Delmont v BMW Financial Services New Zealand Limited [2015] NZHC 2859 (17 November 2015)

Last Updated: 23 November 2015

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-1680 [2015] NZHC 2859

BETWEEN	MICHAEL ANDREW DELMONT Appellant
AND	BMW FINANCIAL SERVICES NEW ZEALAND LIMITED Respondent

Hearing:	10 November 2015
Appearances:	G P Denholm for Appellant S G T Ma Ching for Respondent
Judgment:	17 November 2015

_{JUDGMENT OF PALMER J}

This judgment was delivered by me on Tuesday, 17 November 2015 at 4.30 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors: Foy & Halse, Epsom

Lee Salmon Long, Auckland

_{Counsel: G P Denholm, Auckland}

DELMONT v BMW FINANCIAL SERVICES NZ LTD [2015] NZHC 2859 [17 November 2015]

Summary

[1] The narrow issue in this case is whether an application for leave to appeal out of time should be granted. The underlying issue is whether it is in the interests of justice for an appeal, that may have merit, to proceed in the face of a lengthy delay in its pursuit. I have concluded that the application should be granted, with conditions on the terms of leave. My reasons follow.

Facts

The Racing Car

[2] In 2008 BMW Financial Services New Zealand Ltd (BMW) lent $152,722.31 to Mr Delmont to enable him to buy a 2003 reconditioned BMW racing car. The loan was secured over the car. There was no independent valuation of the car at that time.

[3] Mr Delmont bought the car for around that amount in Singapore and shipped it back to New Zealand. He did not intend to race it. Mr Delmont regards the car as a collector’s item due to his understanding of its racing history. His evidence is that Antonio Garcia had raced the car for the ROAL race team and that it was the same as the car in which Andy Prialux had won the World Touring Car title in 2004/05. Mr Delmont has a logbook, or “Wagenpass” for the car which contains some of its racing history (in German).

Selling the Car

[4] Mr Delmont’s business activities soon suffered an unfortunate decline. In July 2009 he defaulted on the loan which, by this time, was $178,639.14. He concluded he would need to sell the car. BMW allowed Mr Delmont to try to sell the car himself over a period of around six months.

[5] By February 2010, when he had not been able to do so, BMW asked Turners Auctions Ltd (Turners) to sell the car. After browsing New Zealand and international websites and speaking to car dealers, Mr Hussain of Turners assessed the value of the car at between $40,000 and $60,000.

[6] BMW obtained an independent valuation of the car from Mr John MacKinlay who had significant experience in selling BMW vehicles in New Zealand. Mr MacKinlay advised that the car would need a new engine in order to race in New Zealand and would be unlikely to sell for more than $60,000. This was substantially less than Mr Delmont had paid for it and substantially less than BMW had loaned to Mr Delmont to do so.

[7] There is some difference between the parties over the amount of information about the car that Mr Delmont provided to BMW. Mr Delmont says that significant information from the Wagenpass (including aspects of its racing history), and a detailed outline of its specialist componentry, was provided to BMW. BMW says the information provided was less than fulsome. Whether or not BMW had the information that would mark the car out as a potential collector’s item, it did not pass that information to either Turners or to Mr MacKinlay.

[8] In the event, Turners sold the car on 26 April 2015 and returned net proceeds to BMW of $53,395. This resulted in the balance of the final amount of the loan still owing by Mr Delmont to BMW being $125,244.14. BMW are now seeking to bankrupt Mr Delmont in respect of this debt.

The Case and its Appeal(s)

[9] The essence of the dispute lies in Mr Delmont’s claim that BMW valued, marketed and sold the car as a racing car, not as a collector’s item. He says the car’s economic value, and consequently the funds available to meet his obligations to BMW, would have been higher if it had been valued, marketed and sold as a collector’s item. Mr Delmont is resisting enforcement of the outstanding amount of the loan, and bankruptcy, for this reason.

[10] The issues were traversed in the District Court on 16 and 17 September 2014. Judge Harrison issued judgment in favour of BMW on 30 September 2014.¹ Costs

_{were subsequently awarded in favour of BMW.}

¹ BMW Financial Services NZ Ltd v Delmont DC Auckland CIV 2011-004-1403, 30 September

2014.

[11] Mr Delmont had a right to appeal and sought to pursue it:

(a) Mr Delmont filed a Notice of Appeal with the High Court on

29 October 2014.

(b) In a minute of 25 November 2014 Katz J ordered Mr Delmont to pay security for costs of $995 by 9 December 2014, noting that s 74(2) of the District Courts Act 1947 requires failure to do so to be treated as abandonment of the appeal.

(c) Mr Delmont’s payment was received two days late. On 19 December

2014 Katz J confirmed that the appeal must be treated as abandoned and expressly noted the possibility of filing an application for leave to appeal out of time. Costs for the abandoned appeal of $2,239 were subsequently awarded to BMW. The late security was insufficient to cover this amount, part of which remains unpaid.

[12] BMW, of course, continued to pursue the debt:

(a) On 12 March 2015 BMW served a notice on Mr Delmont requiring him to complete a financial statement under s 84B of the District Courts Act 1947. No response was received.

(b) On 15 June 2015, BMW obtained a bankruptcy notice against Mr Delmont and on 25 August 2015 served on him an application for an order adjudicating him bankrupt.

[13] On 23 July 2015, Mr Delmont filed the current application for leave to appeal out of time against both the District Court’s substantive and costs judgments. The application was accompanied by a Notice of Appeal and an affidavit in support. BMW emphasises that 23 July was the last day available to Mr Delmont to comply with the bankruptcy notice. It complains that it had had no previous notice of a renewed intention to appeal.

[14] The issue is whether Mr Delmont’s application should be granted. BMW opposes the application but submits that, if it is granted, security for costs of $10,704 should be ordered (being what they say are the likely 2B costs of the substantive appeal).

Law

[15] Rule 20.4(3) of the High Court Rules provides that, “by special leave, the court may extend the time prescribed for appealing” if the enactment does not limit that time, which this enactment does not. The extension of time may be made after the expiry of the time for appealing (r 20.4(4)).

[16] The court has a wide discretion though leave will not be given lightly.² The overall test is whether granting leave for an extension of time would meet the overall interests of justice.³

[17] The parties agree on the factors relevant to the Court’s decision. As set out below, these have been formulated by the Court of Appeal in relation to appeals to that court. The High Court has applied these principles to appeals to the High Court.⁴ The same principles have been applied whether an appeal is out of time because a notice of appeal has not been filed in time, service has not occurred in time, a case on appeal has not been filed in time or because of a failure to pay security for costs.⁵

_{[18] The relevant considerations are:}⁶

² New Plymouth District Council v Waitara Leaseholders Association Inc [2007] NZCA 80 at

_[22].

³ _{Havanaco Ltd v Stewart [2005] NZCA 158; (2005) 17 PRNZ 622 (CA) at [5].}

⁴ _{For example, Cook v Housing New Zealand Corporation [2014] NZHC 683.}

⁵ In Schmidt v Ebada Property Investments Ltd [2012] NZCA 452 at [5] the Court of Appeal notes that an extension of time to file a case on appeal is different from an extension of time to commence an appeal. But it applies the same principles.

⁶ From Havanaco as endorsed and expanded by the Court of Appeal in Waitara Leaseholders

Association Inc at [22] and My Noodle Ltd v Queenstown Lakes District Council [2009] NZCA

224[2009] NZCA 224; , (2009) 19 PRNZ 518 at [19].

(a) The reasons for, and length of, the delay in appealing. If the delay is caused by the appellant’s lawyer, and is not significant, the Court will generally be inclined to grant leave.

(b) The merits of the proposed appeal. If the appeal is of no merit, leave will not be granted.

(c) The conduct of the parties and the prejudice to other parties.

(d) The nature of the litigation and the importance of the issues it raises in the public interest. I do not consider the public interest is engaged here.

Application of Law to Facts

[19] I consider the relevant considerations are finely balanced.

Delay

[20] The original reason for the appeal being abandoned is understandable. Being late by two days in paying security for costs is not long, but it was not a deadline which could be extended. Counsel for the appellant, Mr Denholm, explained from the bar that Mr Delmont had paid the money to his then solicitors in time but the solicitors had failed to pay it into court.

[21] However, seven months is a lengthy delay in filing the renewed appeal. Mr Delmont explains in an affidavit that he was endeavouring to accumulate funds for the appeal but was unable to do so because of ill health (he is currently a sickness beneficiary) and economic hardship.⁷ There was a change of solicitors. Mr Denholm offered to proceed on a pro bono basis.

[22] BMW characterised the explanation as being brief and deficient and suggested the timing of the renewed appeal suggested was made for tactical

_{purposes. Undoubtedly it was a last ditch attempt to avoid bankruptcy. But that}

⁷ By memorandum BMW had objected to Mr Delmont’s affidavit being filed out of time.

However, at the hearing counsel for BMW indicated it would not be pursuing its objection.

does not mean the reasons for the appeal are any less genuine, given the original filing of the notice of appeal.

Merits

[23] The merits of the proposed appeal are not easy to assess as the evidence that was before the District Court is not before me. However, on its face, I consider the proposed appeal may have merit.

[24] BMW was (at the relevant time) required by s 26 of the Credit (Repossession) Act 1997 to “ensure that every aspect of the sale” of the car “including the manner, time, place, and terms is commercially reasonable and, in particular must use all reasonable efforts to obtain the best price”. Mr Delmont cites

case law that reinforces such an obligation.⁸ Section 26(4) provides that the onus of

proving that the goods have been sold in accordance with the section is on the creditor.

[25] In essence, Mr Delmont’s argument is that BMW did not value, market or sell the car on the basis that would yield the best price. It appears to have some basis. The market for an internationally unique collector’s car may well be different, and yield a higher price, than the market for a car that needs to be modified in order to race in New Zealand. Neither Turners nor Mr MacKinlay assessed the value of the car on this basis. Mr Mackinlay’s assessment of its value as lying in its racing ability, and his prescription for its repowering for that purpose, is inconsistent with any potential value it may have as a collector’s item. A key part of Turners’ advertisement of the car stated:

It’s a bit of a mystery but appears to have been imported and also looks to be a professionally built circuit race car. Officially that’s all we know.

[26] If BMW should have, but did not, value, market and sell the car as an internationally unique collector’s car rather than a racing car, it may have breached its duty to ensure the sale was commercially reasonable. The District Court

judgment does not directly address this but assumes that it would have to be repowered to compete as a racing car in New Zealand.⁹

[27] There is force in BMW’s contention that Mr Delmont had seven months to sell the car as a collector’s item and did not do so. But that does not necessarily mean it was commercially reasonable for BMW not to attempt to do so. Mr Denholm suggests that BMW and Turner’s would have been in a better position than Mr Delmont to access international markets for a collector’s car. There is also force in BMW’s contention that it would be difficult to calculate the loss caused by any breach of duty. But that does not mean that Mr Delmont’s claim of a breach by BMW of its duty is without merit.

[28] I note that the final merits of the issue will depend on the evidence, which is not before me. So my observations should not be taken to predict the result of an appeal, if it proceeds.

Conduct and Prejudice

[29] The primary relevant conduct of Mr Delmont that counts against him is the delay in renewing the appeal, discussed above. It is also disturbing that no response to BMW’s s 84B notice requiring a financial statement of Mr Delmont was received. Mr Delmont’s counsel, Mr Denholm was apparently unaware of the notice. Finally, I note that the costs of the abandoned appeal are still owing by Mr Delmont to BMW.

[30] No criticism can attach to BMW for its conduct regarding the appeal. BMW would suffer prejudice in the costs and continuing length of time involved in pursuing its debt if the appeal were to proceed. It is possible that BMW may not be able to recover its debt whether or not the appeal proceeds.

[31] The prejudice to Mr Delmont of not being able to appeal is also clear. He would, more than likely, be bankrupted; though that may occur in any case.

Result

[32] Overall, I consider the interests of justice favour the potential merit of Mr Delmont’s appeal being tested, given the consequences to Mr Delmont otherwise. His delay in renewing the appeal comes very close, but not quite close enough, to overriding that consideration. Accordingly, I grant his application for leave to appeal out of time. The terms of the leave are that:

(a) the following three conditions must be satisfied within ten working days of the date of this judgment and before the leave is taken up:

(i) Mr Delmont is to pay the outstanding amount of the costs awarded against him in respect of the abandoned appeal;

(ii) Mr Delmont is to comply with the 12 March 2015 notice requiring him to complete a financial statement under s 84B of the District Courts Act 1947;

(iii) Mr Delmont is to pay security for costs of $3,500 for the new appeal; and

(b) Mr Delmont must bring the appeal within twenty working days of the date of this judgment, on which date the leave expires.

[33] The costs of this application will lie where they fall.

..................................................................

Palmer J