(Given by ORegan P)
[1] This is an appeal against a decision by MacKenzie J in which he struck out claims made by the appellants against the first and second respondents.[1] In a later judgment, MacKenzie J awarded costs against the appellants.[2]
Parties
[2] The appeal was brought in the name of Mr Reid only. Counsel for the respondents, Ms Laurenson, argued that, since the High Court proceeding was in the name of Mr Reid and Mr Hale as trustees of the Frederick Frank Family Trust, the appeal against the High Court decision should also be made by both of the trustees. We agree. We allowed Mr Reid to make an oral application to amend the notice of appeal by including Mr Hale, who was present in court during the hearing of the appeal, as an additional appellant. We allowed the amendment. We direct the Registrar to amend the Court file and the entry for the file in the court database accordingly.
Background
[3] The background to the claim is summarised in the High Court judgment in terms with which no party takes any issue. For convenience we reproduce the relevant paragraphs of the High Court judgment below.
[2] In about October 1999, Mr Hale purchased a used motor car from McKenzie Motors in Masterton. The sale agreement, dated 22 October 1999, records Mr Hale as œrepresenting Frederick Frank Trust? and he signed œpp FF Trust?. The purchase price was $9,000. Mr Hale paid cash of $2,500, and financed the balance under a conditional purchase agreement dated 17 November 1999. Including finance charges, the balance payable under the conditional purchase agreement was $8,964 payable by 36 monthly instalments of $249. The agreement recorded the purchaser as Mr Hale, and he signed œpp Frederick Frank Trust?. In his affidavit sworn on 13 March 2012, Mr Hale says that because of financial hardship he was unable to make the payments and returned the car to the dealer in 2002. He says it was in good running order.
[3] In July 2006, [Carterton Auto Court Ltd trading as McKenzie Motors], as plaintiff, commenced proceedings in the District Court at Masterton seeking judgment for the amount outstanding under the agreement. The statement of claim recorded that payments had been made up until July 2001, and œtotal number of payments received was 19, totalling $4,731 leaving $4,233 of the principal outstanding?. Penalty interest totalling $5,579.37 to 30 June 2006, plus interest at the contracted rate of 22.08 per cent per annum from that date, was also claimed.
[4] The proceedings were served on Mr Hale by a process server on 8 August 2006. He took no steps. In his affidavit he said œbecause of ill health including spells in hospital, I was unable to travel to Masterton to deal with the claim?. Judgment by default was entered on 19 January 2007 for a total sum, including interest and costs, of $12,118.53.
[5] Steps were taken to enforce the judgment and on 16 May 2007 Mr Hale was examined in the Palmerston North District Court as to his means. On completion of the examination, the Deputy Registrar made no order on payment.
[6] In September 2007, the District Court judgment was removed into the High Court under s 66 of the District Courts Act 1947. A writ of sale was issued on 21 September 2007, signed by the Deputy Registrar of the High Court at Masterton and directed to the Sheriff at Palmerston North. In December 2007, a charging order was registered over the trusts property at 74 McLean St, Woodville. Proceedings to sell the property by virtue of the writ of sale were taken through the Sheriff at Masterton. The notice of sale was issued on 4 February 2008 and served on Mr Hale on 7 February 2008. The property was sold for the sum of $93,500. It appears from the documentation that arrangements were made for Mr Hale to lend $33,500 by way of a vendor mortgage to the purchasers, so that the amount payable on settlement by the purchasers was about $50,000. The total amount then owing under the judgment, plus the costs of execution, was about $44,000. The balance of just over $6,000 was paid to Mr Hale.
[7] The applicants are named as Mr Reid, and Mr Hale as trustee of the trust. Objection was taken to Mr Reid representing Mr Hale in these proceedings. By judgment dated 15 September 2010, Ronald Young J ordered that Mr Reid be removed as one of the applicants. There were then subsequent interlocutory decisions dealing with Mr Reids capacity to represent Mr Hale in the proceedings. Mr Reid was subsequently made a trustee of the trust and so was added back as a party by a judgment of Mallon J delivered on 1 December 2011.
Grounds of appeal
[4] The appeal is mounted on the following grounds:
(a) the Judge did not follow established criteria for strike out;
(b) the Judge ignored the principle that fraud overrides judicial discretion and legal doctrine;
(c) the Judge erred in law by limiting the responsibilities of the relevant court officials to the œminimal? requirements of the rules of Court;
(d) the Judge failed to give due consideration to the presumption of innocence and the fact that a person should not be convicted in absentia;
(e) the Judge failed to recognise the obligations of the Court under s 27 of the New Zealand Bill of Rights Act 1990 (œBill of Rights Act?) to judicially review the actions of the respondents; and
(f) the Judge erred in granting costs against the appellant trusts.
High Court decision
[5] Before dealing with those grounds of appeal, we will set out the significant aspects of the High Court decision.
[6] The Judge applied the principles in relation to strike out applications articulated by this Court in Attorney-General v Prince and Gardner.[3] He summarised these as follows:
(a) Pleaded facts, whether or not admitted, are assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation.
(b) The cause of action must be clearly untenable.
(c) The jurisdiction is to be exercised sparingly, and only in clear cases. This reflects the Courts reluctance to terminate a claim or defence short of trial.
[7] The Judge noted that those principles had been confirmed by the Supreme Court in Couch v Attorney-General.[4]
[8] The Judge noted that the relief sought by the appellants against the Masterton District Court was a declaration that the Registrar of that Court had breached his or her statutory obligation by entering a default judgment in favour of Carterton Auto Court Ltd against the Frederick Frank Family Trust on 19 January 2007 without evidence of indebtedness. There were also claims for damages and compensation.
[9] The Judge said he was satisfied that the assertion that the Registrar of the District Court at Masterton was in breach of statutory obligations could not succeed. He noted that judgment had been entered in accordance with rr 112 and 126 of the District Court Rules 1992 as they were then in force. There was no dispute that the proceedings had been properly served and that no steps had been taken. As the amount claimed was a liquidated amount, the claim was a liquidated demand in money. That meant that under r 463 of the District Court Rules the plaintiff was able to seal final judgment.
[10] The Judge noted that the District Court Rules did not require any examination of the factual basis of the claim when a judgment is entered by default, nor do they require that the Registrar check there is evidence of indebtedness before judgment is entered. The Judge said there was no seriously arguable case that the Registrar did not properly observe all of the requirements for the entry of default judgment. He then therefore concluded that the cause of action against the Masterton District Court had to be struck out.
[11] The Judge noted that the claim against the High Court at Masterton sought declarations that the Wairarapa Sheriff of the High Court had breached his statutory obligations by:
(a) issuing a writ of sale for 74 Maclean Street Woodville, being property owned by Frederick Frank Family Trust, without evidence of indebtedness; and
(b) retaining the services of a solicitor acting for Carterton Auto Court Ltd to execute the writ of sale in circumstances resulting in a conflict of interest.
[12] The Judge considered that the case for the declaration sought in (a) above was not seriously arguable. The writ of sale had been properly issued, based on a default judgment which had been obtained in the District Court and removed into the High Court. The requirements for the issue of a writ of sale were met. The sheriff was under no duty to obtain some further evidence of the indebtedness upon which the judgment had been based.
[13] In relation to the declaration sought in (b) above, the Judge considered there was no tenably arguable case that the sheriff breached the statutory obligations by acting in accordance with documents prepared by the solicitor for the judgment creditor in carrying out the sale, and in engaging the solicitor for the judgment creditor to carry out associated legal work connected with the sale. The Judge said this was standard practice and did not give rise to a conflict of interest on the part of the sheriff or of the lawyer instructed. Accordingly, he determined that the claim against the High Court at Masterton could not succeed, and also struck out that claim.
[14] The Judge did not, however, strike out the claim against the first defendant in the High Court proceeding, Carterton Auto Court Ltd, trading as McKenzie Motors. We understand that that matter is to proceed to a hearing in a few months time.
Analysis of grounds of appeal
[15] We now turn to the grounds of appeal.
Strike out criteria
[16] The appellants argued that the Judge did not follow the established strike out criteria. They said the Judge did not treat pleaded facts as being assumed to be true, as required. However, the Judge correctly applied the principle that the acceptance of pleaded facts as true does not extend to allegations that are speculative and without foundation. The fact that the allegations of fraud were made by the appellants did not require the Judge to proceed on the assumption that the relevant Court officials had been fraudulent, given that there was no proper basis for those allegations.
Fraud ignored
[17] The appellants said the Judge ignored the established principle that fraud overrides judicial discretion and legal doctrines. Since the statement of claim alleged fraud, the Judge had an obligation to œexplain why Court staff are exempt from review for rubberstamping fraudulent claims?. In fact, the Judge correctly found that relevant Court officials had acted in the manner required by the relevant rules of Court. It was not necessary or appropriate for either of them to look behind the judgment that had been issued by the Court. That judgment had been issued by default because of Mr Hales inaction. If Mr Hale considered that Carterton Auto Court Ltd had acted improperly, the time for him to raise the matter was when the claim by Carterton Auto Court Ltd was before the District Court. Once he acquiesced in judgment being entered against him, the consequences of enforcement of that judgment followed. There is nothing in this point.
Error of law
[18] The appellants argued that the Judge erred in law by limiting the responsibilities of Government employees exercising judicial authority to minimum requirements of the rules of Court. We have already dealt with this argument: the Court officials acted appropriately in carrying out the requirements of the rules of Court in relation to a judgment that had been issued pursuant to the Courts processes and was not subject to appeal or to an application to set it aside.
Breach of legal principle
[19] The appellants say the Judge failed to give due consideration to the presumption of innocence and no conviction in absentia. Both of those are principles of the criminal law. They have nothing to do with the present case.
Bill of Rights Act
[20] The appellants say the Judge failed to recognise the Courts statutory obligations under s 27 of the Bill of Rights Act to judicially review the actions of the respondents. That is incorrect. The application for judicial review was made and received by the Court. Under the rules of Court an application that is untenable can be struck out, and that is what happened in the present case. The Judges decision was an orthodox application of the High Court Rules in dealing with applications for judicial review in circumstances where the application discloses no tenable ground of review.
Costs
[21] The appellants said the Judge erred in awarding costs against them in circumstances where the allegation of fraud was assumed to be true and therefore it should have been assumed the Court officials were participants in the processing and enforcement of a fraudulent claim. As indicated earlier, the Court was not required to accept as true allegations of fraud against Court officials that were made without any foundation.
[22] The appellants also argued that costs should have been awarded against the Frederick Frank Family Trust rather than against the trustees personally. That is misguided. The trustees brought the claim on behalf of the trust and where the parties to the litigation, and the costs award was therefore rightly made against them. It may be that the award could be met out of the assets of the trust under s 38 of the Trustee Act 1956, but that is an internal trust matter which may depend on the terms of the deed of trust. It is not a matter in which the Court needs to involve itself.
Result
[23] All of the grounds of appeal fail. The appeal is dismissed.
Costs
[24] Costs should follow the event. The appellants must pay costs to the respondents for a standard appeal on a band A basis plus usual disbursements. The liability of the appellants is joint and several.
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[1] Reid v Carterton Auto Court Ltd T/A McKenzie Motors [2012] NZHC 1153.
[2] Reid v Carterton Auto Court Ltd T/A McKenzie Motors [2012] NZHC 2111.
[3] Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.
[4] Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].