Terry Wayne W Grant v Derek Philip Aplin

IN THE COURT OF APPEAL OF NEW ZEALAND

CA29/00

BETWEEN	TERRY WAYNE W GRANT
Appellant

AND	DEREK PHILIP APLIN
Respondent

Hearing:	27 September 2000 (at Auckland)
Coram:	Heron ACJ Tipping J Anderson J
Appearances:	A L Hassall QC for Appellant B P Rooney for Respondent
Judgment:	27 September 2000

JUDGMENT OF THE COURT DELIVERED BY TIPPING J

The appellant, Mr Grant, contends that Salmon J erred in his discretionary decision to grant leave to the respondent, Mr Aplin, to file an amended statement of set off and counter claim in the circumstances of this case. The Judge was satisfied that leave should be granted in the overall interests of justice. Mr Hassall QC for the appellant submits, for a variety of reasons, that the Judge should have found that the interests of justice required leave to be declined.
Mr and Mrs Grant purchased a farm from Mr Aplin as long ago as 1 December 1986. The transaction was settled on or about 1 July 1987. Mr Aplin left money in secured on second mortgage. That mortgage had the force and effect of a deed. In 1989 and 1990 the Grants commenced proceedings, later consolidated, in which they sued Mr Aplin on various causes of action. It was agreed those proceedings would be heard in two stages; liability first and then, if necessary, quantum. The case was heard by the Judge for 11 days in November 1998. Judgment was delivered on 16 April 1999. The Grants failed on all causes of action, save one. On that one cause of action they established that Mr Aplin had misrepresented the stock carrying capacity of the farm. A quantum hearing thus became necessary but only on that issue. It was at this point that Mr Aplin sought leave to file the amended statement of set off and counter claim now in issue.
In 1989 the Grants defaulted on their obligations under Mr Aplin's mortgage. He sold the farm as second mortgagee. There was a principal shortfall of $40,000 owing to Mr Aplin after all the proceeds of sale had been properly applied. In the Grants' proceeding Mr Aplin raised at an early stage their default under his mortgage. He sought relief from the consequences of any breaches by him of the Credits Contracts Act while denying that there had been any such breaches.
His stance in this respect was originally pleaded in a statement of defence and counter claim filed in August 1989. That document pleaded the advance which Mr Aplin had made to the Grants on second mortgage of the farm, their failure to repay, and it made a claim for the amount then outstanding of $150,000 plus interest. A further pleading was filed by Mr Aplin in August 1997 which did not expressly claim the balance owing under the mortgage but did seek orders under the Credits Contracts Act and such auxiliary or associated orders as might be required in the interests of justice. The pleading which the Judge gave Mr Aplin leave to file was effectively an amendment to the 1989 pleading. It asserted essentially the same cause of action, ie. default under the mortgage or deed. It brought the figures up to date and gave credit for the amount obtained out of the sale proceeds.
These matters were raised in two ways: first by way of defence, as a set off to Mr Grant's claim, and second by way of independent counter claim against him. It should be mentioned here that Mr Grant had become the sole plaintiff in the proceedings by dint of a matrimonial property settlement between himself and his wife. The pleading for which leave was granted, and which can conveniently be called the 1999 pleading, did not raise any new matter as regards the 1989 pleading, but it did resurrect matters which had not been the subject of discrete mention in the 1997 pleadings. It is self-evident that the claims originally filed by Mr Grant and his wife in 1989 and 1990 have not been pursued with conspicuous vigour. An injunction was originally sought to restrain the mortgagee sale. An order was obtained in the High Court to this effect but that order was discharged on appeal to this Court in 1990. In 1994 Mr Grant survived an application to strike out and matters appear to have proceeded in a leisurely way since then.
Mr Aplin gave two reasons why in his 1997 pleading he did not seek to recover the then shortfall under the mortgage. The first related to Mr Grant's financial position which made such exercise appear academic. The second related to the size of the shortfall against the sum exceeding $1m which Mr Grant was claiming in his proceeding. As a result of evidence given at the liability hearing, it appeared that Mr Grant's successful claim for misrepresentation might be worth at most some $50,000. Thus the capital shortfall broadly equated that amount and Mr Aplin then deemed it appropriate to resurrect his claim in this respect as it was now financially viable to do so. Mr Aplin contends that in substance there was nothing new in his 1999 pleading. The default in the mortgage had been pleaded earlier, and he contends Mr Grant must have known there was a capital shortfall with a continuing liability for interest. Mr Aplin also says that the issues raised in his 1999 pleading represent a valid claim to set off and are, and always have been, relevant to the quantum of Mr Grant's claim rather than to questions of liability.
Mr Grant argues that he would be unfairly prejudiced if the amended statement of set off and counter claim is allowed to stand. He contends that the Judge was manifestly wrong in the order he made, and suggests that the disputed pleading could, and should, have been filed 9 years earlier. He argues that Mr Aplin has unreasonably delayed in certain respects and that overall the Judge struck the balance of justice wrongly as between the parties.
In support of the appeal, Mr Hassall suggested that Rule 187 of the High Court Rules had no application after the trial had commenced. We need not go into that issue because it was accepted that the Judge had jurisdiction to make his order under Rule 11. It should be said at the outset that this Court will not readily differ from the views of the High Court on a pleadings decision made at any time. The more is this so if the decision is made in the course of trial by a Judge fully seized of all the issues. It is an area par excellence for the discretion of the trial Judge. The ordinary rules for appeals from a discretion apply but, as with costs, there is a high onus on an appellant in this kind of case to demonstrate a clear error of principle or a wholly inappropriate exercise of the discretion. The ultimate issue is where the interests of justice lie. There are few true amendments which cannot be accommodated, if necessary, by way of costs. Raising a wholly new line of defence or claim is of course another matter. Examples of the exercise of the discretion in similar or analogous circumstances will seldom be of much help.
Mr Hassall referred in some detail in his written submissions to Mr Grant's affidavit filed in opposition to the order now in issue. That affidavit suggests matters which, if correct, could perhaps found a defence to the set off and counter claim asserted by Mr Aplin. Those matters included delay and ordering of affairs on the understanding either that nothing more was owing under the mortgage or that any balance was not being pursued. The fact that there may be a defence to a pleading is not generally of itself any reason to prevent the issues from being raised at all.
In his judgment Salmon J correctly directed himself on the principles in terms of Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA). It is not necessary to refer to any other authorities. It seldom is in this field. The Judge saw the settlement which Mr Grant had reached with his wife as not ultimately prejudicial to Mr Grant because he was entitled to the fruits of the litigation and should therefore be obliged to endure any proper counter to his claim. The Judge also saw the set off and counter claim as more relevant to the quantum stage of Mr Grant's claim than to the earlier liability stage. Overall Salmon J saw it as just to allow the counter claim and set off to be resurrected.
Mr Hassall's first point of appeal was that the Judge did not focus discretely on the overall interests of justice. While the Judge may not have used terminology exactly to this effect, we read his judgment as having addressed this issue in substance. The first point of appeal was not a promising start for Mr Grant.
The second ground was a suggestion that the Judge had failed to consider the consequences of what was termed a 9 year delay by Mr Aplin. If that delay or any facet of it gives Mr Grant a defence, he will be able to assert it. We are also sceptical of the factual validity of the assertion of alteration of position on the basis that nothing more was owing. The delay which the order made by the Judge will cause in the final resolution of the case seems to us to be of no great consequence in the light of the extremely leisurely pace at which Mr Grant has conducted his own claim.
As a third ground Mr Hassall submitted the Judge had failed to identify a number of aspects of prejudice to Mr Grant. One of these was described as assessment of litigation risk. It was suggested in effect that if Mr Grant could have a re-run of the proceedings in the knowledge of what was coming, he might have proceeded differently or perhaps not at all. That seems to us, with respect, to be an unpersuasive argument. Mr Grant must have realised there was a risk that the mortgage issue could resurface. There was no formal settlement or deed of discharge, and it is difficult to see how Mr Grant could have persuaded himself there was nothing more owing. He does not appear to have been given any representation to that effect. In any event on this ground, it can be said that hindsight is a wonderful thing, particularly when it is self-serving.
We have considered the remaining points of appeal as expressly raised in the points and written submissions. They do not require separate traversal, save for one obliquely raised point to which we will come in a moment. Quantum issues relating to the amount owing under the mortgage can be addressed at, and are hardly likely to add significantly to the time needed for, the quantum hearing.
We need not discuss the respondent's submissions in any detail. To an extent they are reflected in what we have already said. We note in particular that in relation to Mr Grant's settlement with his wife, the parties appear to have contemplated that the outstanding proceedings could end up in an ultimate liability to Mr Aplin. That is the natural inference from paragraph 4 of the Matrimonial Property Order:
In regard to the High Court proceedings, the husband will be solely responsible for the High Court proceedings, including any legal fees incurred and any liability arising in regard to the ultimate outcome of the High Court proceedings and any costs awarded.

It is difficult to see what potential liability save for costs there might have been overall, other than a liability for what remained owing under the mortgage.

There is force in the submission made by counsel for the respondent that Mr Grant must have been aware of the shortfall, at least as a likelihood, by dint of the injunction proceedings and the appeal on that point. In addition his claim was for over $1m whereas at that time the capital shortfall was only about $40,000. His assessment of the litigation risk is unlikely to have been different in any event. Mr Grant's complaints of delay by Mr Aplin are rather hollow in the light of his own conduct. In late 1998 the Court was hearing a claim based on events then some 12 years old.
There is a further point not expressly addressed in the submissions on either side or by the Judge. The debt which Mr Aplin claims to be due under the mortgage, first arose in July 1989 or thereabouts when the Grants failed to repay on the expiry of the two year term. The amount outstanding was reduced to the presently claimed amount in 1990 or thereabouts following the completion of the mortgagee sale. The obligation which Mr Aplin seeks to enforce arises pursuant to a document having the force and effect of a deed. Hence the limitation period is 12 years and was still running when Salmon J made his order.
It seems probable, indeed almost inevitable, that Mr Aplin could have brought a completely independent claim for the amount involved in the statement of set off and counter claim now in issue. No formal abandonment or release of the debt is in evidence. Mr Aplin's decision not to include the claim expressly in his 1997 pleadings can hardly prevent a subsequent claim being brought independently. Any defences which Mr Grant claims to have may of course be raised to Mr Aplin's claim, whether it is brought as a counter claim and set off or as an independent claim. In these circumstances it is very difficult to see any material prejudice to Mr Grant from Salmon J's order granting leave, when he, Mr Grant, could in any event have been facing the same issues under a claim brought as a separate proceeding. Mr Hassall's submission that what was originally a deed ceased to be such upon the mortgagee sale is untenable. The security ceased to apply but the personal covenant remained, and it continued to be actionable as raising a debt due under a deed. Such debts have a limitation period of 12 years and that period does not appear to expire until mid 2001.
The appellant's submissions overall, particularly in the light of the point just discussed about the document being a deed, and the limitation period, leave us well short of the view that Salmon J's decision was wrong. In all the circumstances his order was, in our view, a perfectly proper exercise of the Court's discretion. The appeal is dismissed with costs of $2000 to the respondent together with disbursements, to be fixed if necessary by the Registrar.

Solicitors
Whaley & Garnett, Auckland, for Appellant
Callaghan & Co, Auckland, for Respondent

[2000] NZCA 218

27 September 2000