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The dangers of failing to front up in court

17 Mar 2023

| Author: Andrea Hilton

Application to set aside judgment entered on formal proof – High Court Rules 2016, 15.10- miscarriage of justice – principles to be considered – reasonable explanation for failure to appear – substantial defence – irreparable harm – procedure – breach of contract – ADLS sale and purchase agreement cl 7.3(6)(a) – damages -s9 Fair Trading Act 1986 – misleading and deceptive conduct -quantum of damages – judgment mostly set aside

Bhargav & Khajuria v First Trust Limited & Ors (Tahana J)

First Trust Limited (FTL), Rahal (a shareholder and director of FTL), Metsons (NZ) Ltd (Metsons) and Mehta are the first to fourth defendants of the claim.

FTL purchased a do-up plaster property in 2019 after Rahal viewed it. Rahal’s business partner obtained a building report that stated the property was in “satisfactory condition”. Rahal became ill and his business partner organised the renovations without a building consent.

Bhargav and Khajuria  purchased the property from FTL in 2020 after obtaining a pre-purchase report from Metsons, completed by Mehta. The report did not identify any weathertightness issues and Mehta texted “no issues of weathertightness. Absolutely no worries.” After settlement, Bhargav observed water coming through joinery. He obtained another pre-purchase report that identified defects and recommended that a weathertightness remedial specialist investigate.

Bhargav issued proceedings against FTL, Rahal, Metsons and Mehta and others in August 2021. The defendants took no action and judgment was entered by formal proof determining:

  • a) FTL was in breach of cl 7.3(6)(a) of the sale and purchase agreement for not obtaining a building consent when one was required.
  • b) FTL, Rahal, Metsons and Mehta contravened s9 of the FTA
  • c) The first four defendants contributed equally to the deception, so they were jointly and severally liable
  • d) Damages of $861,113 plus interest were awarded.

After they were served with the judgment, the defendants applied to set it aside under rule 15.10 of the High Court Rules 2016.

Applicable principles – procedural – judgment may be set aside if it appears that there has been or could be a miscarriage of justice -three factors to consider – is there a reasonable explanation for the failure to appear – is there a substantial ground of defence – will the plaintiff suffer irreparable harm if the judgment is set aside -a court “may also consider anything that is relevant to assessing the justice of the case”- onus on defendant to establish substantial ground of defence – ill-health is a reasonable explanation for non-appearance -Rahal was unwell – one director being ill is insufficient reason when another director present – advice from a lawyer is necessary – when there is a substantial ground of defence and the plaintiff is not going to suffer irreparable harm, lack of a reasonable explanation is not fatal – interpretation of clause 7.3(6)(a) by the hearing judge correct – when a defence is factual evidence in support is required – no evidence that a building consent not required – quantum of damages – causation and quantum defences require discovery and expert evidence – hearing to hear evidence necessary – damages could not be determined for either breach of contract or FTA- health issues and stress not necessarily irreparable harm – defendant’s ability to pay damages is litigation risk of all plaintiffs – defendants should not be penalised due to court unavailability – costs are generally against the party seeking the court’s indulgence.

Held:

  • a) The judgment is set aside except for breach of cl7.3(6)(a) against FTL and Rahal
  • b) The defendants to file and serve statement of defence, counter claims in 10 working days of judgment
  • c) Defendants jointly and severally liable for wasted costs and disbursements
  • d) Defendants to pay the plaintiffs’ costs.

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