Craig v Sealey [2012] NZHC 3058 (19 November 2012)

Last Updated: 23 November 2012

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2012-419-1205 [2012] NZHC 3058

BETWEEN GARY ALLAN CRAIG, JOHN LEONARD SIEPRATH, NEVILLE WARWICK WOODS, THOMAS

GEORGE NELSON-PARKER, PAUL LEO BORICH AND SCOTT ALAN HUNTER

as partners of the firm of solicitors trading as Rice Craig

Appellants

AND JONATHAN DOUGLAS SEALEY AND DIANE MICHELLE SEALEY

First Respondents

AND BRUCE DOWNING BUILDERS LIMITED

Second Respondent

AND BRUCE ALLAN DOWNING Third Respendent

Hearing: 19 November 2012

Counsel: N W Woods for Appellants

V Whitfield for First Respondents

Judgment: 19 November 2012

JUDGMENT OF LANG J

_{[on appeal against interlocutory orders]}

This judgment was delivered by me on 19 November 2012 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

GARY ALLAN CRAIG, V JONATHAN DOUGLAS SEALEY AND DIANE MICHELLE SEALEY HC HAM CIV-2012-419-1205 [19 November 2012]

[1] This is an appeal against a decision of Judge Marshall in the District Court1 extending the time within which the first respondents (as defendants) were permitted to serve an information capsule on the appellants (as a third party) under the District Court Rules 2009 (“the Rules”).

Facts

[2] Mr and Mrs Sealey (“the Sealeys”) entered into a contract with Bruce Downing Builders Ltd (“Downing Builders”) for the construction of a dwelling in Te Kauwhata. After construction had begun, Downing Builders served claims for payment on the Sealeys under the Construction Contracts Act 2002 (“CCA”). Downing Builders seeks judgment against the Sealeys in the District Court in respect of sums allegedly owing as a result of these claims.

[3] Rice Craig is a law firm in Papakura. It acted for the Sealeys in relation to the CCA claims. The Sealeys joined Rice Craig as a third party to the proceeding because they allege the firm was negligent in the manner in which it acted for them in relation to those claims.

[4] The Sealeys joined Rice Craig to the proceeding by filing and serving a third party notice and notice of claim against the firm as required by r 2.20 of the Rules. On 21 February 2012, Rice Craig served on the Sealeys a response to the notice of claim as required by r 2.22 of the Rules.

[5] In a memorandum dated 18 June 2012, Rice Craig advised the District Court that the Sealeys had failed to serve an information capsule on them. An information capsule is a document outlining the nature of the plaintiff’s claim, and setting out the essential documents upon which the plaintiff intends to rely to establish its claim. Rice Craig submitted that this was a required step under the Rules, and sought

_{confirmation from Judge Marshall that the Rules provided for the Sealeys’ claim}

1 Bruce Downing Builders Ltd v Sealey DC Hamilton CIV-2011-019-000727, 23 August 2012.

against Rice Craig to be at an end as a consequence of their failure to serve an information capsule in the prescribed manner.

[6] On 8 August 2012, Judge Marshall issued a direction that the Sealeys could proceed against Rice Craig. He gave reasons for that decision in a reserved judgment delivered subsequently on 23 August 2012.2 Judge Marshall also gave the Sealeys further time to serve an information capsule on Rice Craig. The Judge noted that one of the objectives of the Rules is to secure the just, speedy and inexpensive determination of civil proceedings,3 and that the approach taken by Rice Craig would needlessly prolong the dispute because the Sealeys could simply file a fresh claim against Rice Craig.

[7] The Sealeys subsequently served their information capsule on 31 August

2012.

[8] Rice Craig now appeals to this Court against the Judge’s decision.

Issues

[9] The appeal raises two issues:

(a) Did the Rules require the Sealeys to serve an information capsule on

Rice Craig; and

(b) If so, did the Judge have the necessary power to grant the Sealeys an extension of time within which to serve their information capsule?

The relevant rules

[10] In order to appreciate the arguments that both parties advance, it is necessary to briefly describe, to the extent they are relevant for present purposes, the rules now

_{governing the conduct of civil proceedings in the District Court.}

2 _Ibid.

3 District Court Rules 2009, r 1.3.

[11] A plaintiff commences a proceeding4 by filing a notice of claim in the prescribed form.5 The notice of claim must contain the information prescribed by r

2.11. The plaintiff must serve the notice of claim on the defendant as soon as practicable after it has been filed.6

[12] A defendant who wishes to contest the plaintiff’s claim must complete and serve a response on the plaintiff within 20 working days after being served with the notice of claim.7 The response must be in the prescribed form,8 and must contain the information prescribed by r 2.13. Failure to file and serve a response within 20 working days will entitle the plaintiff to proceed to obtain judgment against the defendant.9

[13] After receiving the defendant’s response, the plaintiff must decide whether or not to pursue the claim against the defendant. A plaintiff who wishes to pursue its claim must complete an information capsule and serve it on the defendant within 20 working days after receiving the defendant’s response to the plaintiff’s claim.10

[14] The purpose of the information capsule is to inform the defendant of the essential nature of the plaintiff’s case,11 and to disclose to the defendant the information upon which the plaintiff intends to rely.12 If requested to do so, the plaintiff must as soon as practicable and at its own cost, supply the defendant with a copy of each essential document listed or described in the plaintiff’s information

_capsule.13

[15] The proceeding will come to an end if the plaintiff fails to file and serve its information capsule on the defendant within the prescribed period.14 A proceeding

4 Other than a proceeding in admiralty or defamation, or to enforce an arbitral award or where leave has been given to commence the proceeding by way of statement of claim: r 2.10.1.

5 _Idem.

6 _{r 2.10.3.}

7 _{r 2.12.1.}

8 _{r 2.13.1.}

9 _{r 2.12.5.}

10 _{r 2.14.1.}

11 _{r 2.14.2(a).}

12 _{r 2.14.2(b).}

13 r 2.14.3A.

that comes to an end in this way is treated as having been discontinued by the plaintiff.15 In that event the plaintiff may re-activate the claim, subject to any limitation issue that may arise, by filing a fresh proceeding using the same procedure.16

[16] A defendant who still wishes to contest the plaintiff’s claim after receiving the plaintiff’s information capsule must complete its own information capsule. The defendant must serve its information capsule on the plaintiff within 20 working days after receiving the plaintiff’s information capsule.17 The other requirements imposed in respect of the defendant’s information capsule mirror those imposed in relation to the plaintiff’s information capsule.18 The plaintiff may proceed to obtain judgment against the defendant if the defendant fails to serve its information capsule within the prescribed time.19

[17] If the proceeding is settled at this point, the plaintiff must file a notice of discontinuance, and the proceeding comes to an end.20 If the plaintiff wishes to pursue the claim after receiving the defendant’s information capsule, it must file and serve a notice of pursuit of claim in the prescribed form.21 The plaintiff must also at that stage file a copy of the response that it received from the defendant in relation to its claim, together with copies of both the plaintiff’s and defendant’s information capsules. The proceeding comes to an end if the plaintiff fails to file a notice of pursuit of claim within 90 working days after receiving the defendant’s information capsule.22

[18] Once those documents have been filed, the Court must determine the manner

in which the plaintiff ’s claim is to be tried. It may either allocate a short or long

_trial,23 _{or a judicial settlement conference.}24

15 _{r 2.14.6.}

16_{r 2.14.5.}

17 _{r 2.15.1}

18 _{r 2.15.3.}

19 _{r 2.15.4.}

20 _{r 2.17.1.}

21 _{r 2.17.2(b).}

22 r 2.17.4.

[19] A defendant may claim against a person who is not a party to a proceeding (“a third party”) on the ground that the defendant is entitled to a contribution, indemnity or other relief or remedy against the third party.25 Once joined to the proceeding, the third party has “the same rights and obligations in the proceeding as if the defendant had started the proceeding against the third party.”26

[20] The procedure for joining third parties is prescribed by r 2.20. It requires the defendant to file a third party notice and notice of claim against the third party within

15 working days after receiving the plaintiff’s notice of pursuit of claim, or within such further time as the Court may allow.27 The defendant must then serve copies of those documents on the plaintiff immediately, and must serve copies on the third party within 15 working days after filing them.28 In addition, the defendant must provide the third party with copies of the plaintiff’s claim against the defendant, the defendant’s response to the plaintiff’s claim and the information capsules completed by both the plaintiff and the defendant.29

[21] The third party must file and serve a response to the defendant’s claim in the prescribed form within 20 working days after receiving the documents from the defendant.30 Along with its response, the third party must file and serve an information capsule containing the information prescribed by r 2.15.3.31

[22] If the third party fails to file and serve its response within the prescribed period, it is treated as admitting the validity of, and is bound by, any judgment given in the proceeding.32 It is also bound by any decision in the proceeding on any

_{question specified in the defendant’s notice of claim against the third party.}33

24 r 2.40.6. In that event the proceeding is treated as having been discontinued by the plaintiff: r

2.17.6. Subject to any limitation issues, the plaintiff may re-activate the claim by filing a fresh proceeding using the same procedure: r 2.17.5.

25 _{r 2.18.1.}

26 _{r 2.18.2.}

27 _{r 2.20.1(a).}

28 _{r 2.20.1(b) and (c).}

29 _{r 2.20.3.}

30_{r 2.22.1.}

31 r 2.22.1A. Rule 2.15.3 prescribes the information that the defendant’s information capsule must

_contain.

32 _{r 2.25.1(a).}

33 r 2.25.1(b).

[23] Against that background it is appropriate to consider the argument advanced in support of the appeal.

The argument

[24] Rice Craig argues that the Sealeys were under an obligation to serve an information capsule on it within 20 working days after receiving Rice Craig’s response to the Sealeys’ third party notice and notice of claim.

[25] Rice Craig relies on r 2.18.2 of the Rules, which relevantly provides:

2.18 Grounds for joining other parties

...

2.18.2 The third party becomes a party to the proceeding with the same rights and obligations in the proceeding as if the defendant had started the proceeding against the third party.

[26] Rice Craig points out that a defendant has the right under r 2.14.1 to receive an information capsule from the plaintiff within 20 working days after the defendant serves its response to the plaintiff’s claim. It contends that, by virtue of r 2.18.2, a third party enjoys exactly the same right once it files and serves its response and information capsule on the defendant. As a result, Rice Craig submits that the Sealeys face the same consequences as a plaintiff who fails to serve its information capsule within the prescribed period. These are that, just as r 2.14.4 provides that a plaintiff’s proceeding comes to an end in those circumstances, so too does a defendant’s claim against a third party.

Decision

[27] Counsel for the Sealeys submits it would be pointless to require the defendant to complete a new information capsule, because it would merely repeat the information contained in the information capsules the plaintiff and defendant have already completed and served on each other. The third party receives copies of those when it is served with the defendant’s claim.

[28] I accept that information relating to the plaintiff’s claim against the defendant will generally also be relevant to the defendant’s claim against a third party. The defendant’s claim against a third party will generally, however, be based on different grounds to those relied upon by the plaintiff in its claim against the defendant. There is also likely to be additional information that the defendant intends to rely upon in relation to its claim against the third party to that which it relies upon in defending the plaintiff’s claim.

[29] For those reasons the information capsules that the plaintiff and defendant have already completed and served on each other may not always, or even often, achieve the objects they were designed to achieve so far as a third party is concerned. In particular, they may not fully inform the third party of the essential nature of the defendant’s claim against it, and may not fully disclose to the third party the information on which the defendant intends to rely in prosecuting that claim.

[30] Several factors persuade me, however, that Rice Craig’s argument cannot be sustained. First, r 2.20.3 prescribes the documents that the defendant must serve on the third party. These include the information capsules that the plaintiff and defendant have already completed and served on each other. Rule 2.20.3 does not, however, require the defendant to complete and serve on the third party a new information capsule listing the documents upon which it relies in relation to the claim against the third party. It would have been a simple matter for those who drafted the Rules to have included an equivalent requirement in r 2.20.3, or in a separate rule, but they chose not to do so. That choice must have been deliberate.

[31] Secondly, r 2.16 contains an “overview diagram” setting out the steps that the parties to a civil proceeding must take. This obviously represents an attempt by the drafters of the Rules to depict in a convenient diagrammatical form their understanding of the obligations and time limits that the Rules impose on parties to a civil proceeding in the District Court. This makes no reference to the defendant completing and serving a new information capsule on the third party. It can therefore safely be assumed, in my view, that the drafters did not intend to impose such an obligation on the defendant.

[32] The reason for this may lie in the fact that the procedure that the Rules prescribe in respect of claims between a plaintiff and defendant is different in one significant respect to that prescribed in respect of claims between the defendant and a third party. As noted above,34 once the plaintiff has received the defendant’s response and information capsule, it must decide whether or not to continue with its claim. If the plaintiff wishes to continue with its claim against the defendant, it must

file a notice of pursuit of claim within 90 days after receiving the defendant’s

information capsule.35

[33] There is no equivalent procedure in relation to a defendant’s claim against a third party. This may reflect the fact that those who drafted the Rules were anxious to avoid the possibility of lengthy delays in determining claims as between plaintiffs and defendants. If a defendant was given 90 days after receiving the third party’s response and information capsule to file a notice of pursuit of claim against the third party, it would significantly delay determination of the plaintiff’s claim against the defendant.

[34] The argument for Rice Craig would also have far-reaching ramifications. If correct, it means that r 2.18.2 imposes the same obligations on a defendant who has filed a claim against a third party as are imposed on the plaintiff in relation to its claim against the defendant. This means that the obligation on the defendant would not extend merely to filing and serving a new information capsule. In addition, the defendant would be required to file and serve a notice of intention to pursue its claim against the third party once it receives the third party’s response and information capsule. If that is the case, the defendant would presumably be subject to the same sanction as the plaintiff when it failed to file and serve such a notice within the required time frame. In that event the defendant’s claim against the third party would be at an end.

[35] All of this would occur notwithstanding the absence of any express provision in the Rules imposing the obligation on the defendant in the first place. In addition,

_{the sanction would only apply if the defendant failed to file and serve its notice of}

34 _{At [18].}

35 r 2.17.4.

intention to pursue the claim within 90 days after receiving the third party’s information capsule and response. The imposition of such an obligation is inconsistent, in my view, with the scheme of the Rules. I consider the drafters of the Rules clearly intended that third party claims should not unduly delay determination of the plaintiff’s claim against the defendant.

[36] It may have been sensible for r 2.20.3 to have required the defendant to serve an additional information capsule on the third party at the same time as it is required to serve the other documents on it. That would achieve the object of enabling third parties to understand the essential nature of the defendant’s claim, and the information upon which the defendant intended to rely in advancing that claim.

[37] In the absence of a rule expressly requiring a defendant to take that step, however, I am not prepared to accept that a defendant is under an obligation at any stage to serve another information capsule on the third party.36 In particular, I do not accept that such an important obligation, and one that has such far-reaching consequences, can be implied obliquely by virtue of r 2.18.2.

[38] These factors persuade me that r 2.18.2 did not impose an obligation on the Sealeys to serve a new information capsule on Rice Craig. It follows that the Sealeys were never at risk of having their claim against Rice Craig treated as discontinued, or at an end, because they did not take that step.

[39] This conclusion is sufficient to dispose of the appeal. In case I am wrong, however, I will briefly consider whether the Judge had the power to grant an extension of time within which the Sealeys were to file and serve their information capsule.

Did the Judge have the power to extend the time within which the Sealeys were to file and serve their information capsule?

36 Although it would make perfect sense for a Judge who case manages the proceeding to direct the defendant to file and serve another information capsule dealing specifically with the defendant’s claim against the third party. That is in essence what Judge Marshall did in the present case.

[40] As noted above, the obligation to file an information capsule is imposed on the plaintiff by r 2.14.1. The power to extend the time for taking any necessary step in a proceeding is contained in r 1.18, which relevantly provides:

1.18 Extending and shortening time

1.18.1 The court may, in its discretion, extend or shorten the time allowed by these rules, or fixed by any order, for doing any act or taking any proceeding or any step in a proceeding, on such terms (if any) as the court thinks fit in the interests of justice.

1.18.2 The court may order an extension of time although the application for the extension is not made until after the expiration of the time allowed or fixed.

1.18.2A To avoid doubt, a proceeding does not come to an end just because the time allowed by rule 2.10, 2.14, 2.17, 2.39A, 2.47, or

3.40 or any other rule for taking any action in that proceeding expires, if that time is later extended under rule 1.18.2.

...

(Emphasis added)

[41] In my view the wording of r 1.18.2A is plain. It includes the power to extend the time within which a plaintiff may take any step to comply with its obligations under r 2.14. The final words of the rule make it clear that the Court may extend the time for taking such a step even though the time for taking that step has already expired.

[42] Rule 1.18.2A came into force on 14 June 2012.37 It was therefore in force when Judge Marshall granted the Sealeys an extension of time within which to file and serve their information capsule.

[43] It follows that the Judge had the necessary power to make that order.

Result

_{[44] The appeal is dismissed.}

37 District Courts (General) Amendment Rules 2012, r 5.

Costs

[45] There is no reason why costs should not follow the event. The respondent is entitled to costs on a category 2B basis together with disbursements as fixed by the

_Registrar.

Lang J

Solicitors:

Rice Craig, Papakura

Whitfield & Co, Cambridge

Norris Ward McKinnon, Hamilton