J D WORTHINGTON v Third [2003] NZCA 62 (26 March 2003)

IN THE COURT OF APPEAL OF NEW ZEALAND

CA83/02

BETWEEN J D WORTHINGTON

Appellant

AND ASB BANK LIMITED

First Respondent

AND L MELLSOP

Second Respondent

AND A QUINN

Third Respondent

Hearing: 12 March 2003

Coram: Tipping J

Salmon J

Doogue J

Appearances: A D Banbrook for Appellant

S C Dench for Respondents

Judgment: 26 March 2003

JUDGMENT OF THE COURT DELIVERED BY SALMON J

[1]

This is an appeal against a judgment of Nicholson J given on 7 December 2001 in which he held that the plaintiff’s claim for damages against the defendants was statute barred and that the proceedings should, therefore, be dismissed.He further held that had he not dismissed the proceedings as statute barred he would have granted the defendant’s alternative application for summary judgment.

Background

[2]	The plaintiff’s claim arises out of the relationship between the first respondent and a family company owned by the appellant and his wife, known as Worthington’s Fruit and Vegetables Limited.The appellant managed that company and he was the company’s primary contact with the bank.The proceedings concern the bank’s conduct and advice in relation to the company’s business and bank accounts.
[3]	The third amended statement of claim alleges that the first respondent was banker to the Worthington company and to the appellant.It alleges that the first respondent and the second and third respondents as officers of the first respondent, gave financial advice and assistance to the appellant and the company regarding the affairs and business of the company.It alleges that the first respondent did not provide competent financial advice and did not efficiently service the banking needs of the plaintiff and the company.It refers to the company as being operated by and for the benefit of the appellant.It alleges that the first respondent acted in ways detrimental to the company, its shareholders and employees including the appellant.Similar allegations are made in respect of the second and third respondents.It is alleged that the actions of the respondents resulted in substantial financial loss to the appellant and the company, and that loss caused to the company resulted in substantial personal loss to the appellant.
[4]	The proceedings were issued on 7 August 2000.Nicholson J held that all the facts necessary to establish the claim were in existence, at the latest, on 1 August 1994, when the sale of the business of the company was settled.It was on that basis that he held that the claim was statute barred.
[5]	As to the defendant’s application for summary judgment, the Judge held that the evidence established that the appellant was acting as agent for the company in his contact with the bank and that the duties of the bank were to the company and not to the appellant personally.He further held that there was no relationship between the bank and the appellant which gave rise to a duty by the bank to him.
[6]	None of these findings are challenged in the appeal.Rather, the appellant raises fresh issues which have not been pleaded.It is now alleged that the respondents owed duties to the appellant as a guarantor of the company’s liability to the bank and as a principal debtor under the terms of the guarantee.No particulars as to the nature of duties alleged to exist arising from this relationship have been provided.The only provision in the statement of claim that counsel were able to point to as referring in any way to these different relationships was in one of the particulars of the allegation that the first respondent did not sufficiently serve the banking needs of the appellant and the company.The allegation was that the third respondent advised the appellant that the appellant had unlimited guarantees to the first respondent, when in fact those guarantees were limited to an amount of $28,000.There is no indication of how that advice could have resulted in any loss to either the appellant or the company.
[7]	The question that now arises is whether reliance on duties owed to a guarantor or to a principal debtor constitutes a new cause of action.If it does, then the appellant will not be allowed to amend the proceedings by adding such a cause of action.Rule 187 of the High Court Rules allows an amended pleading to introduce a fresh cause of action which is not statute barred.Clearly any fresh cause of action must be statute barred.The very latest that the appellant suggests that its claim could arise is November 1994.
[8]	The claim as now proposed, will have some significant differences from that pleaded in the third amended statement of claim.The guarantor’s liability is limited to $23,000 (not $28,000 as pleaded in the statement of claim).The appellant paid that amount to the bank on 2 November 1994.The amount claimed in the third amended statement of claim is $500,000.The duties pleaded in the amended statement of claim have been held by Nicholson J to be duties owed to the company.That finding is not challenged.
[9]	Mr Banbrook, for the appellant, submitted that the duties relied upon in relation to the guarantor and principal debtor claims would be those contained in the existing third amended statement of claim.One can understand that that might be the case when pleading duties to a principal debtor, but it is more difficult to see how that can be so in relation to duties owed to a guarantor.That is quite obviously a different relationship to that pleaded in the statement of claim.
[10]	However, the real problem faced by the appellant is that no application was made to the Judge in the High Court for an amendment of the statement of claim, or even as is sometimes done, for an adjournment to enable a proposed amendment to be submitted.
[11]	The grounds of appeal complain that Nicholson J did not consider the question of a claim by a guarantor or by a principal debtor.That is not surprising given the fact that the claim was not presented to him on that basis.There could be some grounds for complaint if the statement of claim raised the possibility of a claim arising under those heads.An analysis of it shows that there is nothing that would suggest that possibility.
[12]	The appellant is, therefore, unable to point to any respect in which the judgment in the Court below is defective.There is, therefore, no basis upon which it may be overturned in this Court.Even if we were persuaded (and we are not), that it would be appropriate to give an opportunity for the claim to be amended in the manner sought by the appellant, it is not possible now for that to be done because there is no claim, it having been struck out in circumstances where there are no grounds for revisiting that decision.
[13]	We have noted that even if we had had the power to do so, we would not have allowed this appeal.This is because in the case of the proposed claim as guarantor we are satisfied that that would give rise to a new cause of action which is obviously statute barred. It is a new cause of action because it relies upon a different relationship to that pleaded so far.Liability arises at a different time and is for a different amount.
[14]	As for the claim based on the relationship of principal debtor, it seems to us that that must either be pleaded in the same way as the guarantor claim, in which case it too would constitute a fresh cause of action for the same reasons as in the case of the guarantor claim.
[15]	Alternatively, if the claim as principal debtor is coincident with the shareholder claim as presently pleaded, it must be statute barred for the same reason as that claim.
[16]	The appeal, therefore, is dismissed.The respondents seek costs.Because the appellant is legally aided the amount that he is liable to pay under a costs order must not exceed the amount of the contribution he has made other than in exceptional circumstances.We do not find exceptional circumstances to exist in this case.We, therefore, order that the appellant pay to the respondent costs equivalent to the amount of the contribution that has been made, if any, under s15(1) of the Legal Services Act 2000.Had the appellant not been legally aided we would have ordered that he pay the sum of $3,000 together with disbursements including, the reasonable travel and accommodation expenses of one counsel to be fixed, if necessary by the Registrar.

Solicitors:

John Holmes, Auckland for Appellant

Jones Young, Auckland for Respondents