Williams v Van Loghem Investments Limited

[2012] NZHC 1446

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2008-404-5241 [2012] NZHC 1446

BETWEEN  PAUL KEVIN WILLIAMS AND VICTORIA CATHERINE WILLIAMS Plaintiffs (discontinued)

ANDVAN LOGHEM INVESTMENTS LIMITED

First Defendant

ANDDEREK CLIFTON SALTMARSH Fourth Third Party

Hearing:         19 June 2012

Counsel:         AME Parlane for the First Defendant

S Tee for the Fourth Third Party

Judgment:      25 June 2012

RESERVED JUDGMENT OF ELLIS J

This judgment was delivered by me on 25 June 2012 at 12 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:      Parlane Law, PO Box 1846, Auckland 1140

Morton Tee & Co, PO Box 331-133, Takapuna, Auckland

VAN LOGHEM INVESTMENTS LTD V SALTMARSH HC AK CIV-2008-404-5241 [25 June 2012]

[1]      Mr Saltmarsh applies for review of Associate Judge Bell’s (oral) judgment dated 30 March 2012 declining to vary or set aside an (oral) default judgment that was given by Andrews J following a formal proof hearing held on 13 April 2011.[1]

The result of the judgment was that Mr Saltmarsh became liable to pay to van

Loghem Investments Ltd (van Loghem) some $380,000 plus interest.

[1] Williams v van Loghem Investments Ltd HC Auckland CIV-2008-404-005241, 30 March 2012, [2012] NZHC 829; and Williams v van Loghem HC Auckland CIV-2008-404-005241, 13 April 2011 (HC) respectively.

[2]      It is not disputed that Mr Saltmarsh was formally served with van Loghem’s claim and had proper notice of the formal proof hearing.  Nor is it disputed that he took no steps either prior to entry of judgment by default, or subsequently, until van Loghem initiated bankruptcy proceedings against him.

[3]      The proceeding giving rise to the default judgment involved a leaky building claim in which the plaintiffs (Mr and Mrs Williams) initially sought damages of approximately $569,000 against van Loghem.  Van Loghem was the developer who had  sold  the  leaky  house  in  question  to  the  plaintiffs.    Following  settlement, van Loghem in turn brought third party claims seeking contribution under s 17 of the Law Reform Act 1936 from (inter alia) the North Shore City Council, the architects, Mr Saltmarsh (in relation to the plastering) and Mr Stewart (the builder).  These third parties were later added as defendants to the proceeding.

[4]      Van Loghem settled its claim with the plaintiffs for $380,000.  The Council also settled.  Like Mr Saltmarsh, Mr Stewart had taken no steps in the proceedings and  had  not  participated  in  the  settlement  negotiations.    Following  settlement, van Loghem then pursued its contribution claims against both men as it had reserved the right to do.  Unlike Mr Saltmarsh, Mr Stewart (eventually) filed a statement of defence to Van Loghem’s claim and thus no possibility of default judgment against him arose. Van Loghem’s claim against Mr Stewart remains extant in this Court.

[5]      As regards Mr Saltmarsh, there was, as I have said, a formal proof hearing on

13 April 2011.   Van Loghem filed an affidavit from a building surveyor who had originally been instructed by the plaintiffs to provide them with advice and a report

to assist in their claim against van Loghem.  As was said in Associate Judge Bell’s

judgment presently under review:

[11]      ... Mr Alvey’s evidence contains very full annexures setting out what seems to be a very thorough investigation of the claim.   Part of his report shows that he analysed the defects and then considered which of various participants in the building project were factually responsible for those defects.  The people he considered might be responsible were the architect, the local authority, the builder, the plasterer, the membrane applicator, the developer and the handrail installer.

[12]     Included in his report is a schedule where he has gone through the defects and indicated whether any of the participants could be responsible for particular defects.   He has given a tick where he has shown that that particular participant has factual responsibility.  By “factual responsibility” I mean that in some way the actions or inactions of that participant have caused the loss.   In his affidavit Mr Alvey said that the plasterer and the builder  were  responsible for  100  per  cent  of the  losses suffered  by the plaintiffs.  I accept that in giving that evidence Mr Alvey was meaning to tell the court that for all of the defects which gave rise to the claims for damages, the plasterer and the builder were responsible.  That is, there were no defects for which they did not carry some responsibility in a factual sense.

[6]      On  the basis  of Mr Alvey’s  affidavit  van  Loghem  sought,  and  obtained, judgment by default requiring Mr Saltmarsh to contribute the whole of the $380,000 settlement sum paid by van Loghem to the plaintiffs, together with interest.  In this respect Andrews J had said:

[10]      In  support  of  the  application  for  judgment  by  formal  proof Ms Parlane has referred me to the affidavit of Neil Alvey as to quantum of damages.    Mr Alvey  is  a  building  surveyor  and  was  requested  by  the plaintiffs in this proceeding to provide consultancy services in respect of remedial work required to their house at Milford, Auckland.   Mr Alvey determined  that  the  total  losses  sustained  by  the  plaintiffs  amounted  to

$569,046.21.

[11]      At paragraph 16 of his affidavit, Mr Alvey records that this is the quantum figure that the plaintiffs sought to recover from the defendants and third parties in their proceeding.  Mr Alvey annexed a substantial bundle of invoices and confirmation of payments of work required. At paragraph 19 of his affidavit Mr Alvey records that the plaintiffs have entered into an agreement with other parties to settle the claim.  The total sum accepted by the  plaintiffs  was  $475,000  in  full  and  final  settlement  of  their  claim. Mr Alvey records that, of that sum the first defendant has paid $380,000.

[12]      Further,  at  paragraph  21  of  his  affidavit  Mr  Alvey  records  his opinion that the damage caused by the plasterer and builder of the plaintiffs’ house exceeded the sum of $380,000, which is what was paid by the first defendant.    He  expresses his  opinion that  the  responsibility of both the builder and the plasterer was 100% of the claim. The fourth third party is the plasterer referred to.

[13]      The first defendant seeks judgment against the fourth third party for

$380,000.  That is, the first defendant seeks contribution to the full extent of his payment to the plaintiffs.  The first defendant also seeks costs on a 2B

basis and disbursements, in the total sum of $13,536.   The first defendant

also seeks interest on the sum of $380,000.

[14]      I am satisfied that it is appropriate to enter judgment by way of formal proof against the fourth defendant, and that the amount referred to in Mr Alvey’s affidavit is appropriate.

[15]      Accordingly, judgment may be entered against the fourth third party in favour of the first defendant, in the sum of $380,000.

[7]      Neither  Andrews  J  nor  Associate  Judge  Bell  noted  in  their  respective judgments   that   Mr Alvey’s   schedule,   which   indicated   where   he   thought responsibility  for  the  various  defects  lay,  also  made  it  clear  that,  in  his  view, van Loghem was also 100 per cent responsible for the damage to the house.

[8]      In declining Mr Saltmarsh’s application to set aside the default judgment, the Associate Judge first considered whether it could be said that the judgment had been obtained irregularly.[2]   He concluded that it had not.  Then he referred to the orthodox High Court Rule 15.13 principles which require the weighing of three main factors, namely:[3]

[2] A judgment obtained irregularly may be set aside ex debito justitiae.

[3] Paterson v Wellington Free Kindergarten Association Inc [1996] NZLR 975 (CA) at 983.

(a)       Whether the delay by Mr Saltmarsh in taking any steps had been reasonably explained;

(b)      Whether Mr Saltmarsh had a substantial ground of defence;

(c)       Whether van Loghem would suffer irreparable injury if the judgment was set aside.

[9]      The learned Associate Judge then looked broadly at the issue of whether it could be said there has been or may have been a miscarriage of justice as required by

r 15.13.[4]

[4] Rule 15.13 simply provides:

Any judgment obtained by default may be set aside or varied by the court on such terms as it thinks just, if it appears to the court that there has been, or may have been, a miscarriage of justice.

[10]     As  regards  the first  factor,  the Associate  Judge  found that  there was  no reasonable explanation for Mr Saltmarsh’s delay in taking steps.  That was not really in dispute, and Mr Tee did not invite me to depart from that conclusion.  He accepts that Mr Saltmarsh took no action in the proceeding simply because he hoped they would go away and that if other parties settled the claim he might manage to avoid liability.  Mr Tee submitted, however, that the absence of any reasonable excuse was given too much weight on the r 15.13 scales.

[11]     In terms of whether Mr Saltmarsh had a substantial ground of defence, the

Associate Judge’s judgment records that Mr Tee submitted that:[5]

[5] Williams v van Loghem Investments Ltd, 30 March 2012 at [25].

(a)       the amount of interest that was awarded was excessive;

(b)Mr Saltmarsh does not have any personal responsibility for the defects suffered by the plaintiffs and cannot be sued in tort; and

(c)       even  if  Mr  Saltmarsh  is  tortiously  liable,  the  amount  of  his contribution as a concurrent tortfeasor has not been correctly assessed.

[12]     Mr Tee was successful in relation to the first point and the amount of interest awarded under the default judgment was varied by the learned Associate Judge.

[13]     Mr Tee’s argument in relation to the second matter was not successful for the reasons given in the Associate Judge’s decision and Mr Tee does not now seek to pursue  that  matter.    Mr  Tee  thus  accepted  that  default  judgment  in  relation  to Mr Saltmarsh’s liability (or his status as a joint tortfeasor) was rightly entered and, consequently, that Associate Judge Bell’s decision declining to set that aspect of her judgment aside, was also correct.

[14]     The remaining issue under the “substantial ground of defence” factor related to the assessment of Mr Saltmarsh’s contribution under s 17 of the Law Reform Act

1936.  Section 17 relevantly provides:

Proceedings against, and contribution between, joint and several tortfeasors

(1)     Where damage is suffered by any person as a result of a tort (whether a crime or not)—

...

(c)     Any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued in time have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.

(2)     In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the Court to be just and equitable having regard to the extent of that person's responsibility for the damage; and the Court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.

[15]     The section is expressly predicated on the claimant for contribution himself being a tortfeasor.  Van Loghem must be taken to have accepted that and, indeed, presumably it was for that reason that it settled the claim against it by the plaintiffs. In  terms  of  the determination  of  respective  contributions  under the section,  the

learned authors of The Law of Torts in New Zealand state:[6]

[6] Stephen Todd (ed) The Law of Torts in New Zealand (Thomson Reuters, Wellington, 2009) at

24.3.05

In making an apportionment the court must have regard to the causative potency of the conduct and to the relative blameworthiness of the parties.  A more serious fault having less causative impact on the plaintiff’s damage may represent an equivalent responsibility to a less serious fault which had a greater causative impact.

...

Ultimately  what  is  a  “just  and  equitable”  division  of  responsibility  is

essentially a question of fact.

(citations omitted)

[16]     In  the  present  case,  the Associate  Judge  recorded  Mr Tee’s  contribution argument, and the reasons for his rejection of it, in the following way:

[29]     The final aspect of the substantial grounds of defence is the one to which Mr Tee gave most attention.  The focus of his submission was that in her formal proof judgment, Andrews J had held that Mr Saltmarsh should pay 100 per cent of the amount which van Loghem Investments Ltd had agreed  to pay in  settlement.   The judgment  suggests  that she took into account the evidence of Mr Alvey that both the builder and the plasterer were  100  per  cent  responsible  for  the  building  defects  which  were  the subject of the claim by the plaintiffs.  The argument for Mr Saltmarsh is that that  showed  a  misunderstanding  of  the  evidence  of  Mr  Alvey.    As  I understand  the  argument,  Mr  Alvey  was  simply  doing  what  an  expert building surveyor would do in giving expert evidence on building defects. He was giving his factual findings as to the extent of the defects for which a particular participant on a building project was factually responsible, that is, whether their actions or inactions caused particular defects.   Mr Tee’s submission  was  that  Mr  Alvey’s  evidence  cannot  be  read  as  ascribing relative responsibility for determining apportionment of liability for a contribution claim under s 17 of the Law Reform Act 1936.

[30]      I accept that if the applicant had taken part in the proceeding, and had been given the opportunity to adduce evidence and make submissions, he would have presented a case that in apportioning responsibility for the purpose of a contribution claim he would not have been held 100 per cent responsible.  He has a reasonable case that the court would more likely have apportioned liability so that he would not have carried 100 per cent responsibility and that van Loghem Investments Ltd and Mr Stewart, the builder, would also carry some liability.   Had Mr Saltmarsh taken steps ahead of any mediation, there would also have been apportionment with the architect and the local authority.

[31]     He has an argument that it is an unusual finding in a contribution claim, under which van Loghem Investments Ltd has its own liability as a concurrent tortfeasor, that it should not carry any responsibility at all, and that the liability lies entirely with the director of the plastering company instead.  He has an argument that on a re-hearing he would be able to present evidence and submissions that would result in a different judgment from that given by Andrews J on the formal proof hearing.  I accept that there would be, arguably, a different result on a re-hearing of this case and there would also have been a different result if he had defended the case at the outset.

[17]     This analysis formed the central plank of Mr Saltmarsh’s application for review before me.   Mr Tee said that the “contribution” issue was not simply a question of whether or not Mr Saltmarsh had a substantial ground of defence, but rather one that went to whether or not Andrews J’s judgment had been irregularly obtained.  In making that submission he accepted that this was not quite the way the matter had been advanced before Judge Bell, although the underlying argument was essentially the same.

[18]     I agree that the matters raised by Mr Tee are more fundamental than simply whether there were defences that Mr Saltmarsh “might” have argued which “might” have been successful.  I say that because:

(a)      As noted by Andrews J, Mr Alvey’s evidence, which formed the basis for the default judgment, had its origins in a report prepared for the plaintiffs (rather than van Loghem).  In my view this led to confusion in the default judgment between the joint and several or in solidum liability of multiple defendants to a plaintiff in a tort claim and the liability of joint tortfeasors to contribute as between themselves under s 17(2);

(b)What Mr Alvey did not do is express a view about apportionment or “causative potency”.  His opinion that Mr Saltmarsh was 100 per cent responsible for the damage to the house may be relevant to that issue but it cannot be determinative of it.  In particular, that statement must be  understood  and  applied  in  the  context  of  his  evidence  of Mr Alvey’s opinion that Mr Stewart (and van Loghem) were also 100 per cent responsible for the relevant damage;

(c)      The default judgment also does not assess the causative potency of the acts   or   omissions   of   the   relevant   joint   tortfeasors   (namely van Loghem, Mr Stewart and Mr Saltmarsh).  Nor does it apportion responsibility between them on the basis of justice and equity;

(d)The  effect  of  the  default  judgment  is  that  Mr  Saltmarsh  must completely indemnify van Loghem (rather than make contribution) but there was (in my view) no evidentiary basis upon which such an indemnity might be ordered[7].

[7] As I understand it, the basis for a complete indemnity would usually be contractual.

[19]     The difficulties I have identified above are highlighted by the fact that the claim against Mr Stewart in which van Loghem also seeks a contribution of up to

$380,000 (plus interest) remains extant.  It may well not be possible to proceed by

default in a claim for contribution against one joint tortfeasor in circumstances when a claim against another joint tortfeasor in relation to the same damage is pending. Logic would suggest that this may be so; how is an assessment of justice and equity to be made when a critical part of the factual matrix is absent?

[20]     But, in any event, the upshot in the present case is that I consider that the “proof”   required   to   support   the   default   judgment   (as   to   the   quantum   of Mr Saltmarsh’s contribution) was very arguably not present.  Regardless of whether that means (as Mr Tee submitted) that the judgment was “irregularly obtained” it necessarily follows, in my view, that there has been, or may have been, a miscarriage of justice in terms of r 15.13.

[21]     For completeness I record that the other plank of Mr Tee’s argument was that, in considering the question of “irreparable injury”, the Associate Judge was also wrong  to  focus  principally  on  the  fact  that  van  Loghem’s  settlement  with  the plaintiffs could not now be undone.  In that respect the Judge said:

[40]      If Mr Saltmarsh had chosen at the outset to defend the claims against him he would have been drawn into the settlement process and he would have been involved in settlement discussions.  It is more than likely that he would have made some contribution towards the settlement.  By not taking part in the proceeding he elected out of that process.  He took the risk of the consequences in not taking part.

[41]     Because there has been a settlement with the plaintiffs, that matter cannot now be re-opened.  The settlement negotiations ran on the basis that Mr Stewart and Mr van Loghem were not there and were not willing to make any contribution to settlement.   The load, the contribution to the total settlement, had to be spread amongst only those taking part.  Van Loghem Investments Ltd has probably contributed more than it might otherwise have had to contribute to get a settlement figure which would be acceptable to all parties.

[42]      There is now a prejudice to van Loghem Investments Ltd because it is now being asked to deal with the matter on the basis that Mr Saltmarsh would like to have had a say in the settlement negotiations when it elected not to.  The short point is that the settlement is now an historic fact which cannot  be  changed.   To that  extent  there  has  been irreparable  injury to van Loghem because it has committed itself to that settlement and it cannot now change that fact of settlement.

[43]     I accept part of the submissions of the respondent that there will be other prejudice to it if judgment were to be set aside.   Van Loghem Investments Ltd has made a significant investment in this litigation in the sense that it has engaged lawyers, it has invested time and effort in trying to

resolve this claim, and it has committed itself to a very significant settlement to try and dispose of this proceeding.   Having made that significant investment, it would cause hardship to it if it were now required to embark on further litigation which would involve traversing matters which it had hoped to put to rest in its settlement.

[44]     I also accept that there are other people who have been involved in litigation over the plaintiffs’ property and who would have been pleased to put the matter behind them.  There are the other experts.  There are the other parties.   In effect there is a significant public value in the finality of the settlement of this litigation.  The applicant here is coming along belatedly and wants to destroy the value of that finality by asking for a second chance to look at the case again.  I accept, accordingly, that there is quite a serious and significant prejudice to van Loghem Investments Ltd and other people in allowing this matter to be re-opened.

[22]     Mr Tee was critical of this analysis because:

(a)      Mr Saltmarsh’s (lack of) participation in the settlement negotiations was not relevant to the issue of any irreparable damage that might be suffered by van Loghem;

(b)While van Loghem’s settlement was a fact that could not be altered, it was irrelevant  to whether it would  suffer irreparable injury if the default judgment was set aside.

[23]     I tend to agree.

[24]     Mr  Saltmarsh’s  refusal  to  engage  in  any  aspect  of  the  litigation  (which included the settlement negotiations), his reasons for that refusal and the risk he took by putting his head in the sand and his fingers in his ears are certainly matters which are highly relevant to the exercise of the r 15.13 discretion.  But those matters had already been considered separately and given considerable weight by the Associate Judge.   The reference to it again in the “irreparable harm” context (with which it seems to me to have only a very tenuous connection) does suggest that it may have been “double counted” in the r 15.13 balancing exercise.

[25]     As well, while I am sure that van Loghem did settle with the plaintiffs on the basis that it could and would then pursue Mr Stewart and Mr Saltmarsh for their contributions, it could never foresee with any certainty:

(a)       what, if anything, it would recover from either of them; or

(b)      how long it would take to achieve any such recovery; or

(c)      whether or not it would be able to obtain judgment by default against one or both men.

[26]     The one thing that van Loghem could reasonably be certain of was that in order to recover from Mr Saltmarsh, it would have to (formally) prove its claim, both as to liability and as to his appropriate contribution.   It could not reasonably have expected  recovery  of  a  sum  to  which  it  was  not  entitled  or  that  a  potential miscarriage of justice would be entertained by the Court.

[27]     Although I accept, as did the Associate Judge, that there will be other (wasted time and cost) prejudice to van Loghem if part of the judgment is set aside, such prejudice is not irreparable and, indeed, considerably mitigated by the fact that:

(a)       it will still have its liability judgment against Mr Saltmarsh;

(b)Mr  Saltmarsh  will  ultimately  be  required  to  contribute  whatever portion of the $380,000 (plus interest) is deemed “just and equitable” after the relative causative potency of his acts or omissions are assessed; and

(c)       it will still be able to pursue Mr Stewart for a like contribution.

[28] My views in relation to the irreparable damage issue therefore serve to fortify the conclusion I have recorded at [20] above.

[29]     In summary, although setting aside a decision involves the exercise of a discretion, I consider that in this case the learned Associate Judge was wrong not to set aside the quantum aspect of the default judgment, for the reasons I have given. In saying that I appreciate and record that the issues of quantum and liability were much  more  closely intermingled  at  the  hearing  before  him  and  that  aspects  of Mr Tee’s submissions were necessarily more sharply focussed before me.   I also

wholeheartedly agree that Mr Saltmarsh’s failure to engage with the proceedings until he could no longer hide from their reality was both egregious and lamentable. Delays of the kind he has occasioned do count very strongly against what he now seeks.  But it is equally clear, in my view, that there has been, or may have been, a miscarriage of justice occasioned by the default judgment (as to quantum) and that aspect of it should be set aside accordingly.

[30]     In formal terms, the application for review of the judgment of 30 March 2012 succeeds and the judgment of Andrews J dated 13 April 2011 as to the quantum of Mr Saltmarsh’s contribution is set aside.  That issue will now need to be determined together with the claim against Mr Stewart or in whatever other parallel way is most convenient or expeditious.  Mr Saltmarsh is on notice that any further delays on his part are likely to have consequences of the most serious kind.

[31]     The matter is to be placed in the next convenient duty list in order that timetabling directions can be made.  I would expect that at that time counsel will be in a position to advise whether, to what extent and how the remaining aspect of the

claim against Mr Saltmarsh can be managed with the claim against Mr Stewart.

Rebecca Ellis J