DINERS CLUB (NZ) LTD v DISTRICT COURT AT AUCKLAND [2016] NZHC 2551

DINERS CLUB (NZ) LTD v DISTRICT COURT AT AUCKLAND [2016] NZHC 2551 [26 October 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2016-404-001202[2016] NZHC 2551UNDER the Judicature Amendment Act 1972IN THE MATTER of an application for judicial review ofdecisions by the District Court atAuckland not to enter judgment by defaultand to set the plaintiff's proceeding downfor formal proofBETWEEN DINERS CLUB (NZ) LIMITEDPlaintiffAND THE DISTRICT COURT ATAUCKLANDFirst DefendantRICHARD LESLIE BROOKERSecond DefendantProceedings continued overHearing: 1 September 2016Appearances: R J Katz QC and J G Ussher for the Plaintiff/AppellantA M McClintock for the Commerce CommissionJudgment: 26 October 2016JUDGMENT OF EDWARDS JThis judgment was delivered by Justice EdwardsOn 26 October 2016 at 11 am, pursuant toR 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Counsel: R J Katz QC, AucklandSolicitors: J G Ussher, AucklandMeredith Connell, AucklandCIV-2016-404-001202UNDER Part 21 of the High Court RulesIN THE MATTER OF a case stated from the District Court at AucklandBETWEEN DINERS CLUB (NZ) LIMITEDAppellantAND RICHARD LESLIE BROOKERRespondentIntroduction[1] The Commerce Commission applies for leave to intervene in two proceedings brought by Diners Club NZ Ltd (Diners).[2] At issue in the proceedings is the power of the District Court to decline to seal default judgments for liquidated demands and instead refer the proceeding to a formal proof hearing. That course has been followed where the Registrar or Judge forms the view that a claim may be based on a contract or transaction that is oppressive within the meaning of the Credit Contracts and Consumer Finance Act 2003 (Act).The Proceedings[3] Diners has commenced two proceedings: an appeal by way of case stated and a judicial review.[4] Both proceedings arise out of a claim by Diners against Mr Brooker (the respondent and second defendant respectively in the proceedings). The District Court Registrar refused to enter default judgment pursuant to r 15.7 of the District Court Rules 2014 against Mr Brooker, and instead referred the proceeding to Judge Harrison for direction. Judge Harrison set the proceeding down for a formal proof hearing.[5] The underlying concern of both the Registrar and the Judge was that theamount claimed by Diners' appeared to be oppressive. Section 120 of the Act allowsa court to reopen a credit contract where it considers that a contract is oppressive; where a party has exercised or intends to exercise a right or power conferred by a contract in an oppressive manner; or where a party has induced another party to enter a contract by oppressive means.[6] There are conflicting District Court decisions about whether a Judge has the power to reopen a contract under s 120 of the Act of his or her own motion.11 See for example Agco Finance Ltd v McGowan [2015] NZDC 22298; and Aotea Finance (West Auckland) Ltd v Hiku [2015] NZDC 22553.Accordingly, on Diners' application, Judge Harrison stated a case on appealrequiring this Court to determine that question.[7] Diners considered that judicial review was the more appropriate avenue to determine this question and filed a statement of claim on 3 June 2016. That proceeding challenges the decisions of the District Court not to enter judgment by default, and to set the proceeding down for a formal proof. Guidelines issued by the Chief High Court Judge and training guides on dealing with applications for default judgment are also challenged in the proceeding.2[8] Diners says it is a nominal plaintiff only and is representing a host of other interested and affected creditors. A number of grounds for review are pleaded, but for present purposes the key allegations are that the District Court acted illegally and/or ultra vires the Act and the District Court Rules. It is also pleaded that in making a decision, the District Court failed to take into account a raft of relevant considerations. These include the fact that protections for consumers of financial services are contained in the Act and include the grant of power to the Commerce Commission to bring claims to reopen oppressive credit contracts.[9] While both proceedings remain on foot, Mr Katz QC advises that in reality the case stated has fallen away, with the judicial review being the appropriate vehicle for relief.[10] Subsequent to the hearing of the application to intervene, the decision inReal Finance Ltd v Setefano was released.3 The issues in that case were essentiallythe same as those which are advanced in Diners' proceedings. Mallon J held that the Court had jurisdiction to reopen an oppressive contract under s 120 of the Act on its own initiative. In the course of considering arguments raised by the appellant in that case Mallon J said the following:[49] It can also be argued that, if the court has jurisdiction to reopen an oppressive contract on its own initiative, this is inconsistent with the remedies available under Part 3. For example, an order to refund an2 See Guidelines for Registrars on District Courts Rules 2014; and Judgment by Default Central Processing Officers: Desk Guide.3 Real Finance Ltd v Setefano [2016] NZHC 2293.unreasonable fee, or an order that a credit fee cannot be imposed, may bemade "on the application of the Commission or any party to" a creditcontract.4 However Part 3 and Part 5 of the Act can be seen as working alongside one another. Orders (and other remedies) under Part 3 are available where they are sought by or on behalf of a party. They do not require oppression to be proven. Relief against oppression may be grantedwhen it arises in a proceeding "whether or not it is brought under [the] Act".5[50] It can also be argued that, where the court has concerns about oppression in the context of an application for a default judgment, the proper course is to refer the matter to the Commerce Commission. The Commission has the function of monitoring credit markets and the conduct of creditors and taking civil proceedings under the Act. It has the right to appear and be heard in proceedings even if it was not a party to the proceedings. However it has no duty or obligation to bring any proceedings, and its priorities may not enable it to intervene in every case where a default judgment is sought for a debt under a loan agreement which may raise issuesof oppression. The Commission's right to appear and be heard in any proceeding "does not affect the court's power to make any order".6 The Commission's role does not therefore preclude the court from acting on itsown motion.Grounds for application[11] The Commission submits that it can provide contextual background which will assist in determining the scope of the relevant provisions.[12] If given leave, the Commission would submit that prohibiting the District Court from intervening in situations where the creditor is not legally entitled to the amount sought, or under the oppression provisions, will give rise to abuse of process issues. The Commission says it is best placed to provide submissions as to whether its legal powers under the Act and the Fair Trading Act 1986 are an adequate safeguard in cases of oppression.[13] Further, the Commission says it has direct experience with creditors claiming costs or interest contrary to their legal entitlement and with consumers who are significantly indebted and unlikely to take the steps to set aside a default judgment. It proposes to adduce affidavit evidence detailing situations where the Commission regularly finds collection costs, fees and interest are unlawfully charged in breach of4 Sections 94 and 95(1).5 Section 120.6 Section 112(4).the Act, and a recent prosecution of two finance companies for misrepresentations made to debtors.Relevant legal principles[14] The Court's inherent jurisdiction and r 7.43A(d) and (e) of the High Court Rules allow the Court to grant leave to a non-party to intervene in proceedings.7[15] In Seales v Attorney-General Collins J set out the following principles to apply in determining an application for leave:8[45] First, the power to grant leave to intervene is discretionary and should be exercised with restraint to avoid the risk of expanding issues, elongating the hearing and increasing the costs of the litigation.[46] Second, in a proceeding involving issues of general and wide public importance, leave to intervene may be granted when the Court is satisfied that it would be assisted by the intervener.[47] Third, it may be appropriate to grant leave to intervene where the proceeding is likely to result in the development of the law.[48] Fourth, leave should not be granted when the proceeding is essentially one that involves statutory interpretation and is unlikely to involve broad questions of policy.(citations omitted)[16] I have also had regard to the principles outlined in McClintock v Attorney-General, C v Accident Compensation Corporation and X v X. 9Analysis[17] As Mr Katz submits, the issues in the proceedings are primarily concernedwith statutory interpretation. They involve consideration of the District Court'spowers under r 15.7 and the scope of the powers under ss 120 and 125 of the Act. As the decision in Real Finance makes plain, both those questions are able to be answered without intervention from the Commerce Commission.7 Seales v Attorney-General [2015] NZHC 828 at [41].8 Seales v Attorney-General, above n 7.9 McClintock v Attorney-General [2015] NZHC 1280 at [44]; C v Accident Compensation Corporation [2013] NZCA 34 at [12]; and X v X HC Auckland CIV-2006-404-903, 4 July 2006 at [18]–[28].[18] It is difficult to see how the evidence that the Commerce Commission intendsto adduce will be relevant to the scope of the District Court's powers. Individualexamples of cases where costs, fees and interest are unlawfully charged in breach of the Act, or recent prosecutions, may be of background interest, but they are unlikely to bear weight on the determination of the key issues.[19] However, the proceedings are at a relatively early stage. The content of theproposed affidavit has not been finally settled. Part of Diners' challenge to theGuidelines and practice manual is that there is no guidance on how to assess the fairness and reasonableness of interest, costs, and fees, or whether a contract should be reopened for oppression or unconscionability. These are matters falling within the Commission's purview. Depending on how Diners' arguments are developed,evidence on these issues may be of some assistance to the Court.[20] Furthermore, Diners' claims are presented on a broad platform. It challenges the District Court's processes generally. Diners submits that the case is a test case and has indicated that it intends to apply for a full bench of this Court to hear and determine it. To that extent it engages arguments which have general application,and are not limited to Mr Brooker's case alone, and may extend beyond those issues determined in Real Finance.[21] The wide nature of the challenges means that policy issues are likely to be engaged, even if only by way of contextual background. The Commission has a public role and specialist expertise which are directly relevant to those policy issues. That role distinguishes this case from D v C, where intervention was held to be unnecessary because questions of statutory interpretation were unlikely to lead to broad questions of policy.10[22] There is also a link between the issues in the proceedings and the role of the Commerce Commission. The Commerce Commission has a statutory power to intervene in proceedings.11 Although it does not have an automatic right in this case, the issues in the proceedings are closely connected to those on which it does have a10 D v C (No 2) (2001) 15 PRNZ 474 (CA) at [7].11 Credit Contracts and Consumer Finance Act 2003, s 112.statutory right. Intervention is therefore consistent with the purpose underlying that statutory power.[23] Further, Diners appears to be relying on that role in promoting a more restrictive interpretation of the District Court's powers to reopen the credit contractitself. Any decision could therefore impact (albeit indirectly) on the CommerceCommission's role in policing and enforcing the terms of the Act. Such an interestleans in favour of a right to be heard.[24] Whilst the amicus may be able to make submissions on the Commission'srole, I consider the quality of any information provided will be better safeguarded if it is presented by the Commerce Commission directly. Ultimately, it will not significantly add to the length of the hearing whether information is presented through the amicus or by the Commerce Commission directly.[25] I am satisfied that the Commission's intervention in these proceedings is inthe interests of justice. However it must be strictly confined. Any affidavit evidence and submissions on behalf of the Commission must be directed towards theCommission's role under the Act, its power to intervene in proceedings, the point atwhich it exercises that power, and the impact (if any) that a decision in the proceedings will have on that role.[26] Finally, both parties made submissions about whether intervention by the Commerce Commission should be subject to a condition relating to costs. I consider that is a matter best left for the trial Judge (or panel as the case may be) to determine.Result[27] The application by the Commerce Commission is granted. There is no order as to costs.___________________Edwards J