Smith v Noble Investments Ltd
[2017] NZHC 477
•16 March 2017
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000549 [2017] NZHC 477
BETWEEN GREGORY ROBERT SMITH AND
COLIN PETER STOKES Plaintiffs
AND
NOBLE INVESTMENTS LIMITED Defendant
AND
APPLEFIELDS LIMITED
Second Defendant and Counterclaim
PlaintiffAND
JUSTIN WILLIAM PRAIN Third Defendant
AND
CARDNO (NZ) LIMITED Fourth Defendant
AND
GOLD BAND FINANCE LIMITED Fifth Defendant
AND
DELTA UTILITY SERVICES LIMITED Sixth Defendant
AND
SHAYNE PHILPOTT, NEW ZEALAND TRUSTEE SERVICES LIMITED, FAY EUNICE RICHARDSON, AND BURNSIDE TRUSTEES LIMITED Second Counterclaim Defendants
AND
STUART ELLESMERE LINDSAY AND JULIE IVONNE LINDSAY
Third Counterclaim Defendants
Hearing: (by telephone)
28 February 2017
Appearances:
G R Smith and C P Stokes (Plaintiffs) in person
P J Woods for Gold Band Finance Ltd
R J M Sim for Delta Utility Services Ltd
(other counsel excused)Judgment:
16 March 2017
SMITH v NOBLE INVESTMENTS LIMITED [2017] NZHC 477 [16 March 2017]
RULING OF ASSOCIATE JUDGE OSBORNE
[as to relation to joinder of fifth and sixth defendants]
Introduction
[1] A question has arisen in the course of the case management of this proceeding as to whether there has been an effective joinder of Gold Band Finance Limited (Gold Band) and Delta Utility Services Limited (Delta) as fifth and sixth defendants respectively.
The pleadings to date
[2] In March 2015 the plaintiffs commenced this proceeding by naming four defendants (all of whom remain as defendants).
[3] The plaintiffs subsequently amended their statement of claim twice, each time only naming the same four defendants.
[4] On 29 July 2016 the plaintiffs filed a fourth amended statement of claim, on this occasion naming Gold Band and Delta as defendants and including pleadings in relation to them.
[5] I subsequently made case management directions upon the assumption that the plaintiffs had exercised a procedural right to join the fifth and sixth defendants.
The first issue – the need for an order of joinder
The procedural issue
[6] Counsel for Gold Band and Delta assert that the plaintiffs could not join those entities as parties simply by filing an amended statement of claim naming Gold Band and Delta as defendants. They say that an order for joinder is required to be made under r 4.56 High Court Rules. Mr Sim and Mr Woods submit that the procedural
rights and requirements are accurately summarised in Andrew Beck’s Civil
Procedure – A to Z of New Zealand Law in the following passage:1
3.6.5 Procedure relating to joinder
Where plaintiffs are entitled to join under r 4.2 HCR and wish to commence action together, they can simply cite themselves as plaintiffs. Similarly, where defendants fall within the ambit of r 4.3 HCR they may be cited and served as defendants without any formality when proceedings are instituted. If a potential party falls outside these rules, or is sought to be added some time after the commencement of proceedings, it will be necessary to make an interlocutory application to court under r 4.56 HCR, where the court has a discretion to allow the joinder.
The rules
[7] In considering the procedural regime for joinder of parties it is necessary to read rr 4.1, 4.2, 4.3 and 4.56 High Court Rules together.2
[8] In part 4 of the High Court Rules subpart 1 identifies the “limit on parties”,
providing:
4.1 Limit on parties
The number of persons named or joined as parties to a proceeding must be limited, as far as practicable, to—
(a) persons whose presence before the court is necessary to justly determine the issues arising; and
(b) persons who ought to be bound by any judgment given.
[9] Part 4, subpart 2 deals with the identification of plaintiffs in the proceeding, providing:
4.2 Plaintiffs
(1) Persons may be joined jointly, severally, or in the alternative as plaintiffs,—
1 Andrew Beck Civil Procedure – A to Z of New Zealand Law, (online looseleaf ed, Thomson
Reuters), at [3.6.5].
2 See A C Beck and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR 4.56.04]: “the rules [under r 4.56] are to be construed with rr 4.2, 4.3(3) at least, and probably the whole of r 4.3”.
(a) if it is alleged that they have a right to relief in respect of, or arising out of, the same transaction, matter, event, instrument, document, series of documents, enactment, or bylaw; and
(b) if each of those persons brought a separate proceeding, a common question of law or fact would arise.
(2) On the application of a defendant, the court may, if it considers a joinder may prejudice or delay the hearing of a proceeding, order separate trials or make any order it thinks just.
[10] Part 4, subpart 3 deals with the identification of defendants in the proceeding, providing:
4.3 Defendants
(1) Persons may be joined jointly, individually, or in the alternative as defendants against whom it is alleged there is a right to relief in respect of, or arising out of, the same transaction, matter, event, instrument, document, series of documents, enactment, or bylaw.
(2) It is not necessary for every defendant to be interested in all relief claimed or every cause of action.
(3) The court may make an order preventing a defendant from being embarrassed or put to expense by being required to attend part of a proceeding in which the defendant has no interest.
(4) A plaintiff who is in doubt as to the person or persons against whom the plaintiff is entitled to relief may join 2 or more persons as defendants with a view to the proceeding determining—
(a) which (if any) of the defendants is liable; and
(b) to what extent.
[11] Thereafter successive subparts of part 4 (subparts 4 to 8) deal with later steps in the proceeding, including in relation to third and subsequent parties, the filing of defences, claims between parties, incapacitated persons and changes of parties by death and other events.
[12] Subpart 9 deals with “adjusting parties”. Within subpart 9, r 4.54 provides for the change of a party’s name, r 4.55 deals with situations where parties have been unnecessarily joined, and finally r 4.56 deals with “striking out and adding parties”.
[13] Specifically, r 4.56 provides:
4.56 Striking out and adding parties
(1) A Judge may, at any stage of a proceeding, order that—
(a) the name of a party be struck out as a plaintiff or defendant because the party was improperly or mistakenly joined; or
(b) the name of a person be added as a plaintiff or defendant because—
(i) the person ought to have been joined; or
(ii) the person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
(2) An order does not require an application and may be made on terms the court considers just.
(3) Despite subclause (1)(b), no person may be added as a plaintiff without that person’s consent.
Submissions
[14] Mr Smith and Mr Stokes primarily rely (as I did when making my case management directions) upon the wording of r 4.3.
[15] They assert that they have a claim which they should pursue jointly against the present first defendant (Noble Investments Limited – “Noble”), Gold Band and Delta. The joint claim is identified in their fourth amended statement of claim as a ninth cause of action under the heading “Land Transfer fraud”. In the pleading they allege that around 2009 Noble, Delta and Gold Band agreed to an arrangement whereby Delta’s debt for certain works would become secured. They allege that the arrangement to share Gold Band’s first mortgage between the three parties was an illegal contract.
[16] On this basis Mr Smith and Mr Stokes submit that they were entitled under r
4.3(4) to join Delta and Gold Band so as to obtain a determination of which (if any)
of those parties is liable.
[17] They submit that the inclusion of Delta and Gold Band as defendants is permissible under the “limit on parties” rule (r 4.1) because those entities, with Noble are the appropriate parties to be sued in relation to the ninth cause of action.
[18] In short, the submission of Mr Smith and Mr Stokes rests very much on the substance of the fresh cause of action which they intend to pursue.
[19] The submissions of Mr Sim and Mr Wood had their immediate focus on the procedural regime. In their submission the regime works in precisely the way Andrew Beck summarises it in his text.3
[20] Mr Sim submitted that the initial rules (rr 4.1, 4.2 and 4.3) have their focus on principles underlying joinder. Through the identification of those principles, parties at the commencement of the proceeding know the requirements. Mr Sim submits that the subsequent rules in part 4 of the High Court Rules deal with later events in the proceeding. In particular, r 4.56 is essentially a code for striking out and adding parties during proceedings.
[21] Mr Sim referred me in particular to the decision of Ellis J in Doug Andrews Heating and Ventilation Limited v Dil (Doug Andrews), where the plaintiff made an application for leave to add a related company as second plaintiff. 4 The application in that case was stated to be made in reliance on r 4.2.
[22] Her Honour introduced her discussion thus:5
Although Mr Pietras [for the plaintiff/applicant] submitted that the requirement for leave under r 4.56 was not engaged, I do not agree. It seems to me that r 4.2 (which Mr Pietras said was the applicable rule) merely contains a broad statement of principle about who should or should not be named as a party when proceedings are commenced. Once proceedings have been commenced and further parties are sought to be added, then an application for leave under r 4.56 is required.
[23] Mr Sim submitted that this discussion is equally applicable to the joinder of a defendant as, although rr 4.2 and 4.3 relate respectively to the naming of plaintiffs and defendants, their function is the same, namely to identify persons who can
properly be joined.
3 See note at n 2.
4 Doug Andrews Heating and Ventilation Limited v Dil [2012] NZHC 2534.
5 At [16].
[24] In Mitchell v Attorney General,6 Clark J adopted the above passage from
Doug Andrews.7 Her Honour stated:8
The relationship between r 4.56 and r 4.2 is that once a proceeding is commenced and a further party is sought to be added an order adding that additional person is required under r 4.56. Thus the first requirement is a jurisdictional threshold. Once that threshold is met the principles governing the joinder of plaintiffs, or defendants, as the case may be, are to be found in r 4.2 and r 4.3.9 As Mr Taylor seeks to be joined as a plaintiff, r 4.2 will become relevant but only once the jurisdictional threshold is satisfied.
Discussion
[25] On a consideration of the structure of part 4 of the High Court Rules, I accept the submissions for Delta and Gold Band. The early rules (rr 4.1, 4.2 and 4.3) are properly viewed as establishing either “the principles” (Ellis J’s expression) or “the jurisdictional threshold” (Clark J’s expression). They serve to identify the basis upon which persons commencing claims (or cross-claims) may identify themselves as plaintiffs and others as defendants.
[26] Once the claim (or cross-claim) has been commenced, it is through subpart 9 of part 4 (dealing with “adjusting parties”) that adjustment of parties must occur. In particular, it is r 4.56 to which an existing plaintiff or defendant must resort for either the striking out or the adding of a party. Through the reference in r 4.56(1)(a) to the “improper” joinder of a party, the Court is required to refer back the jurisdictional basis of joinder set out in rr 4.1, 4.2 and 4.3.
[27] As Mr Sim and Mr Vinnell submitted, there are numerous judgments of this Court in which an application for joinder under r 4.56 (or its predecessor r 96) has been dealt with upon the basis that, after commencement, an order of joinder of additional parties is required. Those cases include Kirkland v Jaco’s Timber Company Limited, in which Master Venning treated as a draft an amended statement of claim filed by a single plaintiff in which he purported (with their consent) to join
two additional plaintiffs, but without first having obtained an order for joinder.10 The
6 Mitchell v Attorney General [2016] NZHC 1737.
7 Above at [22].
8 Mitchell, above at [22].
9 See for example Doug Andrews Heating and Ventilation Ltd v Dil, above n 4, at [16].
10 Kirkland v Jaco’s Timber Company Limited [1998] BCL 652; flld in Electrical Control Systems
fact that the Court may have accepted the document for filing does not alter the fact that the intended additional parties have not been joined – an order is still required.
Conclusion
[28] The High Court Rules did not permit the plaintiffs, as of right, to join Delta and Gold Band as additional defendants.
The second issue – consent to joinder?
The issue
[29] The plaintiffs made an alternative submission against the possibility that the Court might find (as I have) that r 4.56 covers the joinder of the parties after the commencement of the proceedings. They refer to correspondence prior to and at the time of the filing of the fourth amended statement of claim. The correspondence is between the plaintiffs’ then-solicitors (Duncan Cotterill) and solicitors representing Gold Band and Delta respectively (the same solicitors who now act).
[30] The plaintiffs submit that if they were not entitled as of right to join Gold Band and Delta, then joinder could be achieved under r 4.56 by consent of the parties to be joined. The plaintiffs did not present a developed submission as to the need for an order under r 4.56(1) High Court Rules. But through the correspondence to which they refer, they impliedly submit that the Court should now make a formal order of joinder having regard to a consent to joinder having been obtained and the plaintiffs having acted on that consent before it was withdrawn.
The procedural requirements
[31] In terms of r 4.56, the later joinder of a party is achieved when a Judge makes an order of joinder (whether or not an application has been made). The order may be
on such terms as the Court considers just.11
Ltd v Gregor Electrical Ltd HC Christchurch CP 217/98, 11 August 2000. See also Chan v The
Seyip Association of New Zealand Inc [2008] NZAR 37 (HC).
11 High Court Rules, r 4.56, as set out above at [13].
[32] Rule 1.8 High Court Rules provides a procedure entitled “consent instead of leave of court”. The Rule provides specifically”
1.8 Consent instead of leave of court
(1) When, by these rules, the leave of the court is required in any matter of procedure, and all parties and persons who are affected consent to the grant of leave, a party may file a memorandum signed by all those parties and persons evidencing that consent and its terms and conditions.
(2) The Registrar must either—
(a) make and seal an order in terms of the memorandum; or
(b) refer the memorandum to the court, in which case the memorandum must be treated as an interlocutory application for the leave.
[33] What occurs under r 1.8 is that the parties achieve the making and sealing of an order (by the Registrar) by consent (recorded in a memorandum) rather than by obtaining the leave of the Court, as otherwise required under the Rules.
[34] Although r 1.8 refers to situations in which the “leave” of the Court is required, the provision has been broadly applied to situations in which the Rules involve or refer to “orders”. The point is made in by the commentators in McGechan on Procedure where they record:12
The procedure is available where the leave of the Court is required in a matter of procedure. The question which arises is whether it only applies to those situations where a rule expressly requires “leave”, or whether the rule should be widely construed so as to apply in any situation where an interlocutory application to Court is necessary. It seems that the wider construction accords with the general canons of interpretation espoused in r
1.2, except where the Court could be said to have an interest in the matter beyond that of the parties.
[35] By their nature, orders made pursuant to r 1.8 (or its predecessor, r 10) will rarely be reported. One reported example is found in Brown & Doherty Ltd v
Whangarei County Council.13 In that case the parties, in reliance on the then r 10
12 McGechan on Procedure (online ed) at [HR 1.8.02].
13 Brown & Doherty Ltd v Whangarei County Council [1990] 2 NZLR 63.
(now r 1.8) agreed by consent to seek orders from the Court answering certain questions (under the then r 4.18) before proceeding further with the action.14
Discussion
[36] The plaintiffs, in their submissions, did not suggest that they had obtained the consent of all parties to the joinder of Gold Band and Delta as additional defendants. Accordingly, the process for what might be called “automatic” joinder under r 1.8(1) has not been satisfied in that not all parties consented. Having adverted to the provisions of r 1.8 after I heard submissions, I sought from the existing parties memoranda as to their respective positions. Some recorded their consent to joinder. Others simply recorded that they abided the Court’s decision, a position which by its nature is not equivalent to consent.
[37] Accordingly, the plaintiffs’ case at its highest is that some parties have consented and that the two non-parties intended to be joined have (on the plaintiff's argument) consented.
[38] The fact that some consents were available does not advance the plaintiffs’ case as to “automatic” joinder – for joinder to now occur there needs to be a decision of the Court under r 4.56.
The Court’s decision on joinder
The Court’s power
[39] Under r 4.56(2) of the Rules the Court may order that additional persons be joined as defendants without an application and on such terms as the Court considers just.
[40] Rule 4.56(1)(b) provides the threshold or jurisdictional tests, including that
the person’s presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
14 Above [32], at 64, line 10.
[41] I note that the test (“may”) is one of possibility and not probability.
Discussion
[42] The issues surrounding the potential joinder of Gold Band and Delta have already (partly due to my contribution) become complicated and time-consuming. The Court’s objective (in keeping with r 1.2 of the Rules) must be to secure the just, speedy and inexpensive determination of issues that arise in this proceeding.
[43] I respectfully adopt the observation of Master Thomson in Gibson v Langley
Twigg in which his Honour observed:15
As this proceeding however shows I think the suggested practice of serving the proposed application for joinder [on the intended defendants] is likely on most occasions to cause more problems than it solves.
[44] In that case his Honour made an order joining the intended defendants, but giving them 12 days within which to apply for a discharge of the order of joinder.
[45] The present case is further complicated by the fact that the plaintiffs are self- represented. Steps which may be relatively straightforward for counsel will not always be straightforward for self-represented litigants.
[46] The most efficient use of Court resources in this case will be to follow what the authorities, to which I have referred or footnoted suggest as the more usual approach.
Conclusion
[47] There will accordingly be an order joining the intended fifth and sixth defendants with a direction that any application by them (or others) for a discharge of the order of joinder or for an order striking out the claim against that defendant be
filed within a set period.
15 Gibson v Langley Twigg HC Napier CP1/96, 30 April 1998 at [8]; see also Arwin Trading Ltd v Pendarves Export Ltd HC AUCK CIV-2006-404-1792, 18 October 2006 and Westgate Transport Ltd v Methanex Ltd (No. 2) HC AUCK CP93/98, 27 August 1999.
Order
[48] I order that:
1.the names of Gold Band Finance Limited and Delta Utility Services Limited be added as defendants in this proceeding (respectively as fifth and sixth defendants); and
2.any defendant joined in the proceeding who wishes to be discharged as defendant or seeks the striking out of a claim previously filed in this proceeding shall file and serve an application in that regard within 10 working days from the date of this judgment, with such application to be given as its first call date a telephone conference at least 10 working days later.
Associate Judge Osborne
Solicitors:
K J McMenamin & Sons, Christchurch
Morrison Kent, WellingtonWhite Fox & Jones, Christchurch
Anthony Hughes-Johnson QC, Christchurch
Anthony Harper, ChristchurchGallaway Cook Allan, Dunedin
Copy to Plaintiffs/First Counterclaimants
Second Counterclaim Defendants
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