Plateau Surveyors Limited v Thomas
[2012] NZHC 836
•30 April 2012
IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY
CIV 2011-483-125 [2012] NZHC 836
BETWEEN PLATEAU SURVEYORS LIMITED Plaintiff
ANDJENNIFER THOMAS Defendant
Hearing: 16 April 2012
Counsel: J C D Corry for Plaintiff
Defendant in Person
Judgment: 30 April 2012
JUDGMENT OF THE HON JUSTICE KÓS
Introduction
[1] An application to set aside a default judgment. Alternatively, to stay its enforcement while a counterclaim is resolved.
[2] Ms Thomas retained the plaintiff surveyors to assist in the subdivision of a residential property in Ohakune. The work took longer than expected, but the subdivision was completed. She could not pay their fee. Some $5,000 or so. An agreement was reached for deferred payment. Payment was not made. Eventually the surveyors issued proceedings in the District Court. Attempts to serve Ms Thomas in Australia, where she lives, were unsuccessful. Eight attempts were made, but she was never at home – albeit that she is an invalid. The surveyors obtained an order from the District Court enabling substituted service. That means Ms Thomas will be treated as served if the papers were delivered to the address of a friend – a Mr Yarwood. The papers were delivered to the address named in the
order. Whether Mr Yarwood ever saw them is uncertain. But it is accepted for
PLATEAU SURVEYORS LIMITED v THOMAS HC WANG CIV 2011-483-125 [30 April 2012]
present purposes that no one passed them on to Ms Thomas. Judgment was entered against her by default. She became aware of the judgment when the surveyors attempted to execute it, via an order for sale of the remaining section in Ohakune. But Ms Thomas wished to issue a cross-claim for damages against the surveyors, for losses resulting from their allegedly dilatory performance. And she says that she has only ever engaged the surveyors in her capacity as trustee of the family trust that owns the land. On that basis she says she should not be liable at all for their bill.
[3] In these circumstances, can the default judgment stand? [4] Four issues arise that need to be considered.
(a) Was the substituted service order duly made?
(b)Was the substituted service order performed in accordance with its terms?
(c) Might there be a miscarriage of justice in allowing the judgment to stand?
(d)If the judgment does stand, should it be stayed while a counterclaim brought by the defendant is determined?
Background
[5] The defendant, Ms Jennifer Thomas, is a New Zealander presently living in Australia. She describes herself as a “disability/carer pensioner”. She has a teenage son with serious health issues. She too labours under a variety of “life threatening illnesses”. Notwithstanding these circumstances, she decided to engage in a modest property speculation in the town of Ohukune, in the year 2005. She bought a residential property on a subdivisible section. It appears that she did so as trustee of a family trust. She is sole trustee. The beneficiaries are herself and her son. The purchase price was funded largely by borrowing. Subdivision was essential to the outcome being profitable.
[6] In August or October 2005 (there is a dispute as to which) she retained the plaintiff, Plateau Surveyors Limited. Its role was to advise her and undertake surveying services associated with the subdivision. An engineer was also retained. In December 2005 Mr Pope from the surveryors wrote to Ms Thomas. He enclosed a copy of the preliminary plan which had been submitted to the Ruapehu District Council. The covering letter concluded:
The subdivision consent lasts for five years and the subdivision process through to the issue of the new titles takes approximately six months.
[7] In fact the work took far longer than either party expected. In April 2006 the completed survey plan was submitted to the Council. The Council issued its s 223 certificate in mid May 2006.1 A week later the engineering plans (prepared by the engineer) were submitted. They were approved by the Council a week later. Construction works (by yet another non-party) were completed in August 2006. A s 224(c) certificate was sought by the plaintiff the same day. That certificate was not issued by the Council for over two months – in mid October 2006.2 Ms Thomas’s solicitors deposited the subdivision plan a month later – in mid November 2006.
[8] Ms Thomas was then unable to meet the plaintiff’s costs. An arrangement for payment upon sale was entered. Ms Thomas had difficulties selling the properties. The market conditions had changed. That of course is something experienced property investors plan and allow for. The more valuable property (which included the original house) was sold in June 2008, for $220,000. Ms Thomas still retains the remaining section. As, she says, trustee only. She suggests it has a value of no more than $20,000 now.
[9] For his part, the plaintiff’s Mr Pope says that no complaint about his company’s work was made by Ms Thomas until May 2008. At that point he was prodding her for payment of his bill. A modest $5,000 or so. In response Ms Thomas sent an email. It says she “must reserve [her] rights, a claim in damages
for the lost opportunity directly attributable to the delay in this particular
1 Resource Management Act 1991, s 223.
2 An earlier certificate issued by the Council included the wrong plan number and had to be corrected.
subdivision”. She describes that delay elsewhere in the email as “inordinate”. For
her part, Ms Thomas says in an affidavit sworn in early February 2012 that:
I have a large counterclaim which the plaintiff’s solicitors were notified of in September 2008 when they first approached me regarding the alleged debt. The significant loss suffered on behalf of the Trust due to the plaintiff’s actions is the basis of the counterclaim.
[10] In a further affidavit in reply to Mr Pope she says the email quoted earlier:
... is but one of a large number of emails showcasing the chasing them up, trying to find out what on earth was happening with the subdivision works and move it forward as quickly as possible.
However, none of those emails were produced.
[11] On 8 February 2012 MacKenzie J directed Ms Thomas to commence any claim for damages against the plaintiff in the District Court at Wanganui no later than
2 March 2012. That claim has now been filed. It seeks damages of $155,423. The claim is that Mr Pope’s company was obliged to complete the services “within the promised time frame of six months”, or otherwise in a “reasonable time”.
[12] While I am not required in this decision to evaluate that claim, it is on its face tenuous. The argument that there is an enforceable promise to complete the subdivision process within six months is plainly weak. First, it is inherently improbable given the exigencies that always accompany regulatory consent applications. In this case, for instance, at least two months of the delay appears to be attributable to an administrative error by the Council. These things tend to happen. Secondly, the letter from Mr Pope quoted earlier indicated that the time frame for subdivision consents was approximately six months. Thirdly, the delay in advancing the claim in the first place, and then in pursuing it, does not suggest that the claim is a strong one. That is all I need to say about it at this stage.
[13] Finally, by way of background, I should note why it is that a claim for just
$7,003.66 (being the plaintiff’s fee and subsequent interest and costs) is in the High Court. A default judgment for that amount was entered in the District Court at Taihape on 6 December 2010. A charging order was subsequently issued under
s 96A of the District Courts Act 1947. The District Court judgment was then removed into the High Court, under s 66 of the District Courts Act. That was to enable enforcement by an order for the sale of the remaining section in Ohukune owned by Ms Thomas. The District Court has power to order recovery of land,3 but not the sale of land, by way of enforcement of judgment. A sale order was issued by the High Court in October 2011. Only thereafter, it appears, did Ms Thomas become
aware of the default judgment and subsequent orders. She then applied to set the judgment aside.
Issue 1: Was the substituted service order duly made?
[14] On 8 June 2010 Judge Everett in the District Court at Taihape made an order for substituted service in these terms:
That the proceedings be served by delivering a copy thereof to the address of
Michael Yarwood at Bligh Manor Offices, 6 Bligh Court, Benowa.
[15] The order indicates that it was made on the basis of an affidavit sworn by Emma Henderson, a legal executive employed by the plaintiff’s solicitors. That affidavit exhibited a number of communications. The first is a letter dated
23 September 2008 from a “Mr Michael B Yarwood (LLB), Chief Executive Officer” on the letterhead of a company called “The Busy Group Pty Limited”. I will have more to say later about Mr Yarwood. He is a disgraced solicitor formerly practising in Queensland. Mr Yarwood’s physical address appeared at the bottom of the letter. It was that address used in the order for substituted service quoted at [14]. The letter was written “on behalf of Jennifer Thomas”. Mr Yarwood said he had been a close friend of Ms Thomas for some 15 years. The purpose of the letter was to suggest settlement of the plaintiff’s claim for its fee. He indicated that the “significant loss suffered by Ms Thomas in respect of your client’s negligence and significant delay ... would approximate on current expert advice an amount exceeding $20,000”. That is the notification of counterclaim referred to at [9] above.
[16] The second exhibit is a report from an Australian process server. It indicates that he or his colleagues had attended Ms Thomas’s address on eight occasions.
3 District Courts Act 1947, s 99.
Each time they had been unable to effect personal service on Ms Thomas. On the majority of visits they had met her son. He always stated that she was out. The agents disbelieved that claim. The process servers thought that they were “receiving the run around”. On 23 July 2009 they had returned again. As they drove up to the premises they saw a female in the living room. She quickly vanished from sight. After some knocking “a faint female voice then came from behind the door”. The speaker denied being Ms Thomas and claimed she was away for three weeks. The speaker declined to identify herself. She refused to open the door, stating that she was in her pyjamas.
[17] The third exhibit is a further letter from Mr Yarwood, this time dated
18 March 2010. This letter is headed up “Michael Yarwood LLB (QUT)”, and the address given is PO Box 454 Ashmore Plaza, Queensland 4214. The letter is signed off “Michael D Yarwood (Retired) Esq LLB (QUT Prac. & Mangt)”. No physical address appears. But the same PO Box number is given as in the first letter. The letter states he was corresponding “in the capacity of a friend and sometimes guardian of the minor Ricky Thomas”. That is Ms Thomas’ son. Mr Yarwood went on to say he was not acting as a solicitor, although had been one until retiring in
2006. The purpose of the letter was largely to contest a further, ninth, attempt at personal service that occurred on Monday 15 March 2010. On that occasion the process server, meeting apparently with a caregiver rather than Ms Thomas, “stuffed” the papers into the fly screen of the locked security door of Ms Thomas’s residence.
[18] The last item exhibited by Ms Henderson is an affidavit of service from a Mr Thistlethwaite, a Queensland process server. It claims that he did in fact serve the document on Ms Thomas on 15 March 2010. It deposes that the person he spoke to identified herself as Ms Thomas.4
[19] So that was the evidence that Judge Everett had, and on which he made the order for substituted service.
4 In response Ms Thomas has filed (in this Court) an affidavit from a Ms Kahika. It is consistent with the version given in the letter sent by Mr Yarwood. Ms Kahika says that she is Ms Thomas’ son’s caregiver. And she says that she was the person who spoke to the process server on
15 March 2010 when he pushed the documents through the fly screen.
[20] Ms Thomas’ principal submission is that the substituted service order was obtained irregularly. It is said that the two letters from Mr Yarwood exhibited to the affidavit in support of the order show different addresses. It is said, too, that Mr Yarwood was no longer occupying the offices at the physical address shown in the order. That address was that given in the first letter (sent in September 2008). The difference is a subtle enough one. No physical address appears in the second letter, but the PO Box address remained the same.
[21] Mr Yarwood’s affidavit deposes that in or about February 2010, because of criminal proceedings pursued against him and other health issues, his marriage was at an end. He then deposes that:
In or about April 2010, I moved to live with my close friend Paul Siede in
Carrara, a western suburb of the Gold Coast.
The affidavit goes on to state that he retired from legal practice in December 2006 after admission to a private psychiatric hospital following a mental breakdown. The affidavit refers to depressive behaviour and prescription drug and alcohol abuse. It goes on to say that in April 2007 his ability to practise as a solicitor in the state of Queensland was revoked, “as a consequence of my clinical declaration of being not mentally capable as well as the irregularities in my practise that arose as a consequence of my mental retardation which subsequently in 2009 resulted in criminal proceedings by the State of Queensland being commenced against me.” Mr Yarwood does not depose (although Ms Thomas elsewhere does) that he was convicted and served a term of imprisonment as a result of those charges. However, to the extent that one can believe anything at all that Mr Yarwood says, one can take it that at the time of the second letter at least he was in fact still operating from the offices at Bligh Court, Benowa: he did not move to live with Mr Siede until the following month.
[22] At the relevant time the District Court Rules 1992 applied. Rule 239 provided that if it appeared to the Court that “reasonable efforts have been made to effect service” and that “prompt service cannot be effected, the Court may direct substituted service by the taking of other steps for the purpose of bringing the document to the notice of the person to be served”.
[23] The evidence indicates that sustained efforts had been made to effect personal service. Whether or not Ms Thomas was seeking to evade service is beside the point. A very strong inference can be drawn from the evidence before Judge Everett that she was doing so. Ms Thomas protested otherwise before me. But all that is beside the point on this issue. Reasonable efforts had been made to effect service on her over a long period. They had not succeeded. Substituted service was plainly warranted.
[24] It is true, as Ms Thomas submits, that other, perhaps better, methods were available to effect substituted service. It might have been more prudent to have sought a substituted service order for delivery of documents to Ms Thomas’ residential address. There had been ample confirmation that she lived there. The order was not in those terms. But that does not make it invalid.
[25] Certainly, too it would have been wise if, the plaintiff had taken steps to communicate with Ms Thomas by email or letter to advise that the order had been made. Or, later again, to advise that the proceedings had been served on Mr Yarwood’s address. Any litigant relying on a substituted service order, without taking additional steps over and above that order to ensure that the proceedings are brought to the attention of the party to be served, takes a risk. There is a greater possibility of a subsequent default judgment being set aside because of actual non- service. Potentially, too, an increased possibility that permitting the default judgment to stand may amount to a miscarriage of justice. However, none of that goes to the validity of the order.
[26] The answer to Issue 1 must be “Yes”.
Issue 2: Was the substituted service order performed in accordance with its terms?
[27] The second question is whether the substituted service order was performed in accordance with its terms.
[28] First Ms Thomas points to a bizarre affidavit sworn by a Mr Greg Hughes, a process server of Queensland. It deposes to his having delivered the documents to the ordered address, 6 Bligh Court, Benowa and having a conversation with Mr Yarwood via a front door intercom. That affidavit was subsequently withdrawn. Mr Hughes did none of the above. Apparently he was confused between two different files. Both involved service on someone named Thomas. On the other hand it appears that the Mr Thistlethwaite referred to earlier had performed the deeds hitherto deposed to by Mr Hughes. There is an affidavit to that effect from him before the Court. In the circumstances, while raising my eyebrows at the ineptitude of some Queensland process servers, I see no reason to disbelieve Mr Thistlethwaite. I can put that objection to one side and turn to the next and more fundamental point.
[29] The second point made by Ms Thomas is that service itself was not effected in accordance with the order. It is necessary to be clear as to what the order actually required. I have set that out at [14] above. The documents did not have to be handed to Mr Yarwood. The substituted service was not substituted personal service. What was required was delivery to the address at Benowa. I do not conclude that it was necessary to effect service to be sure that Mr Yarwood remained in occupation. What was required was delivery to the address, and the question is whether that occurred. Even if that were not the case, I would find on the balance of probabilities that Mr Yarwood was present when substituted service was effected.
[30] The only direct evidence as to service comes from three sources, one of which is unsworn. First, there is Mr Thistlethwaite. He deposes to attending the address at 6 Bligh Court, Benowa at 12.00 noon on 19 July 2010. He was unable to enter the premises due to its high walls and locked gate. He says he spoke to a male occupant via an intercom. He believed the person he was speaking, because of the conversation, was Mr Yarwood. Certainly the terms of the conversation deposed to by Mr Thistlethwaite suggest the recipient was indeed Mr Yarwood. Mr Thistlethwaite concludes:
I then affixed the documents to the door and the wall at 6 Bligh Court, Benowa, this being part of the entrance to the property.
[31] Secondly, Mr Yarwood. In his affidavit, after deposing to his instability and criminality, he claims not to have been present in July 2010. He says he had not spoken to a process server either personally or through an intercom. He then offers the “recollection” that the intercom did not in fact work due to a lightning strike in
2009. Mr Yarwood’s words are carefully chosen. He does not say he was excluded, or even just absent from, the property as at 12.00 noon on 19 July 2010. And nor does he say that he did not see the documents. For reasons given earlier, I decline to give credence to what Mr Yarwood does say.
[32] Thirdly, there is a letter (not affidavit) from Ms Summer Fisher, formerly the business and personal partner of Mr Yarwood. She says she retrieved the documents from the letterbox at 6 Bligh Court, Benowa on 19 July 2010. The letter states:
Please be aware that Michael Yarwood does not live here anymore and I am the new owner of the property. I have not been provided a forwarding address for the previous tenants so return what seems to be an important document to you.
[33] The reference to “previous tenants” is disingenuous. She and Mr Yarwood occupied the property until he moved out in April 2010. And, as I have already said, I would find on the balance of probabilities that the person Mr Thistlethwaite spoke to was indeed Mr Yarwood. But his presence or continued occupation is not essential in any event to due service in accordance with the order.
[34] The evidence demonstrates that the documents were indeed delivered to the address required in the order, and that service was effected in accordance with that order.
[35] The answer to Issue 2 is “Yes”.
Issue 3: Might there be a miscarriage of justice in allowing the judgment to stand?
[36] The third issue is whether permitting the default judgment to stand may result in a miscarriage of justice. That is relevant because High Court Rule 15.13 provides:
Any judgment obtained by default may be set aside or varied by the Court on such terms as it thinks just, if it appears to the Court there has been, or may have been, a miscarriage of justice.
[37] Many of the cases concerning setting aside of the default judgment under this rule concern irregularity in the obtaining of judgment in the first place. In this case there is no such irregularity. We are dealing here with a judgment obtained regularly.
[38] In Russell v Cox5 the Court of Appeal said:
In approaching an application to set aside a judgment which complies with the rule, the Court is not limited in the considerations to which it may have regard, but three have long been considered of dominant importance ... they are, (1) that the defendant has a substantial ground of defence; (2) that the delay is reasonably explained; (3) that the plaintiff will not suffer irreparable injury if the judgment is set aside.
The Court’s discretion in r 15.13 is said to be unrestricted.
[39] In the present case Ms Thomas’ non-appearance at the hearing is reasonably explained. It is accepted for present purposes by the plaintiff surveyors that she had not seen the papers served at Bligh Court, Benowa.
[40] That alone will not suffice, however, to justify exercise of the Court’s discretion under r 15.13. The essential question in the present case is whether Ms Thomas has a substantial ground of defence. As Lang J said in Commissioner of Inland Revenue v Mikkelsen:6
Generally speaking, the most important of these factors is whether or not the applicant has a substantial ground of defence. If an applicant has a substantial ground of defence, it will often be the case that a miscarriage of justice will occur in the event that the applicant is not able to have the defence examined by the Court. On the other hand, no worthwhile purpose will be achieved by setting a judgment aside allowing a case to proceed to trial in circumstances where the proposed defence has no prospect of success.
[41] The primary defence offered by Ms Thomas is that she is not liable at all for the surveyors’ fee because the property was “owned by the Thomas Family Trust”.
Ms Thomas is, however, the sole trustee of that trust. She says that the surveyors
5 Russell v Cox [1983] NZLR 654 (CA).
6 Commissioner of Inland Revenue v Mikkelsen (2011) 25 NZTC 20-053 (HC) at [6].
were made aware from the outset of accepting instructions that they were being engaged on behalf of the Thomas Family Trust. That position is disputed by Mr Pope, the surveyor. He says:
She did not at that time or at any later time tell me that she was trustee of a trust which owned the properties.
[42] I need not resolve the conflict of fact. The suggested defence cannot succeed as a matter of law. Regardless of the capacity in which Ms Thomas contracted with the surveyors, she was the sole liable legal entity. That is so whether she contracted in her personal capacity (as the surveyors say) or was the sole trustee of the trust (as she says). Contracting as a trustee, does not exclude personal liability. At best it would give her a right to claim indemnity from the assets of the trust. (Those assets are, as it happens, the very property the surveyors seek to sell by way of enforcement of the default judgment).
[43] The second ground of defence advanced by Ms Thomas is that she (presumably as trustee) has a substantial counterclaim against the respondent company. That claim has now been filed in the District Court at Wanganui. The same approach should be taken in an application under r 15.13 as is done in the case of applications for summary judgment. A counterclaim does not constitute a ground of defence.7 On the other hand, if the cross-claim can be categorised as a set-off, either legal or equitable, it may be regarded as a defence. One of the early authorities on this aspect of summary judgment, is M L Paynter Limited v Ben Candy Investments Limited.8 It is a decision of Gallen J, whose recent death all who knew him lament. It makes clear that Ms Thomas’ claim in relation to delayed completion, and consequent damages, must be categorised as an equitable set-off. It involved a similar claim for fees, and response by cross-claim based on delayed performance. Gallen J followed the decision of Cleasby B in Young v Kitchin9 that in such circumstances a cross-claim for damages for non-performance is properly to be
regarded as a set-off.
7 Pemberton v Chappell [1987] 1 NZLR 1 (CA).
8 M L Paynter Limited v Ben Candy Investments Limited [1987] 1 NZLR 257 (HC).
9 Young v Kitchin (1878) 3 Ex D 127.
[44] The fact that in the present case Ms Thomas has been compelled to proceed in separate proceedings is beside the point. If we proceed on the common assumption (as we must) that she was unaware of service of the proceedings in the first place, clearly she was unable to plead her cross-claim as a defence (whether by way of set-off or otherwise).
[45] This is not an appropriate occasion, on the basis of the welter of conflicting affidavit evidence, to attempt to resolve the merits of the defence advanced. I have already said that it appears weak.10 It is in my view, sufficiently weak that I should (exercising in the very broad discretion conferred under r 15.13) not set aside the regularly obtained judgment in this case. Rather, I will uphold the judgment and deal with the interests of justice via a stay of enforcement. A second reason for my
doing so is my clear impression on the evidence that Ms Thomas has sought to evade service in the past. She is, therefore, the author of this impasse, even though I proceed on the basis (as I must) that the papers eventually served at Bligh Court, Benowa, were probably not brought to her attention. Had the surveyors taken collateral steps to bring the papers to her attention (eg by post or email), the entry of a stay (despite the potential defence advanced) would have been unlikely.
[46] The answer to Issue 3 is “No”. The application to set aside judgment is dismissed.
Issue 4: If the judgment does stand, should it be stayed while a counterclaim brought by the defendant is determined?
[47] It is difficult in this case not to have very significant sympathy for the surveyors. The affidavits by and for Ms Thomas, are replete with prevarication and special pleading, to a degree that simply strains credibility. One is bound to infer that the process server had it right when he concluded that the surveyors were “being given the run around”. The surveyors have a good claim to their fee. The defence of trust is irrelevant; the defence of breach in the performance of the contract of
services is weak.
10 See [12] above.
[48] In these circumstances the proper course of action in the exercise of my discretion is to leave the sword of the present judgment hanging where it is above Ms Thomas, and to compel her to act for once efficaciously in pursuing her District Court proceedings.
[49] The default judgment entered in favour of the plaintiff surveyors will not be set aside. Enforcement of that judgment is, however, stayed for a period of six months. If within that time Ms Thomas has:
(a) provided an address for service by r 5.44 in the present proceedings
(that being an address within New Zealand); and
(b)acted with despatch in the interlocutory requirements of her District Court proceeding, so that it is able to be set down for trial within the stay period (and on the basis that the respondent company is co- operative in reaching that point):-
then the Court will consider at that point continuation of the stay pending determination of the substantive claim in the District Court at Wanganui. Absent such continuation, the judgment may be enforced.
Disposition
[50] The application for the judgment to be set aside under r 15.13 is dismissed. [51] The application for stay is granted, on the terms set out in [49] above.
[52] The proceeding is to be listed for reconsideration of the stay application on the first available list day in the High Court in Wanganui in November 2012.
[53] There will be no order for costs.
Stephen Kós J
Solicitor:
Simpson & Co, Otaki for Plaintiff
And to:
J Thomas, 8 Lunar Court, Benowa, Queensland, Australia (email: [email protected])
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