Torbay Holdings Limited v Napier [2014] NZHC 2380 (30 September 2014)

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BETWEEN	TORBAY HOLDINGS LIMITED First Plaintiff TORBAY REST HOME LIMITED Second Plaintiff
AND	DUNCAN JOHN NAPIER AND SARA ANN NAPIER First Defendants DUNCAN JOHN NAPIER AND SARA ANN NAPIER AND CHRISTOPHER JOHN DAVIS as trustees of the NAPIER FAMILY TRUST _{Second Defendants}

Hearing:	17, 19 and 22 September 2014
Counsel:	DPH Jones QC for Plaintiffs Defendant in person
_Judgment:	_{30 September 2014}

This judgment was delivered by me on 30 September 2014 at 4.30 p.m., pursuant to Rule 11.5 of the High Court Rules.

TORBAY HOLDINGS LTD v DJ NAPIER AND SA NAPIER [2014] NZHC 2380 [30 September 2014]

[1] On 20 August 2014, the plaintiffs filed an application to strike out the defendants’ statement of defence for non-compliance with interlocutory orders. The plaintiffs also oppose adjournment of the trial fixture or any extension to timetable orders. Alternatively, they wish the Court to make unless orders in terms of compliance of all outstanding interlocutory orders. They also seek costs on a solicitor/client basis.

[2] The application alleges that the defendants are in breach of an order made on

30 May 2014 by Associate Judge Bell, to file a supplementary list of documents by

27 June 2014. In addition, the defendants have failed to provide signed authorities to the plaintiffs. These were authorities addressed by the defendants to their professional advisors engaged in the period 2005 to 2012 authorising release of information to the plaintiffs. They also failed to agree on a protocol for inspection of the rest home premises basement area so that the defendants could ascertain if further relevant documents were present. The defendants have failed to provide a confidentiality undertaking so the plaintiffs’ documents, over which confidentiality was claimed, could be inspected, and failed to answer interrogatories, by 31 July as required. And, finally, the defendants failed to file an updating affidavit, detailing progress to date as required by a minute of this Court dated 16 July 2014.

[3] This application pleads that these defaults are wilful, that the defendants are refusing to comply with their obligations as parties to the proceedings. It pleads that these defaults are designed to delay the trial, set down for hearing on 10 November and that this is delinquent behaviour on the part of the defendants which has prejudiced, and will continue to prejudice, the plaintiffs’ rights and their access to justice.

[4] Also before the Court is the defendants’ application, dated 3 September, applying for an adjournment of the fixture and extending dates for compliance with timetable directions, including the requirement for the plaintiffs to file a more particularised statement of claim. The application argues that the defendants are in breach of the timetable directions of this Court due to circumstances beyond their

control and that they need additional time to seek new counsel. They also seek for the plaintiffs to file a more particular statement of claim. They seek an order that the plaintiffs comply with the audit obligations required of them in terms of the Companies Act 1993 for the 2012 and 2013 years, to be complete and available in a reasonable period prior to the hearing. The defendants plead that they are unable to afford legal representation, in part, due to restrictions on their ability to borrow caused by the plaintiffs. As self-represented litigants, they need additional time to prepare in order to have a chance of a fair hearing.

[5] The second plaintiff, Torbay Rest Home Limited, runs and operates a rest home in Torbay, Auckland. The first plaintiff owns the land and buildings from which that business is operated. The first plaintiff leases the land and buildings to Torbay Rest Home Limited.

[6] The first defendants, Mr and Ms Napier, together with Mr Single, were directors of both Torbay Holdings and Torbay Rest Home. Mr Napier ceased being a director on 8 June 2012 and Ms Napier on 4 September 2012.

[7] The plaintiffs’ claim pleads (and the allegation is denied) that at all material times the day-to-day management and running of the rest home business was undertaken by the first defendants, Duncan and Sara Napier, who both worked on the site. Duncan was the part-time manager and financial controller and Sara was the nursing manager.

[8] The claim pleads (partly admitted, partly denied by the defendants) that Mr and Ms Napier, as directors, had a signing authority for the National Bank accounts of the plaintiffs but that their authority to sign cheques and utilise funds for the plaintiff was limited to authorised expenditure in relation to the business affairs of the companies.

[9] The qualification to the cheque-signing authority is that the defendants plead that they signed cheques and utilised funds under the direction of Mr Single, who was the financial controller of the plaintiffs.

[10] The core of the claim is an allegation that between 1 April 2005 and 31 May

2012, the first defendants took money out of the bank accounts of the first and second plaintiffs without authorisation, in the total sum of $2,007,874.82, including unauthorised cheque payments of $1,612,443.83 and unauthorised remuneration of

$312,869.00 and unauthorised transfers of $12,428.48. That is all in respect of the second plaintiff. In respect of the first plaintiff, the amount alleged to have been taken is $7,133.51. The particulars of the pleadings split these payments out into different amounts for different periods and to different parties. It is also pleaded that Mr Napier neglected to pay taxes to the Inland Revenue Department, increasing the liability of the plaintiffs to that Department, resulting in an interest bill of $19,932.

[11] The claim also pleads that some of the funds were used by the defendants to construct a personal dwelling on a property known as the Whangaripo Valley Road property, in the known sum of $105,316.16. It was further alleged that payments were made in respect of another property called Sandspit in the known sum of

[12] The first cause of action is for monies had and received in the aforesaid sum of $2,007,874.82.

[13] The second cause of action is a proprietary claim against the Whangaripo property by way of a constructive trust in favour of the plaintiffs.

[15] The statement of defence essentially denies unauthorised drawings. To the extent that it pleads a positive defence, it says that the cheques made payable to themselves or the Napier Family Trust included reimbursement for legitimate and authorised expenses incurred by them on behalf of the first and second plaintiffs.

[16] The positive defence was explained more to Associate Judge Bell in a hearing which took place on 6 May. The defendants say that while running the rest home, they personally made cash advances to cover expenses for the residents which were

then reimbursed and these transactions are recorded in a collection of documents called the “Residents Comfort Fund Ledgers”. Mr Napier says that these are a series of triplicate copy books which were kept in storage in the basement at the rest home at the time he left. He believed there about 400 in all. He said the books were detailed and included expenses from residents, including costs of their medical visits, pharmaceutical and other purchases by them.

[17] Mr Napier says there are two other categories of documents, the “Subsidies Resident Approval Notifications” and the “Residents Sundry Charge Sheets”. Mr Napier says that the former category confirmed the start date for the amount of subsidy for residents. Mr Napier also contends that in some cases the plaintiffs met the cost of the residents until the subsidies were approved. This is denied by Mr Single who says that the families of residents met those costs in the first instance.

[18] The Residents Sundry Charge Sheets, Mr Napier says, list all residents’ expenses and are summarised in the form of invoices, which are typically attached to the copy of the Resident Comfort Fund Ledger prepared for each resident. Mr Single has denied that these documents existed, contending that the Napiers must have removed them.

[19] Another category of documents identified by the defendants is “Records of cash advances to staff”. Mr Napier says these were recorded and staff numbers would confirm receipt when the deductions were made from their pay. Mr Single says that this practice was unknown to him and contends it was a fiction. However, the defendants filed a further affidavit showing the practice did occur.

[20] A further category of documents is called by Mr Napier “Reimbursement Analysis Sheets”, which he says were kept in a ring binder in the basement; were prepared weekly, and comprise a summary of expenses and a summary of disbursements. Mr Single says the plaintiffs have already provided what little exists of these sheets.

would refurbish an apartment between one resident quitting and other taking occupation. Again, Mr Single denies the existence of such documents and denies their relevance.

[22] Finally, there are the “Armstrong Murray” files and schedules of refurbishment costs. Mr Napier says these files show the plaintiffs’ expenses in running costs during the relevant period. Mr Napier says they are also kept in the basement. Mr Single denies they are in the control of the plaintiffs.

[23] The repeated denial of the existence of these ledgers by Mr Single is likely to be the context of the defendants’ application that the plaintiffs’ accounts should be audited before the trial. For if there are such ledgers, there is an obvious argument that the plaintiffs’ annual accounts do not include the income and expenditure recorded in these ledgers. All of this is in the context of the apparent goal of the plaintiffs to prove their claim by forcing the defendants to explain the accumulation of their assets, particularly a recent acquisition of land and construction of a home.

[24] Standing back, the defendants’ positive defence, not clearly pleaded, is that the alleged defalcations relate to the operation of these other ledgers apparently not understood or incorporated in the company accounts and, secondly, that the purchase and construction of the Whangaripo property can be explained.

[25] In this regard, it is useful to set out some questions I asked of Mr Tee near the end of his evidence:

Q. Mr Tee, it’s my impression over the last few days, looking at discovery in this case, that although it’s called tailored discovery, in fact both sides are wanting a full discovery of all the financial transactions of the old persons’ homes on the one hand during the relevant period and of the Napier family on the other hand. Am I right?

A. I think you’re right, Sir. I think discovery here is wider than normal rather than the tailored aspect reducing the scope of discovery and really it’s a complex, not complex but its protracted in the sense that almost every transaction, they are not gig [sic] dollar amounts in the main but there are hundreds if not thousands of transactions –

Q. So essentially my appreciation is that each side is calling on the other side for a complete audit of all their affairs?

[26] Having read the judgment of Associate Judge Bell, clearly there is a serious question of the lack of knowledge of Mr Single to the existence of these documents and to the way in which the rest home was actually conducted. Associate Judge Bell in his judgment of 30 May did not rule in Mr Single’s favour. On the contrary, he made orders to enable the defendants to get access to documents in the basement.

1 February 2012, there was a substantial reform of the High Court Rules on discovery. Rule 8.4 requires:

(1) After filing a pleading, a party must, unless subclause (2) applies, serve on the other parties, at the same time as the service of that pleading, a bundle consisting of—

(b) any additional principal documents in the filing party's control that that party has used when preparing the pleading and on which that party intends to rely at the trial or hearing.

(a) the circumstances make it impossible or impracticable to comply with subclause (1); and

(b) a certificate to that effect, setting out the reasons why compliance is impossible or impracticable, and signed by counsel for that party, is filed and served at the same time as the pleading.

(3) A party acting under subclause (2) must, unless the other parties agree that initial disclosure is not required, or that a longer period is acceptable, either serve the bundle referred to in subclause (1) within

10 working days from the service of the pleading or apply for a variation of that requirement within that period.

(4) If a party fails to comply with subclause (1) or (3), a Judge may make any of the orders specified in rule 7.48.

(5) Despite subclause (1), a party does not need to disclose any document in which the party claims privilege or that a party claims to be confidential.

(6) Despite subclause (1), a party does not need to disclose any document that either—

(7) Despite subclause (1), a party does not need to include in a bundle served by that party any document contained in a bundle already served by any party or any document attached to an affidavit already filed in court.

(8) The bundle of documents may be served either electronically or as a bundle of copies in hard copy form.

(9) If an amended pleading is filed prior to the making of a discovery order, this rule applies to that amended pleading if it either—

(a) refers to documents not referred to in any earlier pleading filed by the party who files the amended pleading; or

[28] There was an immediate claim by the defendants that there was no initial discovery by the plaintiffs. Equally, there was no initial disclosure by the defendants.

[29] The very first document filed by counsel was a memorandum from Mr Tee, counsel for the defendants, on 21 February, complaining that the plaintiffs have not provided disclosure of any documents and not complied with its obligations under r 8.4.

[30] This was opposed by a memorandum which said that the plaintiffs were well aware of the allegations from the caveat proceedings and from the result of their former positions as employees and that no specific documents were referred to in the statement of claim. They pleaded:

The plaintiffs have served the defendants with notice of proceedings and statement of claim. This is not vitiated by initial disclosure not being made strictly in accordance with r 8.4 of the High Court Rules. In the circumstances, the defendants are abundantly aware of the nature of the allegations and are in a better position than the plaintiffs in terms of access to financial and other material to answer the allegations.

[31] The parties eventually agreed on some initial disclosure, and then committed to tailored discovery which was more expansive than standard discovery.

[32] Both the plaintiffs and the defendants had problems with compliance with this tailored discovery from the outset. The trial date was fixed on 4 April this year in advance of discovery having been completed. On 6 May, Associate Judge Bell heard argument on cross-examinations for further discovery. I have already had occasion to refer to some of the issues in that regard. The upshot is that the Judge made detailed further orders for discovery against the plaintiffs on the defendants’ discovery application, and against the defendants on the plaintiffs’ discovery application. In both cases, supplementary discovery was to be provided by 27 June.

[33] On the defendants’ part, compliance envisaged that Mr Napier needed to enter and inspect the rest home premises in order to look for the documents he believed had been stored in the basement. That visit was to follow a prior protocol being agreed by the parties or to be fixed by the Court and the defendants giving express written undertakings to use documents disclosed only for the purpose of the proceeding (a normal obligation anyway) but, otherwise, there would be no restrictions on the abilities of the defendants, their lawyers or expert witnesses retained by them to inspect the documents.

8 July, Mr Tee, counsel for the first and second defendants, filed a memorandum. That memorandum advised the Court that he had provided a copy of the judgment of Associate Judge Bell of 30 May to the defendants in a timely manner and had been advised by the defendants they had made requests of the third party holding documents required to be discovered but the documents were not yet available. As a consequence, the updated list of affidavits required by the defendants has not been completed within the timetable directed. He advised that the cloning of each parties’ computer had not been completed and that protocols had not been reached for Mr Napier’ access to the premises of the plaintiffs. Nor had arrangements been allowed for access by the defendant to files of the plaintiffs held by their solicitor, Sellar Bone, including the Armstrong Murray files. He also raised the failure of the defendants to have their accounts audited. He drew attention of the Court:

In all the foregoing circumstances, counsel for the defendants is concerned that the scheduled timetable is not feasible or reasonable and that amending timetable directions and a new fixture date is required in all the circumstances.

[35] That was responded to by Mr Jones QC by memorandum of 11 July. That memorandum submitted that any delays in compliance with the Court orders were as a result of the defendants’ conduct and that they are seeking to take advantage of their own defaults to delay a hearing. It is said that the inspection of the documents by the defendants is yet to be effected because the undertaking in relation to confidential material has not been forthcoming. He went on to say that it was too late for any requests for third party discovery. That the draft protocol to enable access to the plaintiffs’ rest home premises had been forwarded by email on 17 July and no formal response was received until almost four weeks later. Any delays in accessing the rest home premises are the defendants’ making. Similarly, the files of the plaintiffs had been available for inspections but no arrangements had been made for inspection. It was submitted that any slippage in the timetable was a result of the defendants’ inactivity or, otherwise, their failure to comply with the directions of the Court. They sought to maintain the fixture and advised interrogatories were due to be issued on 11 July.

[36] On 16 July, Associate Judge Bell dealt with these memoranda on the papers. He accepted Mr Jones’ submission that the defendants were dragging the chain and had not provided any adequate explanation why matters could not have been attended to in a timely way. He ended, “The defendants have got behind, but there is still time to catch up”.

[37] The next step was the application for striking out of the defendants’ statement

28 August. The minute was critical of the defendants. Asher J said there had been serious slippage in the timetable on the part of the defendants. The defendants should realise that they must, if they wish to defend these proceedings, comply with the timetable directions. That failure to do so may well result in strike out orders being made and the matter will then proceed to formal proof and judgment is likely

to be entered against them. He directed that a copy of the minute be sent directly to

[6] I understand from Mr Tee there is a real prospect he will be applying to withdraw when that strike out application is heard.

[39] This was the first notice the High Court had had of any issues of legal representation of the defendant.

[40] Unbeknown to both Associate Judge Bell and to Asher J, the relationship between Mr Tee and his clients had broken down long before.

[41] On 28 April, before the hearing before Associate Judge Bell, on 6 May, Mr Tee had written a letter to the Napiers.

[42] The letter begins by recording the filing and serving of the defendants’ application for discovery (later heard by Associate Judge Bell) and the submissions in support. It refers to the case for the plaintiff companies to be subject to an audit. It then goes on as follows:

Otherwise I have discussed with you my real reservations about continuing to represent you in these proceedings. Now that a hearing date has been set there is limited time for preparation available and if there is to be a change of representation that needs to be arranged sooner rather than later.

My principal concern is I simply do not have the resources available in our firm to adequately represent your interests, given the plaintiffs have engaged a Queens Counsel and have a team of solicitors available at Sellar Bone to deal with discovery issues in preparation for hearing.

The other issue is obviously one of cost. Our accounts to date have been paid when you were able but typically are in arrears.

In this point in time to the hearing we anticipate that several hundreds of thousands of dollars in costs will be incurred both in legal fees and engaging an expert accountant.

We would need funds to be held in trust both for our costs and for the accountant, but even in that instance as we have indicated we lack the resources to properly represent your interests.

I have raised with you on a number of occasions the prospect of you being able to apply for legal aid. Whilst the Legal Aid Committee will take a charge over your assets and property, that approach will at least enable the proceedings to be funded until the conclusion of the hearing.

If the claim does not settle, you will need to be represented in a sufficient time prior to the hearing so that your counsel has the ability to determine what evidence should be provided to engage accountants and matters of that nature.

I am happy to discuss these matters with you at your convenience and as agreed with Duncan, I will deal with the discovery application due to be heard on 6 May.

I have prepared a note of our cost for our attendance since our last account which is attached.

I note you were to arrange to bring costs up to date today – I’ve attached a

Both David Jones and Luke Crawford are obliged to make contact via me and not with you directly, while I remain your solicitor of record.

I remain concerned we have not received any payment despite your assurance we would be paid in full and if surplus funds in credit by 15 May. A further five weeks have elapsed, and we have not received a single cent. You have outlined your problems with the bank, but really what I need is some reassurance of what you can pay and when.

I note our amended affidavit is due by 27 June and arrangements were made re SLS documents and your site visit. The present situation is untenable.

20 June and 24 June on the subject of reaching agreement on the revised protocol. It would appear from that correspondence that Mr Napier was trying to deal directly with Mr Jones QC, trying to reach agreement on that and copying it to Mr Tee. By June, if not earlier, Mr Napier had to try to get agreement on the protocol because Mr Tee was not engaged on discovery attendances. It transpired at the hearing before me that Mr Jones was not responding to Mr Napier, quite properly, on the view that he should deal only with Mr Napier’s solicitor, Mr Tee.

Below is a further email direct from Mr Napier. Please confirm whether you are still acting. If you remain on the record, any communication must come from you. Any correspondence from your client direct will be ignored. Could you sort this out please.

[47] I am satisfied that from 28 April, Mr Tee clearly signalled that he wanted to withdraw as solicitor for the defendants. Secondly, from that date he confined his attendances to appearing as counsel for them in the hearing before Associate Judge Bell on 30 May, filing the memoranda seeking an adjournment on 11 July and preparing before Asher J on 28 August. Mr Tee did not attend in any way to compliance with the discovery orders.

[48] At no time prior to any of these appearances and memoranda to the Court did Mr Tee disclose that he was endeavouring to be released as solicitor for the defendant. Associate Judge Bell’s important decision for further discovery proceeded upon the assumption that he was dealing with defendants who had the benefit of solicitors and counsel. Likewise his minute of 16 July proceeded on the same assumption.

[49] On 1 September, the Napiers filed a notice of change of representation of solicitors. This was in reliance on r 5.40. This document was prepared by Mr Tee. Yet it was Mr Napier’s evidence that he was disappointed by Mr Tee’s decision to no longer act for him.

[50] Upon hearing that submission, I considered that the change of representation of the defendants could not be done by way of r 5.40 as that rule only applies if the party wishes to change that party’s solicitor or if the party wishes to act in person. There was no change to another solicitor and I had a clear statement from the floor of the Court by Mr Napier that he did not wish to act in person.

[51] Accordingly, I requested Mr Tee to appear at Court and discussed with him whether or not he would be given leave to withdraw under r 5.41. I did grant him leave to withdraw as it became apparent that there was a need for both himself and Mr Napier to give evidence under oath as to compliance with Court orders in

circumstances where there was a waiver of solicitor/client privilege and there was a potential for a conflict of evidence, and a complaint by Mr Napier of attendances by Mr Tee, and particularly of his decision to withdraw as counsel.

[52] Rule 7.48 of the High Court Rules provides for the enforcement of interlocutory orders and includes provision for a judge striking out any pleading. In Coxhead v Hubbard,¹Mr Coxhead lodged a claim in the High Court seeking judgment in the sum of $52m against Mr Hubbard because of allegedly wrongful acts of omissions during Mr Hubbard’s involvement with the Mutual Group of companies, in which both parties had an interest. The allegations made in the claim were serious and damning, including allegations of criminal activities. The

respondent made a request for particulars and an order was made by Master Venning that he provide them. Mr Coxhead deliberately refused to provide further particulars. Master Venning gave him an extension of time. After that refusal, Mr Hubbard’s solicitors filed an interlocutory application to dismiss the claim because of failure to provide any particulars. There was a further hearing before the Master. Mr Coxhead appeared in person. He had not filed any notice of opposition.

[53] Paragraph [9] of the Court of Appeal judgment records the Master’s decision:

[9] In his judgment of that date the Master set out the history of events and the orders which had previously been made. He noted that there had been no compliance and a number of rules had not been adhered to and concluded:

While a Court does what it can to assist litigants in person the Court also has a responsibility to the other parties to the proceeding, in this case to the Defendant. The Court generally extends a degree of latitude to a litigant in person. The Court has already done so in this case. There must come a time when the Court cannot properly, in exercising the balance and fairness due to other parties to the litigation allow one party to ignore the rules and previous orders of the Court. In this case the Court has granted a fair degree of latitude to the Plaintiff already. The Plaintiff has failed to comply with the directions made on 18 December 2000. The Plaintiff has failed to comply with the orders made in the judgment of 28 February 2001. The Court did not make an unless order in default of compliance, it has required the Defendant to bring this separate application. During the course of submissions today Mr Coxhead confirmed that he did

not intend to amend the pleadings. The Plaintiff has made his position quite clear. He has not and does not intend to comply with the orders made by the Court. In those circumstances the Court is entitled to make an order under r277: Franklin v Baycorp Holdings (1990) 4 PRNZ 258. I am also satisfied that given the serious nature of the allegations in these proceedings, including criminal activity by the Defendant, and the substantial damages claimed the Defendant is prejudiced by the state of the proceedings as they stand. (Emphasis added.)

[54] There was an application made by Mr Coxhead to review the Master’s decision but it was out of time, due to confusion by Mr Coxhead that he had a right of appeal from the Master’s decision to the Court of Appeal. The Court of Appeal declined to assist Mr Coxhead the relevant reasoning being:

[19] As has been made clear to the appellant on various occasions he was obligated to provide detail and he has refused to do so. Mr Coxhead had extended to him a sympathetic and liberal approach which recognised the fact that he was not legally represented.

[20] In his written submissions Mr Coxhead argued at length about natural justice, fundamental principles, fairness and legal rights and sought aid from various historical documents. He does not however grapple with the core issues articulated so clearly by both the Master and Judge in the High Court.

[21] There cannot be any doubt that what occurred justified the invocation of the sanctions provided for in Rule 277. Although Courts are always slow to strike out for non-compliance, where there has been a clear default and serious prejudice the Court has no option but to strike out to ensure the integrity of its processes.

[22] We are satisfied that in the situation which developed in this case that even if this case had properly been in this Court there is no basis upon which there could be any alteration of the decisions made in the High Court. The rules of Court are not an impediment or barrier to justice but a framework to ensure the orderly and proper determination of disputes in a way which is professional and has integrity about it.

[23] The Court has no jurisdiction to hear the application and it is accordingly dismissed. The respondent is entitled to costs which we fix at

[55] In Hopman v Peka²the plaintiff succeeded in obtaining orders striking out the defences of the first and second defendants. In this case the Judge held:³

The prejudice to the plaintiff, the disregard for the orders and directions of this Court on the part of both defendants and prima facie, the merits of the plaintiff’s case all lead inevitably to the conclusion this application should be granted.

[56] It would appear that the Judge had accepted the submission of the plaintiff:⁴

... that this failure on the part of both defendants is nothing short of wilful and contemptuous of the orders made by two Masters for discovery and inspection. (Emphasis added.)

[57] The learned authors of McGechan on Procedure, dealing with the practical operation of r 7.48, begin with this observation: ⁵

The customary sequence in New Zealand in the event of non-compliance is an application that the claim or defence be struck out, followed by belated compliance or application for adjournment, an enlargement of time to enable compliance. When eventual compliance occurs, applications for enforcement generally have been dismissed, with costs to the applicant. The two exceptions are:

(a) Wilful default: cases in which a party is wilfully endeavouring to avoid compliance.

(b) Serious prejudice: compliance that prejudice a party may lead to proceedings being dismissed, stayed or a defence struck out.

“Unless” orders are by now reasonably common but should generally be reserved for cases where breach or continued breach is objectively measurable and unchallengeable, in the light of the serious consequences of failure to comply – striking out, stay or the like.

[60] In the bundle of documents provided by Mr Tee after the qualified waiver solicitor/client attendance on discovery, there is no evidence of wilful non- compliance by Mr Napier. On the contrary, there is evidence of his endeavours to

_{comply. I have already referred to his solicitor’s letter of 28
April. Included in the}

bundle is an email sent by Mr Napier on 3 June, four days after the orders for further discovery by Associate Judge Bell, to his former accountant, Mr Williams, as follows:

Scott, as part of our discovery requirements, I am required to provide the financials for the period 1 April 2005 to 31 March 2012 for Sara, myself, the Trust, the partnership. Can you please forward all accounts by return.

I am also required to provide details of other sources of funds. You have all the gifting statements and also you handled the GST refund when we purchased Whangaripo Valley Road, I think it was about $52,000. Please also provide copies of the return and all gifting statements.

The Court has provided tight timeframes and we will have no option but to request an adjournment if we are not able to source the documents in a timely manner.

1 Attached are the financial statements you require. You will be aware that I did not prepare your 2012 financial statements, and that the

2010 was the first year for which the partnership financial statements were prepared. The 2007 Trust financial statements have 2006

comparatives. Note in any case all these financial statements were included amongst the books and records I sent you, as well being provided to you each financial year.

2 Note, other than the partnership, there has never been any requirement to have financial statements prepared for you and Sara personally.

[62] On Wednesday, 25 June, Mr Napier wrote to Mr Tee. It is important to read this email in the context of what I find to be a breakdown in the relationship between Mr Tee and Mr Napier which fractured at least by 28 April and, as that letter indicates, probably sometime earlier. It opens as follows:

They have provided discovery of thousands of documents found, according to the memorandum, after the hearing date.

I do not know whether you would entertain doing a simple affidavit for me to sign in respect of my obligations for Friday.

We have no additional bank statements, credit card statements, loan applications, Torbay invoices or any other documents sought.

I have been working on the over $1,000 items but it’s a very time consuming process and I’m yet to complete and require the return of the credit card receipts and other receipts previously supplied under discovery to complete.

I’ve asked the ASB and Westpac to provide any other statements that may be available for the period but to date have had no response to date. ...

The financials that Scott Williams provided could be supplied along with his email as discovery items.

I have asked the builder who ran the house building project to provide me with all the subcontractor details and any invoices that he may have, but I’m yet to receive and will undertake to provide upon receipt.

We could also make a simple statement about the process we’ve gone through since December 2012 to get the directors to organise an audit of the companies and attach the Companies Office email that you have a copy of.

And finally in the affidavit I could undertake only to use the information that the Court has ordered for the purpose of defence in this matter and express concern at the lack of time set out by the timeframes.

I appreciate that if you do it as a brief document it may lack fire power needed but I also acknowledge we are in arrears with our account.

I could come on Friday and obviously we can pay the filing fee, I would appreciate your thoughts.

[63] This is not a self-serving document. There is no doubt that this was a private communication between Mr Napier and Mr Tee. He had no reason to expect that it would ever see the light of day in Court. It has appeared only in the extraordinary events that have been detailed above. I regard it as a genuine letter. It does not indicate any wilful default of the sort, for example, found as a fact in the case of Coxhead. There is no doubt that it assumes Mr Tee is doing nothing. It is a plea for Mr Tee to help in a limited way, which is not too burdensome on Mr Tee.

Thank you for that information. What I need to clarify is your proposal for repayment of overdue costs of just over $20,000 and what is to occur from this point regarding your representation. I will have to file a memorandum outlining delays to try and progress any application for an adjournment, you can appreciate I am reluctant to incur more costs without some certainty of payment.

Are you able to outline a specific proposal to confirm that we will be paid and when, and can we take some security for payment over the Glenfield property?

[65] In an email sent on 3 July, Mr Napier offered to provide security over the Glenfield property to Mr Tee. The email also recorded attempts to reach him by telephone without success. The receptionist at Morton Tee recorded on 4 July a message to Mr Tee, obviously coming from Mr Napier:

Just really needs to know if you’re going to do anymore work for him. He perfectly understands if you’re not, but needs to know where to from here?

In April I agreed to stay on at least until the discovery hearing on the basis you promised payment in full by 15 May. In good faith I continued to act, and got a good outcome for you. We are already in default of timetables. Interrogatories are due soon. I can file a memo asking the Court to reconsider the timetables and the hearing. As already indicated, my view that I do not have the resources to prepare for the actual hearing other than costs considerations.

[67] But I accept the evidence of Mr Napier that the relationship between him and

[68] Mr Tee gave evidence and there was nothing in his evidence to indicate that he was spending professional time advancing supplementary discovery either by informal means or formally.

Matters had reached a point where we had had made an application for particular discovery and the plaintiffs had made reciprocal type application and that had been scheduled for hearing on 6 May and I recall having discussions with you, Mr Napier, at that stage about representation and you

6 May. At that stage you promised me you had commissioned cheques due on about 15^thMay and that you would ensure all our outstanding costs be brought up to date, and my understanding of that arrangement is that I agreed to undertake the interlocutory application and appear for you but the situation would then be reviewed following that hearing. And my understanding is that you would be considering alternative representation from that point. We got to 15 May and the payments that were promised were not made and you contacted me to apologise. There were quite a few telephone conversations and email exchanges between us which indicated you were approaching your bank, having difficulty getting funds cleared, or things of that nature, which I think essentially culminated in you confirming to me that the letter that Sellar Bone, the solicitors for the plaintiffs, had written to your bank was really making it impossible for you to secure further funding. My recollection at that point is that I urged you to consider whether you would be entitled to legal aid and my understanding was that you in fact approached the Legal Aid Committee to see whether you were eligible in fact. So yes, it is fair to say that probably from 15^thMay onwards I indicated to you that I would assist you in trying to find alternative representation, that I saw as my obligation indeed my desire to ensure you had a transition from the representation that my firm had provided until you were able to secure alternative representation. I think that what that meant in practice was that from that point I made sure you were copied in all correspondence, that you were aware of any deadlines being imposed in terms of the obligation in terms of this proceeding. I do recall in June I was having telephone discussions about the requirement for you to complete an updated list of documents. I do recall discussions about you having to approach your builder to obtain their file and additional documents. I can recall specifically discussions in late June when I forwarded to you the plaintiffs’ updated list of documents and having discussions with you to confirm the plaintiffs had in my view complied with their obligations so that you were at risk of being the party in default at that point and the need to do something about it, which cumulated in my agreement to forward to the Court on your behalf a memorandum for His Honour, Associate Judge Bell, which I think from memory was forwarded on about 3^rdJuly.

[70] The evidence before this Court is that Mr Tee’s attendances were confined to the Court appearances. He was not frustrating discovery but he was leaving performance of the order for discovery in the hands of Mr Napier.

[71] There is nothing in this narrative reflecting the usual role of a solicitor working with the client to achieve compliance with supplementary discovery by a tight deadline and, as often in the case in lieu, making informal progressive discovery such as providing the papers obtained from Mr Williams.

Can I say, Sir, just in terms of that, in terms of my dealings with Mr Napier throughout, he was, in my view, always anxious to try and progress matters and indeed, up to May 2014, he had met all the deadlines required of him. There was certainly a change in the sense he had run out of money and I think it’s fair to say, from my perspective a change in the sense that our firm was unpaid to the extent of over $20,000 and I thought I had made it clear to Mr Napier that it was difficult for us to do any more work in fairness to my partners until some arrangements were made for the payment of our costs.

[73] These are complex proceedings. Mr Napier had, in fact, obtained obviously relevant materials from his conveyancing solicitors, Armstrong Murray, as well as from Mr Williams. Mr Tee acknowledged this in his evidence.

A. I think they were, I think there were three if not four files, they were essentially conveyancing, what we call conveyancing files, so files that involve documentation, your sale and purchase of the properties, including your bank statements recording the amounts you had loaned, settlement statements from Armstrong Murray, which set out the sort of funds received and applied. In addition there is a general trust file that Armstrong Murray had which had copies of trust deeds, resolutions, and just matters of record for your family trust.

Q. Just in respect, Mr Tee, to that 94(b) of Justice Bell, ... would any of those items in that box be included in that, like in 94(b)(inaudible).

A. Yes I think included in there would have been at least (v), probably (iv), possibly (iii), there would have been some financial statements, particularly in the trust file, (vii)(x).

Q. Mr Tee, the email that Mr Williams gave you, sent to you, that was copied from myself, in respect of our financials, would that have satisfied any of those under 95(b)?

Q. When roughly were you provided with these documents, Mr Tee, from Armstrong Murray?

A. I think in May sometime. I’ve written to Mr Jones on 8 June with some documents. These weren’t from the files, but I think those files were provided for me by Mr Davis of Armstrong Murray either in late May or June.

[75] I am satisfied from this evidence that there was no wilful non-compliance with the orders for discovery by the defendants. Perhaps anticipating that finding,

Mr Jones argued that lay litigants should be treated no differently from legally represented litigants.

[76] That is not Court practice as is indicated from the dictum of Master Venning set out above. For very sound reasons, the Courts do give latitude and lenience to lay litigants. Litigants who have the advantage of solicitors and counsel are able to respond to the pre-trial requirements much faster and more efficiently. But that does not entitle them to better justice than lay litigants. The Justices of the High Court have the same obligation, assumed personally, to justly hear and decide disputes, whether the litigant is professionally represented or not.

[77] It is in the public interest that this is so. It is often forgotten that resolving civil disputes is an essential requirement of any society’s justice system as much as prosecuting and deciding breaches of the criminal law. For the maintenance of law and order depends ultimately on access to independent judges to resolve disputes. The twentieth century and, indeed, any century provides numerous examples of the breakdown of law and order when parties can no longer take their civil disputes to court.

[78] For these reasons, I am satisfied that there has been no wilful non-compliance with court orders by the defendants which justify their statement of defence being struck out. Secondly, as currently lay litigants, they are now entitled to some latitude.

[79] I am satisfied that the orders made by Associate Judge Bell on 3 May would not have been made if he had known:

(b) That for all practical purposes Mr Tee’s firm thereafter was not providing legal services in support of performance of the orders for complex supplementary discovery, but was effectively leaving it to the defendants, as lay litigants, to comply.

[80] For these reasons, the application to strike out their statement of defence is dismissed.

[81] I turn to the application to vacate the fixture. This application must succeed. It is now impossible, even with informal discovery, for the defendants to complete the requirements of the order of Associate Judge Bell. The application to vacate the fixture is granted. The date for compliance by the defendants for additional discovery, 27 June, is set aside.

[82] As referred to in [4] above, the defendants have their own applications in addition to adjournment of the fixture. These fall into two parts. For their benefit, extending dates for compliance with the timetable directions and, secondly, seeking more particularised statement of claim from the plaintiffs and an order that the plaintiffs comply with the audit obligations required by them in terms of the Companies Act in a reasonable period prior to the hearing.

[83] These applications were not argued significantly before me. They were not abandoned. But, rather, the hearing was focussing on the critical issue of whether or not the defendants were in wilful disobedience of the Court orders. These issues need further argument. They are issues made in the context of discovery issues. I think the question of discovery should be returned back to Associate Judge Bell. For this reason, the other applications of the defendants, summarised in [4] of this judgment, excluding adjournment of the fixture and release from the timetable, which has been made by this judgment, remain live issues for determination by Associate Judge Bell. The parties have leave, of course, to make any further applications to Associate Judge Bell.

[84] Mr Napier needs to be given an opportunity to apply for legal aid. The Legal Services Act 2011 does not limit legal aid to maximum levels of capital or income, as the regulations might suggest.⁸Leave is reserved to apply to Associate Judge Bell

High Court of New Zealand Decisions

Torbay Holdings Limited v Napier [2014] NZHC 2380 (30 September 2014)