Mercedes-Benz Financial Services Ltd v Conway

[2016] NZHC 1587

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2014-404-1076 [2016] NZHC 1587

BETWEEN

MERCEDES-BENZ FINANCIAL

SERVICES NEW ZEALAND LTD Plaintiff

AND

DESMOND JAMES ALBERT CONWAY Defendant

Hearing:	13 July 2016
Counsel:	P Hunter and S OʼGrady for Plaintiff J D Dallas for Defendant
Judgment:	13 July 2016

(ORAL) JUDGMENT OF HEATH J

Solicitors:

Simpson Western, Takapuna

JD Dallas, Wellington

MERCEDES-BENZ FINANCIAL SERVICES NEW ZEALAND LTD v CONWAY [2016] NZHC 1587 [13 July

2016]

The application

[1]      This proceeding has been set down for trial over three days, commencing on

1 August 2016.  It was earlier adjourned from 7 June 2016 as a result of the need for the defendant, Mr Conway, to instruct fresh counsel due to his solicitor’s ill health. At the time I adjourned the hearing, which was on 30 May 2016, I was aware that an application for leave to amend the statement of defence, to join additional parties, and to adduce further evidence was likely to be filed.  Timetabling directions were made to accommodate that.

[2]      Before me today are Mr Conway’s applications to join additional parties, to subpoena two members of the firm of solicitors who act for the plaintiff, Mercedes- Benz Financial Services New Zealand Ltd (Mercedes-Benz), as witnesses of fact, for leave to amend the statement of defence and to bring a counterclaim, and for an order for particular discovery. All applications were opposed.

[3]      At the commencement of today’s hearing, I had a constructive discussion with counsel for the parties as to a means by which the trial on 1 August 2016 could proceed, while reserving all rights of Mr Conway in respect of matters that he wishes to raise.  The way in which those discussions unfolded will become clear from my analysis of the various applications.

The proceeding

[4]      I summarise the essential facts of the dispute.

[5]      Between 2 February and 30 August 2011, Mr Conway entered into financing arrangements  with  Mercedes-Benz  to  enable  him  to  purchase  three  Mercedes vehicles.   The three contracts were entered on 2 February, 6 July and 30 August

2011.   They related to a 2011 Mercedes-Benz S63 sedan, a 2011 Mercedes-Benz

ML63 SUV and a 2011 Mercedes-Benz SLK 200 Cabriolet.

[6]      The  total  of  the  amounts  borrowed  under  those  three  contracts  was

$827,057.64.   There were provisions in the contracts for payment of interest and

costs of enforcement, including solicitor and client costs.  However the terms of the three contracts are not identical.

[7]      Mercedes-Benz alleges that Mr Conway, in the latter part of 2013, failed to make  monthly payments  in  respect  of  all  three  contracts.   As  a  result,  it  took repossession steps in respect of all three vehicles.  Steps were taken to repossess and to sell.

[8]      The dispute at trial concerns the procedures which were used by Mercedes- Benz to effect repossession and sale of the vehicles.  The sedan and the Cabriolet were sold at auction on 25 November 2013.  However, the SUV was not sold until later.  In terms of the current pleading, that vehicle was located around 25 or 26 June

2015 and steps were then taken to sell at auction on 17 December 2015.

[9]      Initially Mercedes-Benz  sought  summary judgment.    This  was  at  a  time before the SUV was sold.  The application was defended.  In a judgment given on

27 February 2015,1 Muir J dismissed the application.

[10]     The issue is whether Mr Conway made purchases for “business” rather than “consumer” purposes.  The correct characterisation of his purchase determines the mode by which repossession must be effected and sale made.

[11]     The complex inter-relationship among the various statutes that are applicable in the varying circumstances were identified by Muir J in his summary judgment decision:2

[30] There are currently three different statutory notice requirements for the repossession and subsequent sale of secured goods. They are:

(a)      The  [Credit  (Repossession)  Act  1997]  which  applies  to

“consumer goods”;

(b)      The Personal Property Securities Act 1999 … which applies

to all secured goods other than consumer goods; and

(c)      The [Property Law Act 2007] - which contains additional

notice requirements which apply to “mortgages over goods”

1      Mercedes-Benz Financial Services New Zealand Ltd v Conway [2015] NZHC 315.

2      Ibid, at paras [30] and [31].

but   not   to   “consumer   goods”   to   which   the   [Credit

(Repossession) Act 1997] applies.

[31] The argument proceeded on the basis that:

(a)       If the [Credit (Repossession) Act 1997] applied, its notice provisions had been complied with, with the result that summary   judgment   would   be   available   against   the defendant;

(b)       If the [Personal Property Securities Act] applied then, the notice provisions in that Act having been contracted out of (cl 5.6(b) of the [Consumer Credit Contracts], summary judgment would again be available. It would seem, in any event, that the [Personal Property Securities Act’s] notice provisions had been complied with. They are slightly less onerous  than  those  under  the  [Credit  (Repossession) Act

1997] in that a pre-possession notice does not have to be given. Otherwise they are materially the same;

(c)       If the [Property Law Act 2007] applied, then the relevant notice provisions had not been complied with and summary judgment would not be available given reasonably arguable defences in relation to the balloon payments and reasonably arguable counter-claims relating to conversion of at least two of the vehicles.

Procedural history

[12]     In his present applications, Mr Conway seeks the following orders:

(a)       That Juegen Michael ROCHERT, and Horst VON SANDEN, and Steven Eugene GOODALE being directors of [Mercedes-Benz] at the requisite time, be joined to these proceedings as 3rd parties.

(b)       That Paul HUNTER and Sarah Elizabeth O’GRADY, solicitor of [Mercedes-Benz] be subpoenaed to these proceedings as witnesses of fact.

(c)       [Mr Conway] is granted leave of the Court to amend [his] statement of Defence and to include counter claims.

(d)      [Mr Conway] is granted Discovery Orders for the discovery of documents in respect of [Mercedes-Benz’s] agreements, contracts, etc as to matters of responsibility and agency in dealing with [Mercedes-Benz’s] finance agreements.

[13]     The need to join the directors of Mercedes-Benz is said to arise out of their potential liability for conversion (or possibly theft) of the vehicles, in the event that Mercedes-Benz failed to follow necessary statutory procedures.

[14]     Leave is sought to subpoena Mr Hunter and Ms O’Grady. They have acted as solicitors and counsel for Mercedes-Benz in respect of this proceeding, through their firm, Simpson Western.3

[15]     Leave to file an amended statement of defence is sought in order to respond to an amended statement of claim  filed on 29 February 2016.   Leave to file a counterclaim is also sought.   That amended claim deals in a third cause of action with the sale of the SUV and the claim for a shortfall made in consequence.

[16]     The application for discovery relates to documents that identify the agency relationship existing between Mercedes-Benz and the particular distributor who sold the cars to Mr Conway.

Analysis

(a)      Application for leave to file statement of defence to amended claim; and counterclaim

[17]     I deal first with the application for leave to file an amended statement of defence and a counterclaim.

[18]     As I have explained, the crux of this dispute involves the method employed by Mercedes-Benz to repossess and sell the motor vehicles in issue.  If Mercedes- Benz followed the correct procedures, it is likely their claim may succeed, though in what quantum may still be open to dispute.  A claim against Mercedes-Benz and the directors of that company could only be pursued in the event that it was unsuccessful on its claim for debt and there was evidence of a conversion of the motor vehicles on its behalf.  More unlikely, though possible, is a suggestion of theft in relation to the sale.

[19]     I grant leave to amend the statement of defence, so that there could be a pleading to the third cause of action relating to the sale of the SUV.  There was no

opposition to that course.

3      Given the proximity to trial and the difficulties inherent in obtaining such an order, I allowed Mr Hunter and Ms O’Grady to appear for Mercedes-Benz at the hearing.  That approach should not be regarded as precedent for other cases.

[20]     The issue of more substance concerned the counterclaim.   I suggested to counsel that leave be granted for one to be filed on the basis that it would be stayed pending determination of the claim by Mercedes-Benz, and the question whether it should  proceed  be  reconsidered  at  a  case  management  conference  to  follow judgment on that claim.

[21]     Mr Dallas, for Mr Conway, was content to agree to that course provided his client’s rights were adequately protected.  That required the joinder application to be dealt with in a manner which would ensure that the directors could be joined if the counterclaim were to proceed.  I deal with that shortly.4

[22]     I grant leave for a counterclaim to be filed and make an order staying the counterclaim pending determination of the substantive claim by Mercedes-Benz. The question of whether, and if so, in what way the counterclaim should proceed is reserved for consideration at a case management conference before the trial Judge after he or she has given judgment on the substantive claim.

(b)      Application to join additional parties

[23]     In relation to the joinder application, it is clear that that is only required in the event that the counterclaim proceeds.   It will be a matter for the trial Judge to determine what questions may appropriately be put to witnesses in respect of issues arising on the counterclaim when evidence is limited to the claim itself.

[24]     I consider the most appropriate way of dealing with this issue is to adjourn the joinder application to be considered at the case management conference to be held after judgment has been given on the substantive claim.  Directions in relation to the way in which the counterclaim should proceed can be given at the same time as consideration is given to the joinder application.

(c)      Application to subpoena witnesses

[25]   The application to subpoena witnesses does not require determination. Ordinarily, a subpoena would issue and an application would be made to set it aside,

4      See paras [23] and [24] below.

if necessary.  Having said that, I made it clear to Mr Dallas that I did not criticise the approach he took.  It was preferable to resolve an issue involving the possibility of counsel for Mercedes-Benz being called as witnesses before the trial begins.

[26]     I can see no basis on which evidence from either Mr Hunter or Ms O’Grady could be relevant to the main claim.  To the extent that there may be some evidence, and the plaintiff deliberately decides not to call it, it will be open to counsel to make an appropriate submission to the Judge on questions of inference.  However, I rule that no subpoena should issue in respect of those two persons.

(d)      Application for discovery

[27]    Documents have been made available to Mr Dallas as requested in the application  for  particular  discovery.    Mr  Dallas  is  content  with  the  documents received but agreed with a suggestion that I made that a further affidavit be filed to ensure there are no surprises with discovery.

[28]     I will be directing that a supplementary verified lists of documents should be filed either listing documents in addition to those already provided that are located, or by stating that a diligent search has been made and no relevant further documents exist.

Pre-trial directions

[29]   Having made those determinations, it is necessary to consider pre-trial directions.   Having regard to the intervention of these applications, the existing directions are largely spent.   I vacate those directions and replace them with what follows, in order to ensure evidence is ready before trial and the pleadings are in order.

[30]     One of the issues with which I deal is the need for Mercedes-Benz to call evidence from an additional witness, Ms Woon, in order to address the issues raised in respect of the repossession and sale of the SUV.  Because she is currently out of the country, a “will-say” statement will be provided in the first instance, but that will be superseded by a signed brief when she returns.

[31]     I make the following directions:

(a)      Mercedes-Benz shall serve a “will-say” statement by Ms Woon, on or before 18 July 2016.

(b)Mercedes-Benz shall file and serve a supplementary verified list of documents, on or before 18 July 2016.  This shall be in one or other of the forms to which I have already referred.

(c)      Mercedes-Benz’s solicitors shall send a letter to the solicitors for Mr Conway,  on  or  before  18  July  2016  setting  out  the  nature  of  a proposed pleading they intend to make in response to a statement of defence to the amended statement of claim.  This relates to relief for any irregularity in service of documents for repossession and sale purposes.

(d)Mr Conway shall file and serve an amended statement of defence and a counterclaim, on or before 21 July 2016.  Leave for him to do so is granted.  The pleading will need to follow carefully the High Court Rules and ensure that each affirmative defence is pleaded independently and the counterclaim separated from the defence.   I make those comments simply because the draft put before me tends to merge the two.

(e)      Mr Conway shall serve briefs of evidence and a chronology on or before 25 July 2016.  It is acknowledged that Mr Conway’s affidavits of 18 August 2014 and 20 June 2016 may be equated to a brief for present purposes and re-service of those documents is unnecessary. They will be treated as if a brief.  If evidence were to be given by Mr Conway, he will need to be called in the ordinary way to give that evidence and be subject to cross-examination.

(f)      Mercedes-Benz shall file and serve a reply to the amended statement of  defence  and  a  statement  of  defence  to  the  counterclaim  on  or before, 26 July 2016.

(g)      Mercedes-Benz shall serve the signed supplementary brief from Ms

Woon, on or before 28 July 2016.

(h)Mercedes-Benz  shall  file and  serve an  opening  statement  and  the common bundles no later than midday on 29 July 2016.

Result

[32]     On  the  basis  of  those  directions,5   the  trial  for  three  days  scheduled  to commence on 1 August 2016 is confirmed.

[33]     All questions of costs are reserved for the determination of the trial Judge following the hearing.

P R Heath J

5      See paras [19], [22], [24], [26] and [31] above.