Rika v Morrison Kent
[2018] NZHC 1406
•13 June 2018
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
I TE KŌTI MATUA O AOTEAROA TE ROTORUA-NUI-Ā-KAHU ROHE
CIV-2017-463-042
[2018] NZHC 1406
BETWEEN WALTER PERERIKA RIKA
Appellant
AND
MORRISON KENT
Respondent
Hearing: 20 March 2018 Appearances:
Appellant in person
MRC Wolff for the Respondent
Judgment:
13 June 2018
JUDGMENT OF WOODHOUSE J
This judgment was delivered by me on 13 June 2018 at 4:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.
Registrar/Deputy Registrar
……………………………………
Parties / Solicitors:
Mr W P Rika
Mr M Wolff, Morrison Kent, Wellington
RIKA v MORRISON KENT [2018] NZHC 1406 [13 June 2018]
[1] The appellant, Mr Rika, appeals against judgment entered for the respondent, Morrison Kent Ltd, on 8 March 2017 in the District Court at Rotorua in a sum of
$51,200.16.
Grounds of appeal
[2] Judgment was entered on an admission of claim signed by Mr Rika and dated 12 June 2016. The admission was for the total judgment sum of $51,200.16. This was for legal fees of $40,310.38 which Mr Rika admitted he owed Morrison Kent, and interest and costs for which Mr Rika also accepted liability.
[3] On the appeal, Mr Rika did not dispute his indebtedness to Morrison Kent for the legal fees. Nor did he raise any issue relating to the other sums. After Mr Rika had given the admission of claim to Morrison Kent, but before judgment was entered, he made a payment of $2,300. After judgment was entered, but before the hearing of this appeal, Mr Rika made a further payment of $5,000. I am satisfied that no issue arises in respect of these payments. Morrison Kent has not sought to enforce judgment for more than the net sum owing, plus further interest.
[4] In essence, there is no issue of quantum or liability raised by Mr Rika on the appeal. His grounds of appeal are:
(a)Morrison Kent should not have obtained the admission of claim from him because, at the time, they were still acting for him and, as a result, Morrison Kent had a conflict of interest.
(b)The admission of claim was subject to a condition enabling Mr Rika to repay the debt within 12 months, expiring on 8 June 2017, but judgment was entered on 8 March 2017.
District Court r 15.13
[5] Rule 15.13 of the District Court Rules 2014 makes provision for admissions of causes of action. The rule relevantly provides as follows:
15.13 Admission of cause of action
(1)At any time after a party has been served with a notice of proceeding, that party may file and serve (separately from the party’s pleadings) an admission of all, some, or part of the alleged causes of action on all other parties to the proceeding.
…
(3)When an admission is filed and served under subclause (1), a party on whom the admission is served may seal judgment on the cause of action admitted, without prejudice to that party’s right (if any) to proceed on any other cause of action.
(4)An admission under subclause (1) relating to any cause of action in which a sum of money is claimed must state the exact amount admitted.
(5)Any judgment entered on an admission filed and served under subclause (1) may, upon application, be set aside by the court if—
(a)the plaintiff, being under a duty or obligation to the defendant not to enter judgment on the admission, acted contrary to that duty or obligation in entering judgment; or
(b)the plaintiff, in entering judgment, acted fraudulently, unconscionably, or in wilful or reckless disregard of the defendant’s rights.
(6)Upon an application under subclause (5), the court may direct that a proceeding be brought to determine whether judgment was wrongfully entered.
…
[6] Rule 15.13(5) and (6) apply directly to the issues raised on this appeal. The “court” referred to in r 15.13(5) is the District Court. This court nevertheless has jurisdiction to determine the issues.1 Mr Wolff, for Morrison Kent, did not raise any jurisdiction issue.
[7] Both Mr Rika and Mr Wolff made clear that they were seeking a decision of this Court. I am satisfied that it is in the interests of both parties for this court to determine the issues.
[8] This is not a case requiring a direction that a proceeding be brought to determine whether judgment was wrongfully entered, as contemplated by r 15.13(6).
1 Rule 20.19(1) of the High Court Rules 2016.
Mr Rika helpfully filed a bundle of documents. This was an appropriate step to take because this was not an appeal from a reasoned judgment of the District Court, with findings of fact. The judgment had simply been entered by the Registrar on the admission. Both parties presented their written submissions by reference to the documents. And both parties accepted that the issues were capable of being determined on the “papers”, and in particular the contemporaneous documents contained in the bundle of documents. For these reasons this court is well placed to determine the issues raised.
Evaluation: was there a conflict of interest?
[9] As noted in the summary of the grounds of appeal, Mr Rika contended that there was a conflict of interest for Morrison Kent because Morrison Kent was acting for him when it obtained the admission of claim from him. For the reasons that follow I am satisfied that Morrison Kent was not acting for Mr Rika when the negotiations leading to the admission of claim began, or at any subsequent time through to entry of judgment. In consequence, there was no conflict of interest as alleged. And there was no suggestion that there was a conflict of interest for Morrison Kent for any other reason.
[10] The debt for the legal fees arose from instructions from Mr Rika to Morrison Kent to act for the three trustees of the E E Rika Estate Trust (the Trust), and for a company with which Mr Rika was associated, Patetere Farms Ltd. Those instructions were given in February 2013. By August 2014 there were outstanding fees of
$40,310.38, the sum recorded in the admission of claim for fees. No part of the fees had been paid by March 2015. On 4 March 2015 Morrison Kent sent a letter to Mr Rika advising that they would no longer act for Patetere Farms and the Trust because of the unpaid fees.
[11] Mr Rika argued that Morrison Kent continued to act for him because the letter of 4 March from Morrison Kent stated only that the firm was ceasing to act for Patetere Farms and the Trust. I do not agree. The instructions to act for Patetere Farms and the Trust came from Mr Rika and he had personal liability for the fees, as he has expressly acknowledged. When Morrison Kent said they would no longer act for
Patetere Farms and the Trust, that necessarily meant also that they would no longer act on instructions from Mr Rika for Patetere Farms and the Trust. There was no suggestion that Morrison Kent were acting for Mr Rika in any other matter.
[12] Negotiations leading to the admission of claim did not begin until over 14 months after Morrison Kent advised Mr Rika that the firm would no longer act for him. The negotiations began on 17 May 2016 when Mr Rika sent an email to Morrison Kent in response to advice from Morrison Kent that it had issued proceedings to recover the fees. Particulars of Mr Rika’s email are recorded below in the evaluation of the second ground of appeal. Had there been need for it, Morrison Kent’s advice to Mr Rika that it was suing him for fees simply reinforced what was clear from the letter of 4 March 2015.
[13] Mr Rika submitted that Morrison Kent should have advised him to obtain independent legal advice before he signed the admission. This does not provide separate grounds for challenging the fact that Morrison Kent prepared the admission of claim and got Mr Rika to sign it. Morrison Kent was not acting for Mr Rika and therefore had no obligation to advise Mr Rika to obtain independent legal advice before embarking on the negotiations. In any event, there was express notice to Mr Rika, in Morrison Kent’s notice of proceeding that, although he did not have to employ a solicitor for the purpose of the proceeding, it was recommended that he consult a solicitor about the claim immediately.
[14] There is a final consideration. The only provision of r 15.13 which might provide a basis for setting aside the judgment on the first ground of appeal is r 15.13(5)(b). This would require proof that Morrison Kent, in entering judgment, “acted fraudulently, unconscionably, or in wilful or reckless disregard of” Mr Rika’s rights. There was no allegation by Mr Rika to that effect. And it is plain from the evidence that there could be no basis for an argument to that effect.
[15]The first ground of appeal is dismissed.
Evaluation: was the admission of claim filed contrary to conditions?
[16] The terms on which Mr Rika provided the admission of claim are to be determined objectively by interpreting what is recorded in the emails between Mr Rika and Morrison Kent over the relevant period. These commence with the email of 12 May 2016 from Morrison Kent, advising that they had commenced the proceeding against Mr Rika. They end with an email from Morrison Kent of 15 June 2016 acknowledging receipt of a letter from Mr Rika containing the signed hard copy of the admission of claim.
[17] Mr Rika, in his discussions with me, accepted that this issue turned on the content of the emails. Having read those emails, several times, and considered the meaning of them in light of Mr Rika’s submissions, as well as those for Morrison Kent, I am satisfied that it was not a condition that Morrison Kent would not on any basis file the admission of claim for a period of 12 months commencing on 8 June 2016.2
[18] As noted earlier, negotiations between Mr Rika and Morrison Kent began with Mr Rika’s email of 17 May.3 Mr Rika acknowledged that the fees should have been paid and the claim was not disputed. He said, in effect, that he was not in a position to pay at that time, but he was expecting to receive funds which would enable him to pay and he was willing to “work out a way to ensure that” Morrison Kent was paid. He concluded the email as follows:
I can give you an assignment of funds coming from the complaint4 and /or I will give an Acknowledgement of Debt which I will not dispute if payment is not made. However If you have any other suggestion on how to secure your position I would be happy to oblige. This would be better for both of us than going thru the H/Ct which would avoid a costly H/Ct action.
Can you please consider this and advise me whether we can work something out along the lines of what I have suggested, or something else you think will work.
2 The starting date is taken as 8 June because that is the date of Morrison Kent’s email on which Mr Rika relies. It is possibly arguable that the 12 month period, to the extent it is relevant, started on 12 June, being the date on the admission of claim signed by Mr Rika. Nothing turns on this.
3 As will be apparent, all of the emails relating to this issue were in 2016, and the year has been omitted from the dates.
4 This was a complaint by Mr Rika to the New Zealand Law Society. It was not a complaint against Morrison Kent.
[19]Morrison Kent responded with an email which included the following:
In light of your email and because we have already filed proceedings, we believe that the best course of action now is to file an “Admission of Cause of Action” (see Rule 15.13 of the District Court Rules 2014 attached). This would effectively surpass most of the costly court proceedings to seal judgment on the cause of action admitted.
(emphasis in original)
[20] On 18 May Mr Rika said he agreed to the suggestion, but had a couple of questions which he would put in an email the following day. In an email of 19 May Mr Rika again said that he accepted responsibility for the debt and that he should be held responsible for it. He then said:
Could you please advise me:
1. What is the total amount of debt that you seek from me ?
2. If I agree with this would Morrison Kent agree to with hold enforcement of the judgment for an agreed period of up to 12 months?
3 And within the 12 mth period I be allowed to make payments to reduce the debt.
This would allow time for the Law Society complaint to be determined … And failing that it will allow time to put in place an alternative repayment arrangement of the balance owed.
[21] Morrison Kent responded the same day, 19 May. Their email included the following stipulation:
We will agree to withhold enforcement of the judgment for 12 months, but only on condition that you agree to repay the $40,310.58 in 12 equal monthly instalments over the course of that year (12 x $3,359 is $40,308). If you miss a payment, then we reserve our right to proceed to enter judgment for the balance of the full amount including the interests and costs, and to pursue recovery.
[22]Mr Rika replied by email of 27 May. He said:
I am happy to sign an admission of claim, to keep things simple and keep costs down.
But at the moment I will struggle to keep to monthly payments.
I am expecting payments from some work that I am doing for our Whānau Trust lands but I have yet to receive the payments scheduled from them.
Once I have that I can realistically commit to some interim payments. Can we work around that?
…
[Mr Rika then turned to other matters, not of relevance. At the end of the email he came back to the admission of claim as follows.]
If you can send me a draft admission of claim I can then put in what I can realistically pay in the interim, and then you can decide if that is okay or not.
[23] Morrison Kent’s response was on 8 June. There are two paragraphs bearing on the issue, as follows:
1.We refer to your email of 27 May 2016. If you admit the claim, and continue to communicate with us in good faith about payment, then we will not need to take any further steps in the proceeding. If you do not sign the admission of claim, or fail to make payment, then we will have no option but to continue.
2.If you admit the claim and repay the $40,310.58 as soon as possible, and certainly within the next 12 months, we will not seek judgment on the admission. If you miss a payment, then we reserve our right to proceed to enter judgment for the balance of the full amount including the interests and costs, and to pursue recovery.
[24] There was nothing else in that email relating to terms of settlement. The remainder of the email explained the calculation of the total of $51,200.16 recorded in the admission of claim and a draft admission, which was forwarded with the email.
[25]By email of 10 June 2016, Mr Rika responded by saying:
Happy to sign off on the Admission of Debt and will put the signed hard copy of the doc in the post to your office over the weekend.
There was nothing else in the email, other than greetings. There was no challenge by Mr Rika to what was expressly contained in, or to be inferred from, Morrison Kent’s email of 8 June. Nor did Mr Rika say anything about what he could “realistically pay in the interim”, as he had indicated he would do at the end of his preceding email of 27 May.
[26]Morrison Kent responded to Mr Rika on 10 June and said:
Kia ora Walter, and thanks. Please be aware, though, that we expect you to come back to us as soon as possible in good faith to make an interim payment. This is not a situation of us agreeing to keep the signed Admission for a year before we do anything. If we have not received an interim payment from you within the next few weeks we will either continue with the proceeding, or if you have signed the Admission we will seek to enter judgment. I am sorry to speak in these terms, but I wanted you to be clear about the understanding between us and the basis upon which we are accepting the Admission. If you have any questions about it, please do not hesitate to get in touch.
[27] Morrison Kent, in an email of 15 June to Mr Rika, acknowledged receipt of the admission that day and added: “We hope to hear from you soon as regards payment.” That was the last email of relevance.
[28] The essence of Mr Rika’s argument on this second ground of appeal was that Morrison Kent was not entitled to enter judgment on the admission of claim until 12 months had expired. Mr Rika stated that that was his understanding of what had been agreed. As I explained to Mr Rika, the terms of the agreement have to be assessed objectively from what was recorded, and not on the basis of his subjective understanding. Nor is it to be assessed on the basis of Morrison Kent’s subjective understanding.
[29] On an objective interpretation of what is recorded in the emails, I am satisfied that there was no agreed condition that judgment could not on any basis be entered until 12 months had expired.
[30] Morrison Kent’s email of 8 June could have been expressed more clearly, as Mr Wolff acknowledged. This arises from the first sentence of paragraph 2:
If you admit the claim and repay the $40,310.58 as soon as possible, and certainly within the next 12 months, we will not seek judgment on the admission.
[31] But that sentence cannot be read in isolation. Paragraphs 1 and 2 as a whole make sufficiently clear that, to avoid entry of judgment, Mr Rika was required to make reasonably regular payments, even if they were not fixed instalments, and he was also required to communicate in good faith with Morrison Kent about payment over the following months. Failure to do these things entitled Morrison Kent to enter judgment.
[32] That is a conclusion based on the two paragraphs in the 8 June email. When those paragraphs are read in the context of the full exchange of emails, the conclusion that there was breach of the agreement by Mr Rika, entitling Morrison Kent to enter judgment when they did, is reinforced. Morrison Kent’s email of 19 May made clear that regular payments were required. Mr Rika was wanting a more open-ended arrangement and indicated that he could not commit to regular monthly instalments. But Morrison Kent did not at any point agree to what Mr Rika was seeking.
[33] Mr Rika’s email of 27 May concluded with a request that Morrison Kent send the draft admission of claim and Mr Rika would then “put in what I can realistically pay in the interim”. Mr Rika did not do that. As recorded above, his response on 10 June was simply to say that he was happy to sign the admission of claim and he would put the hard copy in the mail. The objective inference is that Mr Rika had accepted that he could not get a loose arrangement as he had sought. He signed the admission on Morrison Kent’s terms. That conclusion is reinforced by the terms of Morrison Kent’s immediate response to Mr Rika in Morrison Kent’s 10 June email.
[34]For these reasons, Mr Rika’s second ground of appeal is dismissed.
Result
[35]The appeal is dismissed.
[36] The respondent is entitled to costs on a 2B basis and reasonable disbursements. There is an order to that effect. If the quantum of costs on a 2B basis and any disbursements can be agreed, a joint memorandum, or other appropriate evidence of agreement, may be filed and judgment entered for costs on those terms. If the parties are unable to agree on the quantum of costs, and any disbursements, on a 2B basis, the dispute is to be determined by the Registrar in the first instance.
Woodhouse J
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