Lawrence Riverside Limited v Colliers International New Zealand Limited HC Auckland CIV-2011-404-1486 [2011] NZHC 753 (30 June 2011)

Last Updated: 31 July 2011

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

_{CIV-2011-404-1486}

BETWEEN LAWRENCE RIVERSIDE LIMITED First Plaintiff

AND BRIAN RICHARD LAWRENCE AND BRIGIT HANNELORE LAWRENCE Second Plaintiffs

AND COLLIERS INTERNATIONAL NEW ZEALAND LIMITED

Defendant

Hearing: 30 June 2011

Counsel: G. Keene - Counsel for Plaintiffs

S. Armstrong and M. Eastwick-Field - Counsel for Defendant (Memorandum filed by A. Singh for the Defendant in proceeding CIV-2006-404-4739

Judgment: 30 June 2011

_{ORAL JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL}

Solicitors: Simpson Dowsett Mackie, Solicitors, PO Box 27-240, Mt Roskill

Russell McVeagh, Solicitors, PO Box 8, Auckland

_{A.K. Singh, Solicitors, PO Box 26344, Epsom, Auckland}

LAWRENCE RIVERSIDE LIMITED V COLLIERS INTERNATIONAL NEW ZEALAND LIMITED HC AK CIV-2011-404-1486 30 June 2011

Introduction

[1] Before the Court is an application by the defendant, Colliers International New Zealand Limited seeking an order for a temporary stay of this proceeding pending the final determination of pre-existing litigation between the plaintiffs and CP Holdings Limited and Capital Hospitality Holdings Limited (CIV-2006-404-

4739) (the related proceeding). In addition, before me an oral application was made effectively by the plaintiffs seeking an alternative order that the present proceeding might instead be heard together with the related proceeding which I understand is scheduled for an 8 day hearing in this Court commencing 21 November 2011.

[2] The application for a stay was initially opposed by the plaintiffs and in turn the application for an order that the proceedings be heard with the related proceeding was opposed by the defendant and (in his 28 June 2011 memorandum), by counsel for CP Holdings Limited and Capital Hospitality Holdings Limited, the defendants in the related proceeding.

[3] As I understand the position, the present proceeding was brought by the plaintiffs in March 2011. The related proceeding, however, appears to have been commenced around 5 years ago in 2006 and, since that time, it has enjoyed a complex history.

Brief Background Facts to the Events which Give Rise to These Proceedings

[4] Both the present proceeding and the related proceeding arise out of the ownership by the first plaintiff of a motel business carried on in Rotorua and known as the Lakewood Manor Motel. The first plaintiff purchased this business in about

2003. For the next 5 years according to the plaintiffs, they experienced serious difficulties as the motel buildings suffered water pipe failures and associated flooding which the landlord it is said “persistently refused to remedy”.

[5] The second plaintiffs are shareholders in the first plaintiff. They are in receipt of a grant of legal aid for the present proceeding and also the related proceeding.

[6] In around March 2005 a rent review under the lease of the motel became due. The defendant in this proceeding, Colliers, was instructed by the landlord of the motel premises CP Holdings Limited (the first defendant in the related proceeding) to provide an assessment of the current market rental at the time.

[7] That rental assessment report was prepared by Colliers and made available to the landlord. A copy was apparently provided to the first plaintiff as tenant and the second plaintiffs as shareholders.

[8] The plaintiffs now allege that in preparing this valuation the defendant Colliers was negligent and as a result the plaintiffs suffered loss in the form of an unjustifiably increased liability for rent and other potential damages.

[9] It seems also that about this time the plaintiffs’ motel business was struggling severely. It is the contention of the plaintiffs as I understand it that their ultimate substantial loss of the business related in part to the landlord’s actions in failing to repair the consistent flood damage and also the excessive rent which they were required to pay in terms of the Colliers rental assessment valuation.

[10] As an aside at this point, I note that at the time the rent review under the motel lease was scheduled to take place in about March 2005, the plaintiffs it seems failed to avail themselves of the opportunity of contesting the landlord’s suggested rent increase as assessed by the Colliers valuation.

[11] The case for the plaintiffs as tenant and shareholders therefore is effectively that the wrongful actions first, of the landlord in the related proceeding and secondly, of the valuers Colliers in this proceeding, have caused or contributed to the collapse of their motel business and both should be required to pay damages.

[12] In the present proceeding it is significant, as I see it, that the plaintiffs have only today chosen to file an amended statement of claim against Colliers. This appears to claim now the sum of $650,000.00 being $350,000.00 for partial loss of goodwill of the business and $300,000.00 for loss of business income together with an additional amount by way of special damages totalling $20,976.55.

[13] In the related proceeding, as I understand it, the plaintiffs’ claim against the landlord is something in excess of $1.4 million. The landlord has counterclaimed against the plaintiffs for approximately $600,000.00 for alleged rent arrears (which are based on the increased rental following the Colliers valuation).

[14] A significant factor in my consideration of the application before me, in my view, relates to the fact that the related proceeding brought by the plaintiffs against the landlord was issued in 2006 and finally it has an 8 day hearing scheduled to commence on 21 November 2011 as I have noted above. The present proceeding before me against Colliers was filed in this Court only on 16 March 2011. As I have also noted above, the present proceeding is also the subject of an amended pleading from the plaintiffs which has been filed only today, 30 June 2011.

[15] I turn now to consider the two applications which are before me. The first application is for a temporary stay of the present proceeding.

Stay Application

[16] By this application, the defendant Colliers, seeks a temporary stay of this proceeding until the scope of the plaintiffs’ liability (if any) for rent arrears under the related proceeding and any recovery in that proceeding the plaintiff may achieve by way of damages relating to any wrongful action taken by the landlord on this rent review, are known. This liability obviously would be determined at the 8 day trial scheduled for the related proceeding commencing 21 November 2011.

[17] The present application before me is made in terms of r 10.12 High Court Rules which allows the Court amongst other things to stay a proceeding if the Court is satisfied in terms of r 10.12(c) that there is a desirable reason for such an order to be made. Before me Ms Armstrong for the defendant acknowledged that the provisions of r 10.12(a) and (b) have no application here. I must therefore decide in this case whether under the circumstances prevailing here it is desirable to make an order staying this proceeding until conclusion of the related proceeding.

[18] On this aspect, as I understand it, the defendant’s position is that there is a “common thread” running between the present proceeding and the related proceeding such that the Court’s discretion to order a stay under r 10.12 is engaged. In addition the defendant contends that a temporary stay is required here to do justice between the parties. It is emphasised also that this stay would clearly be only temporary in nature.

[19] On these aspects what is clear to me is that both the present proceeding and the related proceeding arise out of the first plaintiff’s tenancy of the Lakewood Manor Motel and the March 2005 rent review that resulted in it incurring a liability to pay an increased level of rent. In addition, I am satisfied that in the present case the plaintiffs will be reliant to some extent on the outcome of the related proceeding to determine the scale of the plaintiffs’ alleged losses against the defendant valuers, Colliers.

[20] This is because, as I understand it, the plaintiffs have sought leave to amend their statement of defence to the landlord defendant’s rent counterclaim in the related proceeding to include complaints against the landlord relating to the rent review. This application for leave I am told was refused by Associate Judge Doogue in a decision given on 13 December 2010 but his decision is the subject of an appeal to the Court of Appeal. Before me Mr Keene for the plaintiffs indicated that if this appeal is successful, and he has some hope that this may be the case, then the November 2011 hearing of the related proceeding will address aspects of the landlord’s actions relating to the rent review and, in that event, Mr Keene acknowledged before me that a temporary stay of the present proceeding would be appropriate.

[21] In his making that generous concession, I nevertheless share the views expressed by Mr Keene. That is to the effect that, if the hearing of the related proceeding in November 2011 is to address possible liability on the part of the landlord for damages relating to the rent review complaints, then this needs to be disposed of first before the present proceeding is disposed of.

[22] That said, the application by the defendant before me for a stay of this proceeding pending the final determination of the pre-existing litigation between the plaintiffs and CP Holdings Limited and Capital Hospitality Holdings Limited, CIV-

2006-404-4739 the related proceeding succeeds. An order is now made staying this proceeding on this basis or until any earlier further order of this Court is made.

Application to Hear Proceedings Together

[23] That leaves for consideration the defendant’s oral application before the Court that the present proceeding should be heard at the same time as the related proceeding. This application is also brought effectively under r 10.12 High Court Rules on the basis that both proceedings are claimed to deal with the same key events relating to the failure of the motel. Mr Keene for the defendants contended also that any damages that might be awarded in either proceeding are likely to be directly affected by how much should be apportioned between the landlord defendant in the related proceeding and the valuer defendant, Colliers, in this proceeding. He argued that it is desirable that the same judge should consider the damages to be awarded in each matter (if any) at the same time. His contention is that here we have a situation where the same plaintiff is suing different defendants for damages arising out of the same occurrence and these proceedings should therefore be heard together.

[24] On these aspects I have some difficulty with the arguments advanced by Mr Keene. The present claim against the valuers, Colliers, relates to their alleged negligence in completing the rent review valuation. The action by the plaintiffs in the related proceeding, however, as I understand it is considerably wider making a range of allegations including failure on the part of the landlord to observe the terms of the lease by promptly remedying leakage issues which ultimately lead to catastrophic consequences for the plaintiff.

[25] It is clear to me also that the two proceedings in issue here are now at very different stages of readiness for trial. The related proceeding as I have noted above, is to be the subject of an 8 day trial commencing 21 November 2011, a little over 4 months away. The present proceeding, however, is now the subject of a detailed and

amended statement of claim filed by the plaintiffs only today. Readiness for trial is clearly a recognised factor which weighs against orders for hearing related proceedings at the same time – Ward v Genesis Equipment & Manufacturing Incorporated HC, Auckland, 30 October 2006, CIV-2005-404-1686, Courtney J and Easton v Larsen HC, Palmerston North, 3 September 2010, CIV-2009-454-549, Associate Judge Abbott.

[26] I am also satisfied that the defendant in this proceeding Colliers would have little relevant knowledge of the matters at issue in the related proceeding against the landlord and, other than relating to its specific rental valuation, could not make a contribution to that proceeding. This would, in my view, lead to considerable time and cost being incurred on the part of the defendant here.

[27] Next, as I have noted the present proceeding is now the subject of a detailed amended statement of claim by the plaintiff. The defendant clearly needs time to respond to this statement of claim and to properly prepare its defence to the case against it. To some extent, the defendant, Colliers, in my view might be subject to some prejudice if it was required to accelerate the work needed for its new defence and to properly meet all of the requirements of the approaching 21 November 2011 trial date.

[28] If an order is made to hear both matters together, the allocated trial date it seems from counsel’s submissions would need to be vacated and a new trial date set. This is because the 8 days allocated for trial would be insufficient if both matters were to be heard together. Given that the related proceeding was commenced in the vicinity of 5 years ago and it seems it has experienced a chequered career since, in my view that is scarcely desirable here.

[29] Lastly, I note that the second plaintiffs in each proceeding are legally aided. It is my view that the best use of costs for both these impecunious litigants and the defendants in each proceeding will result if the related proceeding against the landlord is disposed of first, which might also possibly deal with a range of issues concerning the rent review claim, and then the present proceeding which may well be somewhat narrowed is to follow.

[30] And in conclusion, in my view there is also a possible attendant risk as McGechan on Procedure notes at para 10.12.03(3)(d), that confusion, prejudice or even oppression might result to one or more of the parties to the related proceeding and more particularly the present proceeding from the complexity that would arise from a consolidated proceeding or hearing the proceedings together. By this I do not conclude that necessarily evidence admissible in one proceeding would not be admissible in the other but indeed, as I see the position, the related proceeding involving the claim against the landlord with its leakage questions should not be permitted here to confuse the discreet action against the defendant, Colliers, relating solely to their valuation.

[31] For all these reasons, I decline the application by the plaintiffs to have the present proceeding heard with the related proceeding which would necessarily mean that the 21 November 2011 hearing date for the related proceeding would be lost.

Costs

[32] As to costs, neither counsel made submissions to me regarding the issue of costs on the applications before me. If counsel are unable to agree on the issue of costs, then they may file memoranda sequentially which are to be referred to me and, in the absence of either party indicating they wish to be heard on the matter, I will decide the question of costs on the basis of the material before the Court.

‘Associate Judge D.I. Gendall’