Mauger v Tucker

[2022] NZHC 1135

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2020-409-226

[2022] NZHC 1135

BETWEEN

P S MAUGER, T J MAUGER, S W MAUGER and P J CRON

Plaintiffs

AND

S M TUCKER

First Defendant

L C HERMANSSON

Second Defendant

Hearing:

On the papers

Appearances:

N A Till QC for Plaintiffs

K W Clay and R L D Paul for First Defendant T J Castle for Second Defendant

A N Riches for Executors of Estate of W J Mauger

Judgment:

23 May 2022

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

Introduction

[1]    In a judgment dated 29 November 2021 (substantive judgment) I made orders sought by the plaintiffs substituting them for the original plaintiff (W J Mauger by his litigation guardian, his daughter, the last-named plaintiff, Penelope Cron), dismissed applications by the defendants for orders striking out the proceeding and reserved costs.1 In a subsequent judgment dated 10 February 2022 (costs judgment) I awarded the plaintiffs costs against the defendants.2

1      Mauger v Tucker [2021] NZHC 3214.

2      Mauger v Tucker [2022] NZHC 138.

MAUGER v TUCKER [2022] NZHC 1135 [23 May 2022]

[2]    The defendants now apply for leave to appeal against both judgments. Their applications are opposed by the plaintiffs.

[3]    The plaintiffs’ applications for leave to appeal against the substantive judgment focus exclusively on the dismissal of the defendants’ applications for an order striking out the proceeding. The two applications are based on the same grounds. Moreover, Mr Clay for the first defendant has elected not to make submissions. He adopts the argument advanced by Mr Castle for the second defendant. The upshot is that these applications can be dealt with as if they were one.

[4]    Pursuant to s 56 of the Senior Courts Act 2016 the defendants require leave to appeal, my substantive judgment having been interlocutory in its nature.3 Conventionally, reasons for granting or declining leave are expressed in general terms and briefly. The principles governing applications for leave to appeal are well settled:

(a)the leave requirement is a “filtering mechanism” intended to ensure that only appeals on significant matters are allowed — the process weeds out appeals that are trivial, unmeritorious or merely tactical;4

(b)the threshold for leave is high and intended to reduce the number of interlocutory appeals.5

(c)the proposed grounds of appeal should raise matters “of general or public importance” or of sufficient importance to the parties to outweigh the lack of general or public importance;6

(d)thus, applications for leave involve balancing the substantive merits of the proposed appeal on the one hand against the inevitable delay in the

3      Section 4 of the Senior Courts Act 2016 defines an ‘interlocutory application’ as any application to the High Court in civil proceedings for some relief ancillary to that claimed in a pleading. An unsuccessful application for strike out falls within this definition.

4      Firewood Upholstery Ltd v Vaughan [2017] NZHC 1679 at [13] affirming Fairway Holdings Ltd v McCullagh [2018] NZCA 605 at [11].

5      Firewood Upholstery v Vaughan [2017] above n 4, at [9] (Lay); and Ngai Te Hapū Inc v Bay of Plenty Regional Council [2018] NZCA 291 at [15].

6      Firewood Upholstery v Vaughan [2017] above n 5, at [9]; citing A v Minister of Internal Affairs

[2017] NZHC 887.

resolution of the litigation that would result from an appeal on the other;7 and

(e)the ultimate question is whether, standing back and assessing matters “in a pragmatic and realistic way”, the interests of justice are served by granting leave to appeal.8

[5]Context first then.

[6]    In May 2020 Ms Cron applied for an order to enable her to commence and prosecute a proceeding in the name of her father, Mr Mauger, on the basis that he did not have capacity to do so. This was done in independent proceedings commenced by originating application pursuant to pt 19 of the High Court Rules 2016. Ms Cron was the only party in that proceeding.

[7]    The proposed proceeding was for the recovery of substantial gifts made by Mr Mauger to the first and second defendants. The amounts involved were in the order of  half  a  million  dollars  each.  In  a  judgment   dated   21   May   2020   Associate Judge Paulsen made the order sought.9 This proceeding followed and was prosecuted by Ms Cron in her father’s name until November 2020 when Mr Mauger died.

[8]    On his death, the right to prosecute the claim passed to his personal representatives, the executors and trustees of his estate. His personal representatives were uninterested in pursuing it. They assigned it to his children, the plaintiffs, who were the beneficiaries of his estate and therefore stood to gain if the gifts their father had made to the first and second defendants were recovered. The children then looked to regularise their status as the plaintiffs in the proceeding by applying pursuant to    r 4.52 for an order substituting themselves as such. That application was opposed by the first and second defendants.

7      Firewood Upholstery v Vaughan [2017] above n 5, at [15(e)].

8      Firewood Upholstery v Vaughan [2017] above n 5, at [14].

9      Re Cron [2020] NZHC 1074.

[9]    In the substantive judgment I made the order sought (reflected in the current intitulements). Not only was the application for substitution sought by the applicants opposed by the defendants, they both applied to strike the proceeding out. These applications were made on the ground that in her original application Ms Cron did not

— or so it was alleged — comply with her obligations in relation to applications made ex parte.

[10]   As already said, I dismissed those applications, and it is that determination against which the defendants seek leave to appeal.

The competing arguments

[11]At para [3] of his synopsis of submissions, Mr Castle says:

Central to the applications for leave is the submission that the second defendant is denied, by the judgment in [2001] NZHC 3214, the public interest protections against injustice and/or miscarriage of justice for which the High Court Rules provide in prescribing mandatory obligations of a party seeking Court orders without notice to other parties interested or affected; and then suffers the unfair imposition of costs in [2022] NZHC 138.

[12]   That passage deftly captures the argument advanced on the defendants’ behalves, and the balance of Mr Castle’s submissions are directed at fleshing it out.

[13]   Mr Castle’s starting point was the obligations on a party applying ex parte under r 7.23. He submitted that the rule:

… requires that all reasonable enquiries and all reasonable steps be taken to ensure that the without notice application and the supporting documents contain all material that is relevant to the application; including any defence that might be relied on by any party and any facts that would support the position of any party.

[14]   He referred the Court to authorities in which the importance of these obligations was emphasised. In particular, he cited two English cases, R v Kensington Income Tax Commissioners10 and Brink’s Mat Ltd v Elcombe11, as well as the recent New Zealand High Court case of Greenway Ltd v Neutral Construction Ltd.12

10     R v Kensington Income Tax Commissioners, ex parte Princess Evelyn de Polignac [1917] 1 KB 486 at 514.

11     Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 at 1357B–C.

12     Greenway Ltd v Neutral Construction Ltd [2021] NZHC 1704.

[15]    As Mr Castle submits, those cases (and a great many other cases besides) emphasise the importance of the obligations of parties making applications ex parte, which I would describe generally as an obligation of absolute candour.

[16]   Whilst acknowledging that, in my substantive judgement I concluded that  Ms Cron may not have provided as full a picture as she could have in her original application, Mr Castle criticised the judgment for failing to undertake a closer examination of the evidence as to what Ms Cron did and did not put before the Court.

[17]   Mr Castle said that Ms Cron breached her obligations in a way that was “egregious”. He said that this would have been apparent to the Court had it conducted an adequate examination of the evidence. In this regard, he referred particularly to the affidavits of Cranwell Bull and Kevin McDonnell, respectively one of Mr Mauger’s personal representatives and a business associate and friend. Mr Castle even attached further copies of these affidavits to his submissions.

[18]   He reserved his most stringent criticism for my conclusion that no useful purpose would be served by striking out the claim. He described this as a “proclamation”, and said it begs the question: “Useful for whom?” He submitted that my dismissal of the defendants’ application for an order striking out the proceeding effectively locked in adverse consequences for the defendants.

[19]   Mr Castle continued, saying that rather than striking the claim out as the defendants had invited the Court to do:

Instead, the High Court excused the without notice applicant’s failure to comply, as well as her counsel’s omission and mandatory certification, in declining the only remedy available now to the party detrimentally affected. The [defendants are] now permanently deprived of the protection of the Rules. That situation is now compounded by the award of costs against innocent party [parties] suffering from Ms Cron’s breach of mandatory High Court Rules and the abusive (sic) process this represents.

[20]   That is followed by an analysis of the “deprivations” that the defendants are said to have suffered. Mr Castle described these in his paras 19 and 20. I quote these paragraphs in preference to summarising them::

19.        The answer [to the rhetorical question of the how the defendants were deprived] is in several ways:

(a)Ms Cron used the ex parte (without notice) process to secure authority to commence proceedings that she knew would never have been instigated by her father. Without the ex parte process, given that Mr Mauger was still alive at the time, the second defendant would not have been subjected to this legal proceeding.

(b)The High Court’s case management conferencing procedure initiates upon the issue and service of a proceeding. When served Ms Cron’s proceeding was not accompanied by the pleadings and paper work which had been presented by her, unbeknown to the second defendant, to support the without notice application. Time was reasonably required then to obtain that paperwork and for it to be the subject of careful consideration and instructions, while, in the meantime, the standard High Court Rules procedural (CMC) provisions were in play. Before very far into that procedure Mr Mauger died. The reality is that the second defendant was deprived of a realistic opportunity to seek recission of Ms Cron’s erroneous (given the non-compliance) appointment and seek costs for its immediate consequences.

(c)The second defendant has now been placed in the unenviable position of having to rewind the proceeding to ensure the initial steps taken by Ms Cron to launch a proceeding (her father would have not ever contemplated) are appropriately scrutinised by the Court. The willingness on the part of the Court in [2021] NZHC 3214, to overlook non-compliance and effectively adjudicate that it now does not really matter, deprives the second defendant from her reasonable reliance on the Rules of Court being observed and enforced.

(d)There is an arguable case that Ms Cron and her counsel had a continuing duty to remedy their non-compliance and non-disclosure which at the very latest was clear to them upon the filing and service of the Bull and McDonnell affidavits. Neither Ms Cron or her counsel discharged such responsibilities which arguably required of them to accept the non-compliance and discontinue the proceeding. The second defendant was deprived of opportunities to reinforce that continuing obligation.

(e)The existence of Ms Cron’s position as a beneficiary in her father’s estate, and therefore with a conflict of interest, was treated incorrectly (by denial of its existence) in the pleadings filed by Ms Cron seeking, ex parte, her appointment. The second defendant is deprived of an opportunity to have the Court scrutinise the circumstance as required by the Rules.

(f)The second defendant is now deprived also of her opportunity to have the Court scrutinise the validity of the claim that the requisite degree of urgency existed to justify a without notice application.

20.These deprivations are real and now permanent.

[21]   Returning to what he described as “the threshold question” of whether the proposed appeal is capable of serious argument, Mr Castle frames the appellate issue in the following terms:

The consequences for the [defendants] arising from the Court decision to excuse, ignore or overlook the failure of a without notice application to discharge the heightened duty of camber to the court, namely the consequence of no avenue or recourse to challenge when bringing to a halt court processes (which impose significant time and costs on parties to litigation represents issues, and interests, private and public, of significant importance to outweigh any costs any costs in delay of the appeal.

[22]   Mr Castle then identified what he contended was the  critical evidence  of  Ms Cron’s failure to comply with her obligations. He submitted that the Court had turned a blind eye to this evidence, and contended that unless the Court enforced those obligations in the manner sought by the defendants, that is to say by striking out the proceeding, confidence and trust in the justice system would be lost and “those seeking justice and accountability will lose respect for and patience in due process which thereby be unresponsive to legitimate complaint”.

[23]   In the concluding section of his submissions, aside from re-emphasising aspects of his argument previously discussed, Mr Castle identified an additional ground upon which leave was sought. He referred to r 4.36 of the High Court Rules which requires that any application for an order pointing a litigation guardian is to be served on the principal. As he said, that was not done in this case. That, he advanced as a further breach on Ms Cron’s part of her obligations.

[24]   Finally, Mr Castle submitted that even if leave were not granted to appeal against the substantive judgment:

… the circumstances of the material non-disclosure and non-compliance under the Rules by Ms Cron, the without notice applicant, and non-complying certification under the Rules by her counsel should result in the without notice applicant being denied costs.

[25]   I am taking it that the contention here is that even if leave were to be denied in relation to the substantive judgment it should nevertheless be granted in relation to the costs judgment.

[26]   In his submissions in reply, Mr Till began by referring to arguments advanced by him at the hearing to the effect that the law governing interlocutory applications made ex parte was not engaged in this case.

[27]   Mr Till submits that the original application was made in a precursory proceeding in which there was no counterparty. Referring to the definition of the term “party” in r 1.3 of the High Court Rules, he submits that Ms Cron was the only party in her early proceeding. Turning to r 7.23(1), Mr Till draws attention to the fact that the definition of the phrase “application without notice” contemplates an application brought by one party in a situation in which that party wishes to have it determined without it being served on any other party or parties. In reliance of these definitions, Mr Till submits that Ms Cron’s application was not an application under r 7.23 at all.

[28]   He also submits that Ms Cron did not need to make the application she did. The foundation for this submission is the evidence that Mr Mauger had executed enduring powers of attorney. Particularly, one such enduring power of attorney was executed in August 2016 in favour of Stephen Mauger and a second was executed in March 2019 in favour of Stephen Mauger and Ms Cron. As Mr Till says, Associate Judge Paulsen, in granting leave, commented that a general authority under the Protection of Personal and Property Rights Act 1988 to act on a donor’s behalf would entitle the attorney to act in the role of litigation guardian in any event.13

[29]   On these bases, Mr Till suggested that Ms Cron’s application was only made out of an abundance of caution and submitted that these factors were enough to dispose of the case as it was unnecessary for her to make the application in the first place.

[30]   Mr Till went on to submit that even if the law relating to applications made ex parte applies, Ms Cron complied with her obligations.

[31]   Addressing the scope of any obligations that Ms Cron may have had under     r 7.23, Mr Till contended for “some proportionality and common sense”. He submitted that the nature of the case ought to determine the extent of the enquiry that

13     Re Cron [2020] NZHC 1074 at [23]-[31]; citing Chick v Blackwell (2011) 20 PRNZ 812;       B v Waitemata District Health Board [2013] NZHC 852; Warin v Warin [2017] NZHC 786; and Blows v McDonald HC Auckland, CIV 2007-404-1050, 7 November 2007.

an applicant must make and disclosure that must be provided. He submitted in a case such as this that should not extend to arguments and defences which might be available at the substantive hearing.

[32]   Mr Till then turned to what he described as the “high water mark” of the defendants’ allegations as to non-disclosure, which he  said  is  the  assertion  that Ms Cron was obliged to inform the Court that she was aware her father would have strongly disagreed with the commencement of the proceeding, and that she failed to do so.

[33]   Mr Till described this as “a speculative hypothetical” rather than “a demonstrable fact”.

[34]   In relation to the argument that Ms Cron breached her duty under r 4.36 to serve the proceeding on her father, Mr Till pointed out that she disclosed that in her application so that the Court was well aware of the position when it made the order it did.

[35]   He concluded this section of his submissions by submitting that any suggestion that Ms Cron mislead the Court was unsustainable and on that basis contended that there was no reasonable prospect of the Court of Appeal arriving at a conclusion that r 7.23 had been contravened — even if the rule was held to apply in these circumstances, contrary to his earlier submission.

[36]   Mr Till developed a further argument to the effect that there is no basis for the relief sought on the proposed appeal.

[37]   At the heart of this argument is the contention that the defendants are seeking to challenge Ms Cron’s right to represent her father’s interest in the proceeding and that entitlement, originally conferred by Associate Judge Paulsen’s judgment, was effectively removed by her father’s death.

[38]   That being so, Mr Till submits, the defendants are left with “no principled need, or basis, for additional recourse”. He submits that the fact that they are now seeking further relief, without the support of any authority, demonstrates that they are

over-reaching. He submits they are resorting to sensationalist assertions that the Court is otherwise excusing all, turning a blind eye to alleged wrongdoing.

[39]Concluding this aspect of his submissions, Mr Till said:

Plainly therefore, irrespective of the circumstances of the [litigation guardian’s] appointment, the Court of Appeal will not permit [the] litigating [of] spent issues let alone be amenable to striking out the assignees’ claim. The appeal will not result in the outcome sought by the defendants.

[40]   Mr Till submitted that, in any event, the proposed appeal does not raise any matters of general or public importance, and nor, he contended, does it involve a matter of such importance to the parties to justify leave being granted when there is no issue of public or general importance. The latter submission is essentially based on the reality that even if the proceeding were struck out a new proceeding could be commenced. Mr Till submitted that the circumstances do not warrant further delay and that the interests of justice would not be served by granting leave.

Discussion

[41]   Although Mr Castle did not address the arguments advanced by Mr Till as to whether the law relating to the interlocutory applications made on ex parte basis has any application, I am not persuaded that the argument advanced by Mr Till on this basis is a complete answer to the proposed appeal.

[42]   The fact is that Ms Cron’s original application was made ex parte and therefore r 7.23 is potentially applicable. Associate Judge Paulsen certainly appears to have proceeded on that basis. The hearing before me was, for the most part, argued on that basis.

[43]   Turning to the law relating to interlocutory applications made ex parte, whilst the cases and the leading commentaries emphasise the obligation on an applicant, as Mr Till submits, it is important to have regard to the context in which any particular application is being made in considering the scope of an applicant’s obligations.

[44]   The cases to which Mr Castle refers involve situations in which the applicant was asking the Court to make coercive orders of one form or another — orders

involving such things as injunctive relief, the freezing of assets and the conferring of extraordinary rights of inspection. Such orders have serious consequences of an immediate nature for the party against whom they are made. That is both the rationale for the existence of stringent obligations on applicants, and the reason for the use of terminology (such as allusions to Draco and the like) that frequently emerge in the cases.14

[45]   As I tried to say — though perhaps not clearly enough — in the substantive judgment, there appears to me to be a difference between applications made in such contexts and the application made by Ms Cron in this case where, when all is said and done, whether she needed it or not, she was simply seeking the Court’s sanction to her commencing a proceeding in her father’s name because of his perceived incapacity.

[46]   Professor Zukerman identifies three situations in which applications are made ex parte.15 The first of these is “unilateral process applications”. Most often such applications are made prior to the commencement of a substantive proceeding when there is no counterparty to serve. They can however, much less frequently, be made after the commencement of a proceeding when there is a counterparty but one that is unaffected by the order sought. In any event, the defining characteristic of such applications is that there is no or minimal consequence for anyone other than the applicant.

[47]   In my view, the law is sufficiently adroit to cater for these different situations, and the obligations on an applicant in making a unilateral process application are not the same as those on an applicant seeking coercive injunctive relief.

[48]   In my assessment, Ms Cron’s application in the earlier proceeding is properly regarded as having been a unilateral process application.

14    See Green Way  Ltd v Mutual Construction Ltd [2021] NZHC 1704 at [34]-[36]; noting the duty on an applicant ex parte to disclose all material facts whether they support their case or go against it.

15 Adrian Zuckerman Zukerman on Civil Procedure (4th  ed, Sweet & Maxwell, 2021) at 8.32–8.37; see also McGechan on Procedure (online loose-leaf ed, Thomson Reuters, Wellington) at [HR7.23.04]; and Green Way Ltd v Mutual Construction Ltd [2021] NZHC 1704 at [77]; as to the overriding discretion of the Court to distinguish between the effect of non-compliance on orders made depending on the nature of the order sought and the extent of non-compliance.

[49]   In the end, in my view, the only consequence for the defendants of the order that was made was their need to defend a claim which, had he had the capacity to do so, Mr Mauger could have commenced himself.

[50]   It is important to keep in mind what the core issue was in that application. It was whether Mr Mauger had capacity to commence and prosecute the proposed claim. Only if he did not was it appropriate for a guardian ad litem to be appointed. Such matters as Mr Mauger’s capacity at the time he made the gifts, whether there was any proper basis for pursuing a claim for the recovery of those gifts and what Mr Mauger’s views at any given time when he had capacity may have been, are all issues for trial.

[51]   So, to be clear, when I said in my judgment that Ms Cron may have been more fulsome in the material she put before the Court, I was referring to material concerning Mr Mauger’s capacity at that time.

[52]   As far as I am able to see Ms Cron put before the Court what information she had about her father’s capacity as at the date of her application. It does appear to me that she might have attempted to go further in this by arranging for an up-to-date cognitive assessment, but I would put the matter no higher than that.

Conclusion

[53]   For those reasons, I am not prepared to grant leave to the defendants to appeal from my substantive judgment.

[54]   Returning to the factors relevant to such applications set out in [4] above, bearing in mind the first three and in particular the high threshold that applicants for leave must meet, I do not accept that the proposed grounds of appeal give rise an issue of general or public importance. Ms Cron’s original application in the independent proceedings in which there was no counterparty was in my view of an administrative nature and had no serious adverse consequences for the defendants. The upshot for them was simply that they had to defend a proceeding which Mr Mauger could have commenced in any event had he had capacity to do so. Nor, in my view, when viewed correctly, are the consequences of sufficient importance from the defendants’ perspectives to outweigh the lack of any general public importance. The key

consideration here is probably that in the event of the proceeding being struck out the plaintiffs could have commenced a new proceeding effectively involving the duplication of effort and cost for all parties.

[55]   When it comes to balancing the substantive merits of the proposed appeal on the one hand against the inevitable delay in the resolution of the litigation that would result from an appeal on the other, my view is that the merits come down heavily in favour of declining the application. In my view, the appeal is not a strong one, and the preferable course is for the parties simply to proceed to deal with the merits of the case.

[56]   Standing back from the matter as best I can and assessing it in what I hope is a pragmatic and realistic way, it seems to me that the interests of justice do not justify the grant of leave.

[57]   That being so, I decline the applications for leave to appeal against my costs judgment also.

[58]   Costs are reserved. Again, I leave counsel to deal with these. However, if they cannot resolve these they may come back by memorandum in the usual way.

Associate Judge Johnston

Solicitors:

Rhodes & Co for the Plaintiffs

Tim Holton Law for the First Defendant Allan & Yee for the Second Defendant