RENNIE COX LAWYERS v EA [2021] NZCA 648

RENNIE COX LAWYERS v EA [2021] NZCA 648 [3 December 2021]NOTE: LOWER COURT ORDERS PROHIBITING PUBLICATION OF THENAMES AND IDENTIFYING PARTICULARS OF THE RESPONDENT ANDTHE BARRISTER REMAINS IN FORCE. SEE [2019] NZHC 3191.IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA302/2020[2021] NZCA 648BETWEEN RENNIE COX LAWYERSAppellantAND EARespondentHearing: 12 August 2021Court: Gilbert, Collins and Goddard JJCounsel: S P Bryers for AppellantR J Hollyman QC and A J Steel for RespondentJudgment: 3 December 2021 at 11 amJUDGMENT OF THE COURTA The appeal is allowed. The timetable directions made by the District Courtin Rennie Cox Lawyers v EA [2018] NZDC 21916 are reinstated as varied inaccordance with [32] below.B Costs are reserved. Absent agreement, submissions are to be filed inaccordance with the timetable set out at [33] below.____________________________________________________________________REASONS OF THE COURT(Given by Gilbert J)Introduction[1] In common with most civil procedural rules, the objective of the District CourtsRules 2009 (the Rules) was to secure the just, speedy and inexpensive determinationof any proceeding.1 That objective has failed spectacularly in this case.[2] A proceeding for recovery of a barrister's fees in the sum of approximately$105,000 was filed by the appellant in the District Court in March 2012.The respondent has not yet filed a response to the claim, usually the first step when aclaim is disputed as this one is, and the proceeding has progressed nowhere towardsbeing heard on its merits. Instead, the parties have been locked in battle about whetherthere should be such a hearing. The procedural skirmishing has resulted in numerousinterlocutory hearings and at least eight judgments not including this one, the thirdjudgment delivered by this Court in the proceeding. Not only must the costs consumedin this exercise be out of all proportion to the costs that would be required to conducta hearing on the merits, but they are also likely to be disproportionate to the amountin issue.[3] So, in terms of the objective of the Rules, we have disproportionate expense,the commitment of considerable judicial and court resources, the passage of nearlya decade since the proceeding was filed, but still no determination ofthe comparatively simple and modest claim. The question on this appeal is whetherthe Rules, correctly interpreted and applied, now preclude a determination onthe merits. In this judgment we explain why we consider the answer to this questionis "no" — the proceeding should be heard and determined on its merits inthe District Court without further delay.Background[4] In May 2009, Rennie Cox Lawyers (Rennie Cox) instructed a barrister to actfor EA in unrelated proceedings in the High Court.2 This was a formality to comply1 District Courts Rules 2009, r 1.3.1. The District Courts Rules 2009 were revoked and replaced bythe District Court Rules 2014 as from 1 July 2014.2 Orders for name suppression were made in the High Court in the proceeding in which the barristerrepresented EA. A further order was made in the District Court by Judge Gibson on 12 September2016 in this proceeding to give effect to the High Court order. For the same reason, we do notname EA or the barrister in this judgment.with the former requirements of the intervention rule which precluded a client such asEA from instructing a barrister directly. It was agreed that EA would pay the feesdirectly to the barrister on a monthly basis following invoice and Rennie Cox wouldnot be liable for payment.[5] EA duly paid the barrister's fees on a monthly basis for a period of two yearsuntil June 2011. These invoices totalled $116,611.26. However, EA did not paythe next six invoices for the period June to November 2011 totalling $105,014.86.EA says this was because the barrister did not explain (and has still not explained)why the monthly charges increased four-fold during this period. She claims there wasno change in the workload or other reason that would justify the marked increase.EA also says she was prejudiced by the barrister's failure to particularise the costs asthis meant she was unable to justify her claim for indemnity costs against the otherparty to the proceedings for which the barrister was engaged. As a result, EA says shewas awarded scale costs only. Finally, EA claims an entitlement to a legal set-off foran amount of $21,143 for fees she rendered to the barrister on another matter. Shesays these fees were collected by the barrister from the client but have not been passedon to her.[6] On 29 March 2012, Rennie Cox filed a notice of claim in the District Court onbehalf of the barrister for recovery of the barrister's fees. Rennie Cox's participationin the proceeding is in name only (the barrister has retained other barristers to act forhim in this proceeding). EA was served with the claim on 3 April 2012. She had 30working days pursuant to r 2.12 of the Rules to file and serve a notice of response.[7] EA did not file a response to the claim, but the proceeding was stayed byoperation of law as a result of a complaint she made about the fees to the New ZealandLaw Society on 11 May 2012.3 Following investigation, a costs assessor reported tothe Standards Committee on 4 October 2013 that the fees were fair and reasonable.The Standards Committee decided to take no further action on the complaint and theparties were notified of this determination on 14 February 2014.4 EA applied for areview, but the Standards Committee's decision was upheld by a Legal Complaints3 Lawyers and Conveyancers Act 2006, s 161(1).4 Section 138(2).Review Officer (LCRO) on 23 February 2015. This had the effect of lifting the stayof the District Court proceeding. The time for filing and serving a notice of responserecommenced running.[8] EA still did not file a response to the claim. However, on 1 May 2015, hersolicitors contacted Rennie Cox by telephone and followed up with an email later thatday noting that the LCRO's decision was not binding on the courts and did not resolvethe issues between the parties. After summarising EA's core complaints, the solicitorssuggested that the claim should be discontinued or at least left in abeyance.If the claim was to be pursued, they sought confirmation that this would only be doneon notice to them.[9] Rennie Cox responded on 5 May 2015 explaining that Mr Werry, counsel theninstructed to act for the barrister, had the carriage of the proceeding and suggested theytake up any issues relating to the proceeding with him directly. They advised that theywould leave it to Mr Werry to respond but, for the record, stated that the claim wouldnot be discontinued, nor would it be pursued only on notice to them. EA's solicitorsdid not contact Mr Werry following this email, nor did Mr Werry contact them.[10] On 16 June 2015, Mr Werry applied, without notice, for judgment by default.By this time, the time limit for filing a notice of response had expired, as had the timeto apply for judgment by default. Mr Werry therefore sought an extension of time tomake the application. Absent an extension of time being granted, the only way topursue the claim would have been to start it afresh.5 Mr Werry asserted that"the certificate of the Standards Committee or decision of LCRO" was "final andconclusive as to the amount due" and there was "nothing left to dispute", relying ons 161(3) of the Lawyers and Conveyancers Act 2006 (the Act). Mr Werry certifiedthat the application was in compliance with the Rules.[11] However, this ex parte application was seriously deficient. There was nojustification for making this application without notice to EA. The correspondencereferred to at [8] and [9] above was not disclosed to the District Court, a fundamental5 District Courts Rules 2009, r 2.17.5.breach of the duty owed to the court on an ex parte application.6 There was nocertificate and no final or conclusive determination of the amount due as claimed.EA was not prevented from disputing the reasonableness of the fees, pursuing hercomplaint about the lack of particulars or advancing her partial defence by way oflegal set off.[12] Relying on the adequacy of the information placed before him and counsel'scertification as to the correctness of the application in accordance with the Rules,Judge Harrison granted the application for an extension of time and entered judgmentby default in the sum of $112,968.60 on 21 August 2015.[13] EA applied to set aside the judgment, but that application was dismissed byJudge Gibson on 29 April 2016.7 On appeal to the High Court, Lang J accepted thatthe judgment had been irregularly obtained.8 However, the Judge allowedthe judgment to stand, save in respect of the interest which the parties by then hadagreed was not a claim for a liquidated sum.9 The Judge subsequently granted leavefor a second appeal.10 This Court allowed the appeal and set the judgment aside on5 March 2018.11District Court judgment[14] Rennie Cox then sought timetable directions from the District Court toprogress the matter to a substantive hearing.[15] EA opposed the making of any directions, contending:(a) the June 2015 application for an extension of time to apply for judgmentmust have been set aside with the default judgment;6 See Automatic Parking Coupons v Time Ticket International Ltd (1996) 10 PRNZ 538 (HC) at540.7 Rennie Cox Lawyers v EA [2016] NZDC 7359.8 EA v Rennie Cox Lawyers [2017] NZHC 5 at [39].9 At [33] and [66].10 EA v Rennie Cox Lawyers [2017] NZHC 770.11 EA v Rennie Cox Lawyers [2018] NZCA 33, [2018] 3 NZLR 202.(b) the proceeding was therefore to be treated in terms of the Rules ashaving been discontinued by Rennie Cox in May 2015;(c) as a result of the deemed discontinuance, a new claim would have to befiled;(d) any new claim was time barred under the Limitation Act 2010; and(e) there was therefore no way the claim could now be pursued against her.[16] Judge Harrison considered that, the judgment having been set aside, it wasnecessary to assess the position as at 16 June 2015 when the extension of time wassought to apply for the default judgment.12 The Judge agreed with EA that the ordergranting an extension of time to apply for judgment in terms of that application musthave fallen with the judgment:[22] The application for judgment was filed on 16 June 2015 and so wasbeyond the permitted time and an extension was required. That was grantedto the date on which judgment was entered, but obviously with judgmenthaving been set aside the order extending time to the date of the judgmentmust also fall.[17] This meant there had been no "effective" application for default judgmentwithin the time permitted under the Rules (EA having not filed any response to theclaim) and the proceeding was brought to an end at that time.13 The Judge reachedthat conclusion in reliance on r 2.39, which relevantly states:2.39 Application for judgment in case of default, discontinuance,admission of facts, or lack of defence—2.39.1 A plaintiff who is pursuing a claim under rules 2.10 to 2.17 may applyimmediately for judgment if—(a) the defendant does not, within the time allowed,—(i) serve on the plaintiff the defendant's form 3 (responseby defendant); or12 Rennie Cox Lawyers v EA [2018] NZDC 21916 [District Court judgment].13 At [23].2.39.4 When rule 2.39.1 applies,—(a) the plaintiff's proceeding comes to an end if the plaintiff doesnot file the plaintiff's form 6A (application for judgment)within the time allowed; and(b) rules 2.17.5 (starting claim again) and 2.17.6 (treated asdiscontinuance) apply as if the proceeding had come to an endunder rule 2.17.[18] Nevertheless, the Judge noted that r 1.18 permits an extension of time beinggranted even where a proceeding has come to an end under the Rules:1.18 Extending and shortening time1.18.1 The court may, in its discretion, extend or shorten the time allowed bythese rules, or fixed by any order, for doing any act or taking anyproceeding or any step in a proceeding on such terms (if any) asthe court thinks fit in the interests of justice.1.18.2 The court may order an extension of time although the application forthe extension is not made until after the expiration of the time allowedor fixed.1.18.2A To avoid doubt, a proceeding does not come to an end just becausethe time allowed by r 2.10, 2.14, 2.17, 2.39A, 2.47 or 3.40 or any otherrule for taking any action in that proceeding expires, if that time islater extended under r 1.18.2.[19] The Judge reasoned that, although a proceeding may be deemed to have beendiscontinued under r 2.17, it does not come to an end if the Court exercises itsdiscretion in the interests of justice to extend time for the taking of any step.14The Judge took account of the following matters in concluding it was appropriate toexercise his discretion to grant an extension of time pursuant to r 1.18.1:15(i) EA has never filed a response to the claim nor any form of defence,and yet she clearly disputes the amount claimed.(ii) The standards committee dismissed EA's complaints in its decision of14 February 2014 which was confirmed by the decision of the LCROin a decision of 23 February 2015.14 At [27].15 At [29].(iii) The provisions of the Lawyers and Conveyancers Act 2006 prohibitedthe plaintiff from proceeding with the claim until the complaintsprocedure had been finalised.(iv) The plaintiff is entitled to a proper hearing on the merits of the claim.[20] The Judge accordingly extended the time within which EA was to file aresponse to the claim to 15 working days from the date of the District Court judgmenton 1 November 2018.16 The Judge also made the other timetable directions sought byRennie Cox but reserved leave for either party to make a further application ifrequired.17High Court judgment[21] EA did not file a notice of response as directed, but instead appealed tothe High Court. Palmer J allowed the appeal on 15 December 2019, concluding thatthe District Court decision to extend time was plainly wrong.18 The Judge consideredthat three of the four considerations taken into account by the District Court in grantingthe extension of time were "dubious" — (1) EA disputed the claim, (2) the decisionsof the Standards Committee and LCRO did not finally determine EA's complaint, and(3) Rennie Cox was entitled to a proper hearing on the merits (which wasconclusory).19 The remaining consideration — the effect of the statutory stay — wasrelevant but was seen by the Judge to count against an extension being grantedbecause, although the proceeding itself was stayed in May 2012, the limitation periodwas not suspended during the complaints process and accordingly had expired by thetime the extension of time was granted in November 2018.20[22] The Judge also considered there had been no adequate explanation for the delayand the effect of the extension of time application was to evade the purpose of thestrict deadlines in the Rules and the purpose of the Limitation Act. The Judge thereforeconsidered the interests of justice did not favour the grant of an extension of time:2116 At [30].17 At [31].18 EA v Rennie Cox Lawyers [2019] NZHC 3191 [High Court judgment].19 At [23].20 At [24].21 At [26].The second application [for an extension of time] does not suffer from thesame lack of notice or disclosure problems [as the earlier extension of time toapply for default judgment]. But no substantive explanation of the delay wasprovided. And the effect of the application is to evade the purpose of the strictdeadlines in the rules and the purpose of the limitation period prohibiting newproceedings of this age. A procedural extension of time underthe District Court Rules cannot be allowed to revive a proceeding in thesecircumstances. It is now too far out of time under both the rules andthe Limitation Act 2010. Rennie Cox blew their chance to have the deadlineextended, in 2015. The interests of justice do not require they get another one.[23] The Judge subsequently declined leave to appeal to this Court.22However, leave to appeal was granted by this Court.23 The issue is whether, the defaultjudgment having been set aside, the District Court was able to make timetablingdirections to enable the dispute to be heard and determined on its merits and, if so,whether it was in the interests of justice to do so.AppealSubmissions[24] Mr Bryers' submissions for Rennie Cox can be summarised as follows:(a) Although treated under the Rules as being at an end in May 2015,the proceeding was revived when the application for an extension oftime to apply for a default judgment was granted in August 2015.(b) This Court's decision setting aside the judgment in March 2018 did notresult in the proceeding again being at an end and treated as havingbeen discontinued as if nothing had happened since May 2015.EA's contention to the contrary requires pretending that none ofthe many steps taken by the parties in the proceeding since then hadoccurred.(c) The Court therefore had jurisdiction to give appropriate directions forthe future conduct of the proceeding.22 EA v Rennie Cox Lawyers [2020] NZHC 958.23 Rennie Cox Lawyers v EA [2020] NZCA 348.(d) Contrary to the High Court's assessment, the purpose of the applicationwas not to evade the strict deadlines in the Rules or the purpose ofthe limitation period under the Limitation Act. Rennie Cox did not seekor require any procedural time extensions. Instead, it proposed anextension of time for EA to file a response to the claim.(e) Judge Harrison's decision to make directions to enable the proceedingto be heard was a proper exercise of his discretion under the Rules andin accordance with their objective of securing the just determination ofproceedings. It would be contrary to the interests of justice to denya litigant access to the courts because of a procedural error, particularlywhere there is no irretrievable prejudice to the other party.[25] Mr Hollyman QC, for EA, responds by making the following argument:(a) By setting aside the judgment, this Court restored EA to the positionshe ought to have been in but for "the first extension", beingthe extension of time to apply for default judgment granted inAugust 2015. Apart from fixing costs, the Courts were functus officioand there was no jurisdiction to entertain the application for directionsto take steps that could revive the proceeding.(b) The District Court invoked r 1.18 of its own volition, Rennie Coxhaving "positively declined" to make any application for an extensionof time under that rule.(c) The High Court was correct to conclude that the limitation period hadexpired and that the principles of finality must prevail.(d) Even if the time bar was not decisive, Rennie Cox cannot benefit fromits own misconduct (in failing to disclose the May 2015 correspondenceto the District Court). It cannot say, for example, that EA's applicationto set aside the default judgment and pursue her appeals had the effectof reviving the proceeding or that the costs incurred in this processwarrant a hearing on the merits.(e) The High Court was correct to intervene because the only availableconclusion was that it would be contrary to the interests of justice toallow Rennie Cox's claim to proceed.Our assessment[26] When EA did not file any response to the claim within the time specified,the next step contemplated under the Rules was an application for judgment bydefault.24 Because the time required for taking this step expired in late May 2015 theproceeding was treated under the Rules as being at an end. In order to revive it, anapplication for an extension of time was required. Both applications were made byRennie Cox on 16 June 2015, reasonably promptly after expiry of the prescribed date,and orders were made accordingly in August 2015. As a result, two things happened— (1) the proceeding was revived enabling it to be used as the vehicle to take theclaim forward; and (2) judgment by default was entered.[27] However, given Rennie Cox knew that EA intended to defend the claim andwanted to be advised of any steps taken to pursue it, it was inexcusable to apply fordefault judgment without notifying EA's solicitors and without disclosing to the Courtthe May 2015 correspondence between the solicitors showing that she wished todefend the claim. These fundamental omissions related to the application for judgmentby default but had little or no bearing on the application for an extension of time.The practical effect of the latter application was simply to revive the existingproceeding, obviating the need for Rennie Cox to start again with a new proceedingadvancing the exact same claim. No useful purpose would have been served byrequiring the claim to have been started afresh.[28] The order made by this Court in March 2018 was simply to set aside the defaultjudgment. There was no application to set aside the order granting an extension oftime to enable Rennie Cox to take the next step (and thereby revive the proceeding).24 District Courts Rules 2009, r 2.39.1(a)(i).No such order was made by this Court, nor was it necessary to do so. The effect ofsetting aside the default judgment was sufficient to restore EA to the position she oughtto have been in before the default judgment was entered, namely, a defendant ina proceeding with notice of an application for judgment by default following herfailure to file a response to the claim. Had the application for default judgment beenon notice to EA, it is inevitable that she would have sought and been granted anextension of time to file her response so the proceeding could progress to a hearingand be determined on its merits in accordance with the fundamental objective of theRules. That is precisely what Judge Harrison's directions allowed for.[29] On this analysis, the proceeding came to an end in late May 2015 but wasenlivened in August 2015 when the extension of time to apply for judgment by defaultwas granted. Numerous steps were taken in the proceeding after that date. As noted,no fewer than eight judgments have been given in the proceeding since August 2015.It seems to us to be quite artificial to suggest that, despite all of these steps havingbeen taken without pause in the intervening six-year period, the proceeding shouldnow be regarded as having been at an end as from late May 2015. We do not acceptEA's submission to this effect or that there was no jurisdiction for Judge Harrison toentertain Rennie Cox's application for timetable directions.[30] It follows that we do not agree with Palmer J that the timetable directions madeby Judge Harrison after the default judgment was set aside had the effect of revivingthe proceeding. For the reasons given, the proceeding was revived in August 2015and did not need to be revived for a second time. Nor do we agree that the effect ofmaking the timetable directions was to "evade the purpose of the strict deadlines inthe rules and the purpose of the limitation period prohibiting new proceedings of thisage".25 The delay between late-May 2015 and mid-June 2015 (when the extension oftime was sought) was comparatively short and caused no prejudice to EA. As noted,it would not serve any useful purpose to require Rennie Cox to start all over again witha new claim. This would achieve nothing other than further delay and expense.Nor was the purpose of the limitation period evaded by making these directions.The purpose of the Limitation Act is to encourage claimants to make claims for25 High Court judgment, above n 18, at [26].monetary or other relief without undue delay by providing defendants with defencesto stale claims.26 Rennie Cox commenced the claim in March 2012, very soon afterthe invoices covering the period June to November 2011 fell due for payment. EAwas promptly served. This was by no means a stale claim.[31] It would have been open to this Court in 2018 to set aside the default judgmenton terms, for example, that it would be set aside if, and only if, EA filed and serveda response to the claim within one month. The parties did not ask for this andthis Court made no such order. But any failure to spell out the consequences of settingaside the default judgment should not deprive Rennie Cox of the ability to havethe claim determined on its merits. This would be a manifestly unfair anddisproportionate response to the errors made by counsel when applying for the defaultjudgment in June 2015. Those errors were addressed by setting the default judgmentaside and awarding costs. Thereafter, there could be no suggestion of Rennie Coxtaking advantage of its own wrongdoing in respect of the application for defaultjudgment. The additional sanction of being deprived of the ability to have the claimheard on its merits is not compelled by the Rules and would not be consistent withtheir core objective.Disposition[32] The appeal is allowed. Subject to any variation directed by the District Court,we substitute the following directions for those made by Judge Harrison:(a) Rennie Cox is to file and serve a statement of claim within 15 workingdays of the date of this judgment.(b) EA is to file and serve any statement of defence and counterclaimwithin 15 working days of being served with the statement of claim.(c) Rennie Cox is to file and serve a reply to any affirmative defence anda statement of defence to any counterclaim within 10 working days ofbeing served.26 Limitation Act 2010, s 3.(d) EA is to file and serve a reply to any affirmative defence tothe counterclaim within 10 working days of service.(e) A fixture for the substantive hearing should be allocated as soon asreasonably practicable thereafter.[33] We would normally have ordered EA to pay costs to Rennie Cox for a standardappeal on a band A basis and usual disbursements. We would also have directed thatcosts in the High Court be fixed by that Court in accordance with this judgment.However, Mr Bryers asked us to take the unusual step of reserving the question ofcosts. We understand this is because Calderbank offers may be relevant tothe assessment of costs. Consequently, we will reserve costs. If the parties are unableto reach agreement, submissions on behalf of Rennie Cox should be filed within20 working days of the date of this judgment. EA's submissions in response shouldbe filed within 10 working days of receipt. Costs will then be determined onthe papers.Result[34] The appeal is allowed. The timetable directions made by the District Court inRennie Cox Lawyers v EA [2018] NZDC 21916 are reinstated as varied in accordancewith [32] above.[35] Costs are reserved. Absent agreement, submissions are to be filed inaccordance with the timetable in [33] above.Solicitors:Rennie Cox Lawyers, Auckland for AppellantFriedlander & Co Ltd, Auckland for Respondent