SM v LFDB
[2014] NZCA 326
•14 July 2014 at 3.00 pm
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NOTE: THE ORDER MADE BY THE HIGH COURT ON 28 MAY 2012
PROHIBITING PUBLICATION OF THE PARTIES’ NAMES AND ANY PARTICULARS THAT WOULD IDENTIFY THE APPELLANT
(INCLUDING HER NAME, OCCUPATION, EMPLOYMENT HISTORY AND HEALTH) REMAINS IN FORCE PENDING FURTHER ORDER OF THE HIGH COURT.
IN THE COURT OF APPEAL OF NEW ZEALAND
CA864/2013 [2014] NZCA 326
BETWEEN SM
Appellant
AND
LFDB Respondent
Hearing: 1 May 2014 (further submissions filed 26 May 2014) Court:
Stevens, Wild and Miller JJ
Counsel:
A E Hinton QC and A R Nicholls for Appellant
S R Jefferson QC and E M Eggleston for RespondentJudgment:
14 July 2014 at 3.00 pm
JUDGMENT OF THE COURT
A The appeal is allowed.
BThe order made in the High Court extending the time for payment of the second costs order until 17 October 2013, discharging the second unless order and cancelling the respondent’s debarment is quashed.
CThe order debarring the respondent from taking any further part in the proceeding is reinstated.
DAny outstanding issue of costs in the High Court is to be determined in that Court.
SM V LFDB CA864/2013 [2014] NZCA 326 [14 July 2014]
E The respondent must pay the appellant’s costs for a standard appeal on a
band B basis and usual disbursements. We certify for second counsel.
REASONS OF THE COURT
(Given by Stevens J)
Introduction
[1] A party to a proceeding flouts an “unless” order. Belatedly the party complies with the order, and applies to be relieved of the sanction imposed upon breach. What principles should guide a Judge dealing with such an application? It seems there is no guidance from this Court.
[2] Here, Ellis J was faced with exactly that situation. The question on this appeal is whether she correctly applied the principles in allowing the respondent’s application. The Judge did that by retrospectively extending time for the respondent to comply with an unless order requiring him to satisfy a costs order by a fixed date, failing which he would be debarred from taking further part in the proceeding, discharging the order and cancelling the debarment.1
[3] Counsel appearing before us were in general agreement as to the principles Ellis J should have applied. That was not the position before Ellis J. Further, Ellis J did not have full information as to the practical consequences of the respondent being debarred from further participation in the proceeding. We have had the benefit of full submissions about that. As a consequence of those two matters, counsel invited us to consider afresh whether the respondent should have remained debarred,
or whether he should have been permitted again to participate in the proceeding.
1 SM v LFDB [2013] NZHC 3105. Normally a decision such as this would not be anonymised.
However, in this case, a suppression order made in the High Court for reasons specific to the appellant remains extant. The High Court order was not challenged in this Court.
Background
[4] The parties have been in dispute since early 2009 over their relationship property. Rather than lengthen this judgment with the full chronology of what has happened, we restrict ourselves to a summary which we think sufficiently conveys the flavour of what occurred.
[5] The respondent filed a relationship property proceeding in Australia in February 2009. After an Australian judge ruled that New Zealand was the forum conveniens,2 what proceeded was the claim the appellant had filed in the New Zealand Family Court in March 2009.
[6] In setting aside the respondent’s protest to the jurisdiction of the Family
Court, Judge Ryan ordered the respondent to pay the appellant costs of $11,660.3
This was the first costs order. The respondent did not pay it.
[7] Defended applications concerning the occupation and sale of two relationship properties, maintenance, discovery, a restraining order under s 43 of the Property (Relationships) Act 1976 (PRA), and removal of a notice of claim followed over the course of 2010 to 2012.4 There were also applications to the High Court for an injunction and for an order removing a notice of claim from the title to a relationship property.5
[8] In October 2011 the respondent applied successfully to transfer the proceeding to the High Court.6 In ordering the transfer, Judge Ryan observed that the parties had already embarked on 23 interlocutory applications, filed 53 affidavits, had five judicial conferences and a hearing, received seven court judgments or
directions and both appealed to and filed applications in the High Court. It
2 [LFDB] v [SM] [suppressed].
3 SM v LFDB FC North Shore FAM-2009-044-726, 21 October 2009.
4 SM v LFDB FC North Shore FAM-2009-044-726, 30 April 2010; SM v LFDB HC Auckland
CIV-2010-404-2320, 22 October 2010; [SM] v [LFDB] FC North Shore FAM-2009-044-727
14 July 2011; LFDB v SM HC Auckland CIV-2011-0404-4245, 15 August 2011.
5 ASB Bank Ltd v SM HC Auckland CIV-2011-404-5239, 30 September 2011; SM v ASB Bank Ltd
[2012] NZCA 103.
6 SM v LFDB FC North Shore FAM-2009-726, 7 October 2011.
understates the position to observe that both parties’ legal costs were, by the date of
transfer, already substantial.
[9] It was Priestley J who first dealt with the matter in the High Court.7 When making orders and giving directions in September 2012 the Judge observed “this seemingly intractable dispute needs prompt resolution. Both counsel have candidly informed me that the legal costs the parties are incurring are close to ruinous”.8
[10] In the above minute, Priestley J made an unless order in respect of the first costs order.9 The respondent paid those costs on the last day before the unless order took effect.
[11] Ellis J then took control of the proceeding. In granting applications by the appellant for an interim distribution and for adjournment of the trial scheduled to start in May 2013, Ellis J referred to the large number of applications, affidavits and judgments, commenting that the proceeding was continuing “in a similar vein …”.10
She recorded that the costs incurred by both sides had been prohibitive, the
respondent’s “in excess of $700,000”.11 Ellis J then made this observation about the way the respondent was conducting the litigation:
[44] Lastly, there is the matter of the recalcitrance with which LFDB has made available much of the financial information that is necessary to undertake the required analysis. Other judges in earlier decisions have commented on that. An adverse inference can fairly be drawn. Nor does LFDB’s general approach to this litigation and his reluctance to comply with Court orders weigh in his favour here.
[12] Having granted the two applications, Ellis J made the costs order in issue in this appeal.12 We term it “the second costs order”. Her Honour ordered the respondent to pay costs of $20,000 plus interest at five per cent from 10 May 2013.
[13] When, by mid-August 2013, the respondent had not paid the second costs order, Ellis J raised the likelihood of an unless order, and granted the appellant leave
7 [SM] v [LFDB] [2012] NZHC 1152.
8 [SM] v [LFDB] HC Auckland CIV-2011-404-6851, 19 September 2012 at [1].
9 At [15]–[17].
10 SM v LFDB [2013] NZHC 1056 at [5].
11 At [47].
12 SM v LFDB HC Auckland CIV-2011-404-6851, 31 July 2013 at [2].
to apply for one.13 When the respondent still failed to pay the second costs order, the appellant applied for an unless order.
[14] The appellant and respondent filed memoranda and affidavits in support of and in opposition to the making of an unless order, respectively. After considering the issue on the papers, Ellis J made a second unless order against LFDB on
29 August 2013 in these terms:14
… if [LFDB] does not pay to [SM’s] solicitors the sum of $24,435.08 plus interest calculated at 5 per cent per annum (from 10 May 2013 until the date of payment) by 5pm (New Zealand time) on Monday 9 September 2013 he will be debarred from taking any further part in the proceedings presently before this Court; …
[15] When the respondent failed to comply with the second unless order, the appellant applied to enforce it by debarring the respondent from further involvement in the proceeding.
[16] In response the respondent appealed to this Court against the second unless order and filed in the High Court several applications seeking, retrospectively, an extension of time to comply with the order. He also applied to set aside the notice he had filed abandoning an earlier appeal against the second costs order and applying for an extension of time to pursue that appeal.
[17] On 27 September 2013 this Court dismissed the respondent’s application for a stay of sale orders in respect of relationship property and payment of interim distribution orders.15 On 11 October it declined the respondent’s application for an extension of time to appeal the judgment Priestley J had given back in May 2012.16
Delivering that second judgment for the Court, Harrison J stated:17
… [The application for an extension of time is a] deliberate attempt to frustrate the progress of the [appellant’s] proceeding to trial. We are satisfied that this step followed a discernible pattern of obstructing the determination of [the appellant’s] claim.
13 SM v LFDB HC Auckland CIV-2011-404-6851, 15 August 2013 at [2].
14 [SM] v [LFDB] HC Auckland CIV-2011-404-6851, 29 August 2013 at [6].
15 LFDB v SM [2013] NZCA 456.
16 LFDB v SM [2013] NZCA 481, referring to the judgment of Priestley J, above n 7.
17 At [14].
This Court awarded indemnity costs because the respondent’s appeal was
“vexatiously or improperly brought”.18
[18] On 14 October Ellis J dismissed an application by the respondent to stay enforcement of the second unless order and debarred the respondent.19 In her judgment Ellis J recorded that the respondent had over the previous four months:20
(a) filed four appeals including against consent orders made at his request, and then abandoned two of them;
(b) made three stay applications, one of which he had withdrawn;
(c) made four applications for extensions of time, one of which he had withdrawn; and
(d)made, withdrawn and then “reinstated” his proposal to meet the second costs order from the sale of one of the parties’ properties.
[19] The judgment of Ellis J rejects offers by the respondent to make staggered payments of the outstanding costs. The Judge comments adversely on the respondent’s failure to pay and his preference “silently to maintain his ‘I can’t pay’ stance and then to put SM and the Court to the time and expense of defending and considering yet a further application by him”.21
[20] The respondent did not appeal that judgment. On 17 October he paid the second costs order and the interest accrued on it.
[21] The respondent then applied retrospectively to extend time for compliance with the second unless order and for its discharge. He supported his application with
a memorandum contending his non-compliance was “explicable”.
18 At [19].
19 SM v LFDB [2013] NZHC 2670.
20 At [6].
21 At [12].
The judgment under appeal
[22] It is Ellis J’s judgment of 22 November 2013 dealing with this application which is under appeal.22
[23] Ellis J rejected the respondent’s explanation. She noted the second unless order had been made because the appellant’s preparation for the scheduled February
2014 trial was being unfairly prejudiced by her comparative lack of access to funds.23 Nevertheless, the Judge accepted payment of the second costs order materially changed the position, and thus warranted reconsideration.24 She also noted the appellant would shortly receive the previously ordered interim distribution of $250,000 because one of the parties’ properties had recently sold.25
[24] The Judge expressed concern that the respondent’s actions constituted a
“protracted game of ‘chicken’ with the Court”.26 She added:
[12] I agree with [the appellant] that the principal matter for me to consider continues to be one of fairness, with particular reference to the prejudice that she has suffered or may continue to suffer as a result of his non-compliance. I accept that that prejudice is far greater than simply her not receiving the benefit of the costs payment until well after it was due. The entire exercise has been a considerable waste of her time and money; it provides further evidence that [the respondent’s] litigation strategy appears principally to be one of attrition.
[25] Ellis J granted the application despite these findings. She considered the appellant would face further protracted litigation if the respondent was debarred from participating in the February trial.27 In doing that, the Judge accepted implicitly she had no information about the ramifications of the respondent remaining debarred. She extended time for compliance with the second unless order,
discharged it and awarded the appellant costs on the application.
22 SM v LFDB, above n 1.
23 At [2].
24 At [6].
25 At [7].
26 At [10].
27 At [15].
Applicable legal principles
[26] The starting point is the objective in r 1.2 of the High Court Rules (the Rules) “to secure the just, speedy and inexpensive determination of any proceeding or interlocutory application”. The case management regime now included (since 2008) in pt 7 of the Rules is designed to achieve that objective by isolating the issues and trying them fairly, swiftly and efficiently, with regard to what is at stake.
[27] Case management plainly matters to the immediate parties in any given case. It matters to litigants in other cases too, because it affects the time their cases will take to come to trial and influences their expectations of the Court; expectations matter because they influence the settlements in which the majority of civil proceedings end. And it matters to potential litigants – the public at large – because they should feel confident that the Court can try cases fairly, quickly and efficiently. From the perspective of a judge dealing with any given case, all these interests are
relevant; all form part of the interests of justice.28
[28] Obedience is the foundation upon which the Rules operate.29 From time to time the Court encounters a party who chooses not to obey, seeking perhaps to avoid accountability to the other party or to secure an unfair settlement. In such a case the interests of justice require that the Court do whatever is necessary to enforce obedience to its orders.
[29] Enforcement powers are found in r 7.48, which empowers a judge to respond to breach of a procedural order by making any order the judge thinks just. Rule
7.48(2) sets out examples of orders the judge may make. Although an “unless” order is not listed, it is now well-established that r 7.48 permits a judge to make one. As the name suggests, an unless order is peremptory; it decrees that unless the specified
action is taken by the specified time, the stated sanction will result. An unless order
28 Similar sentiments are expressed by the High Court of Australia in Aon Risk Services Australia Ltd v Australia National University [2009] HCA 27 at [93] and the English Court of Appeal in Fred Perry (Holdings) Ltd v Brands Plaza Trading Ltd [2012] EWCA Civ 224 at [47]–[48] per Jackson LJ.
29 As discussed by Sir Nicolas Browne-Wilkinson VC in In re Jokai Tea Holdings Ltd [1992]
1 WLR 1196 (CA) at 1202–3; reiterated in Marcan Shipping (London) Ltd v Kefalas [2007] EWCA Civ 463, [2007] 1 WLR 1864 at [13] and Fred Perry, above n 28, at [15]–[16] per Lewison LJ.
takes effect automatically if it is not complied with. In other words, a party need not apply to enforce the order. Any confusion (and there appears still to be some) as to the automatic effect of an unless order should now be resolved, in light of Marcan Shipping.30 It follows that the appellant in this case need not have applied to Ellis J to enforce the second unless order.
[30] We consider the principles that should guide a judge dealing with the situation that faced Ellis J are as set out in [31] below. We have drawn these primarily from the English cases, particularly the excellent statement of principles by Ward LJ in Hytec Information Systems Ltd v Coventry City Council.31 Those principles summarised and restated the position after Birkett v James, Tolley v Morris and In re Jokai Tea Holdings Limited, which have been subsequently reaffirmed in Stolzenberg v CIBC Mellon Trust Co Ltd.32 We have also noted the Australian authorities, many of which endorse the approach in Hytec.33 Not least, we have drawn on the various decisions of our own High Court.34 Lastly, we have factored in what this Court said in Anderson v Mainland Beverages Ltd, which appears to be the one case where this Court has considered unless orders.35 In Anderson, this Court discharged the unless order both because its terms were unclear and because the order was not proportionate to the default.
[31] The principles are these:
(a) As an unless order is an order of last resort, it is properly made only where there is a history of failure to comply with earlier orders.
30 Marcan Shipping (London) Ltd, above n 29, at [29]–[30].
31 Hytec Information Systems Limited v Coventry City Council [1997] 1 WLR 1666 (CA).
32 Birkett v James [1978] AC 297 (HL) at 306 per Diplock LJ; Tolley v Morris [1979] 1 WLR 205 at 211–212; In re Jokai Tea Holdings Ltd, above n 29; Stolzenberg v CIBC Mellon Trust Co Ltd
[2004] EWCA Civ 827 at [163]–[168] per Arden LJ. See generally Marcan Shipping (London) Ltd, above n 29 and Fred Perry (Holdings) Ltd, above n 28, at [15]–[16] per Lewison LJ.
33 CVW Group Holdings Ltd v Addison [2011] WASC 267; MTQ Holdings Pty Ltd v Lynch [2007] WASC 49. See also FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165
CLR 268.
34 Ko v Ko (2000) 14 PRNZ 362 (HC); Jin v Konishi [2014] NZHC 1150; King v Porus [2012] NZHC 3035; Goodall v Sovereign Assurance Co Ltd HC Wellington CIV-2010-485-2300,
20 July 2011; Railway Street Trustees Ltd v Railway Investments Ltd HC Auckland
CIV-2010-404-2545, 17 December 2010; Jarden v Lawlor (1998) 12 PRNZ 516 (HC).
35 Anderson v Mainland Beverages Ltd (2005) 17 PRNZ 757 (CA).
(b)An unless order should be clear as to its terms. That is, it should specify clearly what is to be done, by when and what is the sanction for non-compliance. That sanction should be proportionate to the default.
(c) The sanction will apply without further order if the party in default does not comply with the order by the time specified. However, the party in default may seek relief by application to the Court.
(d)Justice may require that the party in default be relieved of the consequences of the unless order where the Court is satisfied that the breach resulted from something for which that party should not be held responsible. The party should not assume that belated compliance will suffice.
(e) Where the unless order has been deliberately breached – that is, flouted – it is difficult to conceive of any situation where the interests of justice would require granting the flouter relief from the sanction imposed, notwithstanding belated compliance with the order.
(f) In deciding whether or not to excuse breach of an unless order the question for the Judge is: what does justice demand in the circumstances of this case? Considerations in answering that question include:
(i)The public interest in ensuring that justice is administered without unnecessary delays and costs.
(ii)The interests of the injured party, in particular in terms of delay and wasted cost.
(iii)Any injustice to the defaulting party, although that consideration is likely to carry much less weight in the circumstances than considerations (i) and (ii).
Was Ellis J right to discharge the unless order?
[32] For the respondent, Mr Jefferson accepted the second unless order was properly made. Mr Jefferson did not challenge Ellis J’s reasoning in dismissing the respondent’s application to stay the second unless order.
[33] Implicit, rather than explicit, is Ellis J’s acceptance that the respondent’s failure to comply with the second unless order was not caused by something beyond his control.36 The Judge found the respondent’s excuses to be “not legitimate” and “unpersuasive”. We are in no doubt the respondent deliberately flouted the second unless order, knowing full well the consequences. The breach was contumacious. The respondent had the money to pay the costs. On 9 September 2013 he transferred AUD35,000 from an Australian into a New Zealand bank account, and then used
those monies to fund his own legal representation, presumably including making the various applications and appeals he launched unsuccessfully following the second unless order. Ellis J was surely right to observe that the respondent continued to play “some protracted game of ‘chicken’ with the Court”.37 We consider Ellis J failed to give sufficient weight to the respondent’s flouting of the second unless order.
[34] In our view Ellis J was also wrong to consider the respondent, by belatedly paying the costs, had effectively “purged his contempt”, citing Attorney-General for England and Wales v Tomlinson.38 That was not an unless order case. We do not consider its reasoning applies where, as here, a party contumaciously flouts an order affording him a last chance to comply, in the context of a long history of similar defaults.
[35] We think Ellis J was unduly influenced by two factors. The first is the
fortuitous happenstance of the sale of one of the parties’ properties, enabling the
$250,000 interim distribution to the appellant to be made. Although acknowledging this was not directly related to the unless order, the Judge thought it did “somewhat
ameliorate some of the concerns about ongoing prejudice [to the appellant] which
36 SM v LFDB, above n 1, at [11].
37 At [10].
38 Attorney-General for England and Wales v Tomlinson [1999] 3 NZLR 722 (HC) at 730–733.
underlay the order”.39 Little, if any, weight should have been placed by the Judge on this factor. The appellant had secured an interim distribution by way of court order. The fact that the sale of one of the parties’ properties had enabled the distribution to be made, relieving some of the financial pressure on the appellant imposed largely through the respondent’s ongoing conduct of the litigation, should certainly not assist him.
[36] The second matter is the ramifications of the respondent remaining debarred. Without the benefit of any information from the parties about the likely nature and scope of a trial proceeding without the respondent’s participation, Ellis J considered the task faced by the Court would be “extremely difficult”.40 At our request, counsel provided this Court with an outline of the shape of a formal proof hearing. This satisfies us that the Judge’s assessment was incorrect. Further, the appellant, through
her counsel, had applied (albeit unnecessarily) for the respondent to be debarred. In doing that, she had plainly assessed that a successful application would not prejudice her in advancing the litigation. While Ellis J accepted that the prejudice to the respondent from the debarment was “self inflicted”, she was obviously concerned about it.41 The answer to this concern is principle (f)(iii) stated in [31] above: the prejudice to the respondent carries much less weight than the prejudice to the administration of justice generally, and to the appellant specifically, resulting from the respondent’s flouting of the second unless order. He very well knew the
ramifications of what he deliberately did. He brought any prejudice down upon himself.
Result
[37] The appeal is allowed. We quash the order of the High Court extending, to
17 October 2013, time for payment of the second costs order, discharging the second unless order and cancelling the order debarring the respondent. The second unless order, debarring the respondent from taking any further part in the proceeding, is
accordingly reinstated.
39 At [7].
40 At [17].
41 At [14].
[38] Any outstanding issue of costs in the High Court is to be determined by that Court. The respondent must pay the appellant’s costs for a standard appeal on a band B basis with usual disbursements. We certify for second counsel.
Solicitors:
ECD Legal, Auckland for Appellant
Holland Beckett, Tauranga for Respondent
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