RTD Trading Ltd v Ellery Freight Services HC Auckland CIV-2011-404-004061

[2011] NZHC 1130

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-004061

UNDER  The District Courts Act 1947

BETWEEN  RTD TRADING LTD Appellant

ANDELLERY FREIGHT SERVICES Respondent

Hearing:         14 September 2011

Appearances: A Gilchrist for Appellant

P Barratt for Respondent

Judgment:      16 September 2011 at 2:30 PM

JUDGMENT OF VENNING J

This judgment was delivered by me on 16 September 2011 at 2.30 pm, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Vlatkovich & McGowan, PO Box 10-054, Auckland 1446

Jones Fee, PO Box 1801, Shortland Street, Auckland 1140

Copy to:            A Gilchrist, PO Box 5444, Wellesley Street, Auckland 1141

RTD TRADING LTD V ELLERY FREIGHT SERVICES HC AK CIV-2011-404-004061 16 September 2011

Introduction

[1]      This is an appeal against a decision of Judge Sharp in the District Court at Auckland refusing to set aside a default judgment.  Ellery Freight Services Limited is a freight forwarding company.  RTD Trading Limited is, as its name suggests, a trading company.  RTD has business connections with Tonga.

Background

[2]      RTD has used Ellery as its freight forwarder.  In doing so it agreed to Ellery’s

standard trading conditions of contract.

[3]      In April 2010 Ellery shipped a container of RTD’s goods to Mrs Uhi trading as RTD Trading (Tonga).   Mrs Uhi was to pay the freight forwarding costs.   She failed to do so.  Ellery’s charges were $7,931.06.

[4]      At  about  the  same  time,  RTD  also  used  Ellery  to  import  two  40  foot containers of toilet paper from China.  The goods arrived in New Zealand in June

2010.

[5]      As Mrs Uhi failed to pay Ellery’s freight charges for the container of RTD

goods shipped to Tonga, Ellery sought payment from RTD direct.  RTD failed to pay.

[6]      Ellery retained the product of the containers shipped to New Zealand from China on behalf of RTD.  It also issued a claim in the new format under the District Court Rules against RTD for the costs associated with all the shipments totalling

$49,167.16 plus ongoing storage and unpacking charges.  The claim was served on

RTD on 7 December 2010.

[7]      RTD prepared a defence (or response to use the terminology in the rules). The defence was not served at Ellery’s address for service stated in the claim.  There is an issue as to whether the defence was served at Ellery’s  principal place of

business or not.   After the expiry of 30 working days Ellery obtained a default judgment in the District Court.

[8]      RTD then moved to set the default judgment aside.

District Court judgment

[9]      Judge Sharp declined to set the judgment aside.   She concluded RTD was required to serve the notice of defence at Ellery’s address for service.  It had failed to do so.   The judgment was not irregularly obtained and RTD was unable to show there would be a miscarriage of justice if the judgment was not set aside.

[10]     In the alternative, even if the judgment had been irregularly obtained, the Judge concluded that this was one of those rare cases where the residual discretion would be exercised against setting aside the default judgment because there was effectively no realistic defence and no miscarriage of justice could arise.

Issues

[11]     The issues that arise on this appeal are:

(a)       Was the judgment regularly obtained?

(b)      If it was, would a miscarriage arise if the judgment is not set aside?

(c)       If the judgment was not regularly obtained should it be set aside ex debito justitiae ?

Was the judgment regularly obtained?

[12]     The applicable rule is 12.34 of the District Courts Rules 2009.  The first issue is whether the judgment was regularly obtained.   A default judgment entered not

strictly in accordance with the Rules will normally be set aside ex debito justitiae:

O’Shannessy v Dasun Hair Designers Ltd;[1]   Broadbank Corp Ltd v Alexander.[2]

[1] O’Shannessy v Dasun Hair Designers Ltd [1980] 2 NZLR 652.

[2] Broadbank Corp Ltd v Alexander (1986) 1 PRNZ 117.

[13]     Mr Gilchrist submitted the judgment had been irregularly obtained because the default judgment had been entered even though RDT had been served with a response before the judgment was entered.   It had served the response at Ellery’s principal place of business.  As Ellery had been served with a response it was not entitled to enter judgment by default.

[14]     Ms Pigou, the managing director of RTD, has given evidence as to service of the response.  She deposes that on 22 December 2010 she served the response by the defendant and notice of counterclaim at 33 Rennie Drive, Mangere by handing the documents to reception and asking they be brought to the attention of Scott Ellery, the director of Ellery.

[15]     Ellery  does  not  accept  Ms  Pigou’s  evidence.    Ms  Taposi  Deb,  Ellery’s accounts administrator, confirms that she begins work at 9.45 a.m. and finishes work at 4.00 p.m.  There is no receptionist but as her desk is the one located closest to the entrance door she greets all visitors and attends to all deliveries.  She has met Ms Pigou on previous occasions.  Ms Deb confirms that at no time during 22 December

2010 did Ms Pigou attend Ellery’s office and serve documents on Ellery.

[16]     Mr Scott Ellery deposes that outside the hours Ms Deb works deliveries or visitors are greeted by one of the plaintiff ’s staff, whose desks are located in an open plan area.   None accepted service of documents from Ms Pigou on 22 December

2010 or any other day.  Mr Ellery also made inquiries of Burnard International which shares the same building as the plaintiff.  They are on the ground floor.  They have confirmed no documents were received by them for Ellery.

[17]     Ms Pigou’s evidence about service is general.   There is no evidence as to what time of day she says the documents were served or a description of who she

says she left the documents with.  I accept that Ms Pigou prepared a response (and

counterclaim) on or about 22 December 2010, but on the basis of the evidence overall  I conclude  that  the  defendant’s  notice  of  response  did  not  come  to  the attention of Ellery.

[18]     In  the  circumstances,  the entry of  a default  judgment  thereafter was  not irregular.  Judgments irregularly obtained are generally judgments where there is a

procedural defect, obvious on the face of the proceedings, such as:

premature sealing of judgment;

failure to service in accordance with the Rules;

sealing a judgment that goes beyond the amount claimed;  or in the case of an unliquidated claim requiring proof.

[19]     The present case does not fall into those categories.  The evidence does not establish that Ellery was served with the notice of response.  Certainly the notice of response never came to Ellery’s attention.

[20]     But, even if it could be said the notice of response had been served at Ellery’s principal place of business such service was ineffective as not in accordance with the District Court Rules.  As it was not valid service in accordance with the Rules, the judgment obtained by Ellery was not irregularly obtained.

[21]     Mr Gilchrist referred to District Court Rules 2.38, 3.42, and s 387 of the Companies Act 1993.   He submitted that r 3.42.1(a) permitted personal service of documents, including the response and that personal service on a company such as Ellery  could,  pursuant  to  s 387,  be  effected  by  leaving  the  document  with  an employee at the company’s principal place of business.

[22]     However, r 3.42.1, which permits service by personal service, is subject to r 3.42.3, which reads:

This rule does not apply if an Act, a rule, or a form set out in Schedule 1 requires a special and exclusive method of service.

[23]     The relevant form is Form 3, response by defendant.  It provides for a special and exclusive method of service:

What to do when you have completed this form

When you have completed this response by defendant form, you must serve the form on the plaintiff.

See  instructions  for  how  to  serve  forms  under  Further  information  for defendant.

...

...

Further information for defendant

How to serve forms

You must serve this form on the plaintiff by taking or sending the completed form to them at their address for service.

Do not file this form at a court.  Make sure you keep copies of all forms in the process.

(Emphasis added)

[24]     Mr Gilchrist drew the Court’s attention to the notes for defendant and the notice of claim which refers to serve and serve personally.  He also noted that the definition section referred to address for service as:

an address of a place in New Zealand where all documents about a claim can be taken or sent to the plaintiff or defendant.

He submitted the forms were contradictory.

[25]     I  accept  counsel’s  point  that  the  forms  could  be  clearer.    However,  the definitions relied on by Mr Gilchrist are just that, definitions.  The only reference to personal service is in the notice of claim form.  The document in issue in this case was the response by the defendant.  The response form was directory as to what was required by the defendant as to service.  It directed the method of service was to be by taking or sending the completed form to the plaintiff’s address for service.  As such it was, in terms of r 3.42.3, a form which required a “special and exclusive

method of service”.   Mr Gilchrist accepts that RTD did not serve the form at the address for service.

[26]     As RTD did not serve the form at the address for service and the evidence is the response never came to the attention of Ellery, it was not served.

[27]     I conclude that the default judgment was regularly obtained.

Miscarriage of justice

[28]     The issue for the Court then becomes whether in the exercise of its discretion the Court should set aside the judgment.  Generally when considering whether there would be a miscarriage of justice if the judgment was not set aside the Court will

consider whether:

the defendant has a substantial ground of defence;

the delay is reasonably explained;  and

the plaintiff will suffer irreparable injury or not:  Russell v Cox.[3]

[3] Russell v Cox [1983] NZLR 654 (CA).

[29]     In the present case there can be no issue that RTD acted promptly to set aside the default judgment.  Nor is there any evidence that Ellery would suffer irreparable injury if the judgment was set aside.  This aspect of the case really turns on whether RTD can satisfy the Court it has a substantial ground of defence.

[30]     In relation to that issue Ms Pigou’s evidence is that, while she accepts Ellery was RTD’s freight forwarder she says that she introduced Mrs Uhi to Ellery as a future customer.   Subsequently RTD Trading (Tonga) ordered product from RTD and, she says, itself arranged the freight of RTD’s goods with Ellery.  She says in June she received a call from Mr Scott Ellery asking for further contact details of

Mrs Uhi as Ellery was having trouble getting her to pay the freight bills.

[31]     Later in July when RTD asked the plaintiff to release two 40 foot containers to it (she says RTD was expecting to pay the freight on those containers as usual) she was told by Mr Ellery that the containers were going to be restrained and would not be released unless RTD paid the freight for the product shipped to RTD Trading (Tonga).

[32]     In short, Ms Pigou’s position is that originally Ellery invoiced RTD Trading (Tonga) for the freight but when payment was not forthcoming wrongly sought to charge RTD.  She says that RTD has not itself been paid by RTD Trading (Tonga) for the goods that were shipped.

[33]     Ellery’s position is set out by Mr Ellery in his affidavit.  He says that on or about 1 April 2010 Ms Pigou of RTD instructed Ellery to ship goods from Auckland to RTD Trading (Tonga).   Ms Pigou asked Ellery collect the freight charges from RTD Trading (Tonga) rather than directly from RTD.

[34]     Ellery agreed to that but when RTD Trading (Tonga) failed to pay Ellery looked to RTD for payment.  It relied on its standard trading conditions of contract agreed to by RTD, in particular cl 15, which reads:

15.Every special instruction to the effect that charges shall be paid by a person other than the Customer shall be deemed to include a stipulation that if that nominated person does not pay those charges within seven (7) days of delivery or attempted delivery of the Goods, then the Customer shall pay those charges to the Company within seven (7) days of being notified of that person’s failure to pay.

[35]     Mr Gilchrist submitted that whilst RTD was a customer of Ellery it was not a customer in relation to the goods shipped to RTD Trading (Tonga).

[36]     I prefer Mr Ellery’s evidence and the case argued for by Mrs Barratt.  It is supported by the contemporaneous documentation whereas Ms Pigou’s evidence is again  general.   I prefer Mr Ellery’s  evidence  and the respondent’s case for the following reasons:

(a)       Mr Ellery’s evidence is specific and detailed.  Ms Pigou’s is general.

Mr Ellery says that Ms Pigou actually instructed Ellerys to ship goods

to RTD Trading (Tonga) on 1 April 2010 (i.e. the instruction did not come from Mrs Uhi).  Consistent with that is an email of 1 April from Mr O’Donnell of Ellery to Ms Pigou confirming a booking of a 20 foot container ex Auckland to Nukualofa with an estimated departure date of 9 August.   The email requested her advice as to when she wanted the container delivered to the site and how she wanted the doors  placed  on  it.    Clearly  Ms  Pigou  and  RTD  controlled  the shipment of RTD’s goods to Tonga.

On 9 April there is a further email from Mr O’Donnell to Mr Ellery which was forwarded by him to Ms Pigou in the following terms:

Booking for Lou’s [Ms Pigou] container.

(b)      The bill of lading relating to the shipment was subject to CFR terms.

CFR or cost in freight means the seller delivers the goods on board the vessel or procures the goods already so delivered.  The risk of loss of or damage to the goods passes when the goods are on board the vessel.   The seller must contract for and pay the cost and freight necessary to bring the goods to the named port of destination.

(c)      When Ellery pursued RTD Trading (Tonga) for payment  Mrs Uhi denied liability for payment on the basis she had already settled everything with RTD and that RTD had charged commission to cover all the freight.

(d)When payment was not forthcoming from RTD Trading (Tonga) and Ellery pursued the matter directly with RTD, Ms Pigou accepted liability or at the least did not raise any issue as to RTD’s liability. This is shown by the following communications:

(i)       By an email of 15 June Ellery wrote:

Hi Lou

Can you please advise if we will see payment soon for RTD NZ March invoice & RTD Tonga ?

(ii)      Ms Pigou responded on 21 June:

Hi Scott, I’m just waiting transfer of Money from Tonga as soon I receive the confirmation will send you the chq.   Sorry for the late reply I was away overseas  and  communication  there  are  not  very good.

Notably there is no suggestion by Ms Pigou in that email exchange that RTD was not liable for the cost of freighting the goods to RTD Trading (Tonga) in Tonga.  If that was her position one would expect her to have set it out at that time.

[37]     RTD fails to satisfy the Court that it has a substantial ground of defence to

Ellery’s claim.

[38]     Mr Gilchrist submitted that the only evidence of quantum was the invoice for

$7,931.06 for the freight to Tonga and there was no evidence in relation to the balance of the plaintiff’s claim.  However, even on Ms Pigou’s affidavit she notes that there are costs in relation to the other two containers ordered by RTD which RTD accepts liability for.  The issue of quantum was not a matter raised before the District Court. There is no evidentiary basis to challenge the default judgment on the basis of quantum at this stage.

[39]     Mr Gilchrist also challenged Mrs Barratt’s reference to the freight term, CFR on the invoice.   But the invoice was before the District Court.   Counsel simply referred to a standard publication confirming the CFR terms.  Further, even absent that explanation Mr Ellery’s detailed evidence confirms that the goods shipped by Ellery to Tonga were done so at the direction of Ms Pigou.  As such RTD comes within the definition of a customer for the purposes of cl 15 of Ellery’s standard trading conditions of contract and is bound to pay Ellery’s charges.

[40]     For the above reasons, like the District Court Judge, I am satisfied there was no miscarriage of justice in this case by the entry of the default judgment.

Result

[41]     The appeal is dismissed.

Costs

[42]     Costs to Ellery on a 2B basis together with disbursements as fixed by the

Registrar.

Venning J