Stewart v JR Legal Limited
[2024] NZHC 38
•31 January 2024
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2022-470-06
[2024] NZHC 38
BETWEEN NICOLA KIM STEWART
Applicant
AND
JR LEGAL LIMITED
Respondent
Hearing: On the papers Appearances:
S Kang for the Applicant
KM Burkhart for the Respondent
Judgment:
31 January 2024
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 31 January 2024 at 2 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Kennedys, Auckland
Fairbrother Family Law, Napier
NICOLA KIM STEWART v JR LEGAL LTD [2024] NZHC 38 [31 January 2024]
Introduction
[1] The applicant filed these proceedings on 25 January 2022. On 11 January 2023 the Tauranga Registry sent an email following up on whether the proceedings had been served as it had not received notification from the applicant as required by r 5.73A of the High Court Rules 2016. The applicant advised that service had not yet taken place and filed a memorandum dated 19 January 2023 seeking an extension of time for service. The applicant was acting for herself at this stage and explained that the extension was to allow proceedings against her former husband in the Family Court to be determined first. This was partly because she was not in a position financially to engage a lawyer in these proceedings until the Family Court proceedings were determined or to run two proceedings at once.
[2] I issued a minute on 5 April 2023 directing the applicant to serve the respondent with the proceedings by 19 April 2023 and to file an interlocutory application for an extension of time for service by 28 April 2023. The respondent filed a notice of opposition and timetable orders were made leading up to a hearing. On 7 August 2023, I made orders by consent for the application to be determined on the papers.
[3] In addition to the application for an extension, the applicant originally also sought a stay of these proceedings until the Family Court proceedings against her former husband had been resolved. However, a memorandum was filed on behalf of the applicant on 21 December 2023 advising that the applicant and her former husband had reached an agreement and the Family Court proceedings had been discontinued. As a result, the applicant no longer seeks a stay of this proceeding, only an extension of time for service.
[4] Rule 5.72(1) of the High Court Rules requires a plaintiff to serve a statement of claim and notice of proceeding as soon as practicable after they are filed. In addition, r 5.72(2) provides that unless service is effected within 12 months after the day on which the statement of claim and notice of proceeding are filed or within such further time as the court may allow, the proceeding must be treated as having been discontinued by the plaintiff against any defendant who has not been served.
[5] Rule 5.73 allows a plaintiff either before or after the expiration of the 12 month period in r 5.72 to apply to the court for an order extending that period. By r 5.73(2) the court may order an extension if satisfied that reasonable efforts have been made to effect service on the defendant “or for other good reason”.
[6] The applicant’s evidence is that she did not serve the respondent because she was trying to resolve the proceedings in the Family Court before doing so. It is not a case therefore where reasonable efforts have been made to effect service. An extension of time for service will only be available therefore if there is good reason for doing so.
[7] I note at the outset that a submission appears to be made on behalf of the applicant that perhaps the issue of service is moot because the respondent has been served. I record that although the applicant was directed to and has now served the respondent, the question of whether an extension of time ought to be granted retrospectively is still required to be determined by the Court. The applicant was simply directed to serve the respondent so that the respondent could consider its position on the application and had an opportunity to be heard.
[8]The issue that I have to determine is whether there is good reason in this case.
Meaning of “good reason”
[9] In Hibbs v Towle,1 Richardson J considered the meaning of “good reason” and referred to the three separate categories of case identified by Lord Brandon in the House of Lords decision, Kleinwort Benson Ltd v Barbrak Ltd:2
(a)first, where the application for extension is made when the statement of claim is still valid and before the relevant limitation period has expired;
(b)second, where the application for extension is made when the statement of claim is still valid but the relevant limitation period has expired; and
1 Hibbs v Towle CA60/87, 21 July 1988.
2 Kleinwort Benson Ltd v Barbrak Ltd [1987] 1 AC 597 (HL) as cited in Hibbs v Towle CA60/87, 21 July 1988 at 10.
(c)third, where the application for extension is made when the statement of claim has ceased to be valid and relevant limitation period had expired.
[10] Lord Brandon explained that it was not possible to define or circumscribe the scope of the expression “good reason”, holding that it will depend on all the circumstances of any particular case. In category three cases, however, Lord Brandon held that an applicant had an extra difficulty to overcome in that the plaintiff must also give a satisfactory explanation for the failure to apply for the extension before the validity of the claim expired.3
[11] Lord Brandon further commented that whether an extension should be granted is a discretionary decision,4 with the judge entitled to have regard to the balance of hardship between the plaintiff and defendant.
[12] In Zaremba v The Guardian Trust and Executors Co of New Zealand, Henry J went so far as to hold that the jurisdiction to extend time for service should “only be exercised in exceptional circumstances where the claim has become statute-barred and the defendant has a clear right to plead the statute.”5
[13] But in Melgren v Public Trustee, Moller J held that the use of phrases such as “exceptional case” or “exceptional circumstances” may well be misleading and concentrate attention too much upon individual aspects of any given case to the exclusion of an overall view of every aspect of the matter in the search to discover whether the plaintiff had “good reason” for seeking an order.6
[14]Moller J went on to say however:7
It is of course necessary to remember even then that, in cases in which an order to review would deprive a defendant of a defence under the Limitation Act, the reason, to be "good", "must be strong".
3 At 623.
4 At 623.
5 Zaremba v The Guardian Trust and Executors Co of New Zealand [1968] NZLR 476 (SC) at 478.
6 Melgren v Public Trustee [1971] NZLR 681 (SC) at 688.
7 At 688.
Is there good reason in this case?
[15] The proceedings that the applicant wishes to bring plead two causes of action — for breach of contract and for negligence in the provision of legal advice by the respondent in respect of a relationship property agreement.
[16] The applicant filed a memorandum seeking an extension of time for service on 19 January 2023 following which I directed that the proceedings were to be served and a formal application for an extension filed together with a supporting affidavit. As a result the service of the statement of claim and notice of proceeding occurred on 18 April 2023, 15 months after the statement of claim was filed, and a formal application for an extension was filed on 28 April 2023.
[17] The respondent submits that the third category as set out in Kleinwort therefore applies, as service was not made within the 12-month period in the rules and the limitation period expired on 28 January 2023. The respondent calculate the expiry date for limitation on the basis that the last date on which the respondent provided advice to the applicant in respect of the relationship property agreement was six years previously on 27 January 2016.
[18] Allocation between the categories depends on when the application for an extension was made (rather than when the proceedings were served) and whether the limitation period has expired.
[19] I consider that it is appropriate to treat the applicant’s memorandum filed on 19 January 2023 as the application for an extension as the applicant was acting for herself and it would have been within the Court’s discretion to treat the memorandum as the application for an extension.8 As set out in the minute requiring a formal application to be filed, I was concerned to ensure that the respondent had a proper opportunity to be heard given the possible limitation issues arising. I acknowledge the respondent’s submission that Ms Stewart appears to have had some legal advice but Ms Stewart’s evidence is that she did not seek legal advice before filing the January memorandum. I do not consider that the direction to file a formal application to ensure
8 High Court Rules 2016, rr 1.2 and 7.41.
the defendant had a proper opportunity to be heard should then prejudice the applicant in terms of the appropriate Kleinwort category.
What are the relevant dates for limitation?
[20] Under s 11(1) of the Limitation Act 2010 it is a defence to a money claim if a defendant proves that the date on which the claim is filed is at least six years after the date of the act or omission on which the claim is based.
[21] Counsel for the applicant submits that the applicant can rely on the late knowledge period provided for in s 14 of the Limitation Act.
[22] Section 14 provides that the late knowledge period begins to run from the date on which the claimant gained knowledge (or, if earlier, the date on which the claimant ought reasonably to have gained knowledge) of all of the facts set out, including:
(a)the fact that the act or omission on which the claim is based had occurred;
(b)the fact that the act or omission on which the claim is based was attributable (wholly or in part) to, or involved, the defendant;
(c)if the defendant’s liability or alleged liability is dependent on the claimant suffering damage or loss, the fact that the claimant had suffered damage or loss;
…
[23] A defendant may be liable for breach of contract without a claimant having suffered actual loss or damage. However, a claim in negligence does not accrue until damage is suffered. Knowledge of loss is therefore necessary for the late knowledge period to begin to run for the applicant’s claim in negligence.
[24] The applicant submitted that she would not have knowledge of loss until the Family Court proceedings were resolved and that even if it is argued that she ought to have had sufficient knowledge when the Family Court proceedings were commenced on 1 February 2022, the three-year late knowledge period would not expire until 1 February 2025.
[25] The respondent submits that the late knowledge provisions are not relevant in the circumstances of this case because the applicant was already aware that she may have suffered loss or damage within the primary knowledge period. The respondent says that from the date of filing the Family Court proceedings, the respondent would have suffered loss as there would have been costs involved in those proceedings and so the applicant would have been aware that she had suffered loss or damage during the primary limitation period. The respondent makes this submission on the basis that the late knowledge period only applies after the primary period expires.
[26] However, the late knowledge period can start running within the primary period, thereby extending the end date of the limitation period. The question is simply when did the applicant gain knowledge or ought reasonably to have gained knowledge of the matters set out in s 14(1) that she had suffered loss or damage. If the date on which the applicant is held to have gained knowledge is the date the Family Court proceedings were filed, 1 February 2022, that will be the start date of the late knowledge period. The late knowledge period will not expire until three years from that date, being 1 February 2025.
[27] The respondent does not suggest that the applicant would have known she had suffered loss (or ought reasonably to have known) prior to that date.
[28] However there may be an argument that the late knowledge period would begin earlier, after the applicant first sought legal advice regarding both the Family Court and these proceedings as at that stage she may have become aware of possible loss. Even if that were the case, however, the late knowledge period would not expire until three years after that date. The applicant’s evidence is that she first sought legal advice in late 2020 so at the earliest the late knowledge period would not expire until late 2023.
[29] For these reasons I do not think that the limitation period had expired at least in respect of the negligence claim even by the time the formal application for an extension was filed. The claim would therefore still fall within the first rather than the second or third of the Kleinwort categories. The good reason for an extension of time
would not therefore also have to be strong, in the words of Moller J in Melgren v Public Trustee.9
[30] In any event, I have held above that the date of the application for an extension ought to be the date of the applicant’s original memorandum filed on 19 January 2023. At that stage the respondent accepts the primary limitation period had not yet expired. In that case the proceedings would again fall within the first Kleinwort category.
Should an extension be granted?
[31] The applicant’s reasons for requiring an extension of time are set out as follows in her affidavit:
18. I believe I have good reasons for applying to extend the period of service on [the respondent], those being:
a.The damages I am entitled to claim against [the respondent] in these proceedings will be affected by the outcome of my Family Court Proceedings.
b.I filed these proceedings to meet limitation requirements. However, if it were not for those requirements, I would have waited until the outcome of the Family Court Proceedings before filing, so that I was clear on where things stood and could better consider the financial implications of filing these proceedings.
c.Without my Family Court proceedings first being determined I am not in a financial position to engage a lawyer to represent me in these proceedings. I am fearful of what this will mean for my case.
d.I believe it is in both [the respondent]'s and my interests for these proceedings to be put on hold pending the outcome of my Family Court Proceedings. It will save both of us incurring costs until my claim against him can be better quantified.
e.When the outcome of the Family Court proceeding is known I will be in a better position to assess my claim against [the respondent] and whether commercially it makes sense to continue with these proceedings.
[32] The respondent submits that there is no good reason because the memorandum filed on 19 January, the applicant’s interlocutory application and supporting affidavit
9 Melgren v Public Trustee, above n 6, at 688.
all demonstrate that the applicant was aware of the importance of limitation periods and that she needed to serve the proceedings within 12 months of filing, the applicant expressly stating this in paragraph 11 of her affidavit. Furthermore, the respondent submits it was not necessary for the Family Court proceedings to be resolved before serving these proceedings as the question of quantum could have been reserved if required pending the outcome of the Family Court proceedings.
[33] I agree that the proceedings could have been served in advance of resolution of the Family Court proceedings but note that Ms Stewart says in evidence that without the Family Court proceedings being determined she was not in a financial position to engage a lawyer or in a position to run two proceedings at once.
[34] The respondent accepts the applicant has primarily been acting as a litigant in person but says she was clearly receiving legal advice from time to time as referred to in her affidavit. However Ms Stewart confirms in her affidavits that she expected the Family Court proceeding to be resolved within 12 months and that she did not take legal advice in respect of her memorandum seeking an extension filed on 19 January 2023.
[35] Mr Dorset in his affidavit for the respondent says the applicant asked JR Legal for a copy of her file on 3 November 2020. A copy of the electronic file was provided on 30 November 2020 and the physical file on 1 December 2020. The applicant then made further requests about information on her file between 29 September 2021 and 29 September 2022. Mr Dorset deposes:
While I was not able to provide all the records or was unable to provide all the records in the manner that [Ms Stewart] had asked, I explained what we could provide and answered her questions to the best of my ability and recollection. At no time during our communications over this time did [Ms Stewart] indicate she thought she had a claim against JR Legal or me, or that she had filed proceedings against me. She could easily have done so or could easily have served the proceeding on JR Legal's registered office.
[36] Ms Stewart explains in her affidavit in reply that she did not indicate to Mr Dorset that she “was going to make a claim against JR Legal as he would have stopped all communications.” It appears therefore that although Mr Dorset and JR Legal may
not have been aware a claim may be made against them, it is unlikely to have been a surprise given the requests for copies of the file and further information.
[37] In response to the applicant’s submission on the merits, counsel for the respondent submits that the merits of the claim cannot be a good reason to allow late service under r 5.73 as otherwise it would undermine the general requirement to serve a statement of claim and notice of proceeding on a defendant as soon as practicable and would permit plaintiffs to serve late because the merits would not actually be determined until the substantive hearing. On this basis the respondent does not address the merits, submitting those are matters for the statement of defence.
[38] I do not necessarily agree that the merits are not relevant to the exercise of the Court’s discretion but at this stage the merits are difficult to assess other than to conclude that it is not clearly a hopeless case. I do not therefore consider the merits further.
[39] The respondent further submits that it would be more prejudicial to the respondent to allow an extension for service than for the applicant to be denied an extension because the applicant was plainly aware of the importance of serving the proceedings within 12 months but chose not to do so and therefore has chosen to run the consequences of that decision.
[40] However, even on the respondent’s case that the limitation period expired on 28 January 2023, the applicant filed her memorandum seeking an extension of time while the statement of claim was still valid and prior to the date on which the respondent says the limitation period expired. If the applicant’s memorandum had been filed at a different time during the Court year rather than January, it is likely to have been dealt with more promptly and service may have taken place within the 12- month period.
[41] Furthermore, if the applicant had sought legal advice, it is likely that the Court’s email seeking an update on service would have led to service on the respondent within time rather than just a memorandum seeking an extension.
[42] Taking all the above factors into account and weighing the relative hardship for the two parties, I consider there is good reason for an extension of time to be granted. Even if the good reason is required to be strong, I consider the circumstances reach that threshold in this case particularly given the timing of the applicant’s memorandum seeking an extension of time.
Result
[43] Ms Stewart’s application for an extension of time within which to serve her statement of claim and notice of proceedings is granted. The respondent is to file a statement of defence within 25 working days of this judgment. The parties are then to file a joint memorandum (with any differences set out) for the purposes of case management review within the usual time periods set out in the High Court Rules.
Costs
[44] The applicant has succeeded and so in the normal course would be entitled to costs. I ask counsel to confer and only if matters cannot be agreed to file memoranda of no more than three pages (excluding schedules) on behalf of the applicant within 30 working days from the judgment and the respondent within a further ten working days. I have allowed more time than usual to allow the parties to attempt to resolve matters.
Associate Judge Sussock
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