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Court of Appeal of New Zealand |
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Court of Appeal of New ZealandLast Updated: 31 August 2011
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CA789/2010
[2011] NZCA 406 |
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BETWEEN RAYMOND MILLER HUNT
Appellant |
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AND NEW PLYMOUTH DISTRICT COUNCIL
Respondent |
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Hearing: 6 July 2011
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Court: O'Regan P, Chambers and Randerson JJ
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Counsel: B P Henry and K M Towt for Appellant
D J Goddard QC, J Shackleton and N M Blomfield for Respondent |
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Judgment: 23 August 2011 at 3 p.m.
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JUDGMENT OF THE COURT
___________________________________________________________________
REASONS OF THE COURT
(Given by Randerson J)
Table of Contents
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Para No
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Introduction
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Issues
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Procedural history
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Background facts
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The pleadings
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Original statement of claim – 27 July 2006
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The amended statement of claim of 21 September 2009
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Draft second amended statement of claim
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The judgment under appeal
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Could Mr Hunt have reasonably relied on the letters of January 1994 and
February 1997?
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When did the claimed losses arise?
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Was the Judge right to find that no recoverable loss had been pleaded in
any event?
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Conclusions
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Introduction
[1] At relevant times, the respondent Council was the successor in title to certain leasehold land at Waitara comprising in excess of 700 separate properties. The land was leased mainly for residential purposes but some for commercial and industrial purposes. For many years leaseholders had sought the opportunity to freehold their properties. One of those leaseholders is the appellant, Mr Hunt.
[2] In 1989, the Council adopted a policy of permitting the leaseholders to purchase the freehold of their properties. However, for reasons we detail below, it became necessary to secure the passage of a Bill through Parliament in order to achieve the Council’s purpose. As well, difficulties arose in relation to the settlement of Treaty claims by Te Atiawa.
[3] Efforts to implement the Council’s freeholding policy continued over a substantial period, with the Council informing leaseholders of progress from time to time. Critically for present purposes, the Council sent circular letters to the leaseholders in January 1994 and February 1997. The essence of Mr Hunt’s claim as now pleaded is that, in those letters, the Council negligently and inaccurately over-stated the prospects of leaseholders being able to freehold their properties.
[4] Mr Hunt says he relied on the accuracy of the Council’s letters, reasonably believing there was a real chance of being able to purchase the freehold title to his property. In consequence, Mr Hunt says he spent money acquiring his brother’s half share in the leasehold interest and also incurred further expenditure when renovating the house on the property.
[5] On 12 August 2003, the Council made a preliminary decision to facilitate the return of the Waitara land to the Crown for use in a settlement with Te Atiawa. This effectively signalled the end of the Council’s efforts to implements its freeholding policy. The Council’s decision was confirmed by a resolution passed on 31 March 2004. The Bill was never passed and was formally withdrawn on 21 April 2004.
[6] Mr Hunt, along with a number of other leaseholders, issued claims for damages against the Council in 2006. Although initially pleading three causes of action, his claim is now confined to one alleging negligent misstatement based on the letters of January 1994 and February 1997.
[7] The Council applied to the High Court to strike out Mr Hunt’s claim and also sought summary judgment against him. The grounds relied upon by the Council were:
- (a) It did not owe any duty of care to Mr Hunt.
- (b) Mr Hunt could not reasonably have relied upon the Council’s letters.
- (c) Mr Hunt had not pleaded any recoverable losses.
- (d) His claim was barred by the Limitation Act 1950.
[8] Mallon J struck out Mr Hunt’s amended statement of claim.[1] She did so because Mr Hunt’s claim did not disclose a cause of action since it did not plead loss of a kind that was recoverable for negligent misstatement. The Judge also found there were other difficulties with Mr Hunt’s claim but did not consider it necessary to determine the other issues raised by the Council.
[9] Mr Hunt appealed against Mallon J’s judgment on the ground that the High Court was wrong to find that he did not have an arguable cause of action. Mr Goddard QC for the Council supports the decision in the High Court on the ground that no recoverable loss was pleaded but also supports it on three further grounds:
- (a) The Council did not owe Mr Hunt the alleged duty of care.
- (b) It was not reasonable for Mr Hunt to rely on the Council’s statements.
- (c) The amended statement of claim is time-barred.
[10] The Judge did not order summary judgment in favour of the Council and there is no cross-appeal in that respect.
Issues
[11] On the view we have taken in respect of this appeal, it is unnecessary for us to determine whether the Council owed a duty of care to Mr Hunt. It is sufficient if we deal with the following issues:
- (a) Could Mr Hunt have reasonably relied on the reports of January 1994 and February 1997?
- (b) If so, when did the claimed losses arise?
- (c) Is Mr Hunt’s claim statute-barred?
- (d) Was the Judge right to find that no recoverable losses were pleaded in any event?
Procedural history
[12] There has already been substantial litigation over the Waitara leases. In an earlier proceeding, the Waitara Leaseholders’ Association Inc sought a declaration that the Council’s resolution of 30 March 2004 was unlawful. The Association succeeded in the High Court[2] but that decision was overturned by the Court of Appeal[3] and an application for leave to appeal to the Supreme Court was dismissed.[4]
[13] In 2006, some 155 claims (including that of Mr Hunt) were filed by Waitara leaseholders against the Council in the New Plymouth District Court. Six claims were discontinued shortly after filing, with the remaining 149 claims then transferred to the High Court. Six of these were selected by the parties as test cases. The Council applied for summary judgment and strike out in respect of those six cases. Cooper J granted summary judgment in favour of the Council. [5]
[14] A further 69 plaintiffs then discontinued their claims against the Council, leaving 74 claims remaining. The plaintiffs in the remaining claims did not accept that Cooper J’s judgment determined the outcome of their separate claims. Mr Hunt filed a substantially amended statement of claim on 21 September 2009. Thereafter the Council applied for summary judgment in respect of the amended claim or, alternatively, for an order striking it out. The remaining plaintiffs have agreed that the decision on the Council’s application in respect of Mr Hunt’s claim will determine the outcome of their proceedings.
Background facts
[15] The facts are generally uncontroversial and both parties were content that we should take them into account in addition to the pleadings.
[16] Since at least 1977, Waitara leaseholders have expressed interest in freeholding their land. In 1989, the Council sent a questionnaire on freeholding policy to leaseholders. In consequence, the Council resolved on 11 December 1989 to adopt a policy of permitting the owners of leasehold property in Waitara to purchase the freehold of those properties. The resolution also called for an investigation to determine the most satisfactory use of the capital the Council would realise if the properties were freeholded.
[17] It soon became apparent that legislation would be required if the freeholding process were to proceed since the land was subject to certain statutory and other trusts which meant that the proceeds from the freeholding process would have to be applied for the same purposes.[6] That presented a difficulty for the Council which wished to be free to apply the funds derived from the sales of endowment lands in a way which would provide the greatest benefit to the Waitara community.
[18] In 1991 the Council resolved to proceed with the action necessary to promote local legislation. The community was advised of this intention and the reasons for it in public notices given in March 1992. The principal object of the Bill was to release the land from the trusts, endowments and restrictions which affected it and to vest the land in the Council in fee simple. The Bill was introduced to Parliament in June 1992 and referred to a select committee for submissions.
[19] In October 1992 a new District Council was elected in the local authority triennial elections. Shortly afterwards, on 3 November 1992, the then Minister of Justice, the Hon Douglas Graham, wrote to the local MP explaining that the Government had a number of concerns about the provisions of the Bill. In particular, attention was drawn to the ongoing negotiations between the Government and Te Atiawa Tribal Council and the prospect that, if the Bill were enacted before a settlement was reached, it could be viewed by a number of significant tribes as a “calculated offence by the Crown to all Maori”. The Minister saw the possibility, however, that those obstacles might be overcome if local Maori concerns over the Bill could be resolved through discussions with the Council. To this end, the Government supported discussions taking place between the Council and Te Atiawa.
[20] During 1993, the Council held discussions with Te Atiawa but no resolution was achieved. On 18 January 1994, the local newspaper reported comments attributed to the Chief Executive of Te Atiawa Tribal Council to the effect that Te Atiawa was prepared to use disruptive tactics if its negotiations with the Council over the land were to fail. The Chief Executive was reported as asserting that there was no doubt that the land belonged to the iwi. Reference was made to the Taranaki Land Wars which it was said had broken out because the land had been taken from the iwi. In response, the Council’s then manager asserted that the land was privately owned by the Council and was not subject to claim under the Treaty of Waitangi Act.
[21] In response, the Council’s Mayor sent a letter to all the leaseholders in these terms:
January 1994
Dear Leaseholder
RE: FREEHOLDING WAITARA LEASES
There is a lot of concern in the community about the Leasehold sections in Waitara. There have recently been several misleading statements reported in the Newspapers. The rights of Waitara citizens are of the utmost importance to Council. We send this letter, because you need to have up-to-date, accurate information, from your Council.
BACKGROUND
In 1992 Council sponsored a Bill (Act of Parliament) to amend the law relating to the way monies from the freeholding of lease land in Waitara could be used. The Te Atiawa Tribal Council made a submission to Parliament on the Bill and raised objections.
The Minister of Justice, The Honourable Douglas Graham, noted that the land was either included in the disputed Waitara purchase or confiscated in 1863 after the land wars. He indicated that he was unhappy about the Bill proceeding until there had been consultation and discussions between the District Council and the Te Atiawa Tribal Council.
Representatives of Council met with the Minister in May last year to clarify some points.
Minister Graham confirmed that:
Our representatives have had several meetings with the Te Atiawa Tribal Council to try and resolve this issue for Leaseholders.
RECENT PROGRESS
After discussions in December 1993 between our representatives and the Te Atiawa Tribal Council, we agreed to a joint approach to the Minister which would bring benefits to the people of Waitara and to Te Atiawa. This approach involves:
THE COUNCIL’S COMMITMENT
Finally, we are willing to assist Te Atiawa to obtain compensation from the Government for lands that were confiscated last century. The Council is committed to resolving this problem. We want harmony in the District.
We wish to protect the rights of the Waitara Leaseholders, the benefits of our ownership of the land and to respect our obligations to the ratepayers of the District.
[22] Despite further correspondence between the Council and the Minister between 1994 and 1995, no resolution was reached. The Government continued to express its opposition to the Bill being enacted before a settlement was reached with Te Atiawa.
[23] In mid-1995, Mr Hunt and his brother inherited from their late mother a leasehold property in Waitara. At the time, Mr Hunt was living in rented accommodation in New Plymouth but had received a copy of the Council’s letter of January 1994 and was aware from publicity generated by the Council in the late 1980’s and early 1990’s of the issues surrounding the freeholding of land at Waitara. In his affidavit Mr Hunt deposes:
As a result of the publicity I perceived an air of excitement within the Waitara community with regards to what I considered to be the New Plymouth District Council’s promise to afford the leaseholders an opportunity to purchase their freehold title.
[24] Although the property inherited from his mother was in a run-down state, Mr Hunt and his partner decided to make an offer to purchase his brother’s half-share in the property. He intended to repair, decorate and landscape the property so that, in due course, he would be in a position to purchase the freehold and then sell the property.
[25] On 10 November 1995, his brother transferred to him his half share in the leasehold estate of the property for $21,000. Thereafter Mr Hunt and his partner moved into the property and spent approximately $60,000 in 1996 and 1997 carrying out repairs and renovations as well as landscaping work.
[26] In the meantime, there was a further triennial local body election in 1995. Then the Waitangi Tribunal issued a preliminary report into the Taranaki claims in June 1996. It did so after hearing evidence over a lengthy period since 1990. Thereafter, on 27 February 1997, the Council’s Mayor wrote to the Waitara leaseholders informing them of the Council’s current position. We set out the letter in full:
27 February 1997
Dear Leaseholder
FREEHOLDING WAITARA LEASES
In January 1994 I wrote to all leaseholders advising on the background to a special Bill (Act of Parliament) known as the New Plymouth District Council (Land Vesting) Bill which was intended to pave the way for Waitara lessees to freehold their sections. I would like to take the opportunity to advise on the current position.
Acknowledging that some properties have changed hands and that the new lessees may not be aware of the contents of my previous letter it may be appropriate to start by giving a brief background.
Following a petition by a number of Waitara leaseholders to freehold their sections, the Council resolved to proceed with an investigation as to the best method of achieving this. After considerable research it was apparent that the course of action that best suited the Council needs and achieved the lessee’s wishes was a Special Bill to Parliament. This was presented to Parliament in 1992. The Te Atiawa Tribal Council made a submission to Parliament on the Bill and raised objections.
The Minister of Justice at the time (and subsequently the Minister in Charge of Treaty of Waitangi negotiations), the Honourable Douglas Graham, noted that the land was either included in the disputed Waitara purchase or confiscated in 1863 after the land wars. He indicated that he was unhappy about the Bill proceeding until there had been consultation and discussions between the District Council and the Te Atiawa Tribal Council. More recently the Minster requested that the Council postpone making a decision on selling the leasehold properties until after the Treaty claims had been resolved.
The Council is concerned at the slow progress being made in resolving the situation. All parties are in agreement that it is the Government and not the Council who is responsible for obligations under the Treaty of Waitangi; and the Government agrees that the Waitara land is not Crown land but that it is privately owned by the New Plymouth District Council.
The Council’s commitment to the Waitara leaseholders has not changed. The Council still considers the Waitara land to be freehold land and therefore not subject to any Treaty of Waitangi Claim; and the Council still recognises that the individual rights of the people of Waitara occupying and leasing land in the disputed area should be preserved absolutely.
Unfortunately, until either an agreement can be reached between the Council and Iwi negotiators, or the Iwi and the Government reach a settlement on Treaty of Waitangi Claims, the Council is faced with somewhat of a stalemate in the freeholding of these leases. Just as the Council looks to protect the interest of the lessees in this situation, it also wishes to maintain a good relationship with Iwi that fall within its boundaries. Further, without the support of the Government, there is little chance of the Bill proceeding through Parliament.
In summary, the Council is still committed to the Bill which if enacted will enable the freeholding of these lessees. It is also well aware of the complexities of the Taranaki Treaty of Waitangi Claims and the possible delays because of the depth and nature of the issues involved. The final outcome is possibly outside the Council’s control however it will continue to try to influence a timely decision.
[27] Thereafter, no substantive progress was made with the freeholding proposal. Further triennial local government elections were held in October 1998 and in August 2002 the Council resolved to put the Bill on hold. By this time, the Local Government Act 2002 was in force and public consultation processes occurred.
[28] On 12 August 2003, the Council made a preliminary decision to facilitate the return of the Waitara leasehold land to the Crown for use in the Te Atiawa settlement. This marked the end of the Council’s proposals to freehold the land. The Council’s preliminary decision was formalised by a resolution on 30 March 2004. Shortly afterwards, the Chief Executive of the Council wrote to the Speaker requesting that the Bill be withdrawn.
[29] To complete this short history, Mr Hunt filed his proceeding on 27 July 2006 and amended his statement of claim on 21 September 2009.
The pleadings
[30] The manner in which Mr Hunt formulated his pleading is important to the resolution of this appeal. It is evident that the pleading has changed materially since it was first filed. Somewhat surprisingly, Mr Hunt’s solicitors made no attempt to amend the statement of claim following Mallon J’s criticism of it in October last year until the day of the hearing before us. Only then did Mr Henry hand up a further draft amended statement of claim on Mr Hunt’s behalf. We deal with each of Mr Hunt’s pleadings in turn.
Original statement of claim – 27 July 2006
[31] The original statement of claim pleaded three causes of action:
- (a) Breach of the Fair Trading Act 1996;
- (b) Promissory estoppel; and
- (c) Negligent misstatement.
[32] Reliance was placed on the Council’s resolution of December 1989 and the two letters by the Council to leaseholders of January 1994 and February 1997. The claims under the Fair Trading Act and promissory estoppel were firmly based on an allegation that the Council had:
...promised [Mr Hunt] that the latter would be given the right or option to freehold the land and/or [the Council] created a reasonable belief in [Mr Hunt] he would given the right or option to freehold the land.
[33] The promise or creation of a reasonable belief was said to be misleading or deceptive because, amongst other things, it did not have the qualification that it was subject to some future Council reversing the freeholding policy and because it implied that the Council would not change its mind on that policy.
[34] It was further pleaded that when the Council reversed its freeholding policy on 12 August 2003, Mr Hunt had suffered loss arising from his reliance on the promise or reasonable belief that a right or option to freehold the land would be given. In essence, Mr Hunt asserted that his leasehold interest in the land did not increase in value to the same extent as equivalent freehold properties in Waitara since 12 August 2003. He also said he had lost the opportunity to freehold the land and had thereby been deprived of the increase in value in his land that had occurred since 12 August 2003 by which time he said freeholding ought to have been allowed. Mr Hunt also claimed that he would not have purchased his brother’s interest in the leasehold estate nor spent the money on improvements if the promise had not been made.
[35] The cause of action based on promissory estoppel was formulated in the same way as the claim under the Fair Trading Act. The negligent misstatement cause of action simply alleged that the Council owed a duty of care to Mr Hunt and that it had breached that duty of care by making the promise or creating the reasonable belief in the same way as the other two causes of action, and by failing to qualify its statements by reference to the potential for future changes in freeholding policy.
[36] Apart from the figure of $60,000 for improvements, no other losses were specified. No specific sums were sought. Instead, Mr Hunt sought an inquiry into the loss and damage he had suffered and judgment for any loss or damage found.
The amended statement of claim of 21 September 2009
[37] Mr Hunt’s amended statement of claim abandoned any suggestion of a promise made to him to freehold the land and relied on a single cause of action for negligent misstatement. This cause of action also relied on the letters of January 1994 and February 1997 but alleged a quite different duty of care owed by the Council to leaseholders to “accurately represent the likelihood of the Council being able to freehold the leasehold land”.
[38] The statement of claim then gave particulars of the respects in which the statements made by the Council in its reports were said to be inaccurate. In essence, it was asserted that the Council painted an over-optimistic picture of the prospects of the freeholding policy being implemented. Reliance was placed on the communications the Council had received from the Government. It was said that the Council had understated the strength of Government opposition to the passage of the Bill and had also misstated the position of Te Atiawa. In reality, it was said, there was little or no possibility that freeholding would occur.
[39] The amended statement of claim asserted that Mr Hunt believed he had a “real chance” of purchasing the freehold title and made decisions which he would not have made if he had received accurate reports as to the chance of his obtaining the freehold title. In consequence, Mr Hunt said he had “suffered damage due to the loss of value of his leasehold land” and, in addition, had suffered the loss of $60,000 for the renovations. Mr Hunt sought an inquiry into the loss of value in the land and damages of $60,000.
Draft second amended statement of claim
[40] As already noted, a draft second amended statement of claim was produced at the hearing of the appeal. It too is based solely on negligent misstatement. The allegations of breach of a duty of care said to exist on the part of the Council are the same as in the first amended statement of claim but the basis for Mr Hunt’s alleged losses is different, apparently in response to the finding by Mallon J that the first amended statement of claim did not plead recoverable losses.
[41] In essence, the allegation in the draft amended statement of claim is that the Council’s report of January 1994 falsely raised expectations in the community about the prospects of successfully freeholding the Waitara properties. This false expectation was “priced into the market”. Had the true position been known, Mr Hunt would not have paid the amount he did to purchase his brother’s half share in the leasehold estate and would not have spent the $60,000 on renovations.
[42] The particulars pleaded at paragraph 25 are:[7]
25.1 The defendants letter to the leaseholders dated January 1994 wrongly inflated the market price for leaseholding properties in Waitara by creating and fostering a public perception that the owners of Waitara Leasehold titles would be offered the opportunity to freehold the land.
25.2 The plaintiff paid $25,000 on the basis the market price was $50,000 for the property. Had the truth been known the market price would not have exceeded $30,000 making the half share worth less than $15,000.
25.3 The plaintiff undertook work on the property to a cost of $60,000 which he would not have expended had he known the true situation in respect of the freeholding of the leasehold property he owned.
[43] The draft amended statement of claim goes on to assert that the plaintiff has suffered loss of $70,000. Mr Hunt seeks relief by way of an inquiry as to the loss of value he has suffered and, in the alternative, damages for the sum of $70,000.
The judgment under appeal
[44] Mallon J first carefully canvassed the opposing arguments as to whether the Council owed a duty of care to Mr Hunt as he asserted. She agreed with the Council’s submission that it could not have foreseen that leaseholders would make decisions on the basis that freeholding would definitely occur. She noted that Mr Hunt had accepted this by including a representation that there was a real chance of freeholding which created a reasonable belief that he would be able to freehold.
[45] The Judge noted, however, that this chance was dependent partly on matters outside the control of the Council or the leaseholders. In those circumstances, she considered it would not be reasonable for Mr Hunt to have made financial decisions on the basis that the Council was assuming responsibility for financial loss suffered by him if freeholding did not occur. Rather, because there was no certainty of freeholding, she considered Mr Hunt should be taken as assuming the risk if it did not occur.[8]
[46] Mallon J went on to discuss a submission by the Council that imposing a duty of care would be inconsistent with the scheme of the Local Government Act 2002 because it would hinder local authorities from making decisions in accordance with the current interests of its relevant communities. That could occur if the Council considered it could not alter an earlier policy decision out of concern about a possible damages claim. The Judge considered this point would “probably be decisive” against there being any duty of care if the effect of the duty alleged was to hold the Council to a policy decision communicated to a class of its ratepayers.[9]
[47] While noting that the case had been put differently in the first amended statement of claim, the Judge concluded:
[40] Overall my assessment at this stage, on the evidence before me and the submissions I have received, is that a duty of care is unlikely to be established. That is because the factors that point against a duty of care are stronger than those that point in favour of a duty of care. I am particularly doubtful that it would be just and reasonable to impose a duty of care on the Council in respect of financial loss suffered by a leaseholder who has made decisions on the basis of a representation as to a “chance” of freeholding, which by definition means that there was never any certainty that freeholding would occur.
[48] In the end, however, the Judge did not find it necessary to reach a final conclusion about the existence of a duty of care given her conclusion that no cause of action was disclosed because there was no pleading of a loss recoverable for a claim for negligent misstatement.
[49] The Judge commenced her consideration of the loss issue by differentiating between expectation losses and compensatory damages. The original statement of claim had essentially been for expectation losses, being the loss in value of the land because the Council’s freeholding policy was reversed. Noting that the amended statement of claim relied on alleged inaccuracies in the Council’s reports, the Judge noted that compensatory damages were intended to put Mr Hunt in the position he would have been in if the Council’s reports had been accurately stated.[10]
[50] The Judge agreed with the Council’s submission that the expenditure which Mr Hunt had incurred in purchasing the half share in the leasehold estate and carrying out the renovation would not necessarily result in a loss. The property would have a value which might or might not be worth more than the expenditure incurred. There was simply no pleading or supporting evidence of any such loss resulting from that expenditure. That remains the position even now.
[51] As to a more general loss of value, Mallon J noted a submission made on behalf of Mr Hunt that he had a property which had a market value at a level which factored in the prospects of freeholding. Counsel asserted that, after August 2003, the market value had dropped (pointing to some general evidence on this). Mr Hunt’s counsel had submitted that Mr Hunt had suffered loss because he could not sell the property for the amount he understood to be the property’s value when he purchased the half-share and carried out the improvements.
[52] After reviewing the authorities and distinguishing the claim from the kind of economic loss suffered in Invercargill City Council v Hamlin,[11] the Judge concluded:
[53] In the present case the wrong was in stating that there was a prospect of freeholding when there was not. If the wrong had not occurred then the property would have had the value that it now has. It does not matter that Mr Hunt says that he would not have purchased the house at all or carried out the work. Mr Hunt could only recover if he paid more for the property than he would have if the negligence had not occurred, if the improvements are worth less than he spent on them because the prospect of freeholding has gone or (possibly) if he can show that he would not have spent the money at all had the correct information been supplied and that he is now worse off as a result. Otherwise he is seeking to obtain his expectation losses – that is what he thought the property would be worth if the prospects of freeholding were as the Council had stated them to be in January 1994 and February 1997 (to the extent, if any, that there was any expenditure in reliance on the February 1997 letter).
[53] The Judge discussed finally the Council’s submission that Mr Hunt’s claim was out of time under the Limitation Act 1950. She distinguished Hamlin (which held that the cause of action in a faulty foundations case arose when the damage was reasonably discoverable) and noted that in Murray v Morel & Co Ltd,[12] the Supreme Court held there was no general principle that a cause of action accrued for limitation purposes only when the damage was reasonably discoverable by the plaintiff.
[54] The Judge concluded:
[68] ... The loss here was in paying too much for the half share of the property or the improvements (or in some other way being worse off because of the expenditure), because the expenditure was made on the basis of the misstatement about the freeholding prospects. That loss occurred at the time the expenditure was made on the basis of the misstatement about the freeholding prospects. That loss occurred at the time the expenditure was made and was not dependent on any contingency. As discussed above, it differs from Hamlin because the “wrong” there was in not getting a house with proper foundations (and so the plaintiff was entitled to a house with proper foundations) whereas here Mr Hunt was being told something which was inaccurate (and so he was entitled to be put in the position he would have been if there had been no inaccuracy – ie, to have incurred less expenditure in 1996/1997).
[55] The Judge considered that if the claim were to be amended to plead loss of a recoverable kind, the claim was likely to be statute-barred. However, she did not strike out the claim or grant summary judgment to the Council on that basis, given her firm conclusion that the strike-out was justified on the basis that no recoverable loss was pleaded.
Could Mr Hunt have reasonably relied on the letters of January 1994 and February 1997?
[56] The basis of Mr Hunt’s claim as formulated in the draft amended statement of claim is that the letters of January 1994 and February 1997 led him to believe that he had a real chance of purchasing the freehold title to his property and that he would not have done so if the letters had been accurate.
[57] Mr Goddard QC accepted on behalf of the Council, solely for the purposes of argument, that it was arguable that the 1994 letter conveyed a more optimistic picture of the prospects of the Bill being enacted than was justified and that it was arguable the Council did not use reasonable care in describing the prospects of success of the Bill. While making those concessions (solely for the purposes of this appeal), Mr Goddard strongly submitted that the Council did not owe Mr Hunt any duty of care alleged.
[58] Mr Henry accepted he could not rely on the February 1997 report as being causative of Mr Hunt’s losses. Rather, the focus for present purposes must be on the report of January 1994.
[59] We have concluded it was not reasonable for Mr Hunt to rely on the Council’s letter of January 1994 in incurring the expenditure on the property he asserts in the belief he had a real chance of being able to freehold the property in due course.
[60] It is first necessary to consider the context in which the letter was sent. The Waitara and New Plymouth communities at large had been informed about the Council’s proposals to freehold the leasehold properties at Waitara. Those communities had also been informed about the need to obtain the passage of a Bill through Parliament before freeholding could occur. The reasons for the Bill were also made public. It was necessary to ensure that the proceeds received by the Council from the freeholding of the properties could be applied for the general benefit of the community and would not be tied to the terms of the statutory trusts and endowments affecting the land. Any reasonable member of the community would have appreciated that the securing of the Bill would involve a political process with no certainty about when, or if, the Bill would be passed.
[61] The community was also aware that Te Atiawa had made claims in the Waitangi Tribunal in relation to land in the Taranaki District, including the land subject to the Waitara leases. The comments published in local newspapers by the Chief Executive of Te Atiawa Tribal Council shortly before the Council’s letter of January 1994 conveyed in unmistakeable terms that Te Atiawa were asserting claims to ownership of the Waitara leasehold land, despite the Council’s advice that it was not Crown land subject to the Treaty of Waitangi Act.
[62] It was also made clear by the Chief Executive’s published comments that Te Atiawa were strongly critical of the delays in their negotiations with the Council. Matters had reached the point where it was said Te Atiawa were prepared to use “disruptive tactics” if progress was not made. These remarks could hardly have given confidence to members of the Waitara community or to leaseholders in particular that the prospects of making progress in implementing the freeholding policy were good. To the contrary, the strong statements by Te Atiawa were a clear indication that the Council had serious and long-standing difficulties to overcome if the policy were to be implemented.
[63] The Council’s January 1994 letter was sent against the immediate backdrop of the published comments on behalf of Te Atiawa. It was, we accept, intended to present an accurate picture of the Council’s progress towards implementing its freeholding policy. But, viewed objectively, the letter could not reasonably have been relied on by Mr Hunt in the way he asserts.
[64] The letter reiterates the need for the Bill to be progressed through Parliament. It makes it clear that Te Atiawa had made a submission to Parliament objecting to the Bill and that the Minister was “unhappy” about the Bill proceeding until there had been consultation and discussions between the Council and Te Atiawa. There had been meetings and discussions between the Council and Te Atiawa and a joint approach to the Minister had been agreed upon. While one element of this approach involved ensuring leaseholders were invited to freehold their land if they wished to, another element involved negotiating with the Crown over compensation for Te Atiawa for confiscated lands. Consideration was to be given to a proposal to transfer vacant land by the Council to Te Atiawa but on condition that the Crown paid the Council the current market value of the land.
[65] The letter made it clear that the Council was committed to resolving what it considered to be a “problem” and that the Council also had wider concerns to respect its obligations to all ratepayers and to preserve the benefits of its ownership of the land.
[66] While it may be that the reference to a common approach to the Minister was moderately encouraging, those receiving the letter could not reasonably have been under any illusions about the difficulties in the way ahead. The generally protracted and tortuous nature of Treaty claims is notorious in New Zealand. A joint approach with the Council in negotiations with the Government would no doubt assist a resolution but could not be taken as suggesting that resolution was imminent or even likely given the clear statement that the Minister was “unhappy” about the Bill proceeding at that time. Those receiving the letter would know that freeholding was dependent not only on an agreement being reached between Te Atiawa and the Government but that it was also dependent upon the Bill being enacted. Neither Te Atiawa nor the Council had control over those processes. An opportunity to freehold the Waitara leasehold land was being sought but could only become a reality upon the fulfilment of two major contingencies, both of which were uncertain as to outcome.
[67] In our view, the letter could not reasonably create any more than a hope on the part of leaseholders that they would, one day, have the opportunity to freehold their property. It could not reasonably have created an expectation that this would be achieved. The letter did not convey to the reasonable reader that there was a “real chance” of being able to freehold as Mr Hunt alleges. If he incurred expenditure that was justified only by the real prospect of freeholding, there was no reasonable basis for him to do so in reliance on the letter.
When did the claimed losses arise?
[68] Mr Henry submitted that the losses sustained by Mr Hunt crystallised on 12 August 2003 when the Council made its preliminary decision to facilitate the return of the Waitara leasehold land to the Crown for use in the Te Atiawa settlement. At that point, Mr Henry submitted that “the truth came out” and the value of the Waitara leasehold lands dropped. While focussing primarily on the January 1994 letter, Mr Henry submitted that the February 1997 letter could reasonably be interpreted as leaving open the possibility of freeholding.
[69] We disagree. On any objective view, the February 1997 letter clearly conveyed that the prospects of leaseholders being able to freehold their property were virtually at an end. While the letter made it clear that the Council’s commitment to the Waitara leaseholders was unchanged, concern was expressed at the slow progress of negotiations; no progress could be made until either an agreement could be reached between the Council and iwi negotiators or the iwi and the Government reached a settlement on Treaty of Waitangi claims; in the circumstances, the Council was faced with “somewhat of a stalemate” in their freeholding proposals; and, without the support of the Government, there was “little chance” of the Bill proceeding through Parliament. The letter also drew attention to the complexities of the Taranaki Treaty claims; the possibility of delays because of the depth and nature of the issues involved; and the fact that the final outcome might be outside the Council’s control. All of this must have been appreciated by the leaseholders in any event.
[70] Mr Henry submitted the Council should have informed leaseholders at that point that there was no prospect of freeholding being available. Again we disagree. The letter held out virtually no prospect of a favourable outcome. It follows that if Mr Hunt’s latest allegations are correct, namely that the Council’s January 1994 letter had falsely inflated the market price for leasehold properties in Waitara, the February 1997 letter would have resulted in the values of the land reducing once the market appreciated that any realistic prospects of achieving the implementation of the Council’s freeholding policy were at an end.
[71] But if the expenditure incurred in November 1995 in acquiring the brother’s half-share in the property and the cost of the renovations effected in 1996 and 1997 constitutes recoverable loss, then the loss must date from the time the expenditure occurred.
[72] A cause of action accrues when every fact exists which it would be necessary for the plaintiff to prove in order to support his or her right to the judgment of the court.[13] For a claim based in negligence, damage is, of course, an essential part of the cause of action which is complete as soon as any loss occurs. References in the Limitation Act to the accrual of a cause of action are references to the point of time at which everything has happened entitling the plaintiff to the judgment of the court on the cause of action asserted.[14]
[73] If Mr Hunt’s claim is within time, it must relate to losses incurred on or after 27 June 2000 (that is, no later than six years prior to the date he filed his proceeding on 27 June 2006). Since any losses occurred between 1995 and 1997, Mr Hunt’s original claim was filed more than six years after the cause of action accrued. Accordingly, it is out of time under s 4(1)(a) of the Limitation Act 1950.
[74] In view of our conclusion about the original statement of claim, it is unnecessary, in strict terms, to consider Mr Goddard’s alternative submission. He submitted that, even if the original claim was filed within time, the amended statement of claim filed on 21 September 2009 constituted a fresh cause of action and was filed more than six years after 12 August 2003 (which Mr Henry accepts was the latest date upon which Mr Hunt’s cause of action arose). Mr Goddard submitted that the High Court Rules would not permit the amended pleading since it would be statute-barred.[15]
[75] As the Judge noted, when considering whether a pleaded cause of action is new, it is a question of degree whether the pleading is essentially different from that which was pleaded earlier. Amendments which merely alter the particulars without changing the essence of the claim are not sufficient to support the conclusion that the cause of action is new.[16]
[76] The Judge was of the view that the essence of the claim based on negligent misstatement did not change between the original statement of claim and the amended version. However, we consider there is much to be said for Mr Goddard’s argument that there was a material difference between the two statements of claim. The essence of the original statement of claim was that the letters constituted a commitment or promise on the part of the Council that the opportunity to freehold the properties would be granted. It was said that the letters in this respect were misleading and incorrect because the promise was not performed or because there was no express warning or qualification that the policy might not be implemented. The gravamen of the amended statement of claim is that the prospects of freeholding were inaccurately overstated.
[77] Arguably, the differences between the original and the amended claim are material and go beyond mere changes of particulars as the Judge thought. There is room for the view that there is a difference between a claim based on an allegation that a representation amounts to a promise that a policy will be implemented and one which merely holds out a real prospect of its implementation. The concept that the Council created an artificial market is also a new allegation.
[78] However, in the end, it is not necessary to reach a firm conclusion on that issue.
Was the Judge right to find that no recoverable loss had been pleaded in any event?
[79] In case we are wrong about any of the conclusions already reached, it is necessary to consider whether the losses claimed by Mr Hunt are capable of being recovered as a matter of law in a tortious claim based on negligent misstatement. An associated question is whether Mr Hunt has properly pleaded any recoverable losses.
[80] The normal measure of damages in contract cases is expectation loss – the plaintiff is to be put in the position he or she would have been if the promise had been performed. In contrast, in tort cases, the basic measure of damages is that the plaintiff is to be put back into the position that he or she would have been in if the tort had not been committed.[17] In this context, it was necessary for Mr Hunt to plead that he has suffered reliance loss in the sense of being worse off as a result of relying on the alleged misstatements than he would have been if they had not been made or if he had not relied on them.
[81] In this context, it is unnecessary for us to consider the original statement of claim. We will focus on the losses claimed in the amended statement of claim filed on 21 September 2009. Although reference is made in this pleading to the transfer of the leasehold title into Mr Hunt’s sole name, no loss is pleaded in relation to the transfer. The only specific loss pleaded is in respect of the cost of renovations amounting to $60,000. The only reference to any wider losses is the statement in [23] that Mr Hunt has “suffered damage due to the loss of value of his leasehold land”. In this amended pleading, Mr Hunt sought an inquiry into the loss of value in the land and damages of $60,000.
[82] Quite apart from the inability at law to recover expectation losses for negligent misstatement, the amended statement of claim does not comply with the High Court Rules. A statement of claim seeking the recovery of a sum of money must state the amount of the loss as precisely as possible.[18] It is no answer to say that the evidence of a valuer would have been necessary to establish any such losses. If Mr Hunt wished to pursue his claim in this respect, he should have provided the necessary particulars. It is not sufficient to assert there is a loss and then to seek an inquiry into damages. This is not a case where some loss is established but the extent of it is unknown. As we later find, there does not appear to be any realistic prospect that any loss of this first type can be established at all.
[83] The second type of loss Mr Hunt pleads in the amended statement of claim may properly be characterised as reliance loss. We refer to the cost of acquiring his brother’s half-share in the leasehold property and the amount spent on renovations. In this respect, we agree with the Judge that the mere fact that expenditure is incurred in reliance on an allegedly negligent misstatement does not necessarily constitute a recoverable loss. Mr Hunt did not assert in his amended statement of claim that he was worse off as a result of this expenditure. Nor has he provided any evidence to demonstrate that his expenditure in purchasing the property has not been matched by an increase in its value. Similarly, he has not produced any evidence to show that his subsequent expenditure on the property has not resulted in a matching increase in its value.
[84] In summary, any claim for loss of value in the property (if properly quantified and pleaded) amounts to an expectation loss which is not recoverable at law. In respect of the alleged reliance losses, the amended statement of claim does not plead any loss in relation to the acquisition of the half-share in the leasehold and, in respect of the expenditure alleged in relation to the renovations, there is no pleading nor any evidence that Mr Hunt is worse off as a result of incurring that expenditure.
[85] We add that, in the context of the Council’s summary judgment application, it was incumbent on Mr Hunt to produce at least some evidence to support the claimed losses but he did not do so.
[86] For these reasons, we accept that the Judge was right to conclude that the amended statement of claim should be struck out on the ground that it did not plead losses of a kind recoverable for negligent misstatement. On our analysis, the same applies to the original statement of claim.
[87] The position is little different with the second amended statement of claim. As already noted, the draft second amended statement of claim alleges that Mr Hunt paid $25,000 for his brother’s half-share in the leasehold estate when it was worth no more than $15,000 (a loss of $10,000).[19] Again, it is said that $60,000 was spent on renovations. There is no allegation or evidence that Mr Hunt was worse off as a result of this expenditure. In fact there is no pleading of other losses. The relief claimed is an inquiry as to “the loss in value the plaintiff has suffered” but with no particularisation of that loss at all. In the alternative, damages of $70,000 are sought.
[88] Mr Henry referred us to some general evidence which it was said demonstrated that the value of leasehold properties in Waitara had not increased at the same rate or to the same extent as freehold properties in that locality. This evidence is simply not probative of any such loss. The evidence formed part of a submission made to the Council. The author of the relevant material is not stated but was clearly not a registered valuer. The material produced acknowledged that the market is influenced by a variety of factors such as interest rates, exchange rates, political climate, supply and demand and public announcements. Far from demonstrating that the value of leasehold properties in Waitara decreased after the Council’s decision of 12 August 2003, the evidence shows that leasehold property values increased over the period June to December 2003. If, as Mr Hunt now contends, the Council’s letter of January 1994 artificially inflated the value of leasehold properties in Waitara, then it would have been reasonable to expect that upon the reversal of the Council’s freeholding policy in 2003, leasehold property values would have dropped. The evidence adduced to date does not support that proposition. The hypothesis on which the claim is brought, namely that the entire Waitara real estate market was assuming freeholding would occur, is fanciful in the extreme.
[89] We are satisfied that the draft second amended statement of claim suffers from the same or similar defects as the previous version and does not afford any basis to differ from the conclusion reached by Mallon J.
Conclusions
[90] We have not found it necessary to decide whether the Council owed any duty of care to Mr Hunt as pleaded. However, if we had been required to make a determination we would likely have found there was no duty of care, essentially for the reasons canvassed by Mallon J and also those discussed by Cooper J in his decision of 14 May 2008.[20] In particular, we would have had difficulty in accepting the submission that the Council had assumed financial responsibility for the accuracy of its statement in an essentially political context. Councils must be free to amend policy from time to time whenever the public interest so requires. Communities must be taken to be aware of that. Here, the Council was dealing with issues of policy in respect of a class of its ratepayers. Bearing in mind the democratic nature of local government and the vagaries of the political processes involved, we think it very unlikely a duty of care was owed.
[91] In any event, we are satisfied that the Judge was correct to strike out the proceeding because:
- (a) The appellant could not reasonably have relied on the letters of January 1994 and February 1997 as he asserts;
- (b) The claimed losses (if established) occurred between 1995 and 1997 when the expenditure was made, so the cause of action is barred by the Limitation Act 1950;
- (c) The losses claimed in relation to the expected increase in value in the land are not lawfully recoverable in any event and are not properly pleaded;
- (d) The claimed reliance losses were not properly pleaded; and
- (e) There is little realistic prospect any such losses could be established.
[92] The appeal is dismissed accordingly.
Costs
[93] Mr Goddard advised that although Mr Hunt has been granted legal aid for the purposes of the appeal, the Council seeks an order for costs under s 40 of the Legal Services Act 2000.[21] The Council seeks such an order because it is understood there is a cost-sharing arrangement between Mr Hunt and the plaintiffs in the other 73 proceedings pending. Mr Goddard submitted that the existence of this cost-sharing arrangement brought the proceeding within the “exceptional circumstances” provision in s 40(2) of the Legal Services Act. Alternatively, the Council sought a costs order against the 73 other plaintiffs for whose benefit the appeal was pursued.
[94] Mr Henry suggested we should give an indication of the nature of the order which would be made (but for the existence of legal aid) and then reserve costs, allowing the parties to approach the Court further if necessary. We are satisfied that is the proper course in the circumstances.
[95] We indicate that the order we would have made against Mr Hunt if he had not been granted legal aid would be that he pay the Council’s costs as for a complex appeal on a band A basis. We also indicate that we would certify for second counsel.
[96] We formally reserve the issue of costs and invite counsel to confer and file memoranda within one month of the date of this judgment if any order from the Court is required.
Solicitors:
Denis King Law, New Plymouth for
Appellant
Simpson Grierson, Wellington for Respondent
[1] Hunt v New Plymouth District Council HC New Plymouth CIV-2006-43-435, 26 October 2010.
[2] Waitara
Leaseholders Association Inc v New Plymouth District Council HC New Plymouth
CIV 2004-443-162, 4 November
2005.
[3] New
Plymouth District Council v Waitara Leaseholders Association Inc [2007] NZCA
80.
[4] Waitara
Leaseholders Association Inc v New Plymouth District Council [2007] NZSC
44.
[5] New Plymouth
District Council v Waitara Leaseholders Association Inc HC New Plymouth CIV
2006-43-399, 14 May
2008.
[6] The
judgment of Cooper J of 14 May 2008 covers this in considerable detail.
[7] Mr Hunt appears
to have overstated the amount he paid for the half share of the leasehold
estate. The transfer shows he paid $21,000,
not
$25,000.
[8] At
[35].
[9] At
[37].
[10] At [46]
and [47].
[11]
Invercargill City Council v Hamlin [1996] 1 NZLR
513.
[12]
Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721.
[13] Williams v
Attorney-General [1990] 1 NZLR 646 at 678; and Invercargill City Council
v Hamlin [1996] 1 NZLR 513 (PC) at
526.
[14]
Murray v Morel [2007] 3 NZLR 721 at [69].
[15] Rule 7.77(2). This rule has been amended with effect from 1 January 2011 but not in a way which is material to the present case.
[16] Smith v Wilkins and Davies Construction Co Ltd [1958] NZLR 958 at 961; Chilcott v Goss [1995] 1 NZLR 263 at 273; and Harris v Raggatt [1965] VicRp 100; [1965] VR 779 at 786 cited in Gabites v Australasian T & G Mutual Life Assurance Society [1968] NZLR 1145 at 1151 and Chilcott at 273.
[17] Benton v
Miller & Poulgrain [2005] 1 NZLR 66 (CA) at 89; Stephen Todd (ed) The
Law of Torts in New Zealand (5th ed, Brookers,
Wellington, 2009) at [25.2.01]; Peter Blanchard (ed) Civil Remedies in New
Zealand (Brookers, Wellington, 2003) at [2.2.1]; Harvey McGregor McGregor
on Damages (18th ed, Sweet & Maxwell, London, 2009) at
[19–001]–[19–003]
[18]
High Court Rules, r 5.32.
[19] The correct figure is probably a loss of only $6,000 on this basis since the actual price paid for the half share was $21,000.
[20] Arms v New
Plymouth District Council HC New Plymouth CIV-2006-043-399, 14 May 2008 at
[223]–[233].
[21]
Now s 45 of the Legal Services Act 2011 (with effect from 1 July 2011).
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