Reid v Carterton Auto Court Limited t/a McKenzie Motors [2012] NZHC 1153 (28 May 2012)

Last Updated: 20 June 2012

IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY

CIV-2010-435-120 [2012] NZHC 1153

UNDER the Judicature Act 1908, the Judicature Amendment Act 1972, the Declaratory Judgments Act 1908, the Credit (Repossession) Act 1997, the Land Transfer Act 1952 and the New Zealand Bill of Rights Act 1990

IN THE MATTER OF the judicial review of judgments of the Masterton District Court Registrar and the Masterton High Court Sheriff

BETWEEN JAMES ROBERT REID AND GRAEME FREDERICK HALE AS TRUSTEES OF THE FREDERICK FRANK TRUST Applicants

AND CARTERTON AUTO COURT LIMITED T/A MCKENZIE MOTORS

First Respondent

AND MASTERTON DISTRICT COURT Second Respondent

AND MASTERTON HIGH COURT Third Respondent

Hearing: 2 April 2012

(Heard at Wellington)

Counsel: J R Reid and G F Hale in person

K Lakshman for First Respondent

D M Consedine and T J Warburton for Second and Third Respondents

Judgment: 28 May 2012

In accordance with r 11.5 I direct that the delivery time of this judgment is 12pm on the 28th day of May 2012.

REID AND HALE V CARTERTON AUTO COURT LIMITED T/A MCKENZIE MOTORS HC MAS CIV-

2010-435-120 [28 May 2012]

_{RESERVED JUDGMENT OF MACKENZIE J}

[1] This proceeding was issued in June 2010, in the Masterton registry. The statement of claim describes it as an application for review under Part 18 of the High Court Rules. The plaintiffs seek a number of declarations concerning the actions of the respondents in the entry of judgment by default in earlier proceedings in the District Court at Masterton between the first respondent as plaintiff and the trustees of the Frederick Frank Trust as defendants, and enforcement proceedings in the High Court at Masterton in respect of that default judgment.

[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 “representing Frederick Frank Trust” and he signed “pp 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 “pp 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, the first respondent, 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 “total 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 “because 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 trust’s property at 74 McLean Street, 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 Reid’s 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.

[8] All respondents seek to strike out the proceedings. I deal first with the application by the second and third respondents. The grounds for seeking strike out are set out in the application as follows:

2. The statement of claim cannot succeed because it does not disclose any reasonably arguable cause of action in relation to the second respondent and in particular:

2.1 There is no statutory requirement for the second respondent to obtain affidavit evidence of indebtedness when sealing judgment by default where the claim is for a liquidated amount.

2.2 The only evidence to be provided before judgment by default may be sealed (in the event that neither a statement of defence nor an appearance have been filed by the defendant) is an affidavit of service on the defendant. An affidavit of service was provided by the first respondent in this case.

3. The statement of claim is likely to and has caused prejudice and delay in the proceeding.

4. In so far as it relates to the second respondent, the proceeding is frivolous and vexatious.

5. The proceeding is an abuse of process:

5.1 the applicants did not exhaust the proper procedures available to challenge the decision of the second respondent at the time; and

5.2 the damages sought are not available in judicial review;

...

10. The statement of claim cannot succeed because it does not disclose any reasonably arguable cause of action in relation to the third respondent, in particular:

10.1 There is no evidence that the third respondent acted in contravention of his or her statutory obligations when issuing and executing the writ of sale of the property in issue in this proceeding.

11. The statement of claim is likely to and has already caused prejudice and delay in the proceeding.

12. In so far as it relates to the third respondent, the proceeding is frivolous and vexatious.

13. The proceeding is an abuse of process:

13.1 the applicants did not exhaust the proper procedures available to challenge the decision of the third respondent at the time; and

13.2 the damages sought is not available in judicial review.

[9] The grounds on which the applicant opposes the making of the orders are:

3.1 that the Court is obliged to accept that the allegations in the statement of claim are provable. As no statement of defence has been filed and no affidavit evidence has been sworn by the first respondent itself, the validity of the credit contract remains in issue;

3.2 that review of the illegal enforcement of an invalid contract is within the jurisdiction of the Court under the statutes cited in the intituling of the proceeding.

3.3 that (in response to Grounds 2-5 of the respondent’s application) the Court has no statutory authority to enforce an invalid contract. The Court has inherent jurisdiction to redress injustice and to grant the relief sought.

...

3.5 that (in response to Grounds 10-13 of the respondent’s application) the Crown has misconceived the purpose of a strike out application by referring to a lack of “evidence”. It is clear from documentation filed by the Crown that senior Court staff John Earles, Graeme Elliott and Brian Johnston all signed off the confiscation of Trust property without reference to a Judge. There is no evidence that they were not colluding with the first respondent.

[10] As Ms Consedine submits, the principles applicable to this strike out application are those set out by the Court of Appeal in Attorney-General v Prince and Gardner.[1] These may be summarised 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 exercise sparingly, and only in clear cases.

This reflects the Court’s reluctance to terminate a claim or defence

_{short of trial.}

[11] That approach was endorsed by the Supreme Court in Couch v Attorney-General.[2] These principles apply also to an application to strike out judicial review proceedings.[3]

[12] The relief which the plaintiffs seek against the second respondent is a declaration that the registrar of the Masterton District Court breached his or her statutory obligations by entering a default judgment in favour of Carterton Auto Court Ltd against Frederick Frank Trust on 19 January 2007 without evidence of indebtedness. They also seek damages and compensation.

[13] I am satisfied that the assertion that the registrar was in breach of his statutory obligations by entering a default judgment cannot succeed. Judgment by default may be entered in accordance with rr 112 and 126 of the District Court Rules 1992 then in force. The District Court proceedings were properly served and no steps had been taken. The amount claimed was a liquidated amount, so the relief claimed was a liquidated demand in money. Under r 463 of the Rules, the plaintiff was able to seal final judgment. The Rules do not require any examination of the factual basis of the plaintiff’s claim, when judgment is entered by default. The Rules do not require that the registrar check that there is evidence of indebtedness before judgment could be entered. There is no seriously arguable case that the registrar did not properly observe all of the requirements for the entry of the default judgment. The cause of action against the second respondent must be struck out.

[14] Against the third respondent, the declarations sought are:

(a) A declaration that the Wairarapa Sheriff of the Masterton High Court breached his statutory obligations by issuing a Writ of Sale for 74

McLean Street, Woodville, being property owned by Frederick Frank

Trust, without evidence of indebtedness.

(b) A declaration that the Wairarapa Sheriff of the Masterton High Court breached his statutory obligations by retaining the services of Ainslie

Hewton, solicitor for Carterton Auto Court Limited, to execute the

Writ of Sale in circumstances resulting in a clear conflict of interest.

[15] There is no seriously arguably case for the declaration sought in (a). The writ of sale was properly issued, based upon the default judgment which had been obtained in the District Court, and removed to this 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.

[16] As to the declaration sought in (b), there is no tenably arguable case that the Sheriff breached his statutory obligations by acting in accordance with documents prepared by the solicitor for the judgment creditor in carrying out the sale, and in otherwise engaging the solicitor for the judgment creditor to carry out associated legal work connected with the sale. That is standard practice. It did not give rise to a conflict of interest on the part of the Sheriff, or of the lawyer instructed.

[17] For these reasons, the claims against the second and third respondent cannot succeed, and the claim against those respondents are struck out.

[18] That decision makes it unnecessary for me to consider the second and third

respondents’ counter application for security for costs.

[19] The position is different with regard to the first respondent. I do not consider that this claim can be so easily dismissed. I have referred to Mr Hale’s evidence to the effect that he returned the car to the dealer in 2002 in good working order. That evidence is not contested. There is no evidence as to what the dealer did with the car after it had been returned. The statement of claim in the District Court proceedings gave no credit for any residual value in the vehicle. The exact factual position is unclear.

[20] The applicants assert that the first respondent has not complied with the Credit (Repossession) Act 1997. The applicants’ evidence does not establish that there was a repossession. The evidence is that the car was voluntarily returned. It appears however that the first respondent may have accepted the return of the

vehicle, and it may be that the first respondent has taken steps to dispose of the vehicle. If it did, then it may be arguable that it has taken possession of the goods so as to engage the provisions of that Act. If it did not take possession under that Act, then it would need to demonstrate some other legal basis for dealing with the applicants’ property. If in dealing with that property it obtained some value for it, then it is at least arguable that the dealer would be required to account to the applicant for it.

[21] These are issues which ought properly to have been resolved in the District Court. They could have been resolved there, if Mr Hale had taken steps to defend the proceedings. They are not a proper subject for an application for review in this Court. However, this Court will be slow to strike out proceedings, even if they are badly pleaded, when there may be some legal substance to the claim. The proceedings would have to be properly reformulated. An application to the District Court might be more appropriate. But, on the present state of the evidence, with no evidence from the first respondent on what happened to the vehicle, I do not consider that the proceeding should be struck out against the first respondent.

[22] The application by the first respondent for an order striking out the proceeding is dismissed.

[23] Costs are reserved. If the second and third respondents seek costs, they may file a memorandum within 14 days. The applicants may reply by memorandum

_{within a further 14 days.}

_{To: J R Reid and G F Hale, Applicants}

“A D MacKenzie J”

Solicitors: A Hewton, Masterton for First Respondent

Crown Law, Wellington for Second and Third Respondents

---

[1] Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.

[2] _{Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].}

[3] Southern Ocean Trawlers Ltd v Director-General of Agriculture and Fisheries [1993]

2 NZLR 53 (CA).