Wiltshire Investments Limited v Halstead HC Auckland CIV 2005-404-6473

[2007] NZHC 1636

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2005-404-6473

BETWEEN  WILTSHIRE INVESTMENTS LIMITED Plaintiff

AND  ERIC JOHN HALSTEAD Defendant

Hearing:         18 December 2006

Appearances: Sara Cameron for Plaintiff

John MacDonald for defendant

Judgment:      16 February 2007 at 4 p.m.

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

16.07.2007 at 4 pm, pursuant to
Rule 540(4) of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

Ms S Cameron, Lowndes Associates, P O Box 7311, Auckland

J Macdonald, Short & Partners, Parnell, Auckland

WILTSHIRE INVESTMENTS LIMITED V HALSTEAD HC AK CIV 2005-404-6473  16 February 2007

[1]      The plaintiff brought proceedings against the defendant seeking to recover the sum of the $235,406.35 arising out of a guarantee which the defendant allegedly gave extending to  rent payable  by persons who  are  not  presently parties to the proceedings who leased commercial premises from the plaintiff.  The plaintiff sought summary  judgment  against  the  defendant  and  I  gave  judgment  2  June  2006 dismissing that application.  Subsequently on 4 July 2006 the defendant issued third party proceedings.   The claim between the plaintiff and the defendant has yet to come to trial.  No judgment has been entered against the defendant.

[2]      In  his  statement  of  claim  against  the  first  and  second  third  parties  the defendant referred to the fact that on 1 November 1996 the defendant and the third parties entered into a deed of settlement.  It is claimed in the statement of claim that the

[F]irst third party indemnified the defendant in respect of any damage, loss or expense incurred or suffered by reason of any liability arising out of the failure to release the defendant from liability as covenantor or guarantor of the lease to the plaintiff.

[3]      The claim against the second third party is in similar terms.  The statement of claim alleges that the third parties failed to obtain a release of the defendant from liability as covenantor or guarantor and that the defendant is now facing the present claim.

[4]      Two of the first third party trustees, the Turleys, did not file a statement of defence to the third party proceedings.  On 18 October 2006 the defendant filed for sealing a judgment by default against the Turleys.  The judgment sought relief in the following terms:

Warren  Graeme  Turley  and  Anne  Barbara  Turley  not  having  filed  a statement of defence to the claim made against them by the defendant Eric John Halstead, it is this day adjudged that

a)        Warren Graeme Turley and Anne Barbara Turley admit i) The plaintiff’s claim against the defendant

ii)        The  defendant’s  right  to  the  relief  or  remedy  that  the defendant claims against Warren Graeme Turley and Anne Barbara Turley

iii)      The validity of any judgment that may be given in the proceeding whether by consent, default or otherwise

b)Warren Graeme Turley and Anne Barbara Turley are bound by any judgment so given which judgment may be enforced against them pursuant to the Rules of Court.

c)        Eric  John  Halstead  recovers  against  Warren  Graeme  Turley  and Anne Barbara Turley the sum of $5,646.25 for costs and disbursements (as per annexed schedule).

[5]      The Registrar referred the matter to me for consideration, being uncertain as to whether or not it was permissible to enter judgment in the form sought and in the circumstances obtaining.

[6]      After the Registrar referred the matter to me, I arranged for the matter to be listed in a chambers list and then heard comprehensive and helpful submissions from Mr Macdonald.  I now set out my conclusions.

[7]      The general rule is that the right to an indemnity does not usually arise until the person entitled to be indemnified has been called upon to pay and his or her liability has been ascertained: Telfair Shipping Corp v Inersea Carriers SA [1985] 1

All ER 243.

[8]      In Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147

CLR 589 at 595, the High Court of Australia said:

Although the right to an indemnity arises on payment of the liability to which it relates and not before, this is not a bar to the litigation as between a defendant and a third party, or as between defendants, of a claim based on an indemnity in respect of a liability in negligence asserted by the plaintiff in his action. It is accepted that under so-called “third party procedures” of the kind provided for by O. 16A, the claim to an indemnity may be litigated in the plaintiff’s action, notwithstanding that the payment creating the right to indemnity is not made until after the amount of the plaintiff’s verdict is ascertained in that action. It has been repeatedly affirmed that one of the peculiarities  of  third  party  procedure is  that  it  enables  litigation  on  the indemnity to take place before there is any liability (Hordern-Richmond Ltd v Duncan; Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport). Consequently, the fact that liability under the indemnity had not arisen was no bar to the Authority asserting its claim to an

indemnity in Soterales’ action by means of a notice served on Anshun under

O 16A, r 16.

[9]      This   “peculiarity”   fits  with  the  rationales  underlying   the   third   party procedure, which were explained by Scrutton J in  Barclays Bank v Tom [1923] 1

KB 221 at 223:

Now I think it is important to keep clearly in mind what the third party procedure is. A plaintiff has a claim against a defendant. The defendant thinks if he is liable he has a claim over against a third party. With that matter between the defendant and the third party the plaintiff has obviously nothing to do. He is not concerned with the question whether the defendant has a remedy against somebody else. His remedy is against the defendant. But the defendant is much interested in getting the third party bound by the result of the trial between the plaintiff and himself, for otherwise he might be at a great disadvantage if, having fought the case against the plaintiff and lost, he had then to fight  the case against  the third party possibly on different materials, with the risk that a different result might be arrived at. The object of the third party procedure is then in the first place to get the third party bound by the decision between the plaintiff and the defendant. In the next place it is directed to getting the question between the defendant and the third party decided as soon as possible after  the decision between  the plaintiff  and  the defendant,  so  that  the defendant may not be in the position of having to wait a considerable time before he establishes his right of indemnity against  the third party while all the time the plaintiff is enforcing his judgment against the defendant. And thirdly, it is directed to saving the extra expense which would be involved by two independent actions.

[10]     It is one thing to recognise that the rules governing third party procedures contemplate the inception of proceedings seeking an indemnity or contribution even before the right to such an indemnity or contribution has arisen.   It is altogether a different matter to take the further step and to contemplate entering judgment by default in those third party proceedings before the main judgment, from which the right to contribution or indemnity derives, has been entered.

[11]     In AMP Fire and General Insurance Company Limited v Dixon [1982] VR

833, the plaintiff had claimed damages for injuries for which the defendants were alleged to be responsible. The defendants then issued a third party notice against, inter alia, AMP Fire and General Insurance Co Ltd (AMP), alleging that AMP had by a policy of insurance agreed to indemnify the defendants in respect of all sums which  the  defendants  should  become  legally  liable  to  pay  for  compensation  in respect  of bodily  injury occurring  as  a  result  of  an  accident  and  happening  in connection  with  the  business.  The  defendants  claimed  a  declaration  that  the

insurance policy extended to them and that by virtue of it, they were entitled to be indemnified by AMP in respect of any judgment obtained by the plaintiff against them.  A Master then ordered that there be a separate trial between the defendants and AMP to determine the issues prior to the trial of the action between the plaintiff and the defendant.  The matter was subsequently heard by Tadgell J, who made the declaration sought. AMP appealed.  In the appeal judgment,  (which is the judgment cited above) the Court first addressed the question of whether the third party proceedings should have been determined before the trial of the action.  The Court considered a number of authorities, and noted at 837 that:

… to determine the third party’s liability to the defendant before the determination of the defendant’s liability to the plaintiff seems necessarily to determine an hypothetical question. It is clearly established by decisions of this Court, following a long line of authority, that the courts will not decide hypothetical questions or give advisory opinions.

[12]     The Court then examined the decision in Hordern-Richmond Ltd v Duncan

[1947] KB 545,

The decision in Hordern-Richmond v Duncan, supra, is therefore a decision upon a very unusual set  of facts  and affords  no  justification for  making a declaration  in  the present  proceedings.  If  it  is  ever  appropriate  to  grant  a declaration of the liability of a third party in third party proceedings before the liability of the defendant to the plaintiff is established, it can only be in most exceptional circumstances.

[13]     In effect, the plaintiff here is seeking a declaration that  the defendant  is entitled to an indemnity against a liability which is yet to be entered.  The Court is in effect being asked to make a declaration as to liability.   In my view the approach taken by the Supreme Court of Victoria (Full Court) in AMP Fire provides guidance as to the appropriate approach to be taken in this case.

[14]     This approach contemplates that it will only be in exceptional circumstances that the liability of a third party will be determined before the entering of judgment against the plaintiff.  This does not preclude the instituting of third party proceedings prior to the determination of the claim between the plaintiff and defendant. Indeed, this is consistent with the discussion of the nature of third party proceedings in Barclays Bank v Tom [1923] 1 KB 221. That judgment notes that that one rationale for this type of proceeding is so for the question of third party liability to be determined as soon as possible after  the  liability  of  the  defendant,  so  that  the

defendant not have to wait an undue amount of time to enforce his or her right to indemnity.

[15]     There are no exceptional circumstances in this case that warrant what is in effect a declaration as to the third parties’ liability. That being my conclusion, I decline to enter judgment as sought by the defendant.

J.P. Doogue

Associate Judge