Potter v BLue Wallace Surveyors Limited DC Hamilton CIV-2009-019-404 [2011] NZDC 2130 (23 December 2011)

Last Updated: 26 September 2016

IN THE DISTRICT COURT AT HAMILTON

CIV-2011-019-000404

BETWEEN BARRY GRAHAM POTTER AND

JEANETTE MARGARET POTTER Plaintiffs

AND BLUE WALLACE SURVEYORS

LIMITED

First Defendant

AND PAUL DOUGLAS CLARK

Second Defendant

Hearing: 19 December 2011

Appearances: V Whitfield and N Edwards for Plaintiffs P Napier for First Defendant

W Holden for Second Defendant

Judgment: 23 December 2011

RESERVED JUDGMENT OF JUDGE P R SPILLER
[Striking out application for abuse of process]

Introduction

[1] The plaintiffs have filed proceedings against the first and second defendants
for breach of duty of care in creating, preparing and registering plans and easements for the subdivision of properties at MacFarlane Street Hamilton. The first and second defendants have now applied for orders striking out the plaintiffs’ claims on the grounds that they are time barred under the Limitation Act 1950.

Background

[1] In 1998, the plaintiffs engaged the first and second defendants to act for them
on the subdivision of their properties at 81 and 83 MacFarlane Street, Hamilton. New titles were created over 81a, 83a and 83b MacFarlane Street. The first

BARRY GRAHAM POTTER AND JEANETTE MARGARET POTTER V BLUE WALLACE SURVEYORS LIMITED DC HAM CIV-2011-019-000404 23 December 2011

defendant is a surveying company and was engaged to prepare, specify and create easements for the properties to ensure that legal access to the properties was created. The second defendant is a solicitor and was engaged to create and register easements prepared by the first defendant to ensure legal access to the properties was created.

[3] The subdivision involved the creation of easements to enable the properties
situated at 81a, 83a and 83b MacFarlane Street to use a shared right of way and to access a public road. Title was issued on 4 November 1998. A driveway was constructed where the parties thought that the easements existed and all parties proceeded on the mistaken belief that the properties had the necessary easements.
[3] In July 2006, 83 MacFarlane Street was sold to a third party. The third party
did not raise any issue with the properties at 81a, 83a and 83b MacFarlane Street using the driveway as all parties still believed that the necessary easements had been created, granted and registered.
[3] In 2010, the plaintiffs entered into an agreement for the sale of the property at
83b MacFarlane Street for $370,000. The purchaser cancelled the agreement because 83b MacFarlane Street did not have the necessary easements to get access to a public road. This was the first time that the plaintiffs became aware that the properties they owned did not have the required legal access.
[3] The plaintiffs allege that it was the defendants’ responsibility to ensure that
the necessary easements were created and registered to ensure that each of the properties in the subdivision had access to a public road and were entitled to use the common driveway. The plaintiffs allege that the survey plan and easements created and registered by the defendants were deficient in the following respects:

• (a) 83b MacFarlane Street did not have legal access to MacFarlane Street
  (or any street).
• (a) 83a and 81a MacFarlane Street did not have reciprocating easements
  to use each other’s share of the driveway.

changes to the easements over the other properties to correct the above errors would also need to be made to the right of way over 81 MacFarlane Street (which, by 2010, was owned by a third party).

[7] In order to sell 83b MacFarlane Street, the plaintiffs were required to have a
surveyor and solicitor prepare, create and register new easements. The plaintiffs were also required to obtain the consent of the owners of 83 MacFarlane Street and 81 MacFarlane Street to the creation and registration of the easements. In return, both neighbours required the payment of their legal fees, and the owners of 83 MacFarlane Street demanded compensation for the creation of easements over their property. The plaintiffs then sold 83b MacFarlane Street to a new purchaser for $368,800. This was $1,200 less than the original sale price.

[8] On 28 March 2011, the plaintiffs filed proceedings against the first and
second defendants for breach of the duty of care they owed the plaintiffs in specifying, preparing and creating the easements. They sought to recover the loss that they had incurred as a result of the defendants’ negligence, namely:

(a) $1,200 on subsequent sale of 83b MacFarlane Street;
(a) $5,000 compensation payment paid to the owners of 83 MacFarlane Street;
(a) $9,441.75 for additional legal and bank costs to remedy the defective titles.

Defendants’ application

[9] The application by the first and second defendants for orders striking out the
plaintiffs’ claims is made in terms of Rule 2.50.1 of the District Court Rules 2009. The Rule states that:

The court may order that the whole or any part of a pleading be struck out if the pleading—

(a) discloses no reasonable cause of action, defence, or case appropriate to the nature of the pleading; or
(a) is likely to cause prejudice, embarrassment, or delay in the proceeding; or
(a) is otherwise an abuse of the process of the court.
[10] The defendants’ application for striking out is that, because the proceedings are brought out of time, they are an abuse of process of the court. The defendant’s application rests upon the Limitation Act 1950, section 4. This provides that:

(1) Except as otherwise provided in this Act or in subpart 3 of Part 2 of the Prisoners' and Victims' Claims Act 2005, the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say,—

(a) Actions founded on simple contract or on tort ...

[10] It has long been established that a cause of action accrues when every fact exists which it would be necessary for the plaintiff to prove in order to support its right to the judgment of the Court Coburn v Colledge [1897] 1 QB 702, 706: see Williams v Attorney-General [1990] NZCA 20; [1990] 1 NZLR 646, 678). In addition, the defendants referred to the judgment of Tipping J in Murray v Morel & Co Ltd [2007] NZSC 27; [2007] 3 NZLR 721, 749, where it was stated:

Save when the Limitation Act itself makes knowledge or reasonable discoverability relevant, the plaintiff’s state of knowledge has no bearing on limitation issues. Accrual is an occurrence-based, not a knowledge-based, concept.

[10] The defendants have further cited in support judgments in the cases Gilbert v Shanahan Partners [1998] 3 NZLR 528, Fifer Residential Ltd v Knight Coldicutt, High Court, Auckland, CIV-2005-404-2299, 21 December 2007, and Davys Burton v Thom [2007] 1 NZCA 215. The defendants argue from these judgments that loss accrues from the date of any breach of duty in the provision of information or advice or the execution of a document, and that the time for the bringing of proceedings computes from that point.
[10] The defendants contend that every fact which was necessary for the plaintiffs to prove, in order to support its right to judgment, existed when the title to the

stage, loss was caused because the required easements had not been surveyed out or registered as they allegedly ought to have been. The defendants therefore conclude that the cause of action was based on events in 1998, reasonable discoverability does not apply to the present claim, and the plaintiffs’ right to sue ceased six years from 1998 (in 2004).

[14] The defendants accept that the approach to be adopted in considering an application to strike out, on the basis of abuse of process arising from a statute bar, is set out in Murray v Morel & Co Ltd (above), at 736-737:

[33] I consider the proper approach, based essentially on Matai, is that in order to succeed in striking out a cause of action as statute-barred, the defendant must satisfy the Court that the plaintiff’s cause of action is so clearly statute-barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process. If the defendant demonstrates that the plaintiff’s proceeding was commenced after the period allowed for the particular cause of action by the Limitation Act, the defendant will be entitled to an order striking out that cause of action unless the plaintiff shows that there is an arguable case for an extension or postponement which would bring the claim back within time.

Plaintiffs’ response

[14] The plaintiffs oppose the strike out application on the ground that their claims are not time barred because their causes of action did not accrue until they suffered actual loss in 2010 (or, in the alternative, in 2006). The plaintiffs submit that there are no grounds upon which to grant the strike out application because the plaintiffs have, at the very least, an arguable case that their claim is not time barred.
[14] The plaintiffs argue that this is not a case where all of the facts were in existence at the time the easements were registered. They argue that loss did not occur at the time the easements were registered because loss only occurred if the neighbour required compensation for the easements and/or the purchaser cancelled the agreement because of the easements. They contend that the only loss that the plaintiffs would have suffered in 1998 was the cost of registering the correct easements, which would have been de minimus and insufficient for the purpose of damages.

• [17] The plaintiffs submit that the plaintiffs did not suffer any actual loss until they tried to sell the property in 2010. They argue that it was then that the contingencies were fulfilled and their loss occurred. The plaintiffs say that it was then that the owners of 83 MacFarlane Street advised that they would consent to the registration of the easements only if they were compensated, and that it was then that the purchaser of 83b MacFarlane Street cancelled the agreement because the easements were not correct.
• [17] The plaintiffs further argue that, in the event that the Court does not agree that the cause of action accrued in 2010, the plaintiffs did not suffer any actual loss until 83 MacFarlane Street was sold to a third party in July 2006. The plaintiffs argue that it was then that it was likely that compensation would be required to create and register the correct easements because 83 MacFarlane Street was no longer owned by a party that had been involved in the subdivision.
• [17] The plaintiffs say that this is clearly a case where the defendants have acted negligently. They argue that it would be unjust and unfair to allow the defendants to shirk their responsibilities to the plaintiffs on the basis of a mere technicality.
• [17] The plaintiffs note that the threshold for a strike out application is high and the burden is on the defendants to show that the plaintiffs do not have an arguable case. The plaintiffs submit that the defendants have not discharged that burden. The plaintiffs say that they have, at the very least, an arguable case that they did not suffer actual loss at the time the defendants negligently created and registered the easements. Instead, the plaintiffs say that they suffered a contingent loss that did not become an actual loss until the contingencies of the neighbour requiring compensation and the purchaser cancelling the agreement for sale and purchase were fulfilled. Accordingly the plaintiffs say that their claim is not time barred.
• [17] In support of their arguments, the plaintiffs have cited in particular the judgments in the cases Matai Industries Ltd v Jensen [1988] NZHC 205; [1989] 1 NZLR 525, Rabadan v Gale [1996] 3 NZLR 220, Gilbert v Shanahan Partners [1998] 3 NZLR 528, Murray v Morel & Co Ltd [2007] NZSC 27; [2007] 3 NZLR 721, and Davys Burton v Thom [2008] NZSC 65 and [2008] NZSC 65; [2009] 1 NZLR 437.

Discussion

[22] In this case I follow the approach adopted in the Murray case (paragraph [11] above) in considering an application to strike out on the basis of abuse of process arising from a statute bar. Therefore, the defendants in this case must satisfy the Court that the plaintiffs’ cause of action is so clearly statute-barred that the plaintiffs’ claim can properly be regarded as an abuse of process. If the defendants demonstrate that the plaintiffs’ proceeding was commenced after the period allowed for by the Limitation Act, the defendants will be entitled to an order striking out that cause of action unless the plaintiffs show that there is an arguable case for an extension or postponement which would bring the claim back within time.
[22] The leading binding decision in New Zealand, relevant to this case, is the judgment of the Supreme Court in Davys Burton v Thom [2008] NZSC 65; [2009] 1 NZLR 437. In 1990 the firm Davys Burton gave negligent advice to Thom in failing to provide written instructions for the correct execution of a prenuptial matrimonial property agreement between Thom and his wife. In 1999 the agreement was declared void by the Family Court. The result was that the sharing provisions of the Matrimonial Property Act 1976 ultimately attached to property that would have remained Thom’s separate property had the agreement been valid. Thom’s claim in negligence against Davys Burton was not brought until 2002. The issue was whether recoverable loss attributable to the firm’s negligent advice was first suffered by Thom (a) when the Family Court refused to treat the agreement as effective in 1999, or (b) either on entry into the agreement in 1990 or in 1993 when Thom and his wife occupied the house as the matrimonial home. The Court held that whether Thom’s claim was barred by section 4 of the Limitation Act turned on when he suffered loss or detriment as result of the agreement being void. The Court held that Thom suffered measurable economic loss in 1990 when, as result of the negligent advice of Davys Burton, he entered into the non-complying matrimonial property agreement and married without the protection he would have obtained from a valid agreement. The Court held that Thom’s cause of action against Davys Burton accordingly accrued in 1990 and was barred by section 4 of the Limitation Act when his claim was brought in 2002.

[24] In the course of his judgment in the Davys Burton case, Wilson J (at 458) drew a distinction between actual loss and contingent loss:

In summary, a cause of action in tort for negligence does not exist and hence time does not start running for the purposes of the Limitation Act unless and until the plaintiff has suffered some actual and quantifiable loss, harm or damage as a result of the breach of duty involved. Damage will be contingent, and hence not actual for limitation purposes, if the plaintiff will suffer no damage at all unless and until a contingency is fulfilled. That will be so if the damage results from the plaintiff being exposed to a liability which is contingent on the occurrence of a future uncertain event. A good example is where the liability is that of a guarantor and is contingent on a default by the principal debtor, in contrast to the undertaking (as in Gilbert) of a direct and present liability which falls due in the future. The distinction may well be thought to be a fine one, but in any regime of limitation apparently similar cases may fall on opposite sides of the line which divides those which are barred from those which are not. A reduction in the value of an asset, whether tangible or intangible, constitutes actual damage and exists as soon as the asset becomes less valuable.

In this case the Supreme Court held that the time when the plaintiff had suffered actual and quantifiable loss was when he obtained a damaged asset, an agreement that was not legally enforceable, even though the extent of the resultant damage would not become clear until later. The Supreme Court held that the contingencies affected only the valuation of the loss and not whether a loss was suffered.

[24] In the case at hand I find in the same way. I find that the time when the plaintiff suffered actual and quantifiable loss was in 1998, when the required easements were not surveyed out or registered as they allegedly ought to have been. When the title to the relevant property issued on 4 November 1998, every fact existed which was necessary for the plaintiffs to prove, in order to support their right to judgment. Any contingencies affected only the valuation of their loss and not whether a loss was suffered.
[24] I therefore find that the plaintiffs’ cause of action is so clearly statute-barred that their claim can properly be regarded as an abuse of process. The defendants have demonstrated that the plaintiffs’ proceeding was commenced after the period allowed for by the Limitation Act, and the plaintiffs have not shown that there is an arguable case for an extension or postponement which would bring the claim back.

Order

[27] The defendants are entitled to an order striking out the plaintiffs’ cause of action. Counsel are invited to make written submissions as to costs within 21 working days after receipt of this order.

P R Spiller

District Court Judge