WALLS v ULSTERMAN HOLDINGS LTD (IN LIQ) [2019] NZCA 365

WALLS v ULSTERMAN HOLDINGS LTD (IN LIQ) [2019] NZCA 365 [15 August 2019]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA102/2018[2019] NZCA 365BETWEEN RIKI SCOTT STEEN WALLSAppellantAND ULSTERMAN HOLDINGS LIMITED (INLIQUIDATION)First RespondentVIVIEN MADSEN-RIES AND HENRYDAVID LEVIN AS LIQUIDATORS OFULSTERMAN HOLDINGS LIMITED (INLIQUIDATION)Second RespondentsHearing: 4 July 2019Court: Stevens, Venning and Dunningham JJCounsel: A Shaw and P V Cornege for AppellantN H Malarao and B J Hamilton for RespondentsJudgment: 15 August 2019 at 3.00 pmJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondents one set of costs for a standardappeal on a band A basis and usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Venning J)[1] Riki Walls was the sole director of Ulsterman Holdings Ltd. Mr Walls and hispartner each owned 50 per cent of the shares in the company. The company was placedinto liquidation in August 2016 on the application of the Commissioner ofInland Revenue. The second respondents, Ms Madsen-Ries and Mr Levin, wereappointed liquidators.[2] Following their investigation into the affairs of the company the liquidatorsissued proceedings against Mr Walls. The liquidators alleged that Mr Walls hadbreached the duties imposed upon him as a director under the Companies Act 1993and sought orders requiring him to pay compensation to the company for suchbreaches.[3] The proceedings were served on Mr Walls. He took no steps. Following aformal proof hearing Peters J entered judgment against him in the sum of $489,810.06,together with interest and costs.1[4] Mr Walls has not sought to have the judgment set aside under r 15.10 ofthe High Court Rules 2016 (the Rules) but has instead appealed the entry of judgmentagainst him to this Court.The appeal[5] In the amended notice of appeal Mr Walls raised the following points:(a) At no time after the proceeding was listed for formal proof was he givennotice that he could file a statement of defence with leave as providedby r 15.9(3).(b) In an on the papers minute2 Associate Judge Christiansen listedthe proceeding for formal proof in a manner that infringed his rights1 Ulsterman Holdings Ltd (in liq) v Walls [2017] NZHC 3040.2 Ulsterman Holdings Ltd (in liq) v Walls HC Tauranga CIV-2016-470-184, 14 February 2017.under r 15.9(3) (when read together with ss 3(a), 6, 27(1) and 28 ofthe New Zealand Bill of Rights Act 1990 (BORA)).(c) The Deputy Registrar allocated a hearing date for the formal proof of7 March 2017. By failing to draw the attention of a judicial officer tothe fact no notice had been given to the appellant of his rights underr 15.9(3) the Deputy Registrar acted in a manner that infringedthe appellant's rights.(d) In deciding to hear and proceeding to determine the application forformal proof Peters J infringed the appellant's rights under r 15.9(3),(read together with the aforesaid sections of BORA), in that the Judgedid not take any steps to give notice to Mr Walls of his rights underr 15.9(3).(e) The liquidators, being persons who had a duty to act in accordance withthe principles of natural justice and fairness, did not take any step afterthe proceeding was listed for a formal proof hearing to give notice toMr Walls of his rights under r 15.9(3).The relevant procedural history[6] The notice of proceeding and statement of claim, together with the plaintiff'sbundle of initial disclosure, were served on Mr Walls by arrangement at 9.50 am on30 November 2016. No issue is taken as to service.[7] If Mr Walls intended to defend the proceeding, the time for him to file astatement of defence expired on 25 January 2017.3[8] On 14 February 2017 counsel for the liquidators filed a memorandum withthe Court requesting the allocation of a formal proof hearing in accordance withr 15.9(2).3 High Court Rules 2016, r 5.47(2).[9] The memorandum was referred to Associate Judge Christiansen on14 February 2017. On the same day the Judge adjourned the proceeding to a formalproof hearing before a judge in March on a day and at a time to be scheduled bythe Registry.[10] The Deputy Registrar then listed the proceeding for a formal proof hearing inthe High Court at Tauranga on 7 March 2017.[11] The hearing proceeded before Peters J on 7 March 2017.[12] After hearing from counsel for the liquidators and there being no appearancefor or on behalf of Mr Walls, the Judge reserved her decision.[13] On 7 December 2017 the Judge issued her reserved decision ordering Mr Wallsto contribute $489,810.06 to the assets of the company.Presentation of the appeal[14] Mr Shaw addressed the BORA context and Mr Cornege advanced theparticular arguments in support of the appeal. Mr Shaw referred to Noort v Ministryof Transport and R v Goodwin.4 He submitted that s 6 of BORA applied and thatnatural justice required that an interpretation consistent with BORA be given tothe Rules.[15] Mr Cornege submitted that r 15.9(3) provided Mr Walls a right to seek to filea statement of defence with leave of a judge. He submitted that, properly interpreted,the reference in r 15.9(2) to notice was a reference to notice of listing the proceedingfor formal proof, rather than a reference to notice of the date of the formal proofhearing.[16] Noort and Goodwin are seminal cases. They confirm the importance of theright to a lawyer and clarify the concept of detention when considering the applicationof BORA. The general principles espoused are important and uncontroversial.4 Ministry of Transport v Noort [1992] 3 NZLR 260 (CA); and R v Goodwin [1993] 2 NZLR 153(CA).With respect to Mr Shaw's reliance on them, they have little relevance to theapplication of r 15.9 in the present case.Decision[17] The appeal turns on the appellant's construction of r 15.9 of the Rules and inparticular the right said to arise from r 15.9(3). The relevant rule provides:15.9 Formal proof for other claims(1) This rule applies if, or to the extent that, the defendant does not file astatement of defence within the number of working days required bythe notice of proceeding, and the plaintiff seeks judgment by defaultfor other than a liquidated demand.(2) The proceeding must be listed for formal proof and no notice isrequired to be given to the defendant.(3) After a proceeding is listed for a formal proof hearing, no statementof defence may be filed without the leave of a Judge granted on theground that there will or may be a miscarriage of justice if judgmentby default is entered, and on such terms as to time or otherwise asthe Judge thinks just.(4) The plaintiff must, before or at the formal proof hearing, file affidavitevidence establishing, to a Judge's satisfaction, each cause of actionrelied on and, if damages are sought, providing sufficient informationto enable the Judge to calculate and fix the damages.(5) If the Judge before or at the formal proof hearing considers that anydeponent of an affidavit filed under subclause (4) should attend to giveadditional evidence, the Judge may direct accordingly and adjournthe hearing for that purpose.[18] The appellant's argument is that the wording in r 15.9(2) that "and no notice isrequired to be given to the defendant" simply means that no notice has to be given ofthe fact that the court is administratively listing the matter for a hearing. The appellantsays that interpretation of r 15.9(2) is available and should be applied, consistent withs 6, BORA. That would lead to the conclusion that notice should be given that a formalproof hearing has been allocated. Defendants must be told of that so they can exercisetheir right under r 15.9(3) to seek leave to file a statement of defence.[19] We consider that the appellant's construct that r 15.9(3) creates a right to applyto the court for leave to file a defence out of time is misconceived. Rule 15.9(3) doesnot create an additional right, rather it constrains an existing right. When served withthe proceeding a defendant has the right to file a defence. The notice of proceeding,which is a form prescribed by the Rules,5 gives express notice of the consequence offailure to file a defence within time:This document notifies you that you must file in this registry of the court astatement of defence to the plaintiffs' claim (a copy of which is served withthis notice). You must do this within 25 working days after the date on whichyou are served with this notice. If you do not, the plaintiffs may at onceproceed to judgment on the plaintiffs' claim, and judgment may be given inyour absence.[20] The memorandum accompanying the notice of proceeding gives furthergeneral advice, including about filing a statement of defence.6[21] Section 6 of BORA is simply not engaged in the present case. The distinctionMr Walls seeks to argue for in the present case is entirely artificial.[22] The defendant was able to file a statement of defence as of right at any timeafter being served with the proceeding up until the time it was listed for formal proof.A party is taken to be aware of the law and their rights.7 Once the matter was listedfor formal proof the defendant's ability to file a statement of defence as of right wasconstrained. From that time on an application for leave to file a statement of defencewas required. Properly construed, r 15.9(3) does not create an additional right, butrather restricts the existing right to file a statement of defence without leave ofthe judge. On that basis alone the appeal cannot succeed.[23] There are other difficulties with the appellant's argument and a number ofadditional reasons why the appeal must fail. The meaning of r 15.9(2) is plain. Listingof a proceeding for formal proof is an administrative matter undertaken bythe Registry. It would be pointless and otiose for the rule to be interpreted in the wayargued for by the appellant. The Registry need not give notice of various steps takenin the course of the administration of files within the court. The Registry does givenotice of hearing dates and court events. But r 15.9(2) confirms that in the case of aformal proof hearing, notice of the date is not required.5 High Court Rules, sch 1 form G 2.6 Form G 3.7 Alatupe v Police HC Auckland AP90/03, 26 August 2003 at [25].[24] Further, there are other processes prescribed by the rules which onthe appellant's argument would create rights yet no notice is given of them.For example, no notice is given of the ability to issue a third party notice pursuant tor 4.4, the right to file and serve a notice of opposition pursuant to r 7.24 or the right tomake a defendant's application for summary judgment pursuant to r 12.2(2).[25] Next, it is said the right engaged is under s 27(1) of BORA:827 Right to justice(1) Every person has the right to the observance of the principles ofnatural justice by any tribunal or other public authority which has thepower to make a determination in respect of that person's rights,obligations, or interests protected or recognised by law.[26] Section 27(1) recognises and expresses the existing common law that naturaljustice must be applied by a tribunal or other public authority when determining aperson's rights. The use of the word "determination" is particularly relevant in thepresent context. None of the administrative steps taken by the parties referred to bythe appellant in this case, namely the liquidators, the Associate Judge or the Registrar,determined Mr Wall's rights in the matter.[27] The liquidators' memorandum was clearly no more than a request to the Courtthat the Court apply r 15.9(2) and list the case for formal proof.[28] The Registrar could have acted on the basis of that request and, pursuant tor 15.9(2), allocated a formal proof hearing without involving a judicial officer.Although the request was referred to an Associate Judge, he simply adjourned thematter for a formal proof hearing, leaving it to the Registry to list the date and time.None of those steps involved a determination of the appellant's rights.[29] The Registry then listed the proceeding for a formal proof hearing exactly asr 15.9(2) contemplates.8 During the hearing reference was made to s 27(3) but that has no application as it relates toproceedings brought against or by the Crown.[30] While Peters J (in conducting a formal proof hearing and issuing a judgment)did determine Mr Wall's substantive rights, she was not involved in listing the case forthe formal proof hearing, which is the step Mr Walls says engaged the right.[31] There are also practical issues which count against the appellant's argument.In a number of cases the Registry will not be able to serve notice on the defendant asit will have no address for the defendant. In the absence of a statement of defence,the Registry will not have an address for service.[32] Next r 6.20 confirms that a party who has not given an address for service isnot entitled to be served with notice of any step in the proceeding. While Mr Cornegesubmitted the rule appeared under a sub-part heading "Corporations, partners,attorneys, and agents", it appears at the end of those rules and in the context of otherrules which have general application, such as service on a representative: r 6.17;service on a solicitor: r 6.18; and service on certain days being void: r 6.19.Those rules are clearly not limited and plainly have general application, as does r 6.20.[33] When considering r 15.9 and the consequences of the application of BORA, itis relevant to consider r 15.10 and the remedies available to a defendant who has hada default judgment entered against them on that basis.[34] While it is a matter for the appellant rather than this Court, the obvious remedyfor Mr Walls was to file an application to set aside the formal proof judgment underr 15.10. The Court could then take into account the relevant considerations under thatrule, including the merits of any proposed defence. We note there is no evidence fromMr Walls in relation to any of those factors.[35] It may be correct, as Mr Cornege submitted, that it will be more difficult for adefendant to set aside a formal proof judgment than it will be to obtain leave to file adefence out of time. However that does not support his conclusion that failure toadvise a defendant of the right means the defendant's rights are "wholly undermined".99 See Andrew Beck and others McGechan on Procedure (online ed, Thomson Reuters) at[HR15.10.05]; cf Neumayer v Kapiti Coast District Council [2014] NZHC 417, [2015] NZAR1185.[36] Next, the object of the High Court Rules is also relevant. It is to secure thejust, speedy and inexpensive determination of proceedings before the Court.10The application of the rule challenged in this appeal, r 15.9, was clarified on3 June 2014 to provide expressly that no notice was required. The reason for theinsertion of those words given by the Explanatory Note to the High Court AmendmentRules 2014 was:These rules also align the drafting of rules 15.9 and 26.27 with the languageto be used in the new District Court Rules 2014, in order to ensure betterconsistency between the 2 sets of rules and to resolve 2 legal questions thatare not currently addressed expressly in the High Court Rules. [37] The other provisions of BORA referred to by the appellant do not assist. Whiles 3(a) applies the Act to the judicial branches of Government, for the reasons givenabove, the only determination in the present case was the substantive decision ofPeters J. Section 3(b) of BORA extends the application to acts done by anynon-government body, but only in respect of their public functions. While liquidatorsare officers of the court and are appointed under the Companies Act, the powers andduties conferred and the exercise of them are essentially private functions.[38] For completeness, we record the appellant did not refer to s 28 of BORA in hiswritten submissions. It adds nothing to the argument.Result[39] The appeal is dismissed.[40] The appellant must pay the respondents one set of costs for a standard appealon a band A basis and usual disbursements.Solicitors:Bytalus Legal, Auckland for AppellantMeredith Connell, Auckland for Respondents10 Rule 1.2.