ORION NEW ZEALAND & ORS v CLAPPERTON [2005] NZCA 57 (21 March 2005)

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ORION NEW ZEALAND & ORS v CLAPPERTON [2005] NZCA 57 (21 March 2005)

Last Updated: 20 April 2005

IN THE COURT OF APPEAL OF NEW ZEALAND

CA260/04

BETWEEN ORION NEW ZEALAND LIMITED
Applicant

AND RAYMOND GEORGE CLAPPERTON
Respondent

Hearing: 14 March 2005

Court: McGrath, Hammond and O'Regan JJ

Appearances: L J Taylor for Applicant
T G A Manktelow for Respondent

Judgment: 21 March 2005

JUDGMENT OF THE COURT

A The application for special leave to appeal is declined.

B The respondent is entitled to costs of $3,000 plus reasonable disbursements (including the travel and accommodation costs of counsel, if any) to be agreed by counsel, or in the absence of agreement, to be fixed by the Registrar.

REASONS

(Given by O’Regan J)

Introduction

[1]

The applicant, Orion New Zealand Limited (Orion) seeks special leave to appeal against a judgment of France J (HCPN CIV-2003-454-100 17 September 2004). That decision related to an application to review a decision of Associate Judge Gendall dated 25 March 2004. Orion sought leave from the High Court under s 26P(1AA) of the Judicature Act 1908 to appeal from the decision of France J to this Court, but leave was declined by MacKenzie J in a decision dated 25 November 2004. Special leave is therefore sought from this Court under s 26P(1AA).

Background

[2]	The respondent, Mr Clapperton, commenced proceedings against Orion seeking substantial damages. Mr Clapperton claims that he was a director and principal shareholder of Stock Food Distributors Limited (the Company) and that, in 1993, he entered into a contract with the predecessor company of Orion, Progas Systems Limited, for the supply and installation of a gas burner in the Company’s processing plant. Orion has taken over the liabilities of Progas. The commissioning of the burner was completed on 29 April 1995. An explosion occurred on 5 November 1995, which Mr Clapperton claims was caused by Progas’s failure to install the burner correctly. He claims damages for breach of both express terms and implied terms of the contract between him and Progas, breach of an implied warranty of fitness and negligence.
[3]	The negligence cause of action was struck out by France J, and there is no appeal from that decision.
[4]	Mr Clapperton claims damages as follows:

(a) He claims $276,000 for lost wages (he says the Company was unable to pay him an agreed salary of $4,000 per month over the six years from the date of the explosion until the date of the claim);
(b) He claims damages of $5,054,376, being a loss of profits for the Company which have correspondingly reduced the dividends which Mr Clapperton would have received or the value of his shares in the Company.

[5]	Orion applied in the High Court to strike out Mr Clapperton’s claim. It argued that:

(a) Mr Clapperton’s claim was statute barred, because he commenced proceedings on 2 November 2001, which was more than six years after 29 April 1995, when the commissioning of the burner was completed. Orion said that the cause of action arose when the breach occurred, and that this must have been on 29 April 1995 because the commissioning of the burner was completed at that date and no further action by Progas was taken after that date;
(b) The damages claimed by Mr Clapperton were in fact losses suffered by the Company, not by him, and were not therefore recoverable by him.

[6]

Associate Judge Gendall declined to strike out the proceedings. He accepted that the cause of action for breach of contract accrues when the breach occurs, not when the damage is actually suffered, but did not accept that, as pleaded, the claim was limited to a claim of a breach which must have occurred on or before 29 April 1995. He pointed to provisions in the statement of claim which referred to breaches on certain dates "and thereafter" and said that detailed evidence would need to be tested as to whether and when particular contractual obligations may arguably have been breached. In particular he noted that the contract was not a simple sale of goods contract, but provided for installation, commissioning and certification and that these extended obligations were complex matters. He concluded therefore that Orion had been unable to establish on the basis of the material before the Court that the causes of action were statute barred. Accordingly it was not appropriate to strike them out.

[7]

The Associate Judge also rejected Orion’s argument that the statement of claim contained no reasonable cause of action because the loss which was claimed by Mr Clapperton was the loss of the Company. Orion had argued that only the Company could claim for the loss which the Company had incurred: Foss v Harbottle [1843] EngR 478; [1843] 2 Hare 461. However the Associate Judge noted that there were exceptions to the rule in Foss v Harbottle, particularly where a shareholder suffers a loss which is separate from that suffered by the Company or where a separate loss is caused by the breach of a duty which is independently owed personally to the shareholder: Christensen v Scott [1996] 1 NZLR 273. The Associate Judge said that the present case could fit within the exception outlined in Christensen v Scott, noting that the contract in question was a contract between Orion and Mr Clapperton, not between Orion and the Company. He said these were complex issues and that he could not rule out the possibility that Mr Clapperton could succeed in establishing that he is entitled to claim losses on the basis pleaded.

Decision of France J

[8]

France J upheld the decision of Associate Judge Gendall on the two matters which remain an issue. She did, however, strike out the negligence cause of action on the basis that it was statute barred. In essence, France J concluded that the Associate Judge was entitled to reach the conclusions that he did, for essentially the same reasons as those given by the Associate Judge.

Decision of MacKenzie J

[9]

MacKenzie J said that the points of law which had been raised by Orion (the points referred to at [5] above) were not points which had actually been decided by either the Associate Judge or France J. Rather, both had decided that it was necessary for the Court to have before it detailed evidence before it could reach a concluded view on either issue. He noted that the test to be applied in considering applications for leave to appeal by way of a second appeal to this Court was set out in Waller v Hider [1998] 1 NZLR 412. That case said that the appeal needed to raise a question of law or fact which was capable of bona fide and serious argument in a case involving some interest, public or private, of sufficient importance to outweigh the cost and delay of a further appeal.

[10]

In the light of that test, MacKenzie J concluded that there was no question of law on which leave to appeal should be given. Since neither of the points of law raised by Orion had, in fact, been determined, the only question which was at issue was whether the points of law which had been raised before the Associate Judge and the High Court Judge could be determined without further evidence, and that was not, in itself, a sufficient question of law to justify an appeal to this Court.

Submissions

[11]	On behalf of Orion, Mr Taylor accepted that the test applied by MacKenzie J, based on the decision of this Court in Waller v Hider, was correct. He said that both of the issues which had been before the High Court were capable of bona fide and serious argument and were perfectly capable of being resolved in the context of a strike out application. He said it was no answer to say that the issues required further evidence.
[12]	In relation to the allegation that the claim is statute barred, he said that it was accepted that no action had been taken by Orion after 29 April 1995. He said any claim for breach of contract causing loss must have arisen on or before that date, and there was no pleaded basis which would suggest otherwise. Accordingly, since the initial proceeding were issued more than six months after 29 April 1995, they were statute barred and should be struck out. He said the sole purpose of the Limitation Act 1950 was to prevent stale litigation being pursued.
[13]	Mr Taylor also argued that the Foss v Harbottle point could be decided without further evidence. He argued that the decision of this Court in Christensen v Scott needed to be reconsidered in the light of the decision of the House of Lords in Johnson v Gore Wood & Co [2002] AC 1. He said that even if Christensen v Scott remains good law, it was not applicable in the facts as pleaded in this case. He said the only duty possibly owed to Mr Clapperton is the contractual duty arising from the contract between Mr Clapperton and Progas for the supply and installation of the gas burner. He said there was no other duty pleaded or postulated which would bring the claim within the Christensen v Scott exception.
[14]	Mr Taylor said there would be no undue delay in having this Court resolve the strike out application on appeal. He said if this were done it would prevent any further cost and wasted resources which would be consumed if the matter went to trial.
[15]	On behalf of Mr Clapperton, Mr Manktelow supported the decisions of Associate Judge Gendall, France J and MacKenzie J.

Discussion

[16]

We accept Mr Taylor’s submission that both of the issues which would fall for consideration if leave to appeal were granted are important issues. But both of the judicial officers who have considered the issues so far have determined that it is not possible to resolve them in the absence of evidence. It is significant that the approach taken by France J on the issues which are before us was very similar to that of Associate Judge Gendall. We agree with MacKenzie J that the real complaint raised by Orion is not that the Associate Judge and the Judge were wrong in their analysis of the legal issues involved, but that they were wrong to determine that the issues could not be decided at the strike out stage. Accordingly, the real criticism of the High Court decisions made by Mr Taylor is that both judicial officers were wrong to determine that further evidence was necessary. That issue is not, of itself, an issue warranting further consideration in this Court.

[17]

In considering whether to allow a second appeal at an interlocutory stage in the proceedings, it is relevant that rulings made in the High Court on important legal points will be subject to the possibility of further appeal to this Court. The declining of leave does not therefore foreclose consideration of the substantive issues by this Court.

Result

[18]	For essentially the same reasons as those given by MacKenzie J, we have determined that it is not appropriate to grant special leave in this case. Accordingly Orion’s application is declined.

Costs

[19]	Mr Clapperton is entitled to costs in this Court. We award costs of $3,000 plus reasonable disbursements, (including the travel and accommodation costs of counsel, if any) to be agreed by counsel or, in the absence of agreement, to be fixed by the Registrar.

Solicitors:
Minter Ellison Rudd Watts, Wellington for Applicant
Guy & Toby Manktelow, Palmerston North for Respondent