Wolzak v Proctor HC Wellington AP 143/00

[2001] NZHC 541

IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY AP 143/00

BETWEEN JOHANNA MAKARINA WOLZAK
Appellant

AND PHILIP MALCOLM PROCTOR
Respondent

Hearing: 21 June 2001

Appearances: P A Morten for appellant
M L Greenhough for respondent

Judgment: 21 June 2001

JUDGMENT OF DOOGUE J

Introduction

[1] This is an appeal against a District Court judgment for the respondent (“the friend”) against the appellant (“the wife”) in the sum of $39,561.80 together with interest and costs.

[2] The appeal turns on whether the District Court Judge was entitled to amend the friend’s statement of claim on her own motion in her substantive judgment without giving counsel an opportunity to be heard. The friend’s case before the District Court relied solely on unjust enrichment. It was accepted, however, that at present there is no such cause of action in New Zealand. The District Court Judge sought to remedy the defect in her judgment by substituting a different cause of action in contract.

Background

[3] The friend had an account with Benchmark Building Supplies Ltd. He agreed with the husband of the appellant (“the husband”) that the husband could charge against that account materials purchased from Benchmark Building Supplies Ltd for use on a property at 18 Bristol Street, Island Bay owned by the wife and the husband. At the time of this agreement the wife and the husband were separated. Effect was given to the agreement and goods of the value of $45,561.80 were supplied by Benchmark and charged to the friend’s account. The husband paid $6,000 of that amount. The balance was not paid and it was that balance which led to the judgment sum. The friend sued the husband and the wife. Judgment by default was obtained against the husband. The husband became insolvent. The friend could make no recovery from him. The friend took the view that, as the materials for which he had paid had been put into the property owned by both the wife and the husband, he should be entitled to recover from the wife. The friend’s proceeding in the District Court against the wife relied solely upon a cause of action based on unjust enrichment.

[4] The hearing in the District Court took two days. At the end of the evidence there was this discussion between then counsel for the wife and the District Court Judge:

“MS MATHERS: Before closing could I just raise one matter, and that is the way that Mrs Greenhough has been cross-examining, leading witnesses suggests that the case is being treated as a debt recovery case. I just want to make certain that we are all of the same mind and we are all dealing with an unjust enrichment case. Not just a simple debt recovery case.

THE COURT: Yes, well we’ll now get up to the legal -

MS MATHERS: I just wanted to make sure -

THE COURT: Having gathered the facts as best we can it’s really a question of liability -

MS MATHERS: I just wanted to make sure that we were all on the same - Mrs Greenhough wasn’t wanting to change the pleadings or do something like that.

THE COURT: Too late.”

(Closing submissions ensue.)

[5] Because of the concern of then counsel for the wife at the course that the closing submissions took, she lodged a memorandum with the District Court on 9 March 2000 which read as follows:

“This is a memorandum to record my objection that I made at the close of the Second Defendant’s [wife’s] case, regarding my concern as to the way in which the case was being run by the Plaintiff [friend]. My concern was that the Plaintiff was not running his case in accordance with the Plaintiff’s pleadings in the Statement of Claim.

This records my concern that the Plaintiff was running only an unjust enrichment case and not a debt or other type of recovery case.

This is to record the concession given by the Plaintiff at the time my objection was raised that this was purely an unjust enrichment case and Your Honour noted that concession accordingly.

The reason my objection was made and my concern was stated [was] to ensure that the Second Defendant ran her defence on the basis of the Plaintiff’s pleadings and to ensure that no amendments to the pleadings would be made by the Plaintiff. This was to prevent any prejudice to the Second Defendant.”

The District Court judgment

[6] The District Court gave its judgment on 16 May 2000. The Judge accepted in that judgment that the friend had conceded that in New Zealand unjust enrichment was not yet a stand-alone cause of action. The Judge referred to the conflicting dicta in the Court of Appeal judgments in National Bank of New Zealand Ltd v Waitaki International Processing (NI) Ltd [1999] 2 NZLR 211 and Rod Milner Motors Ltd v Attorney-General [1999] 2 NZLR 568, 576 as to whether unjust enrichment had the status of a cause of action in New Zealand. In the light of the conflicting dicta she reasonably accepted that it did not. She was understandably not referred to other dicta on the issue in Lankow v Rose [1995] 1 NZLR 277, 281, 287 and 289. In any event, in the light of the conflicting dicta in the Court of Appeal, it was hardly open to the District Court Judge to courageously decide that unjust enrichment could give rise to a cause of action in New Zealand. She preferred to adopt the view that unjust enrichment was an organising principle and not a cause of action in its own right.

[7] The Judge took the view that unjust enrichment as an organising principle would seem to apply very clearly to the facts of the case. However, as the friend had accepted unjust enrichment was not a cause of action, the Judge looked to a method by which she could uphold the friend’s claim against the wife as she had found that it had merit. She determined that the method by which she could do that was to amend the statement of claim, notwithstanding that there had at no time been any application to her by the friend to do that.

[8] To reach that result, the Judge relied upon Rule 11 of the District Court Rules, which she noted gave the District Court power to amend where necessary for the purposes of determining the real controversy between the parties “unless the amendment would cause some injury to the other party that cannot be compensated”.

[9] The Judge referred to the test for granting an amendment as set out in Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 as:

(a) Whether it was necessary to determine the real controversy between the parties; and

(b) Would not result in an injustice; and

(c) Would not cause significant delay.

[10] She determined:

“In this case the Court finds that the amendment is necessary to determine the real controversy, and that there would be no injustice to the defendants as the evidence would be no different to that adduced and there will be no real delay caused. Thus the Court amends the plaintiff’s pleadings pursuant to Rule 11(2) to add a cause of action in contract from which will flow the unjust enrichment pleaded by the plaintiff.”

This appeal

[11] It is in this extremely unusual circumstance that the wife understandably appeals.

[12] The appeal gives rise to two primary issues, namely, first, whether the District Court Judge was right in exercising her jurisdiction to amend the statement of claim and, secondly, if she was not right, what should be the outcome.

Was the Judge right in amending the statement of claim?

[13] In respect of the first issue, submissions were made for the friend that there could be no genuine prejudice to the wife in the course followed by the District Court Judge and that she did have jurisdiction to adopt the course which she did.

[14] With all respect to the submissions for the friend and the course taken by the District Court Judge, it appears to me that course is fatally flawed. It is clear that under Rule 11(2) of the District Court Rules and the corresponding High Court Rule, Rule 11(2), the Court may of its own motion amend a pleading. However, counsel for the friend has been quite unable to point to any case where the Court has amended a pleading of its own motion without first hearing from counsel. That is understandable, particularly as the Court will normally refuse to allow an amendment after trial: see Elders Pastoral Ltd v Pemberton (1990) 2 PRNZ 188, 190.

[15] In the only case of which I am aware where the issue has arisen, the Court of Appeal had no hesitation in allowing an appeal, vacating a judgment and referring the case back to the Supreme Court to enable the respondent, if so advised, to apply for an amendment to the pleading in the Supreme Court: see James v Wellington City [1972] NZLR 978, 982, 983.

[16] That was a different case in that it turned on an affirmative defence of volenti non fit injuria and did not relate to the statement of claim. The Court in that case accepted that the absence of a pleading would not prevent the Court from entertaining the defence if in all the circumstances of the case it was just to do so. The Court referred, with approval, at 982 to what was said by Buckley LJ in Re Robinson’s Settlement [1912] 1 Ch 717, 728 about the equivalent English rule:

“The effect of the rule is, I think, for reasons of practice and justice and convenience to require the party to tell his opponent what he is coming to the Court to prove. If he does not do that the Court will deal with it in one of two ways. It may say that it is not open to him, that he has not raised it and will not be allowed to rely on it; or it may give him leave to amend by raising it, and protect the other party if necessary by letting the case stand over. The rule is not one that excludes from the consideration of the Court the relevant subject-matter for decision simply on the ground that it is not pleaded. It leaves the party in mercy.”

[17] The Court of Appeal went on to say, at 983:

“It does not appear that in the present case the appellant was notified of a defence of volenti in any way, nor was the cross-examination of the appellant conducted in such a manner as would amount to fair notice of such a defence. I cannot therefore feel confident that if the defence had been properly pleaded no factual matters of significance could have been opened up which would have assisted the appellant. It may well be of course that in fact there is nothing which he could have brought forward which would be of avail to him. That however is not the point. He was not given a fair opportunity either by the pleadings or by the conduct of the defence to meet the allegation which is now made against him.”

[18] With all respect to the submissions for the friend, the principles underlying that decision are entirely apposite in the present case. As is submitted for the wife, if an amendment had been sought and granted at the opening of the friend’s case the wife would have had the ability to have changed her cross-examination of the friend, to have changed the way in which she led the evidence of her two witnesses and the focus of that evidence, and to have applied for and possibly obtained a nonsuit at the close of the friend’s case, and to have considered whether or not to have called evidence and the extent of that evidence. All of these matters are covered by the principles discussed in James just mentioned. It is not a question of whether that course would have occurred. The point is that the course of action adopted by the trial Judge has prevented it being considered.

[19] The appeal must therefore be upheld because of the determination by the District Court Judge in her substantive judgment to rely upon the provisions of Rule 11(2) of the District Court Rules without giving the parties an opportunity to be heard in respect of the course which she determined to adopt. That must particularly be so in the present case when there was not only the exchange between counsel for the wife and the Judge at the end of the evidence but counsel for the wife lodged the memorandum already set out above. To permit the judgment to stand in such circumstances would result in a gross miscarriage of justice so far as the wife is concerned. It is not enough to say, as has been said for the friend, that there may not be any prejudice to the wife. The point, as in James, is that the course adopted prevents that being determined.

What should the outcome be?

[20] The second issue is what should be the outcome of that finding in this Court. This is a particularly difficult issue in the circumstances of the present case. Both the wife and the friend are the unfortunate victims of the actions and omissions of the husband. He is the person responsible for the present position. What the District Court was facing was how the loss occasioned by the husband should be dealt with as between the wife and the friend. They are both innocents and yet one or other could be the loser.

[21] This Court’s powers in respect of the successful appeal are under s 77 of the District Courts Act 1947. The Court may order a rehearing, order that the case be referred back for amendment, order that judgment be entered in the District Court for either party, or make a final or other order on such terms as it thinks proper to ensure the determination on the merits of the real questions in dispute between the parties.

[22] Understandably, the wife seeks an order that judgment be entered for the wife in the District Court upon the grounds that the friend elected to run his case in the District Court in the way that he did. The wife makes the following submissions. It was the friend’s obligation to plead his case properly and to pursue it properly. The case went astray through no fault of the wife. There should be finality in the litigation. The wife should not be disadvantaged by the choice made by the friend in the way in which his case was presented. To adopt the language used in McCabe v Cassidy [1966] NZLR 112, 118, the wife should not be vexed with further proceedings in respect of the same matter. Again to adopt the language of that case, the friend had all the facts within his knowledge and chose to bring his action in a certain form in relation to those facts. The wife should not now be faced with a different case simply because of the way in which matters have turned out.

[23] Thus the wife opposes any order for a rehearing, any order that the case be referred back for amendment, or any order for nonsuit.

[24] I say at once that I do not think it appropriate that the case be referred back for rehearing or for amendment. It is clear that on the case as presented to the District Court there is nothing to be reheard. The friend relied upon a cause of action which it was accepted does not exist at present in New Zealand. Equally, it is inappropriate that the case be referred back for amendment when there cannot be a rehearing on the papers in the event of amendment. In my view, that leaves as the only other possible alternative to judgment for the wife in this case the possibility of a judgment of nonsuit in reliance upon Rule 490 of the District Court Rules, this Court having the same powers as the District Court on appeal: s 76(3) District Court Act 1947.

[25] The circumstances in which nonsuit will be entered by the Court under the rule are particularly where there has been a technical or procedural error in the presentation of the case and, if the case is permitted to proceed, there is at least a prospect that if the defect is made good it could give rise to a different result: see, for example McCabe v Cassidy and Tripp v Guest(Note) [1984] 1 NZLR 74 at 80, where the following passage from the decision of Barker J in a ruling in the case under appeal was cited with approval:

“I should just also indicate the result of the brief study of the authorities as to what I should do. I would not be happy at the thought of the plaintiff feeling that he had “lost out”, as it were, on a technicality. It seems from an authority such as McCabe v Cassidy [1966] NZLR 112, the proper course would be to nonsuit the plaintiff. The basis of the cases which were then summarised by Hardie Boys J was that a nonsuit is to be allowed except in those cases where there is no possibility of the plaintiff ‘patching up’ any deficiency in his case. Of course, the rules provide that where there is a nonsuit, the defendant is entitled to costs before the plaintiff can proceed again. So that the position is that the defendant is compensated for the abortive trial but the plaintiff does not miss out purely because of a technicality, that being the rationale of that decision. I refer in particular to the authorities cited by His Honour at p 117 of the Report.”

[26] See also Chase Wellington Properties Ltd v Hughes (1989) 3 PRNZ 121, at 126, where Greig J stated, in relation to the corresponding High Court rule:

“Under r 489 the Court may nonsuit the plaintiff whether he will or no. That is usually to be done on the application of the defendant, but the Court has an inherent right on its own initiative to nonsuit a plaintiff rather than to give judgment. This will be appropriate in circumstances where there is some technical failure on the part of the plaintiff’s proof or some oversight in its case but which failure may be remediable and so the plaintiff should be provided a further opportunity to pursue his case to a conclusion. On the other hand there may be circumstances where the proper course is to enter judgment and not nonsuit. The circumstances in which this may be appropriate are discussed by Hardie Boys J in McCabe v Cassidy, [1966] NZLR 112.”

[27] Although the outcome was different in James in that there there was a reference back for amendment, the principle underlying that reference back is equally applicable to the present circumstances. Here, as I have said, I do not think it appropriate to refer the case back solely on the basis of amendment, because underlying the submissions by counsel for the wife both at the end of the evidence and in her memorandum to the Court was the circumstance that the wife’s case would have been run in a different way if the friend’s case had been differently pleaded. Simply to permit amendment in this case could not result in justice to the wife. Mr Morten understandably sought to persuade me that at the end of the day, even if the friend’s case was pleaded in a different way, there would be a compelling inference that fairness would result in the wife succeeding. However, that submission is in stark contrast to the decision from which the appeal is brought. The District Court Judge only did what she did because she believed, having heard all the evidence, that fairness demanded that the friend should succeed.

[28] It is pertinent to note that in both McGechan on Procedure in respect of High Court Rule 489 and Brookers District Courts Procedure in the commentary on District Court Rule 490 there appears a somewhat similar passage. I cite from McGechan

“HR489.06 Timing

(4) Judgment

Judgment of nonsuit is appropriate where a claim which appears otherwise potentially meritorious must fail through a technical oversight in pleading, or a lack of evidence which may be curable. Conversely, where the Court considers a claim is irreparably defective (ie that there is no possibility of the plaintiff “patching up” any deficiency in its case) then the preferable course is to conclude the litigation by entering judgment for the defendant: Tripp v Guest [1984] 1 NZLR 74n, 80 (Richmond P citing with approval Barker J’s ruling at first instance); Van der Veeken v Watsons Farm Ltd [1974] 2 NZLR 146, 154 (plaintiff’s case irreparably defective - judgment entered for defendant); McCabe v Cassidy [1966] NZLR 112, 115 - 119.”

. . .

[29] Butterworths District Court Practice (Civil) contains similar passages:

“R490-7 Judgment for the defendant or nonsuit

. . .

“When it is apparent that the plaintiff has put his or her whole case forward and cannot suggest that it can be improved, and that case fails, the proper course is to enter judgment for the defendant: Knight v Mason (1912) 15 GLR 300.

If the defect in the plaintiff’s case cannot be made good or repaired, the proper course is to enter judgment for the defendant: Hutchinson v Davis [1940] NZLR 490, 505, [1940] GLR 345, 352 (CA), per Myers CJ. Where the matter of repair to the defect is conjecture, the proper verdict is nonsuit. Judgment for the defendant should be entered only with great caution: McCabe v Cassidy, [1966] NZLR 112, 118. See also Van der Veeken v Watsons Farm (Pukepoto) Ltd [1974] 2 NZLR 146, 154 . . . .”

[30] While I have great sympathy with both parties to this appeal, this is a case where the friend’s case may be able to be made good or repaired even if that is a matter of conjecture. In those circumstances, despite the great disadvantages for both the parties, the only proper course is that this Court should exercise its power to nonsuit the friend in the District Court to enable him to correct his pleading deficiency if he can. It is not a case which on its face is totally without merit or which could only result in judgment for the wife.

Decision

[31] For these reasons the appeal is allowed and a judgment of nonsuit is entered against the friend in the District Court.

Costs

[32] The wife is entitled to her costs in this Court in accordance with Category 2, Second Schedule, and Column B, Third Schedule, High Court Rules, together with any reasonable disbursements. Such costs and disbursements are to be fixed by the Registrar of the High Court in the event of any disagreement.

[33] As counsel agreed that it is preferable that costs in the District Court be fixed in this Court rather than referred back to that Court, they will be awarded to the wife in the same sum, of $5,000, as the District Court awarded to the friend, together with disbursements to be fixed by the Registrar of the District Court in the event of disagreement. Such an award may be slightly parsimonious in respect of the wife, as the District Court had noted in making that order that it did not cover the friend’s costs entirely because the friend had been partly the author of his own misfortune. Nevertheless it will do overall justice in the circumstances of the case.

Solicitors
Harkness & Peterson, Wellington, for appellant
C Ritchie, Wellington, for respondent