Neumayer v Kapiti Coast District Council

[2014] NZHC 417

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2012-485-2677 [2014] NZHC 417

BETWEEN  SEBASTIAN NEUMAYER and LA DENE RAINA NEUMAYER Plaintiffs

ANDKAPITI COAST DISTRICT COUNCIL First Defendant

NEW CENTURY REAL ESTATE LIMITED

Second Defendant

KLAUS TAMERLER Third Defendant

Hearing:                   10 March 2014

Counsel:                  P A Robertson for Plaintiffs and First Defendant No appearance for First and Second Defendants E S K Dalzell for Third Defendant

Judgment:                10 March 2014

ORALJUDGMENT OF THE HON JUSTICE KÓS (Application for leave to defend)

[1]      This is a leaky home case.  It concerns a property at 7 Sylvia Way, Te Horo. The plaintiffs, Mr and Mrs Neumayer, have reached settlement with the first defendant  Council.    In  that  settlement  agreement  they have settled their  claims against the Council for $150,000.  They have assigned to it their causes of action against the second and third defendants New Century Real Estate Limited and Klaus Tamerler.

[2]      On 14 May 2013 the plaintiffs and Council applied for judgment by default against the second and third defendants.   That was because neither New Century

Real Estate nor Mr Tamerler had filed a statement of defence.  In my judgment the

NEUMAYER & ANOR v KAPITI COAST DISTRICT COUNCIL [2014] NZHC 417 [10 March 2014]

following day, I pointed out that the judgment by default procedure was not available in this case.   In particular because the claims were not for a “liquidated demand”. Accordingly r 15.7 did not apply.  But r 15.9 was applicable, providing for entry of judgment following formal proof.  In my judgment I said that:

(a)      If the plaintiffs or Council wished to proceed with formal proof, they could apply.

(b)Given the degree of default by the second and third defendants, no statement of defence could now be filed by them without application for leave to do so.

(c)      Absent leave, they were debarred from defending the claim and cross- claims against them.

That was in May 2013.

[3]      In the ensuing 10 months the plaintiffs and first defendant have taken steps to bring the matter forward to a formal proof hearing.  An application has been made. A copy was served on the defaulting defendants.  The application was set down for hearing this morning.   Then, on Thursday 6 March, an application was made by Mr Tamerler for leave to defend.

[4]      That application on any view is atrociously late.  The delay in bringing the application has caused the plaintiffs to incur significant costs.  Not least, potentially, the hearing fee for the formal proof hearing.  Affidavits from Mr Tamerler and his wife,  Ms  Simons,  were  filed.    In  the  affidavits  Mr  Tamerler  sets  out  various responses to the plaintiffs’ claim.   He denies that he was a formal agent for the property, although he accepts he did act as a sales representative.  He denies that he portrayed himself as a builder or having substantial building experience.  He denies knowing  the  property  well.    He  denies  making  the  representations  alleged  by Mr Neumayer.

[5]      As to the reasons for delay, it comes down to a single point.  He says that he had contacted the manager of the second defendant.   He had formerly been his employer.  Mr Tamerler asked if he had got the same papers, and what he should do about them.  His former employer’s advice was to do nothing.  Apparently on the basis of some legal advice.  If so, it was foolish in the extreme.  Mr Tamerler now recognises that this was the wrong thing to do.  Regardless of all that, it must have been apparent to Mr Tamerler from the documents served on him that the legal process was continuing.   And that he was at risk of entry of judgment through a formal proof process.  Only in the course of last week it seems did Mr Tamerler stir himself to act.

[6]      I turn to the question whether leave to defend should now be granted.

[7]      The relevant principles are set out in the judgment of Duffy J  in  Shoye Venture Ltd v Wilson & Anor,1  drawing on a decision of the Court of Appeal in Russell v Cox.2    The latter case was one where the Court was considering an application to set aside default judgment after it had been entered.   In the former decision,  Shoye  Venture  Ltd,  Duffy  J  held,  “There  is  no  logical  reason  why

miscarriage of justice considerations relevant to setting aside a default judgment should not also apply before default judgment is given when the only practical difference is the timing of the application”.3

[8]      It follows from the decisions of the Court of Appeal in Russell v Cox, and of this Court in Shoye Venture Ltd v Wilson, that the three considerations relevant to the Court making a decision as to whether to grant leave to defend out of time are these:

(a)       Whether the defendant has a substantial ground of defence. (b)           Whether the delay is reasonably explained.

(c)       Whether the plaintiff will suffer irreparable injury if judgment is set

aside (or in this instance if leave to defend is belatedly granted).

1      Shoye Venture Ltd v Wilson & Anor [2013] NZHC 2339.

2      Russell v Cox [1983] NZLR 654.

3      Shoye Venture Ltd v Wilson & Anor [2013] NZHC 2339 at [13].

[9]      I now turn to those three considerations.

[10]     First, in relation to whether Mr Tamerler has a substantial ground of defence, I am satisfied that what he has presented offers an arguable defence.   I make no comment  as  to  the  merits  of  it,  or  whether  it  will  succeed  at  trial.    However, sufficient  is  presented  to  amount  to  a  “substantial  ground  of  defence”  for  the purposes of this application.  Sensibly, Mr Robertson does not argue contra.

[11]     Secondly, whether the delay is reasonably explained.  The answer is, it is not. The proposition that Mr Tamerler had relied on the advice of his former employer in the face of continued service of documents, including by substituted service with documents being stuck to his premises door, is simply unsatisfactory. The irresistible inference is that Mr Tamerler simply hoped the whole thing would go away.  It has not.   Now he is applying for leave to defend when his inactivity has caused the plaintiffs and first defendant to incur significant expense.  I do not regard this limb as satisfied.

[12]     Thirdly, whether the plaintiffs will suffer irreparable injury if leave is granted to defend belatedly.   In my view this is the “trump” consideration.   Mr Robertson again sensibly had to accept his clients will not suffer irreparable injury.  At least, if they are held whole as to costs.  Given satisfaction of the first and third limbs, I think the Court should disregard failure of the second limb and grant leave to defend if

costs are paid.4

[13]     Accordingly the application for leave to defend is granted but on conditions. Those conditions are as follows:

(a)       In the circumstance the Court directs the Registry to waive the hearing fee that otherwise will be payable by the respondents on this hearing.

(b)      Mr Tamerler is to pay costs of $1,500, together with disbursements of

$1,219,  to  the  respondents.     I  am  satisfied  that  that  sum  will satisfactorily keep the respondents whole in terms of costs that have

4      See Howell v Ngakapa (1895) 13 NZLR 298 (HC).

been  caused  by  Mr  Tamerler’s  delay.    On  payment  of  that  sum,

Mr Tamerler may defend the proceeding.

(c)       For the avoidance of doubt that sum is to be paid within 14 days.

(d)A statement of defence is to be filed by Mr Tamerler not later than 14 days hence.

[14]     Finally, and for the avoidance of all doubt, my earlier decision of 15 May

2013 debarring defence by the second defendant, New Century Real Estate Limited,

is unaffected by today’s decision.

Stephen Kós J

Solicitors:

Heaney & Partners, Auckland for Plaintiffs and First Defendant
Parker & Associates, Wellington for Third Defendant