W and R Jack Limited v Fifield HC Auckland Cp436-Im01

[2001] NZHC 1258

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY CP436-IM01

BETWEEN W & R JACK LIMITED
Plaintiff

AND ERNEST JOHN FIFIELD and ALICE JOYCE FIFIELD
Defendant

Hearing: 30 November 2001

Counsel: G W Allan for plaintiff
D J G Cox for defendant

Judgment: 14 December 2001

JUDGMENT OF NICHOLSON J

Solicitors:
Pitt & Moore, PO Box 42, Nelson for Plaintiff
Rennie Cox, PO Box 6647, Auckland for Defendant

APPLICATION

[1] The plaintiff claims summary judgment against the defendants for:

[i] $63,280.00 for overpaid rental;

[ii] $7,761.69 for Goods and Services Tax;

[iii] Interest on the overpaid rental at 11% from 20 May 2001;

[iv] Interest on Privy Council costs at 11% from 24 November 1999;

[v] Costs.

[2] The defendants assert the following defences -

[i] Non-compliance with R 138.

[ii] No judgment or costs order against the named defendants.

[iii] No basis to sue Alice Fifield.

[iv] No breakdown of alleged overpaid rental.

[v] No interest on arbitrator’s award.

[vi] Incorrect date for start of interest on Privy Council costs.

[vii] No provision for GST refund.

CIRCUMSTANCES

[3] The plaintiff leased a commercial building in Auckland from the F J Fifield Family Trust (“the Trust”) for a ten year term from 1 October 1986 with two-yearly rent reviews. The initial rent was $47,000 per annum. The first rent review was due to operate from 1 October 1988. The trust had power to give notice specifying what it considered to be the current market rent. The plaintiff then had 28 days within which to dispute the proposed rent and to require that the rent be fixed by arbitration. The plaintiff received a notice in July 1989 increasing rent retrospectively from 1 October 1988. The plaintiff disagreed with the proposed rent but did not give a counter notice within the stipulated time. After unsuccessful negotiations, the plaintiff applied to the High Court for an order appointing an arbitrator to determine the rent (“the base proceedings”). The Court declined to make the orders sought - W & R Jack Limited v Fifield [1996] 2 NZLR 105. The plaintiff appealed successfully and the Court of Appeal made an order relating to the appointment of an arbitrator - W & R Jack Limited v Fifield [1999] 1 NZLR 48. An appeal to the Privy Council was dismissed with costs - W & R Jack Limited v Fifield [2000] 3 NZLR 129.

[4] The rent arbitration was heard in April 2001. On 20 May 2001 the umpire delivered an award which fixed the market rent at an amount less than that which had been paid by the plaintiff.

PERTINENT LAW

[5] The pertinent summary judgment principles are:

[i] The procedural requirements of R 138.

[ii] The plaintiff must satisfy the Court that there is no arguable defence: Pemberton v Chappell [1987] 1 NZLR 1 (CA).

[iii] To defeat an application for summary judgment a defendant must provide sufficient particulars to show that there is an issue worthy of trial: Pemberton v Chappell

[iv] There has to be a balancing between the right of the defendant to have his day in Court and to have his proper defences explored and the appropriate robust and realistic approach called for by the particular facts of the case - Australian Guarantee Corporation (NZ) Ltd v McBeth [1992] 3 NZLR 54, 58 (CA).

COMPLIANCE WITH R 138

[6] Rule 138(4) provides:

“138 . . .

(4) The party making the application must file and serve on the other party the following documents: . . .

(e) A supporting affidavit.

(5) That affidavit- . . .

(b) If given by or on behalf of the plaintiff, must verify the allegations in the statement of claim to which it is alleged that the defendant has no defence, and must depose to the deponent’s belief that the defendant has no defence to the allegations and set out the grounds of that belief: . . .” - emphasis added

[7] Mr Cox pointed out that the supporting affidavit sworn by Mr R Jack on 13 August 2001, while stating that it was the plaintiff’s belief that the defendant had no defence to the allegations, did not contain a statement that Mr Jack verified the allegations in the statement of claim. Mr Cox submitted that because of this the plaintiff had failed to comply with the procedural requirements of R 138 and that therefore its summary judgment application must fail.

[8] In response, Mr Allan submitted that it is not necessary for a supporting affidavit to use the words “I verify the allegations in the statement of claim” and that the supporting affidavit can verify the allegations by reciting them and confirming them. He submitted that Mr Jack had done this in his supporting affidavit.

[9] In Foodstuffs (Auckland) Ltd v Schweiger [1986] I NZLR 463, Barker J said that the summary judgment rules should be complied with reasonably strictly. However, he emphasised that the summary judgment procedure provided a means for a speedy determination of matters in respect of which there was no real defence and said:

“It has been said to me in other cases - and it has not been necessary so far to rule - that compliance with R 138(2) is mandatory and goes to jurisdiction. In Les Fils Dreyfus et Cie Societe Anonyme v Clarke [1958] 1 All ER 459, the affidavit in support of the summary judgment application under the English rules did not expressly verify the original debt. The affidavit was defective. However, the Court of Appeal held that the Court had jurisdiction to permit a defective affidavit filed in support of a summary judgment to be supplemented by further affidavits; thus any defect would be cured.

I think that a similar attitude should be taken in this country. Therefore, I granted leave yesterday to Mr Young to file a further affidavit which filled in the gaps in the original affidavit satisfactorily. The Court of Appeal judgment in the Dreyfus case is of interest; it tends to resile from an earlier approach which tended to hold that the requirements in the comparable English rules went to jurisdiction. I would think that the approach I have taken is consonant with R 4 of the High Court Rules, which requires the rules to be construed so as to secure a just, speedy and inexpensive determination of any proceeding. It would be unduly expensive, as well as being slow and unjust, to require this application to go on the ordinary list just because the plaintiff had not complied with R 138(2).” - at 464

[10] In delivering the judgment of the Court of Appeal in Australian Guarantee Corporation (NZ) Ltd v McBeth [1992] 3 NZLR 54, 58 Greig J said:

“The summary judgment procedure is a simple expeditious way to enable a plaintiff to obtain judgment where there is no real defence to the claim made: see Pemberton v Chappell [1987] 1 NZLR 1 at p 2. The essence of the procedure is the plaintiff’s own verification by affidavit of his own statement of claim and the allegations made in it: Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co Pty Ltd (1978) 29 ACTR 21. There has to be a balancing between the right of the defendant to have his day in Court and to have his proper defences explored and the appropriate robust and realistic approach called for by the particular facts of the case.”

[11] I consider that the procedural requirement of R 138(4) and (5) is not to be construed strictly so as to require recitation of the mantra “verify the allegations in the statement of claim” and that the requirements of that provision are met if the words of the supporting affidavit in effect verify the allegations in the statement of claim. I find that the supporting affidavit of Mr Jack does this by repeating in essence and on oath what is pleaded in the statement of claim. Had I not reached this view, I would in the circumstances have given leave for a supplementary affidavit to be filed to cure the procedural defect.

JUDGMENT OR COSTS ORDER AGAINST THE NAMED DEFENDANTS

[12] Mr Cox submitted that the base proceedings were brought against Mr and Mrs Fifield in their personal capacity and not against them as trustees of the Trust and consequently the Fifields in their capacity as trustees are under no legal obligation to pay the Privy Council costs or interest on those costs.

[13] It is correct that neither in the intituling or the body of the statement of claim in the base proceedings was it stated that Mr and Mrs Fifield were sued in a representative capacity as trustees. However, in para 1 of the statement of claim the plaintiff pleaded “the plaintiff and defendant are lessee and lessor respectively . . .” of the pertinent commercial premises. In their statement of defence Mr and Mrs Fifield admitted this. The statement of claim then went on to refer to the rent renewal provision of the lease, the alleged communications between the parties about resolution of the renewed rent dispute and sought the relief of appointment of an arbitrator.

[14] The base proceedings were decided on the basis that Mr and Mrs Fifield were the lessor of the premises and, although not expressly pleaded, it was implicit in the statement of claim and the subsequent hearings and orders that Mr and Mrs Fifield were before the Court in their representative capacity as trustees of the lessor Trust.

[15] I accordingly find that Mr and Mrs Fifield are liable as trustees of the Trust to pay the costs and interest thereon as ordered by the Privy Council.

BASIS TO SUE ALICE FIFIELD

[16] Mr Cox pointed out that when the premises were leased to the plaintiff in 1986 the trustees of the Trust were Mr E J Fifield and Messrs J G Cox and H T Garlick, solicitors, and by a deed dated 23 June 1993 Messrs Cox and Garlick retired as trustees and were replaced by Mrs Fifield. She was called the new trustee and Mr Fifield the continuing trustee. Mr Cox submitted that there was no evidence that Mrs Fifield had entered into a lease contract with the plaintiff and that she did not become a registered proprietor of the premises until after the lease to the plaintiff had expired on 30 September 1996. He accordingly submitted that there was no evidence to establish privity of contract or estate as between the plaintiff and Mrs Fifield.

[17] The short answer to Mr Cox’s submission, however, is that Mrs Fifield was a party to the base proceedings and in dismissing the Fifields appeal the Privy Council directed that they pay the plaintiff costs of the appeal incurred in the Court of Appeal and in England. An order of the Privy Council on appeal is to be executed by all Courts in like manner as any original Judgment of the Court appealed from - R 27, New Zealand (Appeals to the Privy Council) Order 1910. With perfection of the Privy Council’s costs direction by taxation and sealed certificate of the Court of Appeal. Mr and Mrs Fifield are each obliged to pay the Privy Council costs and interest thereon. The principle of estoppel judicatam applies - Shiels v Blakeley [1986] 2 NZLR 262 (CA).

BREAKDOWN OF ALLEGED OVERPAID RENTAL

[18] Mr Cox submitted that the amount of $63,280 claimed as alleged overpayment of rental is “not broken down” in either the statement or the supporting affidavits.

[19] However, in its statement of claim the plaintiff pleaded that from 1 October 1988 until 30 September 1996 it paid an annual rent of $71,484 plus GST and that the annual rent applicable for that period as determined by arbitration was $63,574 plus GST. It therefore claimed overpayment of $63,280. This is a matter of simple arithmetical calculation -

$71,484 x 8 $571,872.00

- $63,574 x 8 $508,592.00

$63,280.00

INTEREST ON ARBITRATOR’S AWARD

[20] In its statement of claim the plaintiff alleged that overpaid rental of $63,280 constituted a judgment debt as at 20 May 2001. Mr Cox pointed out that the award of 20 May 2001 merely fixed the rent for the term starting 1 October 1988 and did not direct any sum to be paid. Mr Allan conceded that the award was not of itself a determination as to an amount of money owing. He requested, however, that I order that interest be paid pursuant to the provisions of s 87 of the Judicature Act 1908. A Court can award interest pursuant to that section whether or not it is claimed in the pleadings and may do so as the justice of the case requires - Wilson and Horton Ltd v Attorney-General [1997] 2 NTZLR 513. Bearing in mind that the trust has had the benefit of increasing amounts of surplus rent since late 1988 which reached $63,280 by 30 September 1996, I consider it just to order payment of interest pursuant to s 87 from at least 20 May 2001, the date of the arbitrator’s award. The comment of Alderson B Newton v Grand Junction Railway Co (1846) 16 M & W 139, 141 that the money was “fructifying the wrong pocket” is apt. Although current bank interest rates are below 11% per annum, bearing in mind the time the trust has had the surplus rent, I do not fix a lower rate.

CORRECT DATE FOR START OF INTEREST ON PRIVY COUNCIL COSTS

[21] In dismissing the appeal on 24 November 1999, the Privy Council directed that:

“. . . there be paid by the appellants to the respondent its costs of this Appeal incurred in the said Court of Appeal and its costs thereof incurred in England the same to be hereafter taxed and certified if not agreed.”

[22] On 13 October 2000 the Registrar of the Privy Council certified that he had taxed the costs of the respondents and allowed £14,568.75. Mr Allan submitted that the award of costs made by the Privy Council constituted a judgment debt within the meaning of R 538 and accordingly sought interest on it from when the award was made on 24 November 1999. Mr Cox submitted that there was no liability to pay interest before the quantum of the costs were fixed by taxation on 13 October 2000.

[23] Mr Cox referred to and relied on the statements in McGechan on Procedure HR 538.08:

“The rule [R 538] provides for interest to commence ‘from the time of judgment being given’. Rule 540 provides judgment is ‘deemed to be given” when the decision of the Court is read or pronounced (irrespective of reason) in open Court, or where not so read or pronounced in Court, when copies in writing are available to parties following notice from the Registrar. However, this is to be read subject to the requirement that for interest to run at all, there must first be a ‘judgment debt’ within r 538(1). To be a ‘judgment debt”, an order for payment of money must be a final and actual direction to pay: Garner v Briggs (1858) 27 LJ Eq 483. . . . Likewise, where the quantum of the debt remains to be ascertained, interest does not run immediately. A judgment debtor is not to be required to pay interest on a sum which he cannot pay as it has not yet been determined. Note also Parsons v Mather & Platt Ltd [1977] 2 All ER 715, 719, recognising that interest is payable on judgment from the date pronounced ‘so long of course, as that judgment quantifies the amount’.”

[24] In response Mr Allan referred to and relied on the statements and case cited in para 538.09 of McGechan on Procedure:

“The amount of the judgment debt bearing interest includes costs awarded. Interest on costs runs from the date of judgment not from the date of quantification: Hunt v R M Douglas (Roofing) Ltd [1988] 3 WLR 975 (HL).”

[25] In the Hunt case the House of Lords ruled that a litigant who has been awarded costs is entitled to interest on the amount of the costs from the date on which judgment is pronounced (which it referred to as “the incipitur rule”) and not the date upon which the taxation of costs was completed (the “allocatur rule”). The House of Lords stated that the power to award interest on costs was granted by s 17 of the Judgments Act 1938 which provided:

“17 . . . . every judgment debt shall carry interest at the rate of £4 per centum per annum from the time of entering up the judgment . . . until the same shall be satisfied, and such interest may be levied under a writ of execution on such judgment.”

[26] This is similar to the power to grant interest on costs given by R 538; which provides:

“538 (1) Every judgment debt shall carry interest from the time of judgment being given until the judgment is satisfied

. . .

(3) The interest may be levied under any execution order upon the judgment.”

[27] In the leading speech with which the other Law Lords agreed, Lord Ackner said:

“From 1884 to 1965 the principle that interest on costs ran from the date of judgment became firmly established.” - p 981G

[28] He then discussed the judgment of the Court of Appeal in K v K (Divorce Costs: Interest) [1977] Fam.39 in which Lord Denning MR commented “in all fairness interest should only run from the date of quantification . . .” (p 983) and declared the allocatur rule to be again the law. Lord Ackner then considered the Court of Appeal decision in Erven Warnink B V v J Townend & Sons (Hull) Ltd [1982] 3 All ER 312 which was nearly six years after the K v K decision and where the merits strongly favoured the incipitur rule and in which the Court of Appeal again decided to apply the allocatur rule. Having considered those decisions, the House of Lords overruled them with Lord Ackner stating:

“Accordingly the incipitur rule prevails. I respectfully agree with the observations of the Court of Appeal that a satisfactory result cannot be achieved in every case, but in my judgment the balance of justice favours the incipitur rule for the following reasons. 1. It is the unsuccessful party to the litigation who, ex hypothesi, has caused the costs unnecessarily to be incurred. Hence the order made against him. Since interest is not awarded on costs incurred and paid by the successful party before judgment, why should he suffer the added loss of interest on costs incurred and paid after judgment but before the taxing master gives his certificate? 2. Since, as the Court of Appeal rightly said in the Erven Warnink case [1982] 3 All ER 312 payments of costs are likely nowadays to be made to lawyers prior to taxation, then the application of the allocatur rule would generally speaking do greater injustice than the operation of the incipitur rule. Moreover, the incipitur rule provides a further necessary stimulus for payments to be made on account of costs and disbursements prior to taxation, for costs to be more readily agreed, and for taxation, when necessary, to be expedited, all of which are desirable developments. Barristers, solicitors and expert witnesses should not be expected to finance their clients’ litigation until it is completed and the taxing master’s certificate obtained. If interest is not payable on costs between judgment and the completion of taxation, then there is an incentive to delay payment, delay disbursements and taxation. 3. It is common ground between the parties that the unsatisfactory situation illustrated in K v K can be simply dealt with by an express agreement between the solicitor and his client that any interest recovered on costs and disbursements after judgment is pronounced but before the taxing master’s certificate is obtained, which costs and disbursements have not in fact been paid prior to taxation shall as to the interest on the costs belong to the solicitor, and as to the interest on disbursements be held by him for and on behalf of the person or persons to whom the disbursements are ultimately paid.”

[29] I consider that the incipitur rule applies in New Zealand and in the present case, not only because of the Hunt decision and the similarity in the pertinent English and New Zealand legislation, but also for reasons stated cogently by Lord Ackner in the passage just quoted. Although quantification of costs is expedited in New Zealand by the regime which has operated since 1 January 2000 and the taxation of costs is not as prevalent as in the United Kingdom, nevertheless it can take a considerable time after a liability and costs judgment for the quantum of costs to be fixed.

[30] I accordingly find that the plaintiff is entitled to have interest on the Privy Council costs from the date those costs were awarded, namely 24 November 1999. Such interest is to be at the rate of 11% per annum prescribed under s 87 of the Judicature Act 1908 and in the circumstances I do not fix a lower rate. Mr Cox agrees that the appropriate currency conversion rate is to be that at the date on which I find that interest is to start. Accordingly this will be the conversion rate at 24 November 1999.

GOODS AND SERVICE TAX

[31] Mr Allan advised that the plaintiff claimed repayment of GST out of abundant caution and not for any financial advantage as the plaintiff had received an appropriate offsetting GST credit from the Inland Revenue Department. If the Trust were ordered to refund the GST which the plaintiff had overpaid to it, the plaintiff would in turn be obliged to pass on the refund to the Inland Revenue Department. In turn having made the payment, the Trust would be likely to apply for appropriate GST credit from the Inland Revenue Department. It seems therefore that all that would be achieved would be the circulation of a credit with none of the parties and the Inland Revenue Department being detrimentally affected. In these circumstances the claim for GST repayment is not pursued.

RESULT

[32] There is summary judgment for the plaintiff against the defendants for:

[i] $63,280.00;

[ii] Interest on $63,280.00 at 11% per annum from 20 May 2001;

[iii] Interest on the Privy Council costs of £14,568.75 at 11% per annum from 24 November 1999 with the conversion rate to New Zealand dollars being that at 24 November 1999.

COSTS

[33] It would seem that the successful plaintiff should receive costs and disbursements including travel disbursements and that the appropriate basis would be 2B. However, as R 48E does not apply to an application for summary judgment, I reserve the issue of summary judgment costs. If the parties cannot agree on such costs, then counsel seeking costs is to file a memorandum within 21 days of this judgment and the other counsel is to file a memorandum in response within 21 days of receiving that memorandum.