Thomsons Timber Supplies Limited t/a Thomsons ITM Building Centre v Elite Empire Limited [2015] NZHC 1582 (8 July 2015)

Last Updated: 11 August 2015

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2014-419-422 [2015] NZHC 1582

BETWEEN	THOMSONS TIMBER SUPPLIES LIMITED T/A THOMSONS ITM BUILDING CENTRE Plaintiff
AND	ELITE EMPIRE LIMITED Defendant

Hearing:	15 June 2015
Appearances:	Mr Morris for Plaintiff Mr F Deliu for Defendant
Judgment:	8 July 2015

_{JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE}

This judgment was delivered by me on

08.07.15 at 4 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

THOMSONS TIMBER SUPPLIES LIMITED T/A THOMSONS ITM BUILDING CENTRE v ELITE EMPIRE LIMITED [2015] NZHC 1581 [8 July 2015]

Introduction

[1] An order was made by consent to set aside the statutory demand because it appeared from affidavit evidence that a director of the company was not in fact properly served with the statutory demand. A further result of the apparent failure to properly serve the company was that the respondent was ordered to pay costs on the setting aside of the application.

[2] Subsequently, however, it came to the attention of the respondent, it says, that the problems with service of the statutory demand allegedly came about because of manipulation on the part of the director of the company.

[3] As a result, the respondent seeks an order setting aside the judgment for costs and substituting an order for costs in its favour. The procedure which the respondent has chosen is by way of an application for recall of judgment, pursuant to r 11.9 of the High Court Rules (Rules).

Background

[4] In more detail, the factual circumstances are these. The process server, Mr West, went to a property associated with the director of the defendant company. He encountered two people at the property, a man and a woman. The person he wished to served was Lijun Zhang. He assumed that the person was a male. His understanding would have been influenced by the fact that an alias referred to in the statutory demand identified the company director as also being known as “John Zhang”.

[5] It now transpires that the male person was in fact Jiang Zhang, former husband of Lijun Zhang. Mr West has deposed that the woman who was present was Lijun Zhang. He said that he explained the documents to both of the people while he was attempting to serve them, and they confirmed that Lijun Zhang was the male person. Accordingly, he carried out service on that person. He now appreciates that this was erroneous and he should have served the woman instead.

[6] The plaintiff takes the view that, in the circumstances where the director of the company actively contributed to deceiving Mr West about the identity of the director, the costs order which I previously made on withdrawal of the liquidation proceedings should be recalled.

[7] The company has not taken any steps to oppose the application. Therefore no affidavit has been filed setting out any explanation which might have been available to the circumstances in which a person other than the director, Lijun Zhang, was served with the proceeding.

Law

[8] The first issue is whether this is a case where the Court has authority to set aside an order by recalling it. The circumstances in which the power to recall judgment under r 11.9 of the Rules exist have been discussed on many occasions. The authorities reflect the broad division that was adopted by Wild CJ in Horowhenua County v Nash (No 2) into three categories in which an order for recall of judgment is appropriate:¹

There are, I think, three categories of cases in which a judgment not perfected may be recalled - first, where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the Court’s attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled.

[9] The case under discussion, if it were to fall into any of these categories, would properly reside in the third grouping.

[10] In the Court of Appeal decision of Unison Networks Ltd v Commerce Commission, the category of applications which it covered was intended to be “narrow” and that cases appropriate for recall on that basis are “likely to be rare”.²

[11] In McGechan on Procedure, a number of examples are given of the circumstances in which the court will recall judgment.³ They will include cases

¹ Horowhenua County v Nash (No 2) [1968] NZLR 632 (NZSC) at 632.

where there has been a mistake on the part of the Judge in failing to deal with an issue that the parties required to be ruled on, and where material that had been put in evidence was not considered.⁴

[12] It is clear that the discretion is intended to be exercised where the court is able to do justice in a situation where unintended and unexpected outcomes might otherwise result. It is not, however, a substitute for rights of appeal. It tends to be used to set right problems that have arisen in the process of reaching judgment. It does not extend to cases where the outcome of the case has been influenced by fraud on the part of one of the parties. The correct procedure for dealing with a judgment in error as a result of fraud is to seek relief in the form of setting aside the tainted

judgment.⁵

Analysis

[13] In this particular case, two aspects of the approach which the respondent has adopted are notable. The position of the respondent is that there was in fact dishonesty on the part of the director of the applicant company, according to the affidavit put forward by the respondent, which was sworn by the process server Mr Stephen West. The essential account that he gave was that he was expecting to serve a Chinese or Asian person who was a director of the company. He encountered the person he thought he had to serve in the presence of an Asian woman. He had not met either of these persons previously. When he enquired of them as to which party was “Zhang”, the female indicated that it was the male person. Mr West now believes that, in fact, the director who he was required to serve was the female and that she knowingly and deliberately denied being the director and indicated that the director was the male with her. Plainly, if she was the director and she understood whom the process server wished to serve, then she was seeking to obstruct his efforts by identifying another person, wrongly, as being the named director. On the other hand, there is reason to believe that the parties who Mr West was speaking to were

_{not fluent in English. The possibility of mistake was therefore present.}

³ _{McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [11.9].}

⁴ _{Goh v BNZ (1991) 4 PRNZ 92 (HC).}

5. Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [Redcliffe] [2012] NZSC 94, [2013] 1 NZLR 804 at [41].

[14] The authorities make it clear that the setting aside of a judgment obtained by fraud is reserved for exceptional cases where the facts justifying them can be strictly proved.⁶ In Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd (Redcliffe), the Supreme Court said:⁷

[30] In New Zealand, the Court of Appeal has confirmed that claims based on suspicion are not allowed and has said that the fraud alleged must go to the heart of the judgment. To ensure these requirements are all met in any fresh proceeding challenging the finality of a judgment on this ground, the law sets strict requirements as to pleading in a case brought under the fraud exception.

[15] Sabotage of service by dishonesty of the kind that Mr West suspected would amount to fraud and would require to be dealt with procedurally as fraud. However, I am not satisfied the present case meets that standard. While Mr West’s suspicions are understandable, the evidence before the Court is just as consistent with mistaken mis-service as with dishonest avoidance of service. I will therefore proceed on the basis of mistake.

[16] If recall on the ground of mistake is permissible, it would not matter what the quality of the conduct of the party contributing to the mistake was. The fact alone that there had been a mistake from whatever cause is sufficient.

[17] When the substantive order setting aside the statutory demand was made, it was assumed that the process server had made a simple mistake about the identity of the person whom he wished to serve with the court proceedings. But it seems likely that there was instead, at the least, a mistake on the part of the person who was intended to be served. The position remains that the substantive order setting aside the statutory demand was the correct order for the Court to make in circumstances where there had been mis-service. However, the costs decision rests on rather different considerations and, in my view, can separately be re-visited.

[18] The question is whether recall on the grounds of mistake is permissible. It has been used to correct a judgment entered as a result of mistake on the part of the

Judge who inadvertently overlooked an argument or some evidence in the case.⁸ But the judgment in Horowhenua County makes clear that the use of the recall mechanism is to be reserved for special and exceptional cases.⁹

[19] The Court must be sensitive to the clear policy of the law stated in cases such as Redcliffe that there be finality to litigation so that orders of the court are not abrogated, other than by some recognised procedure such as appeal or the setting aside of judgment by way of fraud.

[20] Any decision which identifies additional categories in which there can be a recall of a judgment opens up a further category of cases in which a party against whom judgment has been issued can dispute the validity of the judgment other than by way of appeal. If not carefully controlled, recognition of an ever-widening category of cases in which recall is recognised would be erosive of certainty of judgments.

[21] I have concluded that the substantive order setting aside the statutory demand was the correct order for the Court to make in circumstances where there had been mis-service. But the question is whether, in such circumstances, the costs order ought properly to have been made against the respondent (the party who attempted to serve the statutory demand). It would certainly not seem to be very fair that in circumstances where the mis-service occurred as a result of the error of the party to be served that the other party ought to carry the costs consequences.

[22] What occurred in this case is that the applicant proceeded in the mistaken belief that service has been carried out on the correct person in circumstances where the view is open to the court that there had been mistakes on the part of both that person and the process server. Such a case is hardly likely to be common. Therefore, there should not be any particular concern about erosion of certainty of judgment as a result of recalling the judgment in this case.

[23] To summarise, in this case there is no dispute that there was a mistake in the service process. The process server did not know the correct person to be served by sight. He was dependent upon accurate information being forthcoming from the party to be served and the person who was accompanying her. Because incorrect information was given to him he served the wrong person. Because both parties contributed to the mistake this is a case where in my view costs should lie where

_{they fall and there will be an order accordingly. The extant costs order is set aside.}

J.P. Doogue

Associate Judge