DAVERN v QBE Insurance (Australia) Ltd [2023] NZHC 3543

DAVERN v QBE Insurance (Australia) Ltd [2023] NZHC 3543 [6 December 2023]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYI TE KŌTI MATUA O AOTEAROAŌTAUTAHI ROHECIV-2020-409-390[2023] NZHC 3543BETWEEN JOHN TIMOTHY DAVERN and MARITADAVERNFirst PlaintiffsIAG NEW ZEALAND LIMITEDSecond PlaintiffAND QBE INSURANCE (AUSTRALIA)LIMITEDDefendantHearing: (Determined on the papers)Counsel: D J Cooper KC and V A Ma for PlaintiffsA J Peat and S D Galloway for DefendantJudgment: 6 December 2023JUDGMENT OF OSBORNE JThis judgment was delivered by me on 6 December 2023at 4.30 pm pursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Introduction[1] I recently gave judgment for the plaintiffs in the sum of $1,593,484.54.1[2] Having regard to the wording of the plaintiffs' claim for interest on thejudgment sum, I reserved the determination of the claim for interest, recording:2I will be reserving questions of interest. The plaintiffs' [third amendedstatement of claim] simply recorded the plaintiffs sought judgment for"Interest". Submissions were not directed to that prayer. It does not appearto comply with the strict requirements of s 25 Interest on Money Claims Act2016. It is appropriate the parties have the opportunity to present submissionsin that regard.[3] The plaintiffs now apply for leave to amend their statement of claim.[4] The defendant abides the Court's decision.The requirements of the Interest on Money Claims Act 2016[5] As identified above, the plaintiffs, by their pleading, sought judgment for"Interest".[6] Such a pleading does not meet the requirements of s 25(1) Interest on MoneyClaims Act 2016 (the Act), which provides:25 Court may not award interest unless procedural requirementscomplied with(1) A court may not award interest under a section of this Act for a periodunless the party who claims interest under the section for that periodspecifies the section and, as far as possible, the period in that party'sstatement or notice of claim or counterclaim.(2) If a party claims interest under section 17, 18, 22, or 24,—(a) the party must specify in that party's statement or notice of claimor counterclaim the amount or rate of interest claimed; and(b) the court may not award interest—1 Davern v QBE Insurance (Australia) Limited [2023] NZHC 2146.2 At [443].(i) exceeding the amount claimed under paragraph (a); or(ii) at a rate exceeding the rate claimed under paragraph (a).(3) Nothing in this section prevents interest being claimed in a statement ornotice of claim or counterclaim in the alternative.(4) Nothing in this section prevents a court from making an award ofinterest where the court has at any time made or accepted an amendmentto a statement or notice of claim or counterclaim in accordance with therules of court and where that statement or notice of claim orcounterclaim, as amended, complies with the requirements insubsections (1) and (2).[7] The relevant "rules of court" referred to in s 25(4) are set out in r 1.9 HighCourt Rules 2016, which provides:1.9 Amendment of defects and errors(1) The court may, before, at, or after the trial of any proceeding, amendany defects and errors in the pleadings or procedure in the proceeding,whether or not there is anything in writing to amend, and whether ornot the defect or error is that of the party (if any) applying to amend.(2) The court may, at any stage of a proceeding, make, either on its owninitiative or on the application of a party to the proceedings, anyamendments to any pleading or the procedure in the proceeding thatare necessary for determining the real controversy between theparties.[8] The Act applies to all money judgments in civil proceedings commenced from1 January 2018 (which the plaintiffs' proceeding was).3 I interpolate that the Act isnot a complete code as, pursuant to s 26, claims for interest may still be brought atcommon law and in equity (as would apply where a contract makes provision forinterest).4[9] By the amended statement of claim, for which the plaintiffs seek leave to file,the plaintiffs would be seeking interest under two provisions of the Act:3 Interest on Money Claims Act 2016, s 5.4 Senior Trust Capital Ltd v Holmes [2023] NZHC 3108 at fn 19.(a) under s 24 of the Act (and pursuant to the Interest on Money ClaimsRegulations 2019), interest at the prescribed rate on costs incurred fromthe date incurred to the date of judgment; and(b) under s 10 of the Act interest from the date of judgment to the date ofpayment in full.Amendment of pleadings[10] The well-settled principles applying to late amendment of pleadings require anapplicant to surmount the "three formidable hurdles" identified by the Court of Appealin Elders Pastoral Ltd v Marr (Elders Pastoral).5 The applicant must show:(a) the order sought will be in the interests of justice (enabling the Court todetermine the real controversy between the parties);(b) it will not significantly prejudice the other party; and(c) it will not cause significant delay.If those hurdles are surmounted, any concept of denunciation of the applicant for itslate application has little part to play.6The need for amendment — the requirements of s 25 of the Act[11] The pleading requirements introduced by the Act are not new, having beenenacted in 2016 and in operation from 1 January 2018. That said, it is clear fromsubsequent cases involving amendment, and the occurrences in this proceeding, thatthe fundamentally important requirements under s 25 of the Act (to specify the detailsof interest claims in pleadings) has yet to be universally known to or understood bythose practising civil litigation.5 Elders Pastoral Ltd v Marr (1987) 1 NZPC 91, (1987) 2 PRNZ 383 at 385.6 At 385.[12] Old-fashioned prayers such as those for "interest for such period and at suchrate as the court deems just" or, very simply, "interest", can no longer form theplatform for a judgment for interest.[13] It is another fact that may not be universally understood amongst the professionthat the previous provision in the High Court Rules that provided for interest to accrueon judgment debts (the superseded version of r 11.27) is no longer in existence —interest does not automatically (without order of the Court) accrue on a judgment debt.What r 11.27 High Court Rules provides:11.27 Interest as part of judgment debtInterest must be awarded in a money judgment in accordance with the Intereston Money Claims Act 2016.[14] If the plaintiffs are to obtain an award of interest for any period (either beforeor after the date of judgment) they will need to have filed (with leave) an amendedstatement of claim identifying a claim for interest under the appropriate provisions,namely ss 10 and 24 of the Act. The draft amended statement of claim attached totheir application properly specifies those sections and the periods for which suchinterest is sought.The legislative history of the Act[15] The approach the courts should adopt to any application to amend a pleadingto comply with the procedural requirements of the Act is appropriately informed bythe text of s 25 and its purpose as evidenced by the legislative history of the Act.[16] Section 25(4) of the Act (set out above at [6]) expressly provides that the Courtmay make or accept an amendment (that meets the Act's procedural requirements) atany time. That contemplates the possibility of very late amendment, including afterthe trial of the proceeding. That is directly in line with the amendment provisionsfound in r 1.9(1) and r 1.9(2) of the Rules (set out above at [7]). The breadth of thepower accommodates the fact that issues in relation to an interest claim are most likelyto arise (with costs) consequentially upon a substantive judgment.[17] I turn then to the legislative history which Mr Cooper KC submits indicates anintention by Parliament to ameliorate the otherwise strict consequences of s 25(1) and(2) of the Act, by expressly permitting such late amendment to remedy non-compliance.[18] The overarching legislative reform, initiated through the JudicatureModernisation Bill, aimed to modernise the principal statutes governing the courts andto ensure the justice system kept up with the demands of the 21st century.7 The Intereston Money Claims Act was one of five new statutes arising from the JudicatureModernisation Bill.[19] The Act provided a statutory framework to mandate the awarding of interest incivil proceedings. It replaced the provisions of the Judicature Act 1908 (s 87) and theDistrict Courts Act 1947 (ss 62B and 65A), which left the courts with substantialdiscretion in relation to pre-judgment interest. The Act introduced standard provisionsfor calculating interest on amounts of money payable under certain enactments, usingthe Internet site calculator.8 A primary purpose is to compensate claimants for thedelay in payment of sums awarded as damages.9[20] The provisions of s 25 of the Act were first envisioned in the LawCommission's 1994 Report Aspects of Damages: The Award of Interest on MoneyClaims.10 Section 16 in the Commission's draft Act, foreshadowing s 25(1), wouldhave introduced a requirement for a person claiming interest to specify the sectionunder which and period for which interest was claimed. The draft Act did not containa provision equivalent to what was subsequently enacted s 25(4) but the Commissionin 1994 commented that, under the general law of procedure, the Court may allowamendments to pleadings during the course of the hearing if the other side is notprejudiced by them.117 Third Readings (11 October 2016) NZPD 717 at 14121–14122.8 Interest on Money Claims Act 2016, s 4.9 Section 3(1).10 Law Commission Aspects of Damages:The Award of Interest on Money Claims (NZLC R28,1994).11 At 119.[21] When the Judicature Modernisation Bill was introduced to Parliament in 2016,cl 465(1) of the Bill was in the terms that came to be enacted in s 25(1) of the Act.[22] It was when the Bill was reported back to Parliament by the Justice andElectoral Committee that there was a recommendation to introduce a provision whichsubsequently came to be s 25(4) of the Act. The Committee recommended theinsertion of that provision so the Court would not be precluded from awarding interestif a non-compliant claim was later remedied according to the rules of the court.Previous cases involving amendments to claim interest[23] Mr Cooper has identified four previous cases in which a plaintiff failed tocomply with s 25 of the Act and subsequently successfully applied (either formally orinformally) for leave to amend the pleading so as to comply. Those cases were:(a) Harvey v Harvey12 — the successful plaintiff in her pleading hadreferred simply to "interest" — Gordon J, following her substantivejudgment, granted an unopposed application for leave to amend thepleading and awarded the interest sought;(b) Leondale Ltd v Boyd13 — the successful plaintiff in its pleading hadsought interest at a contractual penalty rate but had not referred to theAct — Associate Judge Lester, in the context of a summary judgmenthearing, granted leave on an unopposed oral application to amend thepleadings to comply with the Act, and awarded the interest sought;(c) Plumbco New Zealand Ltd v Plumbco Commercial and Civil Ltd14—the successful plaintiff in its pleadings had specified a claim for interestunder the Act but had omitted to specify the interest rate (as requiredby s 25(2)(a)). Following judgment, Edwards J, without expresslygranting leave to amend the pleadings, found the omission had "since12 Harvey v Harvey [2021] NZHC 2405 (substantive judgment) at [362]–[365]; Harvey v Harvey(No 2) [2021] NZHC 3508 (interest judgment) at [5], [44], [49].13 Leondale Ltd v Boyd [2021] NZHC 470 at [55], [57]–[58].14 Plumbco New Zealand Ltd v Plumbco Commercial and Civil Ltd [2023] NZHC 690 (substantivejudgment), [2023] NZHC 1819 (interest judgment) at [13]–[16].been remedied by the memoranda filed after the hearing" and awardedinterest at the prescribed maximum interest rate;15(d) Swenson v Lawton16 — the successful plaintiff had specified a claimfor interest under the Act but failed to specify a commencement date(as required by s 25(1)). On an opposed interlocutory applicationapparently filed after the hearing but before judgment, Isac J grantedleave to amend the pleading to include interest for a now-specifiedperiod and awarded the interest sought.[24] While the Court did not, in these four cases, refer to the Elders Pastoralprinciples (above at [10]), the circumstances and outcome of each of the four casescan readily be identified as meeting those principles:(a) In terms of the interests of justice, the plaintiff in each case hadexpressly made a claim for interest, albeit not complying with the strictrequirements of the Act. The Court, by permitting amendment, couldthen consider whether the interest regimes considered appropriateunder the Act should apply to the plaintiff's claim and, if so, to whatextent.(b) There was no apparent prejudice in any of the cases, as expresslyidentified by the Court in two of the cases.(c) Through the need for amendment to the pleadings being recognisedand/or dealt with in the course of the substantive hearing orimmediately following judgment (when the Court was in any eventdealing with other consequential issues and/or costs), and was dealingwith such matters on the papers, there was no significant delayinvolved.15 At [16].16 Swenson v Lawton [2022] NZHC 3544 at [49]–[51].[25] In the two cases in which there was expressly no opposition to the amendmentapplication, the Court was entitled to infer that the defendant had not identified anyinjustice, prejudice or significant delay that would arise if the Court allowed theamendment.[26] Mr Cooper referred to a fifth case, Body Corporate 81012 v Memelink(Memelink), in which this Court awarded interest under the Act.17 That occurrednotwithstanding that the plaintiffs, while claiming interest pursuant to the Act for aspecified period, had failed (in terms of s 25(1)) to specify the section under which theinterest was claimed. Upon the non-compliance being raised in the course of thehearing of the substantive proceedings and counsel for the defendants' submissionsthat s 25 of the Act precluded an award of interest, the Court nevertheless, and withoutan application for leave to amend, awarded interest to the plaintiffs under s 9 of theAct. The Judge reasoned that, because the defendants had not in their statement ofdefence relied on s 25 of the Act, the defendants should not be allowed to "raise thisdefence belatedly" — he awarded interest for the period claimed.18[27] In line with the outcome in the earlier four cases referred to (at [23] above), theplaintiffs in Memelink would almost inevitably have been granted leave to amend thepleading to correctly refer to s 9 of the Act. On the other hand, the reason adopted forthe outcome in Memelink is inconsistent with the provisions of s 25 of the Act —s 25(1) precludes the Court from awarding interest where there has been relevant non-compliance in the pleading unless the Court has (pursuant to s 25(4)) made or acceptedan amendment.[28] Mr Cooper also referred to two cases in which this Court applied s 25(1) of theAct to refuse an award of interest. In Remnant v Mills (Remnant), the statement ofclaim referred only to "Interest pursuant to the Interest on Money Claims Act 2016".19In TPD 2018 Ltd v Godfrey and Company Ltd (TPD 2018), the plaintiff in its pleadingclaimed interest under s 10 of the Act, whereas at trial it sought interest under s 24 ofthe Act (reflecting an acceptance that the Court could not award interest under s 10 for17 Body Corporate 81012 v Memelink [2022] NZHC 1244.18 At [146].19 Remnant v Mills [2020] NZHC 3414 at [90].the period before the date of judgment because of the provisions of s 24).20 The Courtheld there was no jurisdiction to award interest under s 24 for the period before thedate of judgment because s 25(1) precluded such an award.21 The Court further heldthat, even had jurisdiction existed, interest for the period before judgment would nothave been granted having regard to the facts of the case.22[29] I do not view Remnant or TPD 2018 as cutting across what may otherwise beconsidered the recognition of a liberal approach to amendment as shown in the othercases referred to. The Court, faced with the strict operation of the provisions of s 25(1)will normally, when amendment would validate an interest claim the plaintiff ispursuing, see fit, either at the request of the plaintiff or of its own motion, to grant theplaintiff time to bring an application for leave to amend under s 25(4). Or, in anunusual case, the Court may itself amend the pleading pursuant to the Court's powerunder r 1.9(2) High Court Rules to make amendments on its own initiative — such islikely to be appropriate only when the defendant was on clear notice and did not wishto be heard. The fact the plaintiff in TPD 2018 was not offered an opportunity to seekleave is explicable by the fact the Court would have refused to award interest for theclaimed period even had s 25(1) of the Act not applied.[30] Against the background of these authorities, I turn to the present application.Discussion[31] I acknowledge the comprehensive submissions filed by Mr Cooper both as tothe purpose and application of s 25 of the Act and as to the circumstances of this case.[32] The plaintiffs recognise their claim for interest did not meet the requirementsof s 25 of the Act. They say that non-compliance was an error. It was clear from thepleading that the plaintiffs intended to claim interest. Their amended pleading wouldspecify both the relevant sections of the Act under which the claim was made (ss 10and 24) and the periods of claim.20 TPD 2018 Ltd v Godfrey and Company Ltd [2021] NZHC 1584.21 At [8].22 At [9].[33] I find the proposed amendments satisfy the three "hurdles" identified in EldersPastoral (and applicable to this application made under r 1.9 of the Rules) because:(a) it is in the interests of justice to allow the amendment — the defendantwas always on notice that the plaintiffs sought interest and the awardingof interest, if found appropriate, will accord with the primary purposeof the Act, by providing compensation for the delay in payment of sumsawarded as damages;(b) with costs also yet to be determined following the substantivejudgment, there will not be significant delay occasioned by the grant ofleave to amend the interest claim;(c) the defendant is not otherwise relevantly prejudiced — the amendmentdoes not raise a new matter but instead particularises an existing claim;and(d) there is no suggestion the defendant would have responded in anydifferent way (whether with evidence or otherwise) had amendmentbeen made prior to the close of pleadings.[34] I also take into account the fact the defendant does not oppose the leaveapplication as supporting the inference that it accepts the conclusions in the precedingparagraph.[35] On this basis, the Court has a discretion to permit amendment both underr 1.9(1) (because of the plaintiffs' error in their pleadings) and under r 1.9(2) (becausethe amendments are necessary to determine the real controversy between the parties).[36] I am satisfied, as a matter of discretion, that the plaintiffs' application shouldbe granted.[37] This outcome being in the nature of an indulgence, it is appropriate there be noorder as to costs.Result[38] There will be orders:(a) the plaintiffs are granted leave to amend their claim in accordance withthe draft fourth amended statement of claim filed on 6 October 2023;and(b) there is no order as to the costs or disbursements of the plaintiffs'application.Osborne JSolicitors:Duncan Cotterill, Auckland for the PlaintiffsHazelton Law, Wellington for the Defendant