Lloyd v Waikato District Council HC Hamilton CIV-2009-419-0008 [2011] NZHC 524 (26 May 2011)

Last Updated: 19 June 2011

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

_{CIV-2009-419-0008}

BETWEEN DAVID KELLY LLOYD, ALISON

SHONA LLOYD AND ROGER NEWTON STANICH

First Plaintiffs

AND LLOYD FARMS LIMITED Second Plaintiff

AND MATTHEW DAVID BLAIR LLOYD AND PATRICK JOHN CLUNE

Third Plaintiffs

AND DAVID KELLY LLOYD AND ALISON SHONA LLOYD

Fourth Plaintiffs

AND HEARTBREAK HOLDINGS LIMITED Fifth Plaintiff

AND WAIKATO DISTRICT COUNCIL First Defendant

AND ROBERT TILSLEY Second Defendant

Hearing: 11 May 2011

Appearances: Mr D J Taylor for plaintiffs

Mr M A Cavanaugh for first defendant

Mr P J P Grace for second defendant

Judgment: 26 May 2011 at 3:00 PM

_{JUDGMENT OF ASSOCIATE JUDGE MATTHEWS}

This judgment was delivered by me on 26 May 2011 at 3 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

_{Date...............}

LLOYD & ORS V WAIKATO DISTRICT COUNCIL HC HAM CIV-2009-419-0008 26 May 2011

[1] This is an application by the plaintiffs under r 4.56 for orders striking out Alison Shona Lloyd and Roger Newton Stanich as plaintiffs. These persons are the second and third-named first plaintiffs, and Alison Shona Lloyd is the second-named fourth plaintiff. The second, third and fifth plaintiffs intend to discontinue their claims; thus, the effect of the application is to leave David Kelly Lloyd as plaintiff.

[2] A draft amended statement of claim with the proposed changes to the plaintiffs incorporated into it pleads claims by this party as lessee and farmer of the two blocks of land owned by the present first plaintiff, a trust, and by the present fourth plaintiff, a separate trust, respectively.

[3] The issue in this case is whether the names of Alison Shona Lloyd and Roger Newton Stanich may be struck out as plaintiffs under r 4.56, on which the applicants rely.

[4] Rule 4.56 provides, relevantly:

4.56 Striking out and adding parties

(1) A Judge may, at any stage of a proceeding, order that—

(a) the name of a party be struck out as a plaintiff or defendant because the party was improperly or mistakenly joined; or

...

[5] Each of the defendants opposes the application.

The proceeding as presently before the Court

[6] The proceeding is presently recorded in the amended statement of claim dated 15 September 2009. The plaintiffs plead, respectively, that they own certain blocks of land within a region described as the Swan Road Drainage District. Over the years land within this district has been gradually drained and the land owned by the plaintiffs has been brought into productive farming. It is now alleged that the drainage levels have been set in such a way that there are adverse effects on the farming operations on the land with consequent loss of productivity. The Council is sued as the territorial authority responsible for these actions, and the second

defendant, a chartered engineer, as an expert adviser to the Council on the water levels for the Swan Road Drainage District. Both are said to owe duties of care to the present plaintiffs.

[7] The first plaintiffs, trustees of the Wattle Downs Trust, plead that they own the property and lease it to David Kelly Lloyd, one of the trustees, who farms it. The second and third plaintiffs plead that they own and farm their respective properties. The fourth plaintiffs plead that they are trustees of the Wattle Downs No. 2 Trust which owns its property and leases it to the first plaintiffs. The fifth plaintiff pleads that it owns it property and also leases it to the first plaintiffs. Neither the fourth nor the fifth plaintiffs plead who farms their properties but it may be inferred it is in each case the lessee. As the lessee is said to be the first plaintiff, and that trust now says it does not farm, there is an element of uncertainty in the present pleading.

[8] It is clear from the amended statement of claim that the losses claimed by the plaintiffs all stem from alleged losses of productivity and are therefore losses incurred by those who farm the respective properties.

[9] Any new cause of action would now be barred by the Limitation Act 1950.

The proposed amended claim

[10] The combined effect of the orders sought in this application, and the notices of discontinuance referred to earlier, is that the proceeding would be carried on solely by David Kelly Lloyd as lessee and farmer of the first and fourth plaintiffs’ properties respectively, both claims by Mr Lloyd in his personal capacity.

[11] Despite the pleading in the amended statement of claim it has now transpired that the second plaintiff owns its property, but does not farm it. The second plaintiff therefore intends to discontinue. No application is made for the farmer of that property to be substituted as a plaintiff because it is accepted that this would constitute a new cause of action.

[12] The third plaintiff does not farm its property either. It is leased to one of the trustees and I was informed that the reason an application similar to the present one has not been made by him, is that his losses are low and he does not wish to pursue his claim. This farmer also leases the fifth plaintiff’s land. The fifth plaintiff has not itself suffered a loss as property owner. It therefore intends to discontinue.

[13] In his affidavit in support of the application David Lloyd candidly stated that

―I did not in commencing these proceedings distinguish between my personal interest as a lessee and my capacity as a trustee of the trusts. I pay rent to the trustees but farm the land in my own right as lessee. It is I who have [sic] suffered the loss, not the trusts‖.

[14] This neatly underscores the proposed changes to this litigation: the plaintiff would be a lessee, not an owner, claiming losses as a farmer, and would be an individual, not a trust, albeit that the individual happens to be one of the group of trustees in the case of each trust.

[15] Both the defendants oppose the application on broadly similar grounds which may be summarised thus:

(a) David Lloyd seeks to continue the proceeding in his personal capacity, whereas the proceeding is presently brought by a trust of which he is a trustee.

(b) David Lloyd seeks to continue the proceeding as the lessee of the property, whereas the claim by the trusts of which he is a trustee is, in each case, a claim as owner of the property. Any duties of care either defendant owed to the present first and fourth plaintiffs as owners would be different to any duties of care owed to David Lloyd as farmer.

(c) It cannot be said, in terms of r 4.56, that the other trustees were

―improperly or mistakenly joined‖.

(d) Any new cause of action by David Lloyd in his personal capacity is statute barred as any losses he alleges were suffered in excess of six years ago. Consequently he could not commence an action now and cannot be permitted to continue this action accordingly.

Were Alison Shona Lloyd and Roger Newton Stanich improperly or mistakenly joined?

[16] This issue is at the heart of this application. The authorities establish that the jurisdiction to strike out parties must be used sparingly and only where it is clear that the plaintiff cannot succeed: AMP v Architectural Windows Ltd[1].

[17] It is unusual for plaintiffs to apply to strike themselves out. A plaintiff has a right at any time before the giving of judgment to discontinue a proceeding by filing a notice of discontinuance, and serving it on every other party: r 15.19. Thus, the second, third and fifth defendants do not require leave; they have an absolute right to file notices of discontinuance at any time and bring their claims to an end. There might, of course, be consequences in relation to costs, but that is a separate issue.

[18] At the time the proceeding was filed all three of the first-named plaintiffs were trustees of the Wattle Downs Trust, and all three of the fourth-named plaintiffs were trustees of the Wattle Downs No. 2 Trust. It was not established in evidence or argued that any of the three persons named as the trustees was not in fact a trustee or was wrongly named. Each trust was said to own the land in respect of which the claim was brought. In each case the named persons were trustees of the plaintiff trusts at the time and they were the persons who, together, were the proper plaintiffs in an action for damages by the trust in relation to the trust property.

[19] The application was founded on the proposition that the trusts were not properly plaintiffs, as neither trust had suffered any loss, and that the trusts have therefore been mistakenly joined. Accepting that position to be correct, an application to strike out all the first plaintiffs and/or all of the fourth plaintiffs under

_{r 4.56 would be soundly based, and on the facts before me would succeed, though I}

cannot see any reason why the plaintiffs would bring such an application. As the first and fourth plaintiffs have formed the view that they cannot succeed, they can discontinue their parts of the proceedings. That would remove all the first plaintiffs and all the fourth plaintiffs – not selected members of the respective groups of trustees. However, because in the case of each trust, all three named persons are the current trustees, there has been no mistake in joining two persons from each group as trustees. That was done intentionally, and correctly. Notwithstanding that, Mr Taylor argued that r 4.56 still allows removal of the names of two of the trustees in each case.

[20] First, he referred me to cases dealing with the liability of trustees.[2] The position established by the cases is well summarised in Forde &v Lee in Principles of the Law of Trusts in the following paragraph at 1.6010:

On the other hand, when a trust is created it is not accorded legal personality. The trust is no more than a collection of duties, disabilities, rights and powers in relation to some specific property imposed upon or accorded to an existing legal person, the trustee...

... Trustees as such are not distinct legal persons, in representative capacity, separate from themselves, in a personal capacity.

[21] And further:

A trust not being an entity separate from a trustee or beneficiaries cannot be a party to legal proceedings. The person who is the trustee is the appropriate party. In general, apart from statute... in proceedings relating to trust activity, the trustee is not sued and does not sue in any special capacity.

[22] Mr Taylor submitted that although these cases determine the personal liability of a trustee, they are equally applicable where a trustee is a claimant. He submitted that:

... all that is happening with regard to the third and fourth plaintiffs is that whereas Mr Lloyd thought that the capacity in which he was suing was as a land owner and that in that capacity he suffered the loss, in fact he suffered the same loss but personally and therefore he is not subject to any equitable obligation as trustee to account for any damages that he recovers.

[23] Although a trust is not a separate entity, nonetheless the interest the trustees hold in that capacity is not the same interest they have personally. Whilst trustees are personally liable for their actions as trustees, that does not equate to their duty to protect the trust’s assets (and, if necessary, to sue to do so) being the same as their personal right to sue to recover personal losses. Their actions are taken in two separate capacities, one as fiduciaries, one personally. This submission is not soundly based.

[24] In Farr v Shrimski & Ors[3] the first defendants were sued in their capacity as trustees. In fact, the first and second-named first defendants in their personal capacities were potentially liable in negligence to the plaintiffs on a cause of action in tort. The Judge analysed the position[4]. He referred to a passage from Registered Securities Ltd (In Liquidation) v Jensen Davies & Co[5] which is in the following terms:

If the right defendant has been sued under the wrong name, that is misnomer. If the wrong defendant has been sued, that is misidentification... If this was a case of misidentification the application was rightly refused because the Court will not allow amendment if the result is to deprive a party of a limitation defence: Chilcott v Goss[6]. If, however, the case is one of misnomer, no limitation question arises because the correction of the name has effect from the date that the proceedings were filed.

[25] An examination of the judgment in Registered Securities shows that this passage is a paraphrase of a quoted submission of counsel for the appellant (page

690, lines 5 to 14) and not the words of the Court. The Court itself said7:

Counsel accepted for the purpose of this case that the appropriate rule to apply is that set out in Davies, that is to say an amendment may be allowed to correct a misnomer but should not be permitted where the effect of the amendment would be to substitute a new defendant.

The issue then is to determine the circumstances in which it can be said that a misnomer occurs and to consider on the facts of this case whether the naming of the company as defendant is a case of misidentification or should properly be regarded as one of misnomer.

[26] On the first issue, the circumstances in which it can be said that a misnomer occurs, the Court of Appeal quoted from and applied the following passage from the judgment of Devlin LJ in Davies v Elsby:

It is a general principle of English law, not merely applicable to cases of misnomer, that the intention which the framer of the document has in mind when he brings it into existence is not material. In that we differ from many continental systems. In English law as a general principle the question is not what the writer of the document intended or meant, but what a reasonable man reading the document would understand it to mean; and that is the test which ought to be applied as a general rule in cases of misnomer – which may embrace a number of other situations apart from misnomer on a writ, for example mistake as to identity in the making of a contract. The test must be: How would a reasonable person receiving the document take it? If in all the circumstances of the case and looking at the document as a whole he would say to himself: ―Of course it must mean me but they have got my name wrong‖ then there is a case of mere misnomer. If, on the other hand, he would say ―I cannot tell from the document itself whether they mean me or not and I shall have to make enquiries‖ then it seems to me that one is getting beyond the realms of misnomer. One of the factors which must operate on the mind of the recipient of a document, and which operates in this case, is whether there is or is not another entity to whom the description on the writ might refer.

[27] This test was applied by the High Court in Australia in Bridge Shipping Pty Ltd v Grand Shipping SA[7], and in Registered Securities. It is also the test, therefore, which I will apply in determining whether there has been a misnomer or a mis- description.

[28] In Davies v Elsby Brothers, and in Whittam v W J Daniel & Co Ltd[8], cited also in Registered Securities, proceedings had been issued against defendants described in each case as a firm, and amendment was sought to substitute as defendant a limited liability company by the same name. In Registered Securities the application was the inverse. In all these cases, however, there was a clear distinction between a firm as an entity and a company as an entity. As already noted, a trust is not a separate entity from its trustees. In my view that does not render the test enunciated in Davies v Elsby Brothers and applied in Registered Securities inapplicable in this case. The proceedings were plainly issued on behalf the trust – the opening sentences of the first and fourth paragraphs of the amended statement of

_{claim (and, for that matter, the original statement of claim) make this clear. So, in}

the words of Devlin LJ: How would a reasonable person receiving [the amended statement of claim] take it? In my opinion any defendant sued by a group of persons thus described would take it that the claim was brought by a trust, and further, that it was brought in its capacity as landowner. Looked at another way, but still by reference to Devlin LJ, what would a reasonable man reading the amended statement of claim understand it to mean? Plainly, in my view, it would be read as a claim by a trust whose trustees, in each case, were the named group of plaintiffs. As the Court

of Appeal said in Registered Securities[9]:

That test, as set out in the judgment of Devlin LJ refers to the importance of examining the document to see whether it was clearly intended to be addressed to an entity not within the description of the defendant. The plaintiff failed in Davies because the date of the accident had not been included in the writ. In this case the description of the circumstances giving rise to the claim is so clear and detailed that it must displace any inference arising from the naming of the company.

[29] The facts in this case before me are different, and the case relates to plaintiffs, not defendants, but the consideration is the same. The circumstances giving rise to the claim by the first plaintiffs and, separately, the fourth plaintiffs, are clearly set out. They comprise the actions of the first defendants and the second defendants in setting the drainage level for the land owned by the first and fourth plaintiffs thereby rendering areas of their farms unproductive. It is difficult to see how the case could have been more clearly framed as being brought on behalf of the owners of the land in question.

[30] Can it therefore be said that a recipient of this document would realise that it was in fact meant to be brought by one, only, of each group of three persons, not as a trustee and not as an owner, but as a tenant? In my opinion the answer to that question is no.

[31] It follows that there has not, in my view, been a misnomer, rather there has been a mis-decription of the plaintiff when the proceeding was issued and during the time that it has been pursued. The mis-description was to name and describe the plaintiff as the trust and as a landowner. What, then is the consequence of a mis- description when the time for a proceeding by the party who should, it is now said,

have brought the proceeding has expired under the Limitation Act 1950? Time has expired if the proposal before me results in a new cause of action being pleaded.

[32] Mr Taylor referred me to authorities on whether the amendments proposed on the draft second amended statement of claim amount to introduction of new causes of action. I need refer to only one: Smith v Wilkins & Davies Construction Co Ltd[10]:

The issue is, I think, put as clearly as anywhere in the words of Lord Wright MR in Marshall v London Passenger Transport Board [1936] 3 All ER 83 as being whether the new pleading involves ―a new departure, a new head of claim, or a new cause of action‖, (Ibid 87). In other words is it something essentially different from that which was pleaded earlier? Such a change in character may be brought about, in my view, by alterations in matters in law in fact or both. Alterations of fact could possibly be so vital and important as by themselves to set up a new head of claim. On the other hand more often alterations of fact do not affect the essence of the case brought against the defendant ... in each case it must I consider be a question of degree.

[33] The defendants argued that the proposed claim is materially different in a number of respects from that which is presently brought. Mr Grace for the second defendant made three principal submissions on this point. First, he argued that the duty of care relied upon in the amended statement of claim is alleged to be owed to the trustees of the Wattle Downs Trust. Despite the pleading of farming losses in the amended statement of claim, as damages suffered by the trust, he submitted that it must have been the plaintiffs’ case that the assets of the trust had been diminished in some way by the alleged negligence of the second defendant. However, under the proposed statement of claim reliance is placed upon an alleged duty of are to David Kelly Lloyd in his personal capacity which is an allegation that he, as distinct from the trust, has suffered a loss to his personal interests. These, counsel submitted, are fundamentally different.

[34] Secondly, Mr Grace submitted that the proximity allegations are fundamentally different between the present and the proposed claim. The former alleges a proximate relationship between the plaintiffs as owners of the land and in their capacity as trustees while the proposed claim refers to a proximate relationship between the defendants, David Lloyd, and ―members of the drainage district‖, a term which is not defined in the proposed pleading, and which Mr Grace criticised as

being broad and non-specific. Evidence would need to be adduced as to who precisely was owed the alleged duty, whereas in the present pleading the duty is alleged to be owed to defined owners.

[35] Thirdly, Mr Grace pointed out that in the present claim it is alleged that the second defendant negligently made recommendations to the Council, but in the proposed claim it is alleged that the recommendations were also made to ―members of the drainage district‖.

[36] Based on this analysis Mr Grace submitted that the matters to be proved are essentially different to those which would need to be proved in the case as it is presently pleaded.

[37] Mr Cavanaugh for the first defendant submitted that the relationship between the Council and lessees may be significantly different to that between the Council and landowners, raising different issues of proximity and foreseeability for investigation in determining the existence of a duty of care. He submitted that different investigations of factual matters, policies and legal principles would be required if the amendment were made.

[38] Mr Taylor for the plaintiff submitted that ―the same person sues for the same damages on the same causes of action‖ without modification to the pleadings in respect of factors constituting a close and proximate relationship, giving rise to a duty of care, the duty of care relied on, the factors that constitute the breach of the duty of care and the damages which flowed from that breach.

[39] I do not accept this submission. First, it is not helpful to characterise Mr Lloyd in his personal capacity and as trustee as the same person. He has different capacities. Secondly, the factors which might on investigation be relevant to determining the existence of otherwise of a duty of care, are different, in the material respects identified by counsel for the first and second defendants. Thirdly, if the proposed pleading were to proceed, the case would involve investigation of the losses suffered by Mr Lloyd personally. Whilst the claim as presently pleaded does claim those losses, at an early point in the trial it would be established that the first

and fourth plaintiffs in the present pleading were not farmers and had not suffered the pleaded losses. The factual investigation into issues relating to losses would therefore be significantly extended were the applicant to succeed.

[40] In my opinion the proposed causes of action are essentially different from the present ones.

[41] In the case of misidentification the Court will not allow an amendment if the result is to deprive a party of a limitation defence: Chilcott v Goss[11] and Mabro v Elstar and British Dominions Insurance Company Ltd[12]. In that latter Scrutton LJ said:

In my experience the Court has always refused to allow a party or a cause of action to be added where if it were allowed the defence of the statute of limitations would be defeated. The Court has never treated it as just to deprive a defendant of a legal defence. If the facts show either that the particular plaintiff or the new cause of action sought to be added are barred, I am unable to understand how it is possible for the Court to disregard the statute.

[42] This case has been followed in New Zealand: McCoomb v Fleetwood Motors

Ltd.[13]

[43] David Lloyd in his personal capacity could not now commence an action as it would be statute barred. Allowing the present application would defeat the application of the Limitation Act.

[44] In Coastal Tankers Ltd v Southport New Zealand Ltd[14], the plaintiff was the manager and insurer of a vessel which was damaged. However, the owners of the vessel suffered the loss. The plaintiff applied to substitute the owners of the vessel in order to circumvent a limitation issue. It was found that apart from the issue of ownership there was no discernible difference in the nature of the cause of action.

_{The Court declined the application. Master Venning (as he then was) said:}

In this case rather than it being unjust to the plaintiff to deny the substitution of the oil companies as plaintiffs it would be unjust to the defendant to allow such substitution and thereby deny the defendant an otherwise good answer to the claim on the basis of the Limitation Act.

[45] Although it is not sought in this case to substitute a new plaintiff, as it was in Coastal Tankers Ltd the effect of the application before me is the same: to substitute for a landowning trust an occupier who leases the trust land. I see no reason to distinguish the principles enunciated in Mabro and Coastal Tankers Ltd, and applying those cases this application cannot succeed.

[46] The application is dismissed Each defendant is entitled to costs on a 2B basis, plus disbursements which will be fixed by the Registrar if not agreed. Issues in relation to costs on any notices of discontinuance that may be filed are not covered

_{by this order.}

J G Matthews

Associate Judge

Solicitors:

McCaw Lewis Chapman, Hamilton\ Heaney & Co, Auckland

Franklin Law, Pukekohe

Counsel:

D J Taylor, Hamilton

Mr P J P Grace, Pukekohe

---

[1] [1988] NZHC 36; [1998] 1 PRNZ 655

[2] In re Graham Pitt &Bennett, Ex Parte Nolan & Skeet [19891] 19 NZLR 617; AMP General Insurance Ltd v Maclister Todd Phillips Bodkins & Anor (2006) 22 NZTC 19, 740; NZHB Holdings Ltd v Bartells (2005) 5 NZCPR 506
[3] _{HC Auckland CIV-2004-404-3707, 18 February2005}
[4] _{At [53] to [58]}
[5] _{[1999] 2 NZLR 686 at 690}
[6] _{[1995] 1 NZLR 263}
[7] _{[1991] HCA 45; (1991) 173 CLR 231}
[8] [1962] 1 QB 271
[9] P 693 li 36
[10] [1958] NZLR 958,961

[11] _{[1995] 1 NZLR 263}
[12] _{At 487}
[13] _{[1967] NZLR 945}
[14] [1999] 13 PRNZ 638