Waimauri Limited v Powell Junior Limited
[2024] NZHC 852
•18 April 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-1694
[2024] NZHC 852
UNDER Part 18 of the High Court Rules AND UNDER
Section 137 of the Property Law Act 2007
BETWEEN
WAIMAURI LIMITED
Plaintiff
AND
POWELL JUNIOR LIMITED
Defendant
Hearing: 15 April 2024 Counsel:
M Lenihan for the Plaintiff
J Harvey, Director for the Defendant
Judgment:
18 April 2024
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 18 April 2024 at 4 pm Pursuant to Rule 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors/Counsel:
Michael Lenihan Barrister, Auckland J Harvey
WAIMAURI LIMITED v POWELL JUNIOR LIMITED [2024] NZHC 852 [18 April 2024]
Introduction
[1] The plaintiff, Waimauri Ltd (Waimauri), is the mortgagee of a residential property at 2/35 Powell Street, Avondale, Auckland (the property), owned by Powell Junior Limited (PJL). Waimauri applies for an order for possession of the property.1
[2] The proceeding is set down for an eight-day trial commencing on 19 August 2024. Waimauri has served its briefs of evidence. PJL’s briefs of evidence are due to be served on 13 May 2024.
[3] PJL’s sole director is Jason Harvey (Mr Harvey). Mr Harvey and his family occupy the property as their family home.
[4] PJL has no right to carry on proceedings in a court except by a solicitor, without the leave of the court.2 Mr Harvey has previously been granted leave to represent PJL on a limited basis, on the ground that PJL does not have the resources to retain counsel.
[5] Waimauri applies for an “unless” order, requiring PJL to retain a solicitor, failing which PJL’s defence be struck out. Mr Harvey has been granted leave to oppose the application on behalf of PJL.
Background
[6] The factual background is set out in full in the judgment of Harland J declining Waimauri’s application for summary judgment in this proceeding.3
[7] In summary, Mr Harvey became involved in property developments promoted by his brother-in-law, Peter Chevin (Mr Chevin), through various entities controlled by Mr Chevin.
[8] One such transaction was the purchase of the property. PJL was incorporated by Mr Harvey for that purpose. Waimauri advanced funds to PJL for the purchase, secured by a mortgage (the PJL advance).
1 Under s 137(1)(c) of the Property Law Act 2007 (the PLA).
2 Re GJ Mannix Ltd [1984] 1 NZLR 309 (CA) at 310.
3 Waimauri Ltd v Powell Junior Ltd [2022] NZHC 515 at [14]–-[75].
[9] Mr Harvey also became involved in a development in Te Kauwhata financed by Waimauri.
[10] Waimauri provided finance to other entities associated with Mr Chevin, including Glenvale Holdings Ltd (GHL). The loan agreement between Waimauri and GHL included a clause which obliged GHL to repay the PJL advance on the expiry date if the PJL advance remained outstanding.
[11] When Mr Harvey ended his involvement in the Te Kauwhata development, Mr Harvey entered into an “Exit Agreement” with an entity controlled by Mr Chevin, NIT. The exit agreement imposed obligations on NIT in respect of the PJL advance, including:
(a)an obligation to procure from Waimauri caps on the level of PJL’s indebtedness; and
(b)an obligation to clear the debt by a fixed date.
[12] Exactly what transpired between the various parties, including Waimauri and PJL, and the legal consequences that flow from that are in issue. Mr Harvey contends that PJL’s indebtedness to Waimauri was extinguished. Waimauri contends that it was not and that Waimauri’s mortgage is enforceable.
Procedural history
[13] Waimauri filed its statement of claim on 17 September 2020 together with an application for summary judgment.
[14] The application for summary judgment was first called before Gault J in the summary judgment list on 3 November 2020. Mr Harvey appeared in Court. The minute records that Mr Harvey was made aware of PJL’s obligation to acquire legal representation to conduct its defence. Gault J directed PJL to file and serve a notice of opposition with its lawyers’ address for service, and a supporting affidavit, by 6 November 2020.
[15] PJL filed a notice of opposition to the application for summary judgment signed by Mr Harvey. Mr Harvey subsequently arranged legal representation for PJL at the hearing of the application for summary judgment, which took place on 17 February 2021.
[16] The application for summary judgment was adjourned part-heard due to an issue that arose from an application by PJL to adduce further affidavit evidence. Further hearings were held in respect of the application for summary judgment on 23 April and 4 October 2021.
[17] On 21 March 2022, Harland J delivered her judgment declining the application for summary judgment. This was primarily for two reasons:
(a)the factual complexity of the arrangements between the various inter- related parties warranted further consideration before it could be conclusively determined that Waimauri did not intend to extinguish PJL’s responsibility for repayment of the PJL advance;4 and
(b)the notice issued by Waimauri under s 119 of the Property Law Act 2007 (PLA) did not outline to a sufficient degree the arrears owing under the mortgage, and the amount then owing by PJL to Waimauri was sufficiently uncertain so that it was not appropriate for an order for possession.5
[18] On 10 June 2022, PJL filed a statement of defence which stated that it was filed by the company and without naming any legal representative of the company. On 1 June 2022, Mr Harvey filed a memorandum as to change of representation and address for service for PJL, purporting to give notice that PJL was acting “in person” and giving his own contact details for service.
4 At [84].
5 At [87].
[19] On 13 September 2022, Associate Judge Sussock issued a minute including a direction permitting Mr Harvey to represent PJL for completion of discovery but no further:6
[4]I am concerned however that unless decisions made in advance of the hearing are made with the assistance of counsel, it is likely that matters will not progress smoothly on the allocated trial date. Counsel for the plaintiff accepted a reasonable compromise would be for a solicitor to be required to be appointed sufficiently in advance of the trial but for discovery to be completed in the meantime. I therefore make directions below on this basis.
[5]I note that if any interlocutory applications are filed and opposed, the defendant will need to appoint counsel for the hearing of those matters.
[20] Associate Judge Sussock directed the parties to provide standard discovery by 17 March 2023 and directed PJL to file and serve a notice of change of representation, following the appointment of a solicitor, by 1 July 2023.
[21] By a minute dated 11 May 2023, Associate Judge Sussock directed that the date for provision of discovery was extended to 18 July 2023, confirming her direction that PJL was to instruct a lawyer and to file and serve a notice of change of representation by 1 July 2023.
[22] PJL did not file a notice of change of representation appointing a solicitor by 1 July 2023, or provide discovery by 18 July 2023. That led Waimauri to file its application for an unless order on 20 July 2023.
[23] Associate Judge Sussock issued a minute dated 9 August 2023 recording an extension of the Court’s grant of leave to PJL for representation by Mr Harvey:7
[5]As soon as counsel has been instructed for the defendant, the defendant is to file a notice of change of representation so the hearing date can be reallocated. In addition, the parties are to confer and agree a revised timetable for the completion of discovery and for the filing of any interlocutory applications and file a joint memorandum confirming that timetable as soon as possible.
[6]I direct:
6 Waimauri Ltd v Powell Junior Ltd HC Auckland CIV-2020-404-1694, 13 September 2022.
7 Waimauri Ltd v Powell Junior Ltd HC Auckland CIV-2020-404-1694, 9 August 2023.
(a)if not already filed, the defendant is to file his notice of opposition and affidavit in support to the plaintiff’s application for unless orders by 11 August 2023;
(b)the defendant is to file a notice of change of representation as soon as a solicitor has been instructed;
…
(e) a one and a half hour hearing is allocated on Tuesday, 24 October 2023 at 10 am.
[24] Relevantly, the direction in [5] only applied if PJL instructed counsel. The direction in [6](a) was phrased in terms of a direction to Mr Harvey personally.
[25] Waimauri’s application for an unless order was brought back on for hearing on 24 October 2023. I granted leave to Mr Harvey to represent PJL for the purpose of completing discovery, consistent with the previous directions of Associate Judge Sussock. I reserved Waimauri’s right to request that its application for an unless order be brought back on for hearing.
[26] Both Waimauri and PJL have now completed discovery. PJL has not instructed a legal representative. Waimauri’s application for an unless order was again brought back on for hearing on 15 April 2024.
Legal principles
[27]The general rule regarding corporate representation was stated by Cooke J in
Re G J Mannix Ltd:8
… apart from statutory exceptions, a corporation has no right to bring or carry on proceedings in a Court except by a solicitor. This refers to the filing of documents — writs, statements of defence, notices of appeal, etc.
[28] The rule was reaffirmed by the Court of Appeal in Commissioner of Inland Revenue v Chesterfields Preschools Ltd.9 In that case, the rationale behind the rule was described as follows:
8 Re G J Mannix Ltd, above n 2, at 311.
9 Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679.
[34] We consider that there are sound policy reasons why a solicitor, rather than a lay person such as an officer of a company, should act for the company in commencing and continuing civil litigation. A company is not a natural body and may have a number of officers, each with their own individual concerns and interests. A solicitor is ethically constrained to represent the company’s interests, unlike an individual officer who seeks to represent it. Moreover, if a solicitor is involved, the court can generally be satisfied that careful attention has been given to the validity of the proceedings, and that the company’s interests will be adequately presented and protected. Similarly, solicitors recognise the duties and responsibilities that are owed to the court and to the defendant in the conduct of litigation, and are less likely to require indulgences in the rules of procedure or to use court processes for vexatious purposes. The court must also have a solicitor on the record as it cannot exercise its disciplinary powers over a company. If a director or shareholder is representing the company there is a heightened risk that the representative will lack the objectivity that an independent solicitor can bring to the case …
(footnotes omitted)
[29] In appropriate circumstances, a court may make an exception to the general rule and exercise its discretion to allow a non-lawyer to appear on behalf of a corporate.10 However, a corporate’s lack of funds will not, by itself, justify the making of an exception.11
[30] In Re G J Mannix Ltd, the Court discussed an exception to allow a “one-man” company to be represented by its owner.12 McMullin J said:13
… it may seem somewhat unrealistic and illogical to allow a private person a right of audience in a superior Court as a party to proceedings but deny it to him when he is the governing or managing director of a small "one-man" company which is no more than his business alias. The principle that a company is a separate entity from its members … would suffer no erosion if he were given that right.
[31] In AFFCO New Zealand Ltd v NZ Premium Trading Company Ltd, Hinton J considered that in circumstances:14
… where a tightly-held, private company cannot afford representation, and where the interests of the company and a director are clearly aligned, a commonsense approach towards exercising the discretion is appropriate.
10 See Keemati Ltd v Civil Ltd [2021] NZHC 538 at [6].
11 Business Associates Ltd v New Zealand Post Ltd (1998) 12 PRNZ 497 (HC) at 501 citing
Radford v Freeway Classics Ltd [1994] 1 BCLC 445 (CA) at 448–449.
12 Re G J Mannix Ltd, above n 2, at 314–315.
13 At 315.
14 AFFCO New Zealand Ltd v NZ Premium Trading Company Ltd [2017] NZHC 2218 at [4].
The parties’ positions
[32] For Waimauri, Mr Lenihan submitted that the Court can have no confidence that Mr Harvey will prepare briefs of evidence that comply with the rules, and Waimauri has a right to the orderly conduct of the trial. Counsel highlighted the potential for:
(a)pre-trial applications in respect of PJL’s briefs of evidence or, alternatively, applications in respect of PJL’s briefs of evidence at the commencement of the trial; and
(b)general confusion regarding the state of the defence evidence.
[33] Mr Lenihan described the substantive issues for trial as complex: Waimauri’s case being a straight-forward claim for the recovery of a loan complicated by numerous defences asserted by PJL. Counsel observed that Mr Harvey is likely to be the primary witness for PJL, resulting in a lack of objectivity. The history of the proceeding to date demonstrates that Mr Harvey does not have a sufficient understanding of the law to manage PJL’s defence at trial.
[34] Mr Harvey advised the Court that PJL still wishes to instruct counsel to conduct the trial. Mr Harvey has endeavoured to retain Mr Glenie, counsel who represented PJL when the application for summary judgment was heard. Mr Harvey confirmed that PJL is endeavouring to agree terms for the instruction of Mr Glenie, which will necessarily need to include payment of fees that were acknowledged to be outstanding following Mr Glennie’s representation of PJL at the summary judgment hearing.
[35] Mr Harvey confirmed that PJL is not presently able to engage Mr Glenie, however Mr Harvey is optimistic that terms will be agreed and PJL will be in a financial position to retain counsel for the trial. In the interim, Mr Harvey proposes to prepare his own brief of evidence, with assistance from a legal advisor but not acting in the capacity as solicitor or counsel on the record.
Analysis
[36] PJL’s discovery was arranged and completed by Mr Harvey with assistance from an external provider. Waimauri has not raised any issue with the form or substance of the discovery provided.
[37] The only outstanding pre-trial step for PJL is preparation of witness statements and selection of documents for the common bundle.
[38] Preparation of PJL’s witness statements will be aided by the existence of the affidavits in opposition to the application for summary judgment, including Mr Harvey’s affidavits. Mr Harvey appears able to grapple with the issues that arise from Waimauri’s claim against PJL.
[39] Mr Harvey’s affidavit evidence in opposition to the application for summary judgment is that the property was always intended to be his family home. That evidence has not been contradicted.
[40] Mr Harvey and his wife intended to take title to the property in their own names, however Waimauri required that its finance be provided to a company, and PJL was therefore incorporated for that purpose.
[41] If not for Waimauri’s requirement that its advance be to a company, the mortgagor would be Mr and Mrs Harvey personally and Mr Harvey would have the right to represent the defendants. PJL is a vehicle for ownership of the property, and the interests of PJL and Mr Harvey are clearly aligned.
[42]It is necessary to balance the interests of the parties:
(a)Waimauri’s interest in an orderly disposition of its claim at trial, which will be served by an order that effectively prevents PJL from advancing its defence unless represented by counsel; and
(b)PJL’s interest in being able to advance a defence which has previously been held to be arguable.
[43] Waimauri seeks to gain possession of Mr and Mrs Harvey’s family home. It is in the interests of justice that PJL’s defence is heard. PJL is presently unable to afford legal representation, but that position may change.
[44] I consider that this is an appropriate case for leave to be granted to Mr Harvey to continue to represent PJL on terms that provide for on-going review. This can be achieved by reserving leave to Waimauri to seek a review of the grant of leave to Mr Harvey after the date for service of PJL’s briefs of evidence.
Orders
[45]I grant leave to Jason Harvey to continue to represent the defendant.
[46] Leave is reserved to Waimauri to seek a review of the grant of leave after 13 May 2024.
[47]There is no order as to costs.
[48] For ease of reference, I repeat the extant pre-trial directions made by Associate Judge Sussock on 15 September 2022:
(a)the defendant is to serve its briefs of evidence (including any experts’ briefs) together with an index of the documents it wishes to include in the common bundle by 13 May 2024;
(b)the plaintiff is to serve any briefs of evidence strictly in reply together with an index of any further documents for inclusion in the common bundle by 24 June 2024; and
(c)a pre-trial conference is to be allocated in the week commencing 8 July 2024 prior to which memoranda (preferably joint) are to be filed and served addressing:
(i)whether it would be appropriate for the defendant to open first given the nature of the defences raised;
(ii)whether a meeting of experts should be directed and potentially a report filed confirming matters on which the experts agree and disagree; and
(iii)directions for the timing of the filing of the common bundle and the parties’ openings.
Associate Judge Brittain
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