RIKA v MORRISON KENT [2018] NZHC 1406

RIKA v MORRISON KENT [2018] NZHC 1406 [13 June 2018]IN THE HIGH COURT OF NEW ZEALANDROTORUA REGISTRYI TE KŌTI MATUA O AOTEAROATE ROTORUA-NUI-Ā-KAHU ROHECIV-2017-463-042[2018] NZHC 1406BETWEEN WALTER PERERIKA RIKAAppellantAND MORRISON KENTRespondentHearing: 20 March 2018Appearances: Appellant in personMRC Wolff for the RespondentJudgment: 13 June 2018JUDGMENT OF WOODHOUSE JThis judgment was delivered by me on 13 June 2018 at 4:00 p.m.pursuant to r 11.5 of the High Court Rules 1985.Registrar/Deputy RegistrarParties / Solicitors:Mr W P RikaMr M Wolff, Morrison Kent, Wellington[1] The appellant, Mr Rika, appeals against judgment entered for the respondent,Morrison Kent Ltd, on 8 March 2017 in the District Court at Rotorua in a sum of$51,200.16.Grounds of appeal[2] Judgment was entered on an admission of claim signed by Mr Rika and dated12 June 2016. The admission was for the total judgment sum of $51,200.16. This wasfor legal fees of $40,310.38 which Mr Rika admitted he owed Morrison Kent, andinterest and costs for which Mr Rika also accepted liability.[3] On the appeal, Mr Rika did not dispute his indebtedness to Morrison Kent forthe legal fees. Nor did he raise any issue relating to the other sums. After Mr Rikahad given the admission of claim to Morrison Kent, but before judgment was entered,he made a payment of $2,300. After judgment was entered, but before the hearing ofthis appeal, Mr Rika made a further payment of $5,000. I am satisfied that no issuearises in respect of these payments. Morrison Kent has not sought to enforce judgmentfor more than the net sum owing, plus further interest.[4] In essence, there is no issue of quantum or liability raised by Mr Rika on theappeal. His grounds of appeal are:(a) Morrison Kent should not have obtained the admission of claim fromhim because, at the time, they were still acting for him and, as a result,Morrison Kent had a conflict of interest.(b) The admission of claim was subject to a condition enabling Mr Rika torepay the debt within 12 months, expiring on 8 June 2017, but judgmentwas entered on 8 March 2017.District Court r 15.13[5] Rule 15.13 of the District Court Rules 2014 makes provision for admissions ofcauses of action. The rule relevantly provides as follows:15.13 Admission of cause of action(1) At any time after a party has been served with a notice of proceeding,that party may file and serve (separately from the party's pleadings)an admission of all, some, or part of the alleged causes of action onall other parties to the proceeding.(3) When an admission is filed and served under subclause (1), a party onwhom the admission is served may seal judgment on the cause ofaction admitted, without prejudice to that party's right (if any) toproceed on any other cause of action.(4) An admission under subclause (1) relating to any cause of action inwhich a sum of money is claimed must state the exact amountadmitted.(5) Any judgment entered on an admission filed and served undersubclause (1) may, upon application, be set aside by the court if—(a) the plaintiff, being under a duty or obligation to the defendantnot to enter judgment on the admission, acted contrary to thatduty or obligation in entering judgment; or(b) the plaintiff, in entering judgment, acted fraudulently,unconscionably, or in wilful or reckless disregard of thedefendant's rights.(6) Upon an application under subclause (5), the court may direct that aproceeding be brought to determine whether judgment waswrongfully entered.[6] Rule 15.13(5) and (6) apply directly to the issues raised on this appeal. The"court" referred to in r 15.13(5) is the District Court. This court nevertheless hasjurisdiction to determine the issues.1 Mr Wolff, for Morrison Kent, did not raise anyjurisdiction issue.[7] Both Mr Rika and Mr Wolff made clear that they were seeking a decision ofthis Court. I am satisfied that it is in the interests of both parties for this court todetermine the issues.[8] This is not a case requiring a direction that a proceeding be brought todetermine whether judgment was wrongfully entered, as contemplated by r 15.13(6).1 Rule 20.19(1) of the High Court Rules 2016.Mr Rika helpfully filed a bundle of documents. This was an appropriate step to takebecause this was not an appeal from a reasoned judgment of the District Court, withfindings of fact. The judgment had simply been entered by the Registrar on theadmission. Both parties presented their written submissions by reference to thedocuments. And both parties accepted that the issues were capable of beingdetermined on the "papers", and in particular the contemporaneous documentscontained in the bundle of documents. For these reasons this court is well placed todetermine the issues raised.Evaluation: was there a conflict of interest?[9] As noted in the summary of the grounds of appeal, Mr Rika contended thatthere was a conflict of interest for Morrison Kent because Morrison Kent was actingfor him when it obtained the admission of claim from him. For the reasons that followI am satisfied that Morrison Kent was not acting for Mr Rika when the negotiationsleading to the admission of claim began, or at any subsequent time through to entry ofjudgment. In consequence, there was no conflict of interest as alleged. And there wasno suggestion that there was a conflict of interest for Morrison Kent for any otherreason.[10] The debt for the legal fees arose from instructions from Mr Rika to MorrisonKent to act for the three trustees of the E E Rika Estate Trust (the Trust), and for acompany with which Mr Rika was associated, Patetere Farms Ltd. Those instructionswere given in February 2013. By August 2014 there were outstanding fees of$40,310.38, the sum recorded in the admission of claim for fees. No part of the feeshad been paid by March 2015. On 4 March 2015 Morrison Kent sent a letter to MrRika advising that they would no longer act for Patetere Farms and the Trust becauseof the unpaid fees.[11] Mr Rika argued that Morrison Kent continued to act for him because the letterof 4 March from Morrison Kent stated only that the firm was ceasing to act for PatetereFarms and the Trust. I do not agree. The instructions to act for Patetere Farms andthe Trust came from Mr Rika and he had personal liability for the fees, as he hasexpressly acknowledged. When Morrison Kent said they would no longer act forPatetere Farms and the Trust, that necessarily meant also that they would no longer acton instructions from Mr Rika for Patetere Farms and the Trust. There was nosuggestion that Morrison Kent were acting for Mr Rika in any other matter.[12] Negotiations leading to the admission of claim did not begin until over 14months after Morrison Kent advised Mr Rika that the firm would no longer act forhim. The negotiations began on 17 May 2016 when Mr Rika sent an email to MorrisonKent in response to advice from Morrison Kent that it had issued proceedings torecover the fees. Particulars of Mr Rika's email are recorded below in the evaluationof the second ground of appeal. Had there been need for it, Morrison Kent's advice toMr Rika that it was suing him for fees simply reinforced what was clear from the letterof 4 March 2015.[13] Mr Rika submitted that Morrison Kent should have advised him to obtainindependent legal advice before he signed the admission. This does not provideseparate grounds for challenging the fact that Morrison Kent prepared the admissionof claim and got Mr Rika to sign it. Morrison Kent was not acting for Mr Rika andtherefore had no obligation to advise Mr Rika to obtain independent legal advicebefore embarking on the negotiations. In any event, there was express notice toMr Rika, in Morrison Kent's notice of proceeding that, although he did not have toemploy a solicitor for the purpose of the proceeding, it was recommended that heconsult a solicitor about the claim immediately.[14] There is a final consideration. The only provision of r 15.13 which mightprovide a basis for setting aside the judgment on the first ground of appeal isr 15.13(5)(b). This would require proof that Morrison Kent, in entering judgment,"acted fraudulently, unconscionably, or in wilful or reckless disregard of" Mr Rika'srights. There was no allegation by Mr Rika to that effect. And it is plain from theevidence that there could be no basis for an argument to that effect.[15] The first ground of appeal is dismissed.Evaluation: was the admission of claim filed contrary to conditions?[16] The terms on which Mr Rika provided the admission of claim are to bedetermined objectively by interpreting what is recorded in the emails between Mr Rikaand Morrison Kent over the relevant period. These commence with the email of 12May 2016 from Morrison Kent, advising that they had commenced the proceedingagainst Mr Rika. They end with an email from Morrison Kent of 15 June 2016acknowledging receipt of a letter from Mr Rika containing the signed hard copy of theadmission of claim.[17] Mr Rika, in his discussions with me, accepted that this issue turned on thecontent of the emails. Having read those emails, several times, and considered themeaning of them in light of Mr Rika's submissions, as well as those for Morrison Kent,I am satisfied that it was not a condition that Morrison Kent would not on any basisfile the admission of claim for a period of 12 months commencing on 8 June 2016.2[18] As noted earlier, negotiations between Mr Rika and Morrison Kent began withMr Rika's email of 17 May.3 Mr Rika acknowledged that the fees should have beenpaid and the claim was not disputed. He said, in effect, that he was not in a positionto pay at that time, but he was expecting to receive funds which would enable him topay and he was willing to "work out a way to ensure that" Morrison Kent was paid.He concluded the email as follows:I can give you an assignment of funds coming from the complaint4 and /or Iwill give an Acknowledgement of Debt which I will not dispute if payment isnot made. However If you have any other suggestion on how to secure yourposition I would be happy to oblige. This would be better for both of us thangoing thru the H/Ct which would avoid a costly H/Ct action.Can you please consider this and advise me whether we can work somethingout along the lines of what I have suggested, or something else you think willwork.2 The starting date is taken as 8 June because that is the date of Morrison Kent's email on which MrRika relies. It is possibly arguable that the 12 month period, to the extent it is relevant, started on12 June, being the date on the admission of claim signed by Mr Rika. Nothing turns on this.3 As will be apparent, all of the emails relating to this issue were in 2016, and the year has beenomitted from the dates.4 This was a complaint by Mr Rika to the New Zealand Law Society. It was not a complaint againstMorrison Kent.[19] Morrison Kent responded with an email which included the following:In light of your email and because we have already filed proceedings, webelieve that the best course of action now is to file an "Admission of Cause ofAction" (see Rule 15.13 of the District Court Rules 2014 attached). Thiswould effectively surpass most of the costly court proceedings to sealjudgment on the cause of action admitted.(emphasis in original)[20] On 18 May Mr Rika said he agreed to the suggestion, but had a couple ofquestions which he would put in an email the following day. In an email of 19 MayMr Rika again said that he accepted responsibility for the debt and that he should beheld responsible for it. He then said:Could you please advise me:1. What is the total amount of debt that you seek from me ?2. If I agree with this would Morrison Kent agree to with hold enforcement ofthe judgment for an agreed period of up to 12 months?3 And within the 12 mth period I be allowed to make payments to reduce thedebt.This would allow time for the Law Society complaint to be determined Andfailing that it will allow time to put in place an alternative repaymentarrangement of the balance owed.[21] Morrison Kent responded the same day, 19 May. Their email included thefollowing stipulation:We will agree to withhold enforcement of the judgment for 12 months, butonly on condition that you agree to repay the $40,310.58 in 12 equal monthlyinstalments over the course of that year (12 x $3,359 is $40,308). If you missa payment, then we reserve our right to proceed to enter judgment for thebalance of the full amount including the interests and costs, and to pursuerecovery.[22] Mr Rika replied by email of 27 May. He said:I am happy to sign an admission of claim, to keep things simple and keep costsdown.But at the moment I will struggle to keep to monthly payments.I am expecting payments from some work that I am doing for our WhānauTrust lands but I have yet to receive the payments scheduled from them.Once I have that I can realistically commit to some interim payments.Can we work around that?[Mr Rika then turned to other matters, not of relevance. At the end of theemail he came back to the admission of claim as follows.]If you can send me a draft admission of claim I can then put in what I canrealistically pay in the interim, and then you can decide if that is okay or not.[23] Morrison Kent's response was on 8 June. There are two paragraphs bearingon the issue, as follows:1. We refer to your email of 27 May 2016. If you admit the claim, andcontinue to communicate with us in good faith about payment, thenwe will not need to take any further steps in the proceeding. If you donot sign the admission of claim, or fail to make payment, then we willhave no option but to continue.2. If you admit the claim and repay the $40,310.58 as soon as possible,and certainly within the next 12 months, we will not seek judgmenton the admission. If you miss a payment, then we reserve our right toproceed to enter judgment for the balance of the full amount includingthe interests and costs, and to pursue recovery.[24] There was nothing else in that email relating to terms of settlement. Theremainder of the email explained the calculation of the total of $51,200.16 recorded inthe admission of claim and a draft admission, which was forwarded with the email.[25] By email of 10 June 2016, Mr Rika responded by saying:Happy to sign off on the Admission of Debt and will put the signed hard copyof the doc in the post to your office over the weekend.There was nothing else in the email, other than greetings. There was no challenge byMr Rika to what was expressly contained in, or to be inferred from, Morrison Kent'semail of 8 June. Nor did Mr Rika say anything about what he could "realistically payin the interim", as he had indicated he would do at the end of his preceding email of27 May.[26] Morrison Kent responded to Mr Rika on 10 June and said:Kia ora Walter, and thanks. Please be aware, though, that we expect you tocome back to us as soon as possible in good faith to make an interim payment.This is not a situation of us agreeing to keep the signed Admission for a yearbefore we do anything. If we have not received an interim payment from youwithin the next few weeks we will either continue with the proceeding, or ifyou have signed the Admission we will seek to enter judgment. I am sorry tospeak in these terms, but I wanted you to be clear about the understandingbetween us and the basis upon which we are accepting the Admission. If youhave any questions about it, please do not hesitate to get in touch.[27] Morrison Kent, in an email of 15 June to Mr Rika, acknowledged receipt of theadmission that day and added: "We hope to hear from you soon as regards payment."That was the last email of relevance.[28] The essence of Mr Rika's argument on this second ground of appeal was thatMorrison Kent was not entitled to enter judgment on the admission of claim until 12months had expired. Mr Rika stated that that was his understanding of what had beenagreed. As I explained to Mr Rika, the terms of the agreement have to be assessedobjectively from what was recorded, and not on the basis of his subjectiveunderstanding. Nor is it to be assessed on the basis of Morrison Kent's subjectiveunderstanding.[29] On an objective interpretation of what is recorded in the emails, I am satisfiedthat there was no agreed condition that judgment could not on any basis be entereduntil 12 months had expired.[30] Morrison Kent's email of 8 June could have been expressed more clearly, asMr Wolff acknowledged. This arises from the first sentence of paragraph 2:If you admit the claim and repay the $40,310.58 as soon as possible, andcertainly within the next 12 months, we will not seek judgment on theadmission.[31] But that sentence cannot be read in isolation. Paragraphs 1 and 2 as a wholemake sufficiently clear that, to avoid entry of judgment, Mr Rika was required to makereasonably regular payments, even if they were not fixed instalments, and he was alsorequired to communicate in good faith with Morrison Kent about payment over thefollowing months. Failure to do these things entitled Morrison Kent to enter judgment.[32] That is a conclusion based on the two paragraphs in the 8 June email. Whenthose paragraphs are read in the context of the full exchange of emails, the conclusionthat there was breach of the agreement by Mr Rika, entitling Morrison Kent to enterjudgment when they did, is reinforced. Morrison Kent's email of 19 May made clearthat regular payments were required. Mr Rika was wanting a more open-endedarrangement and indicated that he could not commit to regular monthly instalments.But Morrison Kent did not at any point agree to what Mr Rika was seeking.[33] Mr Rika's email of 27 May concluded with a request that Morrison Kent sendthe draft admission of claim and Mr Rika would then "put in what I can realisticallypay in the interim". Mr Rika did not do that. As recorded above, his response on 10June was simply to say that he was happy to sign the admission of claim and he wouldput the hard copy in the mail. The objective inference is that Mr Rika had acceptedthat he could not get a loose arrangement as he had sought. He signed the admissionon Morrison Kent's terms. That conclusion is reinforced by the terms of MorrisonKent's immediate response to Mr Rika in Morrison Kent's 10 June email.[34] For these reasons, Mr Rika's second ground of appeal is dismissed.Result[35] The appeal is dismissed.[36] The respondent is entitled to costs on a 2B basis and reasonable disbursements.There is an order to that effect. If the quantum of costs on a 2B basis and anydisbursements can be agreed, a joint memorandum, or other appropriate evidence ofagreement, may be filed and judgment entered for costs on those terms. If the partiesare unable to agree on the quantum of costs, and any disbursements, on a 2B basis, thedispute is to be determined by the Registrar in the first instance._______________________________Woodhouse J