IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE	
CIV-2014-488-187
[2019] NZHC 130	

BETWEEN	RODNEY DAVID HAINES and KATHLEEN ANNE NORMAN
Plaintiffs	
AND	ROBERT JOHN HERD
First Defendant

RHUMBA HOLDINGS LIMITED
Second Defendant	

Hearing:	11 February 2019 at 12 noon	
Appearances:	Nathan Gedye QC for the Plaintiffs J Maassen for the Defendants	
Judgment:	11 February 2019	

ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL (No.2)

Solicitors:
Richard C Mark, Kerikeri, for the Plaintiffs
Wadham Partners (M S Dobson), Palmerston North, for the Defendants

Copy for:
Nathan S Gedye QC, Auckland, for the Plaintiffs John Maassen, Wellington, for the Defendants
Herd Lawyers, Maroochydore, Queensland 4558, Australia, for the First Defendant

HAINES v HERD [2019] NZHC 130 [11 February 2019]

[1]	The substantive hearing for this proceeding is to start on Monday 18 February 2019. Urgent rulings are required. Ideally, the trial Judge should deal with them, but as of this morning no trial Judge has been appointed. These matters require decision:

[a]	the defendants’ application to file and serve an amended statement of defence after the close of pleadings date;

[b]	the defendants’ application after the close of pleadings date for further and better discovery;

[c]	whether the defendants may serve statements of evidence after the date set for them to serve their evidence; and

[d]	the plaintiffs’ objections to parts of the defendants’ evidence.

[2]	There are other matters that have fallen by the wayside. The defendants issued a subpoena for the second plaintiff, Ms Norman. Mr Gedye QC advised that the second plaintiff would appear if required and service of a subpoena on her is not necessary. The defendants served a notice to produce documents but, as I explained, that requires production of documents which have not been discovered. I am going to rule that the plaintiffs are not required to discover further documents. Correspondingly the notice to produce is not required.

What the case is about

[3]	The plaintiffs are suing the defendants under an agreement for the sale of a Hatteras launch, “Its Time”. Mr Herd is the purchaser. Rhumba Holdings Limited, a Vanuatu corporation, guaranteed his performance. The plaintiffs live in Northland but have business interests in Vanuatu. Mr Herd is an experienced Queensland solicitor who has had business interests and land holdings in Vanuatu. I understand that he now lives in Gibraltar. Rhumba Holdings Limited is a Vanuatu corporation through which Mr Herd has interests in land on Espiritu Santo.

[4]	In October 2011, Mr Herd and the plaintiffs entered into a written agreement for Mr Herd to buy “Its Time” for NZ$800,000. The consideration involved Mr Herd transferring 50 per cent of his interests in various islands in Vanuatu. That agreement included a guarantee of clear title. Clause 13 says:

The Vendor is the sole legal owner of the vessel and the vessel and all her gear mentioned in the inventory and specification attached will be passed to the Purchaser on settlement free from any mortgage, instrument by way of security or any other charge or encumbrance whatsoever.

[5]	In May 2012, Mr Herd and the plaintiffs made a new a deed of variation of boat sale agreement. Rhumba is a party to the deed of variation. I have described aspects of that agreement in my decision on choice of forum.1 Here I mention simply this: the agreement provided three alternative ways by which Mr Herd was to pay for the vessel but, in the event, only one applied. That was for Mr Herd to pay AUD400,000 in cash to Mr Haines and any interest that was due at the time of settlement. In addition he was to transfer to Mr Haines or nominee AUD400,000 worth of land (as per Vanuatu registered bank panel mortgage valuation) with the preferred land being Palekula Beachfront or waterfront property. The agreement provided that “Its Time” was a Vanuatu-registered vessel. At the time, Ms Norman was registered as the owner of the vessel, apparently under Vanuatu’s Shipping Act. Legal title and ownership of the vessel would not pass to Mr Herd until he had paid the consideration for the vessel. He was entitled to take and obtain possession of the vessel before settlement. His right to take possession ran from 5 May 2012. He was entitled to remove the vessel to Australia. He was in New Zealand at the time of the agreement. He was responsible for insurance and the vessel was at his risk. The agreement is governed by the law of Vanuatu, excluding French law.

[6]	Clause 6.1 of the variation deed says:

6.1	The vessel belongs to Haines and Norman. They are the owners, and the vessel is registered as a Vanuatu ship.

[7]	Clause 7.3 says:

7.3	Upon Herd paying or causing to be paid the Consideration for the Purchase of the Vessel-

1	Haines v Herd [2015] NZHC 3365.

(a)	Haines shall immediately release the Security Documents and shall have no further interest in the Vessel nor security interest in Lot 58;

(b)	Title in the Vessel shall pass to RHL as trustee for the “Its Time Trust”.

(c)	Haines and Normal shall sign such documents and forms to:

(i)	release the security documents; and

(ii)	enable the Vessel to be registered in the name of RHL as Trustee for the Its Time Trust in the Vanuatu Shipping Register.

[8]	In May 2012 “Its Time” sailed from Auckland to Queensland and it remained on the Queensland coast. Mr Herd took possession of the vessel from the time of its arrival in Queensland, if not earlier. Under the agreement he was required to pay the consideration by 5 May 2013, but he did not do so. In August 2013, Mr Haines gave notice of the default, requiring Mr Herd to remedy the default within 30 days. Mr Herd did not provide the consideration inside those 30 days. Mr Haines re-took possession of “Its Time” on the Queensland coast on 17 October 2013.

[9]	In February 2014, Mr Herd gave notice terminating the boat sale agreement for breach by Mr Haines. Mr Herd contends that he was entitled to terminate because of either repudiation by Mr Haines or the failure by Mr Haines to agree on land which was to be transferred as part of the consideration. The vessel returned to New Zealand in 2015. The plaintiffs are now claiming damages said to arise from Mr Herd’s failure to complete the purchase.

[10]	Paragraph 1 of the statement of claim of 5 December 2017 says that the plaintiffs are resident in New Zealand and are the owners of  the  Hatteras  launch,“Its Time”. In his second amended statement of defence of 19 December 2017, Mr Herd says:

1. Admits that the plaintiffs are resident in New Zealand but otherwise denies paragraph 1 and says further that it was represented to the first defendant that the first-named plaintiff was the sole owner of the Vessel, although the Vessel was registered under the second-named plaintiff for tax purposes, as later confirmed by the second-named plaintiff to the first defendant.

[11]	Mr Maassen’s synopsis outlined six defences which the defendants intend to run:

(a)	Matters essential to agree upon under the contract concerning the transfer of land as part of the Alternative Consideration were not achieved, including identification of the land and its value. The contract required agreement on these matters in order to establish an enforceable agreement.

(b)	By reason of actions or omissions of the Plaintiff and/or the absence of agreement, Mr Herd could not perform the transfer of land and he therefore did not cause the breach and therefore the default notice issued on 26 August 2013 was not valid. One cannot accuse someone of default that you have been a party to.

(c)	At all material times the Plaintiffs were not in a position to perform the contract and register the vessel in Rhumba Holdings Ltd (“RHL”) under clause 7.3.

(d)	The vessel was not free of charges or encumbrance because it was subject to a lien to the Vanuatu Government for non-payment of duty in breach of clause 13 of the original contract. \

(e)	The exclusive machinery for remedies for default under clause 4.1 is clause 9 of the contract. The machinery was not followed and no debt is owed. Common law damages are not available.

(f)	The Plaintiffs did not reasonably mitigate their loss.

The defences under (a), (b) and (e) are already available under the existing pleadings. The defendants under (c), (d) and (f) are new. They were raised for the first time in Mr Herd’s application to amend his pleadings.

[12]	To  short-circuit matters, I deal with plea of failure to mitigate their loss.     Mr Gedye acknowledges that failure to mitigate loss is already in issue. The plaintiffs have already prepared on the basis that they have received evidence from the defendants on that issue. There is apparently no objection to the defendants pleading a failure to mitigate loss.

How the proceeding has run

[13]	It is necessary to refer to how the proceeding has run until now. The proceeding started in 2014. At an early stage the defendants protested the jurisdiction of the court. That matter was not finally resolved until a decision of the Court of Appeal in May 2017 dismissing the defendants’ application for special leave to appeal. The plaintiffs had initially applied for summary judgment, but they withdrew their application in August 2017. Final pleadings and discovery were completed by the end of 2017.

In March 2018, Toogood J gave this case an 8-day fixture beginning next Monday, 19 February 2019.

[14]	During 2018 I gave timetabling directions:

(a)	The close of pleadings date was 24 August 2018.

(b)	The plaintiffs were to serve their evidence by 12 October 2018.

(c)	The defendants were to serve their evidence by 26 November 2018.

(d)	The plaintiffs were to file any reply evidence by 17 December 2018.

(e)	The parties were to confirm arrangements for getting overseas witnesses to give their evidence by AVL during January 2019.

(f)	The plaintiffs were to file  a  common  bundle  and  chronology  by  21 January 2019.

(g)	There was to be a pre-trial conference in the last week of January 2019.

(h)	The experts’ reports were to be filed by the beginning of February 2019.

(i)	The plaintiffs were to serve their opening by tomorrow (12 February 2019).

[15]	Up until December 2018, the defendants were represented by Auckland lawyers who instructed counsel. In December 2018 those lawyers applied for leave to withdraw. They had not received instructions from the defendants. I granted leave to withdraw on 18 December 2018. Only very recently have the defendants instructed Palmerston North solicitors who have, in turn, instructed Mr Maassen. The new lawyers have come up to speed with the case at very short notice.

[16]	Between 18 December 2018 and the appointment of the defendants’ new solicitors, Mr Herd was unrepresented. Rhumba Holdings Ltd is a corporation and did

not have any representation. There was a telephone conference on 19 December 2018. New timetable directions were given. At this stage, while the plaintiffs had served their evidence, the defendants had not served any evidence. Mr Herd was given extended time, to 18 January 2019, to serve his evidence and a list of documents for the bundle. That was over the opposition of the plaintiffs who wanted the evidence served by 11 January 2019. I directed that the plaintiffs were not required to serve statements of evidence in reply before the hearing. That was because of the compressed time for them to respond. The parties were to confirm arrangements for witnesses to give evidence by AVL from Australia and Vanuatu by 1 February 2019, and I directed a pre-trial conference for last week. I dispensed with any requirement for expert witnesses to confer before trial – again, because of the shortness of time. The plaintiffs were required to serve their opening by today (11  February 2019).       I said:

The defendants are warned that if they do not serve statements of evidence and a list of documents for the bundle on time, there may be consequences. One possible consequence is that they will be barred from adducing evidence at the hearing.

At that conference on 19 December 2018, Mr Herd did not indicate that he intended to amend his pleadings and raise fresh defences. Mr Herd served a statement of his evidence on 18 January 2019.

The proposed amended statement of defence

[17]	After 18 January 2019 Mr Herd applied to amend pleadings. Mr Herd emailed to the court an application dated 25 January 2019 seeking leave to amend his statement of defence and seeking particular discovery under r 8.19 of the High Court Rules. He sent a draft statement of defence. During the hearing, however, it became apparent that a further draft statement of defence was proposed. That was tendered only at the end of submissions for the defendants. As a result of discussion during the hearing, it became apparent that that draft is not in a final form either.

[18]	The defendants propose these additions. Paragraph 9(f) will say:

(a)	He relies on the full terms of the boat sale agreement, which required the plaintiffs to convey unencumbered title in the vessel, which the

plaintiffs were unable to do because the plaintiffs had made a misleading or false declaration at the time of the importation into Vanuatu about -

(i)	The ownership of the vessel by stating that Ms Norman was the 100% owner of the vessel;

(ii)	The amount of duty payable on the vessel as it did not qualify for importation duty free on account of Ms Norman as importer not owning the vessel for the previous 12 months; and

(ii)	That the vessel was not registered in any foreign jurisdiction. which had the effect:
(iv)	Under the Customs Act 1999 the vessel is liable for seizure and forfeiture and the Vanuatu Government has a lien over the vessel for all unpaid duty, penalty and interest; and

(v)	Pursuant to the Maritime Act-

(1)	the vessel was not properly registered in Vanuatu; and/or

(2)	property in the vessel had passed to the Vanuatu Government.

An addition to paragraph 14(b):

“and they insisted on payment under the Variation Boat Sale Agreement in circumstances where they were not able to convey clear unencumbered title to the vessel:”

A new paragraph 20(b):

(b)	The Plaintiffs were not entitled to cancel the Variation Boat Sale Agreement or insist on completion as the Plaintiffs were not in a position to transfer clear and unencumbered title to the Vessel as required by clause 13 of the Boat Sale Agreement for the reasons detailed in paragraph 9(f) above.

Paragraph 21(b) to say:

(b)	The Plaintiff has suffered no loss because prior to completion of the sale:

(i)	the property in the vessel was forfeited to the Republic of Vanuatu pursuant to section 47(3) of the Maritime Act; or

(ii)	the Vanuatu Government has a lien over the vessel for unpaid duty, penalty and interest under the Customs Act Vanuatu; and/or

(iii)	the vessel is also liable for seizure and forfeiture under the Maritime Act.

Paragraph 28 pleads a proposed fourth affirmative defence:

28.	The First Defendant repeats and relies upon paragraph [9](f) herein and says that the Plaintiffs could not complete the contract of sale because prior to completion of the Agreements:

(a)	ownership of the vessel has passed to the Republic of Vanuatu pursuant to s 47(3) of the Maritime Act; and

(b)	further the vessel was burdened with a lien for the unpaid duty, penalty and interest under the Customs Act on account of false or misleading declarations; and

(c)	the Plaintiffs could not have insisted on the First Defendant completing the Agreement as the Plaintiffs could not comply with clause 13 of the Boat Sale Agreement and provide clear title to the First Defendant at completion of the Agreements.

And there is a fifth affirmative defence:

29.	The First Defendant repeats and relies upon paragraph 9(f) herein and says that the Plaintiffs could not complete the contract of sale and/or were in breach of the contract themselves and the vessel could not be registered in the name of the Defendant for the following reasons:

(a)	The Plaintiffs were in breach of the warranty that the Vessel was properly registered in Vanuatu because the preconditions for registration of the vessel did not exist on account of the fact that the vessel was still registered in New Zealand and the Permanent Certificate of Registry was not properly and validly issued to Kathleen Norman; and

(b)	The Plaintiffs were not the registered owners of the Vessel according to the records of the Office of the Marine Regulator on account of the fact that Kathleen Norman as the registered owner had not complied with Part 4 of the Maritime Act by failing to cause the Vessel to be registered in the joint names of the Plaintiffs and a new Permanent Certificate of Registry to be issued.

[19]	The sixth affirmative defence, failing to take reasonable steps to mitigate loss, as I have already noted, is not opposed.

[20]	Mr Maassen submitted on other matters in addition to those affirmative defences. Whereas the draft that I have quoted referred to Vanuatu’s Maritime Act, the defendants now say that the  plaintiffs  registered  the  vessel  in  the  name  of Ms Norman under Vanuatu’s Shipping Act. Mr Maassen explained that Vanuatu’s

Shipping Act applies only to domestic vessels, that is, vessels registered in Vanuatu that operate only within Vanuatu’s territorial waters, whereas the Maritime Act applies to vessels which carry a Vanuatu flag and may operate outside Vanuatu. As “Its Time” was registered under the Shipping Act, non-compliance with the Maritime Act did not matter. but inability to comply with the requirements of the Shipping Act was relevant.

[21]	The court was provided with copies of other legislation which the defendants intend to rely on. A copy of the Shipping Act was not provided.

The principles on applications to take steps under r 7.7

[22]	The general principle is that before trial a party may file an amended pleading which introduces a fresh ground of defence – r 7.77. That is subject to the requirement that no amended pleading may be filed and no interlocutory application may be made after the close of pleadings date without the leave of a Judge – see r 7.77(10) and r 7.7. In addition, under r 1.9 of the High Court Rules, the court may, before, at or after trial, amend pleadings so as to allow the determination of the real controversy between the parties. It has been said that to obtain leave to take steps after the close of pleadings date, it is necessary to surmount three formidable hurdles: to show that doing so would be in the interests of justice, will not significantly prejudice other parties, and will not cause significant delay.2

[23]	The purpose of r 7.7 is to ensure that by the close of pleadings date the pleadings and all interlocutory matters have been completed so that the parties can concentrate on preparing for the hearing – that is, drafting evidence and serving it, preparing chronologies, and preparing lists of documents for the bundle. That in itself is demanding work which requires care, time and attention. It should not be subject to disruption from interlocutory matters.3

[24]	In EBR Holdings Ltd (in liq) v van Duyn,4 the court outlined considerations relevant to the exercise of the discretion to permit amendments to a statement of defence:

2	Elders Pastoral v Marr (1987) 2 PRNZ 383 (CA) at 385.
3	RHH v Anderson (No.3) [2018] NZHC 2045 at [9].
4	EBR Holdings Ltd (in liq) v van Duyn [2016] NZHC 1169 at [59].

(a)	the starting point is r 1.2 and its emphasis on the “just, speedy and inexpensive” determination of proceedings;

(b)	the expectation created by r 7.7 is that the parties will proceed to a hearing based upon pleadings as they stand “after the close of pleadings date”;

(c)	a Judge’s discretion to permit a late amendment to a pleading in r 7.7(1) requires that access to justice principles will be regarded as the primary consideration. An approach focussing on the “interests of justice”, taking into account the need to obviate significant prejudice to other parties, should be preferred over taking a disciplinary approach in respect of belated amendments;

(d)	the need to take public interest factors into account, such as waste of public resources, undue delay, and the concomitant strain and uncertainty imposed on litigants;

(e)	the need to compensate parties who are affected adversely, usually by way of a costs order, if leave to an amend and an adjournment are granted; and

(f)	the need to impose conditions to ensure any required steps are taken promptly, including by way of orders in appropriate cases, where the amending party’s conduct is particularly egregious.

[25]	Other considerations are the amendment’s likely impact on case management, the timing of the application for leave, and whether any fresh cause of action will be statute-barred.

[26]	Mr Gedye also referred to a decision of the English Court of Appeal in Ali v Saddique.5 I will quote from that judgment, as set out in the decision of Cull J in Goodier & Ors v The Earthquake Commission:6

[45]	In considering any application to amend a court is concerned to ensure that the case is dealt with justly and that, so far as practicable, the real issue between the parties can be adjudicated upon. However, the court is also concerned to ensure that a party faced with an amendment is not unfairly prejudiced. If an amendment is sought at any early stage in a claim, it will often be the case that any such prejudice can be adequately compensated in costs. But where an amendment is sought at a very late stage and perhaps, as here, at the trial, the position may be very different. A party faced with an application to make such a late amendment may be placed in great difficulty in giving it adequate consideration, in determining how it affects the case that has been prepared and in assessing whether, for example, it requires a corresponding amendment to its own pleading, further disclosure or fresh evidence or even an adjournment.

[46]	For all of these reasons a court will not only consider the prejudice that would be caused to the party seeking a late amendment if it were refused but will also have careful regard to the prejudice that would be caused to the party faced with the amendment if it were allowed. Moreover, relevant facts to consider will include the degree of precision with which the proposed amendment is formulated and any explanation as to why it is being made so late. Indeed it has been emphasised on more than one occasion by this court that a party seeking a late amendment bears a heavy onus to justify it …

[27]	The defendants can be criticised for raising their new defences very late in the piece. The proceeding has been on foot since 2014. The defendants have had considerable time – years, in fact – in which to carry out enquiries in Vanuatu to establish their defences, to raise matters which they have only raised very late. I gather from his affidavit that Mr Herd travelled to Vanuatu in December 2018 to prepare evidence, and it was only on that visit that he found out matters on which he now relies for his amended defences.

[28]	I have referred earlier to Mr Herd’s pleading in paragraph 1 of his statement of defence, which suggests that he was alert to issues of title, and did not accept the so- so of the plaintiffs that they were in a position to convey clear title to the vessel to him. There was also a suggestion of this in the hearing on the challenge to this court hearing the case,7 although at the time there was no clear pleading suggesting that the matter

5	Ali v Siddique [2015] EWCA Civ 1258.
6	Goodier v The Earthquake Commission [2018] NZHC 2980.
7	See paragraph [91] of my decision.

was squarely in issue. Counsel for the defendants indicated that there would be a challenge to the registration of the vessel in Vanuatu.

[29]	The defendants do not provide any adequate explanation for their failure to raise the matter earlier. I accept that Mr Herd is litigating from a distance, he is based in Queensland and more recently has moved to Gibraltar, and the evidence is in another jurisdiction, Vanuatu. But all the same he has had more than adequate time in which to carry out investigations and find out facts and evidence to support the defences that he raises now.

[30]	To a certain extent, Mr Herd tries to pass the buck to the plaintiffs by alleging that they have failed to make adequate discovery and should have anticipated challenges to title. But in my view the matters that Mr Herd raises now ought properly to have been pleaded much earlier. His bare denial of title is not sufficient to put in issue the matters that he now wishes to raise as affirmative defences. That is clear from r 5.48(5), which requires that a statement of defence must give particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances sufficient to inform the court, the plaintiff, and any other parties of the defendant’s defence. If Mr Herd intended to say earlier in the proceeding that the plaintiffs’ title was in issue, he ought to have done more than make a bland denial.

[31]	I now refer to the defences that the defendants wish to raise.

The proposed fourth affirmative defence

[32]	The proposed fourth affirmative defence alleges that ownership of the vessel passed to the Vanuatu Government under s 47(3) of the Maritime Act, and that the vessel was subject to a lien for unpaid duty, penalty and interest. Because of those encumbrances, the vessel could not be transferred. Mr Maassen now accepts that he cannot rely on the Maritime Act because the vessel was never registered under that Act, and so the Act does not apply. Instead, he says that the vessel was imported into Vanuatu without paying import duty on it. Vanuatu law gives certain exemptions on payment of import duty. One of those exemptions is that a person intending to take up residence in Vanuatu may import one means of transport, free of duty. A vessel

such as “Its Time” is considered a means of transport. Mr Haines was originally the owner of “Its Time” when the vessel was in New Zealand, and he is shown as owner under New Zealand’s shipping registration legislation. He imported another vessel into Vanuatu at the same time, “Celebration”. The defendants’ case is that to avoid paying duty on “Its Time”, the vessel was imported into Vanuatu under the name of Ms Norman.  That importation is said not to comply with the exemption because   Ms Norman had allegedly not owned the vessel for the requisite 12 months before the importation. The argument goes that she must have made a false declaration and that the vessel was imported without paying duty. The evasion of duty under Vanuatu legislation carries penal sanctions as well as giving rise to liability for duties, penalties and interest.

[33]	The defendants rely on s 37(3) of the Customs Act 1999 which says:

If an importer is in debt to customs in respect of any duty or tax, Customs may detain any goods imported by the importer that are held or stored in a Customs-controlled area until the debt is paid. Customs has a lien over any such goods.

The materials also refer to s 38 of the Customs Act which deals with exemptions from duty from those who wrongly claim exemptions. Section 38 provides that Customs may detain the goods and s 38(4) says:

Goods involved in the offence may be seized by Customs and on seizure are forfeited to the Government.

As I understand the case for the defendants, the vessel is somehow subject to an ongoing lien under s 37(3), and the vessel may be subject to forfeiture under s 38(4). I do not accept either contention.

[34]	Section 37(3) provides that Customs may detain goods imported by an importer, if those goods are held or stored in a Customs-controlled area, and the importer is in debt to Customs. The provision for a lien describes the nature of the power under which Customs holds the goods. It seems clear in this case that Customs never claimed a lien over the goods while the goods were held or stored in a Customs- controlled area because the plaintiffs were able to take the vessel away from Vanuatu back to New Zealand and sell it in 2011. The lien under s 37(3) is purely a possessory

lien. In its context, the lien can hardly be an equitable lien which operates as a charge over an asset by operation of law. Instead, it must be possessory as it arises out of a Customs power to detain goods if duty is not paid on other goods. Any such lien is lost once the lien-holder no longer has possession of the goods. Any lien that Customs might have had over this time was clearly extinguished once the plaintiffs took possession of the vessel after importing it into Vanuatu.

[35]	As for the forfeiture provisions under s 38(4), forfeiture arises only on seizure by Customs. In other words, there is not an automatic forfeiture but only a forfeiture that arises on seizure by Customs. It is self-evident that there was not any seizure in this case because the vessel was able to leave Vanuatu. The absence of automatic forfeiture is a standard approach in legislation providing for forfeiture. In this regard I refer to Attorney-General of New Zealand v Ortiz8 where Lord Denning said:
So far as England is concerned, whenever there is legislation providing that \ goods are to be forfeited for one cause or another, the law has always said that the forfeiture does not take effect until the goods are seized and that the title then relates back to the cause of forfeiture. If the owner or anyone else disputes the forfeiture, there are proceedings for condemnation. After condemnation the title is perfected and can no longer be disputed by anyone.

[36]	Accordingly, I do not regard the fourth affirmative defence by the defendants as raising a seriously arguable issue as to some encumbrance on the title in favour of the Vanuatu Government. Vanuatu legislation on its own face does not apply. In any event, I would decline to apply it in the absence of any forfeiture having been effected on the vessel in Vanuatu. The Vanuatu law could not apply outside Vanuatu. Again, the decision of The Attorney-General for New Zealand v Ortiz is authority for that proposition. New Zealand’s Historic Articles Act 1962, which provided for forfeiture, was held not to have any extra-territorial application.

[37]	As I do not consider the proposed fourth amended defence is seriously arguable, there is no reason to allow it to be run.

8 Attorney-General of New Zealand v Ortiz [1984] AC 1 (HL) at 15.

The proposed fifth affirmative defence

[38]	The fifth affirmative defence says that the plaintiffs were not in a position to transfer title to the vessel. The draft pleading says that because the pre-conditions to registration of the vessel had not been satisfied, the vessel was not properly registered in Vanuatu. For the court to enquire into that, the court would have to decide on the validity of registration in Vanuatu, but as a general rule New Zealand courts do not consider the validity of or set aside the acts of foreign government agencies under foreign law.

[39]	It is also pleaded that the plaintiffs are not the registered owners of the vessel because Kathleen Norman is the registered owner under the Maritime Act (as opposed to both plaintiffs). Again, Mr Maassen indicated that the defendants rely instead on the Shipping Act. The impossibility of performance of the agreement is said to arise from the fact that the Shipping Act applies only to domestic vessels, and a transfer of registration to Rhumba Holdings Ltd could not be carried out when the vessel was either in New Zealand or in Australia. At this stage, the Shipping Act has not been provided. The argument was only developed in the course of Mr Maassen’s submissions.

[40]	On this point, the plaintiffs are in obvious difficulty. They are required to consider a new defence based on foreign legislation which as yet has not been properly pleaded. They have an expert witness on Vanuatu law, Professor Corrin, an Australian academic. Mr Gedye advises that she is temporarily in New Zealand but will be out of contact until tomorrow (12 February). There are obvious difficulties for the plaintiffs in trying to respond to this allegation. They will need to ascertain what the Vanuatu legislation provides and make enquiries how the legislation operates in practice.

[41]	While I am reasonably confident that Professor Corrin is well equipped to give evidence on general principles of Vanuatu law, I for one would be pleasantly surprised to find that she had a close knowledge of the detailed workings of the Shipping Act. Clearly, enquiries in Vanuatu need to be made, but there is not enough time to make these enquiries before the hearing. In my judgment there is a serious prejudice to the

plaintiffs with raising that defence at this stage. That prejudice, in my view, counts against allowing this late amendment.

[42]	I record that both counsel were agreed that the fixture for next week should go ahead. Neither side invited an adjournment. I cannot see how the case can readily proceed in a fair fashion if that defence is allowed to run.

[43]	As I have already indicated, the defence as to failure to mitigate is allowed without objection, so that amendment is accordingly allowed.

Rulings as to evidence

[44]	There are consequential rulings required for evidence. Mr Herd served an additional statement of evidence at the beginning of February 2019. At the same time, he also served evidence by a Vanuatu lawyer. The evidence of the Vanuatu lawyer goes to compliance with the Maritime Act and the Customs Act. As I have ruled that the defences relating to the Maritime Act, the Customs Act and Shipping Act are not to be heard, his evidence is not relevant and is not to be considered.

[45]	Mr Herd’s evidence of 1 February 2019 relates to these issues:

(a)	Ownership of the vessel and ability to transfer;

(b)	the Law of Property Act 1925 (UK); and

(c)	the laws of land transfer and ability to transfer land under the Land Leases Act.

[46]	I rule that Mr Herd’s evidence as to ownership of the vessel and ability to transfer are not to be received as part of the evidence for this case. That goes with the ruling that arguments as to compliance with the Shipping Act are not to be raised as an issue in the proceeding. In that regard, any issues as to transfer of title will run on existing pleadings. The defendants will not be allowed to argue that title to the vessel could not be adequately transferred in a way that complied with the Shipping Act. Paragraphs 26-46 of Mr Herd’s evidence of 1 February 2019 are not to be read.

[47]	In paragraphs 6-11 of his evidence, Mr Herd addresses the Law of Property Act 1925 (UK). The purpose of his evidence is to show that the Law of Property Act 1925 (s 42) is part of the general laws of Vanuatu, and remained in force in Vanuatu following independence. That provision is equivalent to the old Statute of Frauds as it applies to contracts for sale and purchase of land and is generally equivalent to s 2 of the Contracts Enforcement Act 1962 and s 24 of the New Zealand Property Law Act 2007.

[48]	Mr Maassen explained that the issue has contextual relevance for this case as it shows that Vanuatu’s law as to sale and purchase of land has formal requirements. That would go to establishing whether the parties did enter into a binding agreement that meets the requirements of s 42 of the Law of Property Act. Mr Maassen reinforced his submission by pointing out that if the evidence were not allowed in he would nevertheless cross-examine the plaintiffs’ expert and the matter would become more protracted at trial. I accept his submission on that. I doubt that there is going to be significant prejudice to the plaintiffs when the defendants at this late stage are allowed to give evidence as to Vanuatu legislation relating to the sale and purchase of land. That part of Mr Herd’s evidence may come in: paragraphs 6-11 of his statement of evidence.

[49]	Paragraphs 12-25 of Mr Herd’s evidence relate to the conveyancing requirements for transferring land under the Land Leases Act. His evidence notes that conveyancing steps to achieve a valid transfer involve obtaining the consent of indigenous owners. That part of his evidence goes to the context of the agreement, but more by way of background rather than anything determinative of any significant issue. I consider that there is little disadvantage in that part of his evidence coming in. Again, I accept Mr Maassen’s submission that if I were to rule against that evidence coming in late the defendants would nevertheless cross-examine the plaintiffs’ expert on the point. I see little prejudice to the plaintiffs in having advance knowledge of the matters to be raised in cross-examination.

Miscellaneous matters

[50]	Mr Maassen said that at trial the defendants will object to the variation of the deed being admitted as evidence on the ground of non-compliance with the Stamp Duties Act 2006, s 19. As I understand Mr Maassen, that provision provides that in Vanuatu deeds cannot be admitted in evidence if the stamp duty has not been paid on them. This is a New Zealand deed. While the contract is governed by Vanuatu law, and substantive issues will be decided under Vanuatu law, in conflicts of laws cases New Zealand courts apply New Zealand rules of procedure. The admissibility of the variation deed will be decided under New Zealand law, not under Vanuatu law. Accordingly, while I signal the issue, Mr Maassen may wish to note that he may face difficulties in pursuing his objection at trial.

[51]	Mr Maassen has also signalled that there will be objection to hearsay evidence. He indicates that the hearsay objection is not only to the evidence of Mr Haines, but also to the evidence of a Mr Barnes. The Haines objection concerns a conversation with a Mr Toka, a valuer. The objection to Mr Barnes concerns the status of a Ms Olul, who is a bank valuer. He is raising these matters now, so as to avoid any allegation by the plaintiffs at trial that they have been ambushed.

[52]	The parties have helpfully confirmed that the existence of Lot 58 Pulekula is no longer in issue. Mr Gedye advises that the plaintiffs accept that Lot 58 exists, and that a caution (caveat) was lodged against the title to protect the plaintiffs’ interests by way of mortgage.

The discovery application

[53]	My rulings on the application to amend the pleadings have taken away any ground for pursuing the application for further discovery. It is therefore unnecessary to make any rulings as to discovery.

[54]	Counsel also noted that there are matters to be agreed as to further documents to go in the bundle of documents for the hearing. That does not require the court’s

supervision. I have confidence in the parties that they will be able to resolve that matter themselves.

Rights of review

[55]	As with my decision on choice of forum, the remedy for challenging my decision is to seek a review rather than to appeal to the Court of Appeal.9 If either party wishes to challenge this decision, I suggest that they file an application promptly with a view to the trial Judge considering it.

Orders

[56]	Accordingly, I make the following orders:

(a)	Mr Herd’s application for leave to amend the statement of defence is dismissed, save that leave is granted add a defence of failure to mitigate.

(b)	Leave is granted to Mr Herd to serve a statement of evidence out of time in so far as it addresses formal requirements for the sale and purchase of land in Vanuatu and conveyancing requirements and practice for the transfer of interests in land under the Land Leases Act, but the other parts of Mr Herd’s statement of evidence of 1 February 2019 are not to be read.

(c)	The application for leave to apply for particular discovery after the close of pleadings date is dismissed.

[57]	I invite submissions on costs.

……………………………….
Associate Judge R M Bell

9	See Senior Courts Act 2016, sch 5, cl 11.