Teinangaro v Fastway Couriers (NZ) Limited HC Napier Civ-2009-441-000751

[2011] NZHC 1698

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2009-441-000751

BETWEEN  JAMES DOUGLAS TEINANGARO AND SHARON HAZEL TEINANGARO Plaintiffs

ANDFASTWAY COURIERS (NZ) LIMITED First Defendant

ANDAUCKLAND CITY COURIERS LIMITED

Second Defendant

Hearing:         21 November 2011

Counsel:         Plaintiffs in person

M von Dadelszen for Defendants

Judgment:      25 November 2011

JUDGMENT OF THE HON JUSTICE KÓS

Introduction

[1]      Mr and Mrs Teinangaro were once franchise drivers for the defendants.  The defendants terminated their franchises.   The Teinangaros then issued these proceedings, challenging termination and claiming various losses.  But they botched their  pleadings.    Not  once,  but  twice.    The  defendants  applied  to  strike  the proceedings out.  An Associate Judge considered the defendants’ application in July

2010, but deferred it.  He said the Teinangaros needed “breathing space” to obtain legal assistance and to file a competent pleading.   Rather than strike out the proceeding, he stayed it.  That meant the Teinangaros could take no further steps in their proceeding.  Except that is, one step:  if they wished to lift the stay, they were to file an application, or a memorandum, preferably with a new, compliant draft statement of claim.  This, they had to do by 7 January 2011.  A six month breathing

space then, from the judgment.

TEINANGARO AND TEINANGARO v FASTWAY COURIERS (NZ) LIMITED HC NAP CIV-2009-441-

000751 25 November 2011

[2]      On 22 December 2010 the Teinangaros filed a “second amended statement of claim”.  It is common ground that this document is broadly compliant with the High Court Rules.  It is unlikely to be able to be struck out by the defendants.  But, of course, the proceeding had been stayed.  The Teinangaros were not entitled to file that document.   What they overlooked doing was filing the memorandum or application that the Court required in order to lift the stay.  On 13 January 2011 – six days out of time – they apprehended their omission and filed a memorandum.  The defendants  can  point to  no prejudice from  a delay of six  days.    But  when the Associate Judge came to consider the matter, he concluded that this non-compliance, on top of all that had gone before, was too much to condone.   So he struck the proceedings out.

[3]      Was the Associate Judge right to do so?

Background

[4]      In 2006 and 2007 Mr and Mrs Teinangaro entered two franchise agreements with  the  second  defendant.    This  provided  them  with  exclusive  territories  in Auckland in which to operate a courier delivery business.  They paid $25,000 for each franchise.  And they incurred other costs (e.g. to acquire vehicles).   But the business relationship between the parties did not go well.  The defendants say in late

2007 they started to receive complaints about the performance of the Teinangaros. These complaints came from customers and other couriers.  So the second defendant sent the Teinangaros formal notices of breach.

[5]      The franchise agreements provide, inter alia, for a power of termination in the event a franchisee commits:

(a)       four   breaches    of   the    contractor   operating    manual    within   12 consecutive months; or

(b)any verbal or physical abuse of customers or other couriers at any time.

[6]      The contractor operating manual provides for an informal dispute resolution process.  On 17 March 2008 a “first step resolution meeting” was held between the Teinangaros  and  the  General  Manager  of  the  second  defendant.    The  General Manager of the first defendant chaired the meeting.   The meeting did not go particularly well.

[7]      The manual (which was not in evidence before me) apparently provides for an independently-chaired second meeting if the first does not resolve things.  Both sides agreed to go to such a meeting.  They agreed upon an independent chairman - a lawyer proposed by the Teinangaros.  The Teinangaros were unable to afford the cost of the chairman’s fees. The second meeting did not proceed.

[8]      Subsequently more complaints from customers and other couriers and courier staff were alleged to have occurred.   On 24 October 2008 the second defendant terminated the franchise agreements, with immediate effect.

[9]      All  that  needs  to  be  said  at  this  point  is  that  the  circumstances  of  the termination are challenged by Mr and Mrs Teinangaro.   They allege that they themselves were the subject of verbal and physical abuse by staff members of the second defendant.  They say the notices of complaint or breach were contrived and dishonestly presented by the defendants.  All of this remains to be proved at trial. The Teinangaros say, also, that they have been denied the resolution processes to which they are entitled under the contractor operating manual, franchise agreements

and the code of practice of the Franchise Association of New Zealand Inc.[1]

[1] Upon which, as non-members, they profess to rely pursuant to the provisions of the Contracts

(Privity) Act 1982.

[10]     On 3 November 2009 Mr and Mrs Teinangaro, acting for themselves, filed their statement of claim.  It is a rudimentary, potpourri of a pleading.  It professes to rely   on   the   Contractual   Remedies  Act   (misrepresentation   and   breach),   tort (negligence and defamation), the Fair Trading Act 1980 (misleading and deceptive

conduct, false and misleading representations) and equity (“inequity”).

[11]     Such a pleading would not do.  On 11 December 2009 there was a telephone conference before an Associate Judge.   The deficiencies in the statement of claim were the subject of some discussion.  The Teinangaros were directed to file and serve an amended statement of claim by 29 January 2010.

[12]     On 26 January 2010 Mr and Mrs Teinangaro filed an amended statement of claim.  It was, if possible, worse than the first document.  It catalogues, in the course of a series of 60 narrative paragraphs, various alleged misdeeds by the defendants. To the extent it is organised at all, the organisation is purely chronological.   Its content is largely evidence.  Some of the alleged misdeeds by the defendants do not appear to relate to the plaintiffs at all.  Rather, they are misdeeds perpetrated on other courier franchisees. The relevance of this is not apparent.   Following the chronological narrative there is a series of headings said to be “causes of action”. But nothing is actually pleaded beneath each such heading.

[13]     On 10 March 2010 the defendants applied, quite understandably, to strike out the claim.  They also applied for security for costs.  The Teinangaros filed a notice of opposition on 25 March 2010, together with a supporting affidavit.  They filed brief submissions on 4 June 2010.

[14]     On 2 July 2010 the applications were heard by the Associate Judge.  After reviewing High Court Rule 15.1, the Judge said that the amended statement of claim was “self-evidently an unsatisfactory pleading”.   It contained “large tracts of irrelevant material” and “set out events which could not give rise to any claim for relief on the part of the plaintiffs”.  The Judge concluded the pleading offended most of the limbs of R 15.1(1).  With that conclusion, there could be no contest.  But the Associate Judge decided nonetheless not to strike out the pleading, as the defendants had sought.  Rather, he chose to stay the proceeding. This is what the Judge said:

[9] However because Mr and Mrs Teinangaro have said that they now wish to take advantage of their improved financial situation to obtain legal aid, I consider that the appropriate order to make rather than an order striking out is one staying the proceeding. It is preferable to take that step rather than to direct paying security for costs (an order for which there is considerable justification on the material before the Court). I consider that it would be preferable for the plaintiffs to use such resources as they have to get legal advice on whether they have a viable cause of action against the defendants and, if they have, to have a statement of claim prepared which complies with

the rules. While I am prepared to give the Teinangaro’s a breathing space to achieve this objective, I want to make it clear that matters cannot be allowed to drift on indefinitely. What I envisage is that if Mr and Mrs Teinangaro wish the Court to lift the order staying the proceedings they must file a memorandum setting out the reason why the stay of proceedings should be revisited. For example, if,  having instructed  a lawyer to  advise them,  a further draft statement of claim is produced which Mr and Mrs Teinangaro wish the Court to consider, then the Court would no doubt accede to a request to do so and to hear submissions from both sides on whether the stay should be lifted. However, any such application to remove the stay must be filed and served within six months of the date of this order. If it is not, then the defendants are entitled to give notice requiring the application for strike out order, security for costs etc to be brought on for hearing.

[10]  If  a  memorandum  is  filed  indicating  that  the  plaintiffs’  wish  to reactivate the proceeding, in the first instance the Registrar is to allocate a telephone conference before an Associate Judge.

[15]     It will be seen, at once that the judgment is slightly equivocal as to what it is that the Teinangaros had to file.  In two places (paragraphs [9] and [10]) it refers to a memorandum.   In another place (paragraph [9]) it refers to an application.  It also suggests that a further draft statement of claim be produced.

[16]     At this point Mr and Mrs Teinangaro got themselves into a further muddle. In September 2010 they obtained legal advice from a solicitor.  He looked at their papers, and drafted a second amended statement of claim.   The document is, as I have already said, a competent pleading.   He charged the Teinangaros $3,000 for preparing that pleading.  They have paid most (but not all) of that sum.  The need to first file an application or memorandum seems to have been overlooked by the solicitor or by the Teinangaros, or by both.  The solicitor also seemed to think that the revised pleading had to be filed by the end of January 2011.  But of course the date provided for in paragraph [9] of the Associate Judge’s judgment was earlier:

7 January 2011.

[17]     In any event, this is what the Teinangaros did:  on 22 December 2010 they travelled down from Kaikohe to Napier and filed the second amended statement of claim prepared by the solicitor.  The proceeding was stayed, and the pleading should not have been accepted.  But it was.  They did not file an application.  They did not file a memorandum.  7 January 2011 came and went without any further filing by them.  Then Mr von Dadelszen returned from holiday, and on 11 January 2011 he filed a memorandum for the defendants.  He said the second amended statement of

claim  should  not  have  been  filed.    He  said,  too,  that  the Teinangaros  had  not complied with the Court’s directions in terms of paragraph [9] of the July judgment. So, the defendants applied – also under paragraph [9] - to bring their application for strike out and security for costs on for hearing.

[18]     For  one  reason  or  another,  those  applications  could  not  be  heard  until

19 October 2011.   A new solicitor appeared for the Teinangaros.   The defendants stuck to their guns and contended that the proceeding should be struck out.   The Associate Judge said:

[4]       The Court’s intention was, and I consider that it was made clear, that there should be a stay in the meantime but that if the Teinangaro’s took action within six months to put their house in order, the Court might be prepared to lift that stay.  There needed to be firm timeframes applicable to any such attempt on their part.   The Court’s intention was that the matter should not be permitted to drag on.

[5]       The plaintiffs did not seek an order lifting the stay within the period directed.  As well, notwithstanding the stay order the plaintiffs’ purported to file a second amended statement of claim 22 December 2010.  They did not seek leave of the Court to do so.

The Judge also noted that the Teinangaros are still seeking legal aid, and looking for more time to do that. The Judge then concluded:

[7]       The position therefore was that it was always clear to the parties that the  stay order  was an  interim arrangement  to  give  the Teinangaro’s  the opportunity to take prompt steps to get this proceeding in order.  It was made quite clear that if they did not do so there was a risk that the proceeding would be struck out.

[8]       The Teinangaro’s have unfortunately not made satisfactory progress in this proceeding.  I consider that they have been given more than adequate leeway. Therefore while Mr Mark is correct when he submits that is relevant to take into account the right of the plaintiffs to have their claims determined by the Court, that is part of the story only. There is also a right on the part of defendants not to be taxed by vexatious or dilatory proceedings.  This type of proceeding is exactly of that character.  So while a reasonable opportunity should be given to the Teinangaro’s to get to grips with their case, any indulgence must be one that is limited as to time and the parties must be told, as they were here, that they needed to act promptly.   Unfortunately the Teinangaro’s have not been able to act promptly as required.  I consider that the point has been reached where the proceedings ought to be brought to an end and I make an order striking them out.

[19]     And so, without more, the plaintiffs’ proceedings were struck out.

The present application

[20]     Mr and Mrs Teinangaro apply for review of the strike out order.  They submit that they had acted in accordance generally with the legal advice they had received, and had filed what they were told to file on 22 December 2010.   That was their second amendment statement of claim.  They had not appreciated that there should have been a memorandum.  They did not have a memorandum to file.   None had been prepared for them. As soon as they realised their mistake (as a result of Mr von Dadelszen’s memorandum of 11 January 2011) they immediately drafted the memorandum.  It was filed on 13 January 2011 – just six days late. They also submit that they have a legal aid application still pending.  They have been given until 1

December 2011 to provide further information in support of it.

[21]    For the defendants, Mr von Dadelszen accepts that the second amended statement of claim is a much better document than its predecessors.  He says some paragraphs will require further particulars.  Although minded initially to take certain technical objections to the form of the memorandum filed on 13 January 2011, Mr von Dadelszen accepts that it is adequate to meet the requirements of the Judge in paragraphs [9] and [10] of the 7 July 2010 judgment.  Mr von Dadelszen accepts that the delay that occurred between January and October 2011 cannot in any way be attributed to the plaintiffs.  He also concedes that he cannot point to any prejudice to the defendants from the six day delay in filing the memorandum in early January

2011.

Decision

[22]     Section 26P of the Judicature Act 1908 provides a right to apply to the High Court for review of any decision made by an Associate Judge in chambers.  This is such a decision.  Where the order being reviewed was made following a defended hearing, and  is supported by documented reasons, then High Court  Rule 2.3(4) provides that the review is to proceed as a “rehearing”.  Section 26P(1)(b) provides that the High Court on review “may make such order as may be just”.

[23]     The  review  is  to  proceed  as  if  it  were  an  appeal  by  way  of  rehearing. Therefore:

(a)      the  applicant  bears  the  burden  of  persuading  the  Court  that  the Associate Judge’s decision was wrong.  Only if the High Court Judge considers the appellate Judge’s decision to be wrong should it be interfered with;[2]

[2] Austin Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR at [4].

(b)the applicant should, therefore, show that the Judge had acted on a wrong principle, that the Judge failed to take into account some relevant matter or took into account some irrelevant matter, or was “plainly wrong”;[3]   and

(c)      as the decision being reviewed is a chambers decision without oral evidence, the High Court on review is not required to defer to the decision of the Associate Judge.  If the High Court Judge thinks the Associate Judge was wrong, the reviewing Judge should say so forthrightly.[4]

[3] Wilson v Neva Holdings Ltd [1994] 1 NZLR 481; (1993) 6 PRNZ 654.

[4] Austin Nichols & Co Inc v Stichting Lodestar at [3] and [16].

[24]     I am satisfied that the Associate Judge’s decision of 19 October 2011, to

strike out the plaintiffs’ claim, cannot stand.

[25]     First, the extent of non-compliance was very minor.  The Teinangaros were given six months to apply to lift the stay, and missed the date by just six days.  But their intent was evident, ahead of expiry of the six month period, by their non- compliant filing of a now-compliant amended pleading.  Having used the time, and their limited economic resources, to produce a compliant pleading, I do not think that they should be denied the opportunity to continue the claim now based upon that

pleading.  It is not evident on the face of the minute[5]  that the Associate Judge had

considered the terms of the new pleading.  Had he done so, I do not think he would have said that the Teinangaros had not made satisfactory progress in the proceeding.

[5] Quoted at [18] above.

[26]     Secondly, what was filed, on 13 January 2011, six days late, unquestionably meets the requirements of the Judge’s earlier decision of 7 July 2010.  No prejudice can be pointed to by the defendants from delay.  The Court has jurisdiction to extend time limits under prior orders, pursuant to High Court Rule 1.19(1).   It can do so even when the time limit has already expired.[6]   It does not appear to have occurred to the Teinangaros or their previous counsel to seek relief under this provision.

[6] HCR 1.19(2).

[27]     Thirdly, had the now-compliant second amended statement of claim not been “filed”, the position might have been different.   But (as I have already said) that document shows that the plaintiffs have used the “breathing space” given to them well, to produce a proper, ordered pleading.  It may be as Mr von Dadelszen submits that it needs some further particularisation.   I will make provision for that in due course.  But that is a relatively minor tidying exercise.

[28]     Fourthly, the position would also have been different if the Associate Judge had, on 7 July 2010, made an “unless” order.  That is, had he provided that unless application to lift the stay was filed by 7 January 2011, the proceedings would automatically be struck out.  Even then an application to extend time, and reinstate the proceedings, could be made.[7]   But there was no “unless” order in this case.  The proceedings  continued  in  existence,  albeit  stayed.    They  would  have  remained stayed, had the defendants not taken the option given them in the 7 July 2010 judgment to apply for the determination of their outstanding applications for strike out and/or security for costs.

[7] Samuels v Linzi Dresses Ltd [1981] 1 QB 115; Jarden v Lawlor (1998) 12 PRNZ 516 (HC).

[29]     Finally, the touchstone for civil justice in New Zealand is expressed in High Court Rule 1.2:   the object of the Rules, and of this Court, is to “secure the just, speedy, and inexpensive determination of any proceeding”.   The Associate Judge was right to have criticised the Teinangaros for the delays caused by their defective pleadings, and for the added expense that these actions caused.   The six month period granted them was a very generous one.  But the Judge went too far in striking out the proceeding altogether when, at the end of the six month period, the plaintiffs

were just six days late in filing their application to lift the stay.

Note

[30]     I have told Mr and Mrs Teinangaro at the hearing, and I repeat again here, that they must ensure they do better to comply with the requirements of the High Court Rules.  It is not good enough for them to blunder about regardless of the rules, and then hope that things will be fixed up when they appear before the Court and throw themselves upon its “mercy”.  Well, on this occasion, they have received it. But in future they must do better.  If they remain unrepresented, they must acquaint themselves with the requirements of the High Court Rules.  In their new format they are far easier than before for lay litigants  to  follow.   They can  be accessed at I note that the Teinangaros have internet access at the Kaikohe Public Library.   They need to look up the Judicature Act 1908 under “Act”, and go to its second schedule. There they will find the High Court Rules.

Disposition

[31]     The  application  for  review  is  granted.     The  order  striking  out  these proceedings is set aside.

[32]     I make the following consequential directions:[8]

[8] Which I set out in more detail than usual, so that the plaintiffs are clear as to what must be done.

(a)      The  defendants  are  to  file  and  serve  on  the  plaintiffs  any  notice requiring more explicit pleading, under High Court Rule 5.21, by Friday 2 December 2011.

(b)      The plaintiffs are to respond to that notice no later than Friday 9

December 2011.   They may do  so  either by filing and  serving  a separate document, or (preferably) a third amended statement of claim which fills out the gaps which the defendants reasonably require.  To the extent the plaintiffs consider that any part of the defendants’ notice is completely unreasonable, they may file a document objecting to providing unreasonable particulars.

(c)      Any application for further and better particulars, and any other interlocutory applications, are to be filed and served by the parties no later than Friday 16 December 2011.

(d)      Any notice of opposition to such applications are to be filed by Friday

20 January 2012.[9]

[9] See HCR 7.24 and 1.3 (definition of “working day”).

(e)       Submissions  in  opposition  are  to  be  filed and  served  by Monday

13 February 2012.  I draw the plaintiffs’ attention to High Court Rule

7.39(6).

(f)      All interlocutory applications (including those already filed as at the date of this judgment) will then be heard by the Court on Wednesday

15 February 2012, at 2.15 pm.

(g)      Except to the extent set out above, the provisions of the High Court

Rules are to apply.

[33]     The plaintiffs being self-represented, there will be no order for costs.

Stephen Kós J

Solicitors:

Bannister & von Dadelszen, Hastings for Defendants