no miscarriage of justice. Indeed, he said, all factors pointed to the contrary: to set aside the default judgment in its totality would be an abuse of process in light of the time that had passed and the steps that had been taken since default judgment was entered.[13]
[13]At [43]–[44].
The Judge dismissed the application to set aside the default judgment, but varied the quantum of the default judgment by reducing it by $65,000. The Judge awarded costs to KDIC as successful party, reduced by 25 per cent to reflect that the default judgment needed to be varied.[14]
Steps taken to pursue an appeal from High Court judgment
[14]At [45]–[46].
The High Court judgment was delivered on 17 August 2023. Because the original proceedings against Mr Huh were commenced in 2014, before the Senior Courts Act 2016 was enacted and came into force, Mr Huh’s appeal rights are governed by the Judicature Act 1908. Mr Huh was entitled to appeal as of right to this Court within 20 working days of 17 August 2023; that is, by 14 September 2023.
However, Mr Huh’s lawyers, acting under the mistaken belief that the Senior Courts Act applied and that leave to appeal was required, filed an application in the High Court on behalf of Mr Huh on 11 September 2023, seeking leave to appeal under s 56(3) of the Senior Courts Act. That application was opposed. On 9 November 2023, Whata J declined to grant leave to appeal.[15]
[15] Korea Deposit Insurance Corporation v Huh [2023] NZHC 3139.
On 5 December 2023, still acting under the mistaken belief that the Senior Courts Act applied, Mr Huh’s lawyers filed an application to this Court under s 56(5) of the Senior Courts Act seeking leave to appeal from the High Court judgment. The Deputy Registrar of this Court advised counsel for both parties that steps taken following the High Court judgment appeared to have been based on a misapprehension about the regime governing Mr Huh’s rights of appeal. The Senior Courts Act did not apply, and this Court had no jurisdiction to entertain an application under s 56(5) of that Act. Mr Huh had not needed leave to appeal from the High Court judgment. But as a result of the steps taken in the High Court, Mr Huh was now out of time to appeal to this Court. If he wished to pursue an appeal, an application for an extension of time would be required.
Mr Huh’s lawyers then promptly filed an application under r 29A of the Rules, annexing the proposed notice of appeal.
Relevant principles governing extension of time to appeal
The principles that govern the exercise of the discretion to grant or deny an extension of time to appeal were summarised by the Supreme Court in Almond v Read.[16] The ultimate question is what the interests of justice require. That necessitates an assessment of the particular circumstances of the case. Factors which are likely to require consideration include:[17]
(a)the length of the delay;
(b)the reasons for the delay;
(c)the conduct of the parties, particularly of the applicant;
(d)any prejudice or hardship to the respondent or to others with an alleged interest in the outcome; and
(e)the significance of the issues raised by the proposed appeal, both to the parties and more generally.
[16]Almond v Read [2017] NZSC 80, [2017] 1 NZLR 801.
[17]At [38].
The Supreme Court confirmed that the merits of a proposed appeal may, in principle, be relevant to the exercise of the discretion to extend time because there will be occasions on which the Court will risk facilitating unjustifiable delaying tactics on the part of dilatory or recalcitrant litigants if does not consider the merits.[18] The Supreme Court identified three qualifications to this principle:[19]
(a)There will be some instances in which the merits or otherwise of a proposed appeal will be overwhelmed by other factors (such as the length of the delay and the extent of the prejudice to the respondent or others) and so will not require consideration.
(b)As we have already indicated, the merits will not generally be relevant in a case such as the present where there has been an insignificant delay as a result of a legal adviser’s error and the proposed respondents have suffered no prejudice (beyond the fact of an appeal). As we noted above, r 29A differentiates between cases where the respondent consents to the extension and those where it does not, giving the Court broader powers in the former case. In cases of this type, respondents are generally best advised to consent to an extension to enable the appeal to be determined promptly. The delay which has occurred in final determination of this case could have been avoided had the respondents given their consent and has been to no one’s benefit. A respondent who does not consent in such a case runs the risk of an adverse costs award.
(c)Consideration of the merits of an appeal in the context of an application to extend time must necessarily be relatively superficial. In this connection, we agree with the observations of the Court of Appeal of England and Wales in R (Hysaj), to the effect that the court should firmly discourage much argument on the merits and should reach a view about them only where they are obviously very strong or very weak. Moreover, any assessment of the merits must take place against the background of this Court’s description of the nature of a general appeal in Austin, Nichols. Accordingly, a decision to refuse an extension of time based substantially on the lack of merit of a proposed appeal should be made only where the appeal is clearly hopeless. An appeal would be hopeless, for example, where, on facts to which there is no challenge, it could not possibly succeed, where the court lacks jurisdiction, where there is an abuse of process (such as a collateral attack on issues finally determined in other proceedings) or where the appeal is frivolous or vexatious. The lack of merit must be readily apparent. The power to grant or refuse an extension of time should not be used as a mechanism to dismiss apparently weak appeals summarily.
This case
[18]At [39].
[19]At [39] (footnotes omitted).
Mr Khan, who appeared as counsel for Mr Huh, emphasised that Mr Huh had a right of appeal from the High Court judgment under the applicable legislation. He had sought to exercise that right in a timely manner. The only reason that he had not been able to pursue his appeal as of right was his lawyers’ misapprehension that the Senior Courts Act required an application for leave to appeal. That application was filed within the 20‑working day period for filing an appeal. Once that misapprehension was identified, Mr Huh moved very promptly to file an application for an extension of time. In summary, Mr Khan said the delay in Mr Huh exercising his right of appeal was short (some three months) and was adequately explained.
We accept that if one focuses solely on the period following delivery of the High Court judgment, and the steps taken by Mr Huh with a view to pursuing an appeal from that judgment, the delay was short and is sufficiently explained. Ordinarily in these circumstances an extension of time would be granted.
However, we are nonetheless firmly of the view that it would not be in the interests of justice to grant an extension of time in this case. In the words of the Supreme Court in Almond v Read, that would “risk facilitating unjustifiable delaying tactics on the part of dilatory or recalcitrant litigants”.[20]
[20]At [39].
Mr Huh took no steps to challenge the default judgment for some six years after he became aware of it. He participated in steps taken in the High Court to facilitate enforcement of that judgment without raising any issues in relation to its validity. He was represented by counsel in connection with those steps.
If Mr Huh wished to challenge the default judgment, he should have done so promptly. Mr Huh did not file any evidence explaining the lengthy delay between the date on which he became aware of the default judgment, and the date on which he applied to set aside that default judgment. Mr Khan indicated that his understanding was that Mr Huh’s former lawyers had not identified the two procedural issues that were the basis of his application to set aside the default judgment (as summarised at [15] above).
However, that leads into the second concern we explored with counsel at the hearing of this application; the absence of any identified ground on which Mr Huh proposes to defend the claims against him on the merits, if the default judgment were to be set aside. In response to questions from the Court, Mr Khan was not able to identify any basis on which Mr Huh proposed to defend those claims, apart from putting KDIC to proof of its claims. Mr Khan raised questions about the entitlement of KDIC to sue for the relevant debts. He also raised questions about possible limitation issues under Korean law. But as he frankly acknowledged, these were simply legal issues he had identified in relation to the underlying claim. He was not in a position to identify any argument on these or other points that Mr Huh would advance by way of defence at a trial of the claims against him under the guarantees. As he acknowledged, there is no evidence before this Court to support an arguable defence on the merits. Nor was Mr Khan able to identify any arguable basis on which Mr Huh could contend that he was not bound by the Korean judgments, with the result that he was estopped from disputing his liability under the guarantees.
Thus, Mr Huh’s argument that there has been, or may have been, a miscarriage of justice in connection with the entry of judgment against him by default rests solely on the procedural issues identified at [15] above. He has not engaged at all with the merits of the claims which resulted in the entry of judgments against him as long ago as 2014 in both Korea[21] and New Zealand.
[21]It does not appear that Mr Huh has ever pursued any challenge to the Korean judgments in that country on either jurisdictional or substantive grounds.
We agree with the Judge that, given the six-year delay in making an application to set aside the default judgment and the absence of any identified arguable defence on the merits, setting aside the default judgment in its totality at this late stage would amount to an abuse of process.[22]
[22]High Court judgment, above n 1, at [43].
Nor has Mr Huh made any proposal to pay the whole or part of the sum claimed into Court, or provide security for that amount, as a condition of setting aside the default judgment.
The application to set aside the default judgment did result in a reduction of the quantum of that judgment by $65,000 (less than 1 per cent of the judgment sum). But that was not the relief sought by Mr Huh, and that is not the relief he is seeking on appeal to this Court. Rather, he seeks to set aside the default judgment in its entirety without putting forward any satisfactory explanation for his long delay in taking this step, and without identifying any arguable factual or legal basis on which he would oppose the claims against him on the merits if the matter were to be reopened.
In these circumstances, the inference that the application to set aside the default judgment was made as a delaying tactic, to hinder KDIC advancing its application for bankruptcy in New Zealand, is irresistible. Both the application to set aside the default judgment in its entirety, and the proposed appeal, amount to an abuse of process. It would be contrary to the interests of justice to permit Mr Huh’s appeal to proceed: to do so would be to facilitate an improper use of the process of the courts.
Result
The application for an extension of time to appeal is declined.
Mr Huh must pay costs to KDIC for a standard application on a band A basis, with usual disbursements.
Solicitors:
Fortune Manning, Auckland for Applicant
Gregory J Thwaite, Auckland for Respondent
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