Shoye Venture Ltd v Wilson
[2013] NZHC 2339
•6 September 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-404-007912 [2013] NZHC 2339
BETWEEN SHOYE VENTURE LIMITED
Plaintiff
AND
DONALD GORDON WILSON
Defendant
AND
MANUKAU GOLF CLUB INCORPORATED
Third Party
| Hearing: | 6 September 2013 |
Counsel: | No Appearance of or for the Plaintiff A E Hansen for the Defendant No Appearance of or for the Third Party |
Judgment: | 6 September 2013 |
JUDGMENT OF DUFFY J
Solicitors: Heimsath Alexander, Auckland
SHOYE VENTURE LTD v WILSON and ANOR [2013] NZHC 2339 [6 September 2013]
[1] This proceeding, which was to be heard by way of formal proof, and Manukau Golf Club Inc v Shoye Venture Ltd (CIV-2010-404-4422), which was to be tried by a Judge alone, were set down to be heard together in mid 2012. However, the Judge alone trial ran overtime, and so the formal proof of this proceeding was adjourned to a date to be fixed by the Registrar.
[2] When I delivered judgment in the related proceeding, Shoye Venture Ltd v Wilson [2013] NZHC 658, I found that the arrangements in place between Shoye Venture Ltd (Shoye Venture) and Manukau Golf Club Ltd (Manukau) for a gambling operation were illegal. After that judgment was released, Shoye Venture indicated its intention in this proceeding to pursue judgment by way of formal proof against the defendant, Donald Wilson. Mr Wilson now seeks leave to defend the claim against him out of time.
Background
[3] Mr Wilson provided a personal guarantee on 10 September 2007, purporting to ensure the due performance of a management agreement in relation to a gambling operation between Shoye Venture and Manukau, which was operated from the venue known as the Trophy Bar. Mr Wilson says that he derived no benefit from the guarantee and had no actual involvement in the operation. He provided the guarantee at Manukau’s request.
[4] The guarantee included the obligation to purchase the business of the Trophy Bar for the sum of $300,000 plus GST in the event of a breach of the management agreement. The guarantor also indemnified Shoye Venture from any loss or damage that it may suffer as a result of breach of the management agreement.
[5] In November 2009, Shoye Venture commenced proceedings against Mr Wilson by way of a summary judgment application. At that time, Mr Wilson opposed the summary judgment application. The proceedings continued. In May 2012, Mr Wilson abandoned his opposition because he believed that the
gambling arrangements were legal. It was then that the Court directed that this proceeding be set down for a formal proof hearing.
[6] On 28 March 2013, I delivered the judgment finding that the gambling arrangements between Shoye Venture and Manukau were illegal. Despite this, Shoye Venture continues to seek judgment by way of formal proof against Mr Wilson under the guarantee.
Submissions
[7] On the basis of my illegality findings, Mr Wilson now believes that he should not be held liable under his personal guarantee because, in essence, Shoye Venture is seeking to recover financial losses caused by the illegal gambling operation in which Mr Wilson had no involvement. In these circumstances, Mr Wilson says that it would be a miscarriage of justice if judgment were entered against him by default, so leave should be granted for him to file his defence out of time.
[8] The grounds on which Mr Wilson seeks leave to file a defence are that:
(a)The delay in filing the defence was based on Mr Wilson’s misapprehension that the arrangements were legal, and there has since been a change in circumstances, namely, the delivery of my judgment which made illegality findings;
(b)Mr Wilson has a substantial ground of defence against Shoye Venture’s claim on the basis of illegality;
(c)Allowing Mr Wilson to defend his position on the basis of illegality will not cause Shoye Venture any injury; and
(d)Costs involved would be minimal going forward, as the issue of illegality could easily be determined in a short hearing.
[9] Shoye Venture has filed notice that it abides the Court’s decision on this application.
[10] Rule 15.9(3) of the High Court Rules states that once a formal proof hearing has been set down, a statement of defence cannot be filed without the leave of a Judge. The Judge may grant leave if there will, or may be a miscarriage of justice if judgment by default is entered, and leave will be on terms that the Judge thinks fit. Rule 1.19 effectively allows the Court to grant an extension of time to file a defence.
[11] According to the Court of Appeal in Russell v Cox [1983] NZLR 654 (CA) at 659, when the Court is considering if there has been a miscarriage of justice in the context of exercising a discretion on whether to set aside or vary a default judgment, relevant factors include:
(a)Whether the defendant has a substantial ground of defence;
(b)Whether the delay is reasonably explained; and
(c)Whether the plaintiff will suffer irreparable injury if the judgment is set aside.
[12] Where the delay is substantial, the Court can more readily conclude that injury would be caused. That decision relied on a line of authorities: Paterson v Wellington Free Kindergarten Association Inc [1966] NZLR 975 (CA); Atwood v Chichester (1878) 3 QBD 722; Hovell v Ngakapa (1895) 13 NZLR 298 (SC); and Trengrove v Inangahua Hospital Board [1956] NZLR 587 (SC).
[13] Counsel for Mr Wilson submits that these considerations should also apply to the discretion to grant leave under r 15.9(3). I agree. 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.
[14] I am of the view that this is clearly a case where leave to file a statement of defence should be granted. Shoye Venture’s claim can only succeed if it is able to successfully rely on the illegal arrangements being valid as between the parties. As I found in Shoye Venture Ltd v Wilson at [173]-[175], a party cannot benefit from its own wrong, as otherwise the Court might be seen as condoning it. Because Mr Wilson has a strong argument to say that the guarantee is inextricably bound up in the illegal arrangements, he has a substantial defence to the claim.
[15] As to the delay, it was unclear at the time when Mr Wilson first abandoned his opposition whether the Court would find that the arrangements were illegal. It was only after my judgment was issued that the legal position became clear, and it was only at that point that Mr Wilson had all the necessary information to make an informed decision about whether to defend the proceedings. In my view, the delay has not materially prejudiced Shoye Venture, nor has it caused irreparable injury. I agree with Mr Wilson’s submission that because the question of whether the guarantee is bound up in the illegal arrangements is a short isolated point, the substantive hearing is likely to be a short one, so any costs in the future would be minimal.
Result
[16] The result is that the application for leave to file a defence out of time is granted. Mr Wilson should file and serve his statement of defence by Friday 20 September 2013.
[17] The matter will then be dealt with as an ordinary proceeding warranting a defended hearing. It will, therefore, need to go to a first case management conference. However, Ms Hansen has indicated to me today that there may be an application to strike out this proceeding, in which case it may be better if this is dealt with first, given the circumstances of this matter.
[18] For the moment, I direct that by Friday 4 October 2013, the Case Officer is to liaise with the parties to see, first, whether or not Shoye Venture intends pursuing this claim. If so, it will then need to be set down for a first case management conference. If there is to be any application to strike out, that should be indicated to the Case Officer without delay, after the statement of defence has been filed and served.
[19] Costs are reserved. I note that Shoye Venture did not appear to oppose the application.
Duffy J
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