DONALDSON V FRANKTON ALUMINIUM (1982) LIMITED HC HAM CIV 2012-419-001478

DONALDSON V FRANKTON ALUMINIUM (1982) LIMITED HC HAM CIV 2012-419-001478 [19 March 2013]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYCIV 2012-419-001478[2013] NZHC 534BETWEEN ROBERT HILARY DONALDSONAppellantAND FRANKTON ALUMINIUM (1982)LIMITEDRespondentHearing: 18 March 2013Appearances: A Shaw for ApplicantC Fletcher and D Delic for RespondentJudgment: 19 March 2013JUDGMENT OF GILBERT JThis judgment was delivered by me on 19 March 2013 at 2.30 ampursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate: .Counsel: C Fletcher and D Delic, Hamilton: charles@fletcherlaw.co.nzA Shaw, Wellington: antony.shaw@xtra.co.nzCopy to: R H Donaldson, Cambridge: motorsports@maxnet.co.nzIntroduction[1] Mr Donaldson appeals against a judgment of Judge Spiller in the Hamilton District Court declining to set aside a default judgment entered against him in favour of Frankton Aluminium (1982) Limited. The judge found that the judgment had been regularly obtained and that Mr Donaldson had not provided any evidence to show that he had a seriously arguable defence. Mr Donaldson argues that the judge was wrong to find that the judgment had been regularly obtained.Background[2] Frankton supplied windows to Mr Donaldson in September and October 2010. It claims that the goods were sold on the basis of its standard terms of sale which provide that title does not pass until the goods are paid for in full and that Frankton may repossess and dispose of the goods if payment is not made by due date.[3] Mr Donaldson did not pay for the windows and they were returned to Frankton in December 2010. There is a dispute about the basis upon which Frankton accepted the return of the windows and also whether Frankton's standardterms and conditions formed part of the contract for supply.[4] On 15 March 2012, Frankton served Mr Donaldson with a notice of claim pursuant to r 2.10 of the District Courts Rules 2009. Frankton claimed $30,920.82,being the total of the two invoices, $2,200 for "storage costs + ongoing costs",interest of $4,305.70 calculated in accordance with the standard terms at the rate of13 per cent per annum being 5 per cent above Frankton's bank overdraft interest rate, and costs of $1,793.11. The basis of the claim for storage was not explained in the claim and the standard terms and conditions do not refer to any entitlement to claim storage costs. Mr Fletcher advised from the bar that the storage costs were claimed pursuant to a separate contract allegedly made with Mr Donaldson at the time the goods were returned.[5] The notice of claim, which was in form 2 as set out in schedule 1 of the District Courts Rules, advised Mr Donaldson that if he wished to defend the claim heneeded to "fill in form 3 – Response by defendant" within 30 working days after hereceived the notice of claim. Form 3 advises defendants to serve the completed formon the plaintiff "by taking or sending" it to the plaintiff's address for service asspecified in form 2, which in this case was the street address of Frankton's solicitors.[6] The 30 working day period expired on 1 May 2012. Mr Donaldson completed form 3 on 30 April 2012 but he did not send it to Frankton's solicitors until 2 May 2012 when he emailed them an unsigned copy of the form and posted the signed original. The original was received by the solicitors on 8 May 2012.[7] On 8 May 2012, despite having received Mr Donaldson's notice of response, Frankton's solicitors applied to the court for judgment by default. Frankton'ssolicitor deposed that no response was served by 26 April 2012, being the date he incorrectly calculated as the expiry of the 30 working day period.[8] On10 May 2012, in reliance on information supplied by Frankton's solicitors,a deputy registrar of the District Court sealed judgment for $43,155.08, being the full amount claimed including interest of $5,847.84 and costs. The solicitors did not advise the court that they had received a response to the claim from Mr Donaldson in the prescribed form.[9] Mr Donaldson applied to set aside the judgment on the basis that it had been irregularly obtained. The judge found that the judgment had been regularly obtained because Mr Donaldson had not served a compliant response by the time the 30 working day period had expired. Having found that the judgment was regularly obtained, the judge considered whether it should nevertheless be set aside on the basis that there had been or might have been a miscarriage of justice. The judge was not persuaded that Mr Donaldson had established a credible or seriously arguable defence and accordingly he declined to set the judgment aside.Was the judgment regularly obtained?[10] Rule 2.39 entitles a plaintiff to apply immediately for judgment by default if the response by the defendant is not served within the time allowed. It relevantly provides:A plaintiff who is pursuing a claim under rules 2.10 to 2.17 may apply immediately for judgment if –(a) the defendant does not, within the time allowed, -(i) serve on the plaintiff the defendant's form 3 (response bydefendant); or(ii) ...[11] The issue is whether a plaintiff can make such an application after the defendant has served its response. The judge did not address this issue. He proceeded on the basis that the last available date for serving the response was 2 May 2012 but that Mr Donaldson failed to serve a response in accordance with the District Courts Rules that day because he only sent an unsigned copy by email. The judge did not consider whether service of the signed copy at the nominated address for service on 8 May 2012 should have prevented Frankton from seeking a default judgment later that day.[12] Rule 2.39 must be interpreted in the light of the objective of the District Courts Rules as set out in r 1.3.1:The objective of these rules is to secure the just, speedy, and inexpensive determination of any proceeding or interlocutory application.[13] In my view, the proper interpretation of r 2.39 is that a plaintiff may apply immediately for judgment following expiry of the 30 working day period if no response has been received from the defendant. However, the rule does not permit a plaintiff to make such an application after a response has been received. It would hardly serve the objective of securing the just disposal of a dispute if a plaintiff were permitted to apply for judgment by default after a defendant has served a fully compliant notice of its intention to defend the claim.[14] This conclusion is reinforced by the prescribed form of application for a default judgment, which is form 6A in the first schedule to the Rules. This form clearly contemplates that such an application can only be made if two prerequisites are met:(a) the time for serving a response has expired; and(b) no response has been received at the time the application for judgment is made.[15] At the time Frankton applied for judgment, form 6A relevantly provided:Section 3: Affidavit3A Swear of affirm the appropriate affidavit (sic)You must fill in one of the affidavits below (option 1 or option 2), then get a Registrar or Deputy Registrar, Justice of the Peace, lawyer, or Judge to swear or affirm that your affidavit is true and sign below.Cross out whichever affidavit you do not fill in.Option 1 – You have not received Form 3 from the defendantUse this affidavit if it has been more than 30 working days since you servedForm 2 – Notice of Claim on the defendant and you have not receivedForm 3 – Response by defendant from them (sic)[16] Frankton sought summary judgment on the basis that Option 1 applied. Option 1 only applies in circumstances where a plaintiff has not received Form 3 from the defendant. That was not the case when Frankton applied for judgment and completed the affidavit. There is no dispute that by this stage Mr Donaldson had served correctly a fully compliant response in Form 3.[17] In my view, Frankton was not entitled to seek judgment by default after it had been validly served with a compliant response from Mr Donaldson in Form 3. It follows that the judgment was irregularly obtained.Should the judgment be set aside?[18] Generally, a judgment that has been irregularly obtained will be set aside. However, the ultimate question is whether there has been or may have been a miscarriage of justice. Rule 12.34 provides:Any judgment obtained by default may be set aside or varied by the court on any terms it thinks fit, if it appears to the court that there has been, or may have been, a miscarriage of justice.[19] Mr Delic urged me not to set aside the judgment, even if it had been irregularly obtained, because this would cause injustice to Frankton. He submitted that there is no defence to the claim.[20] I am not persuaded that this is necessarily correct. Mr Donaldson may beable to show that Frankton's terms and conditions did not apply to the supply contract. He may also be able to establish that he is not liable for storage. There may also be a dispute about the basis upon which Frankton accepted the return of the windows. All of these potential defences will depend on the evidence. However, at this stage, I cannot be satisfied that Mr Donaldson has no arguable defence. To allow this default judgment to stand, notwithstanding that it was irregularly obtained, could result in a miscarriage of justice because it would deny Mr Donaldson his right to defend the claim.Conclusion[21] The judgment was irregularly obtained because Mr Donaldson had served a response to the claim complying with the rules before Frankton applied for the default judgment. To allow this irregularly obtained judgment to stand could result in a miscarriage of justice. The appeal should be allowed and the judgment should be set aside.Result[22] The appeal is allowed. The default judgment is set aside.[23] The appellant is entitled to costs calculated on a category 2A basis.___________________________M A Gilbert J