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High Court of New Zealand Decisions |
Last Updated: 28 July 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-044-999 [2012] NZHC 1589
BETWEEN BODY CORPORATE 173457
Plaintiff
AND JOY FLORENCE DESPY AND GARY JAMES DESPY
Defendants
Hearing: 11 May 2012
Appearances: Mr Bowler for plaintiff
Mr Bennett by consent for first and second named defendants
Judgment: 19 July 2012
JUDGMENT OF ASSOCIATE JUDGE DOOGUE
This judgment was delivered by me on
19.07.12 at 10 a.m., pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date...............
Solicitors:
Grove Darlow & Partners, P O Box2882, Auckland – trentb@grovedarlow.co.nz
J Despy and G Despy, 109 Roseberry Avenue, Birkenhead, Auckland
BODY CORPORATE 173457 V DESPY HC AK CIV-2010-044-999 [19 July 2012]
[1] This proceeding started life in the District Court at the North Shore. It was later transferred to the High Court.
[2] The parties had already been involved in proceedings in the District Court on the one previous occasion, which resulted in judgment being entered against the defendants for the amount of $70,493.95.
[3] The background to the proceedings is that the defendants own one of the apartments, Unit D in a complex at 68 Mokoia Road, Birkenhead, Auckland. The property was discovered to be subject to water ingress. The Body Corporate (the plaintiff in this case) took steps to have the property repaired. Both privately owned parts of the property and common property required repairs.
[4] In order to expedite the repairs, the plaintiff sought and obtained from the High Court an order approving a scheme under s 48 of the Unit Titles Act 1972 (“the Scheme”).
[5] Dealing with this matter has not been easy for several reasons. Even though the proceeding does not involve a very large sum, the litigation has gone on for over a year and a half, and several hundred pages of documents have been filed. A large volume of documents have been filed. Many documents that are not legally admissible have found their way onto the file. The difficulties were compounded by the fact that the defendants have changed legal advisors on several occasions and did not have counsel at the hearing. Further, the plaintiff did not provide a comprehensive indexed and paginated bundle of all the pleadings for the hearing. It produced a bundle containing only those documents that it had filed itself.
[6] While the defendants were not represented by legal counsel at the hearing before me, the situation was relieved to some extent when the first defendant sought leave for Mr Bennett to represent her. I granted leave for that to occur, even though Mr Bennett does not hold a current practising certificate. He is, however, a qualified lawyer who has some litigation experience. The result was that the Court was assisted by Mr Bennett’s submissions. As a result of his assistance, the scale of the
matters that were disputed was reduced to a manageable level and presented in a coherent order. I should add that the second defendant told me that he would ally himself with the submissions that Mr Bennett was to make for the first defendant. I have proceeded on that basis.
[7] In this proceeding, the plaintiff seeks to recover:
(i) The balance of a $15,990.00 levy after a $8,673.20 credit from a final wash-up of costs, leaving $7,316.80 payable;
(ii) $1,162.58 of solicitor and client costs incurred by the plaintiff and payable by the defendants after debt recovery action;
(iii) Interest at the rate of 10 per cent per annum on unpaid levies up until
31 January 2010 of $4,817.42
(iv) Costs incurred by the Body Corporate Secretary in collating the information for debt recovery action of $967.50.
together with indemnity costs and interest on (i) thereon.
[8] The plaintiff says that the basis for its claim is: (i) The Unit Titles Act; and / or
(ii) The scheme that was approved under the Unit Titles Act; and / or
(iii) The Body Corporate rules; and / or
(iv) The Body Corporate resolutions.
[9] The plaintiff contends that it is entitled to seek interest pursuant to r 3(a) of the Body Corporate rules. The plaintiff says that it is entitled to borrow money where necessary to fund an outstanding balance. The plaintiff further contends that interest can be charged at 10 per cent per annum pursuant to s 34A of the Unit Titles Act.
[10] Part of the amount sought to be recovered is identified as:
Final Special Levy final payment for remedial works
pursuant to scheme $7316.80
[11] The notice of opposition states the following grounds of defence so far as they relate to the special levy:
a) That the final special levy was an unnecessary and excessive and therefore not authorised by the Scheme; and
b) That in any event, it is extinguished by money due and owing to the defendants under the Settlement Agreement entered into between the plaintiff and the named unit owners of the plaintiff and the North Shore City Council dated 23 July 2009, to which the defendants are a party.
[12] The levy in question was imposed by the committee of the Body Corporate by a resolution passed at a meeting 24 September 2009. The committee resolved:
That a special levy of $615,000 be raised for payment by 31 October 2009. It was agreed that the owners who were involved in the litigation would make payment from their share of the litigation fund, whilst the three owners not involved in the litigation would need to pay the Body Corporate direct.
[13] The validity of this special levy must be considered.
Application for leave to bring summary judgment application
[14] The plaintiff has filed an application for leave to bring a summary judgment application. The defendants oppose this application.
[15] I will first consider the procedural issues in the case, before inquiring into the merits of the application.
Procedural matters
[16] At the half-day hearing conducted before me procedural difficulties emerged. In short, it became apparent that it was very difficult to deal with a summary judgment application at the point the file was placed before me for consideration on
11 May 2012. The main difficulty is the form of proceedings adopted in the District
Court by reason of the District Court Rules 2009.
[17] I have had earlier occasion to comment on the procedural incongruity between the proceedings filed in accordance with the District Court Rules and the High Court Rules. In that case, the proceedings had been commenced by notice of claim in the District Court, and transferred to the High Court pursuant to s 43(1) of the District Courts Act 1947).[1] I issued a minute directing the plaintiff to file a statement of claim that accords with the High Court Rules. Though there is no requirement in the High Court Rules to this effect, I consider that directions of the kind that I gave in Icepak are justified by r 1.6(2). It remains my view that on
transfer of a civil general proceeding to the High Court, a statement of claim must be filed so that the proceedings are from that point on in step with the High Court Rules. Had a proceeding of the kind under consideration in this case been commenced in the High Court, a statement of claim would have been required under r 5.25.
[18] Rule 12.4 (5)(b) requires that an affidavit be filed verifying the statement of claim. Of course it will not be possible to comply with that requirement if no statement of claim has been filed in the proceedings. The elements of a statement of claim are identified in Part Five of the High Court Rules. I have given consideration to rejecting the application for summary judgment in this case for the reason that the Rules have not been complied with. I was deflected from such an outcome by four considerations:
a) the defendants did not take the point;
d) the adoption of the notice of claim type procedure in the District
Court has resulted in the procedural lacuna in cases where
proceedings are transferred from the District Court to the High Court. That problem, I understand, will at some time in the future be eased with the reinstatement of traditional summary judgment procedures in the District Court.
[19] The fact that I have taken that course in the present case should not be viewed as an indication that in future cases the Court will treat the procedural path that has been followed in this case as involving an irregularity only.
Summary judgment principles
[20] I intend to be guided by the following passage from the judgment of the
Court of Appeal in Krukziener v Hanover Finance Ltd:[2]
[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1; (1986) 1 PRNZ 183 (CA) at p 3; p 185. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331; [1979] 3 WLR 373 (PC), at p 341; p 381. In the end the Court's assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[27] Under r 141A the defendant need not file a statement of defence.
The onus remains on the plaintiff, and summary judgment will be denied if on the hearing of the application it appears that there is an
issue worthy of trial.
The claim to recover a proportion of special levy
[21] In August 2007, the plaintiff applied to the High Court and obtained an order approving a Scheme, under s 48 of the Unit Titles Act. As Mr Bowler for the plaintiff pointed out, recital 4.1 of the Scheme authorised the plaintiff to levy and collect from each owner from time to time as may be necessary for undertaking and completing the repairs to the property, in such proportion as between the owners as the plaintiff shall decide.
[22] Recital 4.2(b) of the Scheme authorised the plaintiff to demand payment of such levies from each owner in amounts and at times that the plaintiff may from time to time determine.
[23] Recital 4.2(c) of the Scheme authorised the plaintiff to sue or take other steps to recover from any owner who fails to pay their levies.
[24] It was stated at paragraph G of the preamble that:
It is recognised that once work has commenced on the Initial Repairs, and internal aspects of the building presently concealed, are exposed in the course of those Initial Repairs, further damage may be discovered that requires repair. It is intended that the term "Repair" in this Scheme refer to all repairs at whatever stage those repairs are identified...
[25] Paragraph H of the preamble provided:
It is further recognised that once the scheme is sanctioned and the process is set in motion for the Repairs it will be impractical to stop the process, and Owners will be committed to having the Repairs completed.
[26] In recital 1.2 of the Scheme, the plaintiff was appointed the agent of each owner with authority to authorise, commit and undertake on behalf of each owner the repairs and to collect all costs in effecting those repairs. In recital 1.3, it was provided that the plaintiff had the irrevocable authority on each owner’s behalf to manage, approve and commit each owner to that owner’s proportion of repairs, including repairs to relevant private property. The Scheme further provided that the plaintiff would have power to engage suitably qualified persons to identify and quantify the extent of the repairs, to let the contract to contractors and tradespeople and to sign all necessary building contracts, and so forth.
[27] In short, the plaintiff’s authority was in wide and comprehensive terms, and it bound all the owners, including the defendants, from the time the Scheme was approved.
[28] Preamble G anticipated that concealed defects might be revealed as the works progressed. The situation anticipated became a reality.
[29] Throughout the remedial works, the plaintiff was advised by architects and by quantity surveyors. The architects were a firm called Babbage Consultants. On
23 October 2009, Babbage Consultants wrote to the plaintiff’s managers on the subject of cost overruns that had occurred with the building. They discussed the fact that the original contract price for the works was approximately $1,500,000. However, after the addition of certain further contingency amounts, the price for the works became $1,900,000. At the date of the letter, the cost had risen to $3,137,000. The discrepancy between the figures was explained by Babbage as resulting from a number of factors:
a) The very poor quality of the building. It had been a warehouse before conversion to residential purposes. The poor quality only become gradually apparent as remediation work progressed.
b) The extent of the remediation work also increased as the building was opened up. The specifications in the original contract needed to be varied.
c) There were difficulties in working around some uncooperative tenants.
[30] Essentially, the point that the architects took was that the work had to be done in any event and, at least implicitly, the vastly increased cost was justified, even if unexpected.
[31] The cost overrun was commented on by the quantity surveyors in a letter to the plaintiff’s manager dated 8 April 2009. They noted that there had been a cost overrun of $1,137,965.80.
[32] The nub of the argument presented for the defendants was that by the date the committee decided to raise the special levy, the quantity surveyors retained to advise the plaintiff had identified what were believed to be the cost overruns in the project to date of some $724,879. The defendants’ contend that the cost overruns could be equated with excessive payments to the contractors, so that if allowance were made for overpayments, there would have been no need for a special levy.
[33] However the position is not quite so straightforward. The cost overruns spoken of really mean that the works had been to a greater extent than expected, and accordingly, cost more than expected. I accept that an explanation was called for from the experts who were advisers to the project as to how this unsatisfactory state of affairs came about.
[34] But even if there is a possibility that errors of judgment led to the cost overruns of the current scale, that does not decide the real issue, which is whether the defendants have a defence against the claim brought by the plaintiff.
[35] In Mr Despy’s affidavit (sworn on 8 June 2011), he included what amounted to a submission about the merits of the case. I shall reproduce it here because it summarises the differences between the two positions of the parties:
The section 48 order authorised the Body Corporate to levy and charge proprietors for the costs of repairing the Complex only insofar as repairs were “required” and only insofar as money was “required to meet the cost of such repair”... . Thus, to the extent that levies imposed related to repairs or money that was not required, it was not authorised by the Scheme.
[36] It hardly needs to be said that the Body Corporate committee is not directly responsible for the failure on the part of contractors and architects, even assuming that there had been some breach of obligation on the part of other parties so that the full extent of the cost did not become apparent until the repairs were well advanced.
[37] The fact that there have been cost overruns does not mean that the Body Corporate committee was not entitled to levy its members for the full amount. Once work has commenced, it has to be driven through to completion. I have already noted the inclusion in the statement of the Scheme of the preamble in H, which stated that once the process of repairs had been set in motion, it would be impractical to stop.
[38] The plaintiff had to deal with what was in front of it. The alternatives open to it must have been very limited. No doubt the contractor would have been aware of its entitlements under the Construction Contracts Act 2002 to exact payments by means of the processes established under that Act. In his affidavit of 28 March
2011, Mr Leishman, for the plaintiff, has deposed that the special levy had to be raised in order to pay the contractors who would otherwise have walked off the job. I would accept that the plaintiff would at least be required to seek clarification to the best of their ability of why the costs were mounting up and generally to advocate for the owners’ position when dealing with the contractors and retained professional advisers. It would have been unwise for them to waive any rights to revisit the matter of the costs explanations once all the work was completed. The very least that the plaintiff could do would be to keep open its rights to seek recovery of any excess of payment at some point in the future. But there is no reason to believe that they compromised any such entitlement.
[39] The defendants emphasise two specific aspects where construction costs were incurred that were not justified. They referred to where work had been carried out on the roof, and how further and substantial sums were expended a relatively short time later in carrying out more repairs. They also take the view that there were duplicated costs incurred in respect of the shear walls at the construction site.
[40] My conclusion is that he statement of opinion contained in Mr Despy’s affidavit set out above also oversimplifies the position. It cannot have been the overall intention of the Scheme that as work progressed (work that had been authorised by the plaintiff, and the individual owners so far as their private property was concerned) that each owner was entitled to make a judgment whether any particular levy would be paid. Such a view, if correct, would make the Scheme
unworkable. The Scheme established a bipartite structure. First, the plaintiff was appointed to represent the individual owners for the purposes of remedying the problems with the building. The plaintiff’s function, in substance, was to act as agent of the owners in arranging the repairs. Secondly, the construction company would be entitled to treat the plaintiff as having express authority to negotiate the conditions of the contract and to generally deal with it on other matters of charges, the standard of the work, and so forth.
[41] In relation to the owners, the plaintiff had authority to recover by levy sufficient funds to cover all the obligations that it had entered into with the contractors.
[42] Under recital 10.1 of the Scheme, the owners were entitled, in the event of disagreement, to invoke an arbitration provision. But they were not entitled to withhold levies on the basis that an objection was pending under the dispute resolution mechanism. The owners gave an indemnity to the plaintiff, which was in wide terms, though the indemnity excluded from its scope “any act or omission done fraudulently or with wilful misconduct”.
[43] The extent of the indemnity would rule out the possibility that an owner could be excused from meeting levies because he or she considered that the committee had incurred a commitment negligently, or as a result of a mistake or an error of judgment.
[44] While such an outcome might appear unduly onerous to the defendants, it was necessary to have such arrangements included in the Scheme, otherwise the reinstatement of the building would be unworkable. That is the price that the defendants and the other owners paid to extricate themselves from the unfortunate circumstances in which they found themselves.
Stay Application
[45] The plaintiff has applied for a stay of any claim on the part of the defendants, on the grounds that the matters raised in dispute are covered by Part 10 of the
Scheme. I have not had the advantage of full submissions on the matter of the stay. As I see it, the issues that arise are as follows.
[46] The defendants are in effect attempting to establish that they have an arguable defence arising from an equitable set-off. If equitable set-off is available to them because, for example, the plaintiff had exceeded its authority, such a set-off would not be negatived by the procedural consideration that the issue had not been ruled upon in the course of alternative dispute resolution (ADR) proceedings. The ADR provisions mean no more than that there are, in this case, dispute resolution arrangements that must be negotiated before the equitable set-off can be converted into a legal one. This does not, however, prevent the Court inquiring into whether there might be an equitable set-off available or not.
[47] However, because there is no evidence of fraud or wilful misconduct on the part of the plaintiff, my conclusion is that the defendants do not have a defence that they do not owe the money, and nor do they have a set-off based upon such matters.
[48] In any case, I do not believe that the defendants are able to point to a basis in the evidence upon which they could mount a claim that the plaintiff caused loss to the defendants through breach of an obligation owed to the defendants. Cost overruns on their own do not provide a basis for such a claim, particularly where, as here, the committee had taken advice from those engaged in building-related professions, whom they could reasonably rely upon to bring to their attention matters such as unjustified duplication of work or double charging.
Accounting issues
[49] The defendants’ position is that the plaintiff’s accounting records are, in any event, so unreliable that the Court would not be justified in entering summary judgment against them for the amounts claimed. They referred me to seemingly conflicting statements of position that had been prepared by the plaintiff’s administrator. The introductory part of the submission for the defendants on this point reads as follows:
not balance, they had no opening balance, running balance or they were different to one another.
[50] The defendants point to a statement of account, apparently printed out by the plaintiff on 1 August 2009, which showed that $75,880.08 was outstanding as part of the special levy, as at 1 June 2008. A second statement, printed on 11 September
2009, identifies an amount of $454.20 outstanding as part of the special levy, as at 1
June 2008. A third statement, printed on 9 February 2011, did not show a figure to be outstanding for the special levy, as at 1 June 2008. Further examination of these statements of account reveal that on their face, they show that the defendants indeed were indebted to the plaintiff at the conclusion of the accounting period covered in the statements. Taking the position, as set out in two of the accounting records that Mr Bennett referred to, the following closing accounts in the period are as follows:
8 September 2009
3 February 2011
$62,197.60
$20,946.58
[51] In yet another accounting statement purporting to show the account balance from the period 1 June 2008 to 23 March 2011, the closing balance is shown, as a debit, of $21,052.81.
[52] Against this, there is a specific assertion made on oath by Mr Leishman, the plaintiff’s secretary, that as at 25 March 2011 (the day he swore his affidavit), the defendants were indebted to the plaintiff in the sum of $14,350.51.
[53] The inconsistencies do not necessarily mean that the amounts the plaintiff now claims have been incorrectly calculated. As a matter of general approach, and where a balance is claimed following extensive and complex accounting, the Court will generally ask whether it can have confidence in the robustness of the accounting systems and skill and reliability of those whose task it is to maintain them. Caution will be called for when one or more of those elements is not present.
[54] I have not overlooked that in this case, the plaintiff has provided the usual averment on oath verifying the statement of claim and negativing the existence of any defence available to the defendants. In most cases, once the plaintiff has
provided the affidavit just mentioned, the defendant will find itself under an obligation to refer the Court to some material which nonetheless suggests that he or she does have a defence.[3]
[55] In this case, the accounts had been maintained by the plaintiff’s administrator. The administrator is an incorporation managed by Mr Leishman. Mr Leishman has qualifications in, amongst other things, law. He is not an accountant. He, or someone under his instructions, has run data through an accounting software package. He relies upon the result produced as the basis for his evidence establishing that the defendants are indebted to the plaintiff and for the amount of that debt. In this case documents have been produced which give rise to concerns about the accuracy of the plaintiffs accounting records. In the specific circumstances of this case I do not think it would be safe to proceed on the basis that the affidavit verifying the statement of claim and negativing a defence provides justification for entering judgment for the amount claimed.
[56] Without in any way criticising the plaintiff or its advisers, it might have been useful to have the figures checked by a Chartered Accountant, or someone in a similar position, to remove any doubt even though that would add to the expense of the case.
[57] I am left in no doubt that the defendants are actually indebted to the plaintiff. I accept, in other words, that the defendants have been levied for amounts that they have not paid. I agree that there must have been interest added to these unpaid amounts.
[58] It is not clear on the evidence before me and on the arguments that have been presented whether interest charges on borrowings from third parties can be passed on to the defendants. That would depend upon whether the plaintiff had authority to borrow from third parties. In this case, the plaintiff borrowed money from a Lower
Hutt law firm.
[59] The Scheme does not expressly refer to the plaintiff’s borrowing powers. The overall structure of the Scheme appears to require the plaintiff to fund its operations out of cashflow derived from levies. However, it is also the case that under s 16 of the Unit Titles Act, body corporates are given all such powers as are reasonably necessary to enable them to carry out the duties imposed by the Act and its rules. The obligations incumbent upon the plaintiff under the Scheme (authorised by s 48 of the Act) would be encompassed within s 16. Although the overall structure of the Scheme depended upon levies to raise money, given that the Body Corporate had to maintain continuity of the work once it had begun, it was not wholly unforeseeable that this requirement would be jeopardised if there was to be a significant withholding of levies — for example, the plaintiff finds itself without sufficient funds to meet current invoices, therefore jeopardising the continuity of the construction work. In those circumstances, a body corporate could well be driven to borrowing funds to bridge the position until it could recover the levies. Borrowing funds to bridge the position is recognised and widely accepted contemporary method for negotiating temporary liquidity difficulties. I do not believe that the legislature intended that it should be excluded from a body corporate’s powers under s 16 of the Act. Interest on borrowings from the law firm is therefore a recognisable expense for which the owners may be levied.
[60] For these reasons, in my judgment, subject to the matters I consider next, this is a case where there ought to be judgment on liability against the defendants.
The contribution and distribution agreement
[61] In their notice of opposition, the defendants say that the plaintiff’s claim:
...[Is] extinguished by money due and owing to the defendants under the settlement agreement entered into between the plaintiff and the named unit owners of the plaintiff and the North Shore City Council dated 23 July 2009 to which the defendants are a party.
[62] The defendants essentially claim that the plaintiff breached its obligations to them when it did not account for a proportion of the amount received by way of settlement from the North Shore City Council that was payable to the defendants, and to that extent, they have a counterclaim that ought to be set off against the amount that the plaintiff now seeks to recover.
[63] The plaintiff accepts that at one point, one of the defendants was included in the group that instructed solicitors to seek recovery for the defective state of the building. Solicitors Grimshaw & Co had been instructed. That firm sent out invoices for their work from time to time, which the plaintiff forwarded onto the owners in the claim group, so that those owners would pay their share of the costs. In his affidavit of 28 March 2011, Mr Leishman deposes that the defendants were levied for their share of the costs from 2007 onwards. I am not clear whether they made any payment or not, but in any event, in October 2008, the defendants were in arrears with their contributions. The plaintiff’s secretary wrote to them, and warned that they could not continue to be represented by Grimshaw’s if they did not pay their share of the costs. The same deponent says that in January 2009, a solicitor who was then acting for the defendants e-mailed him to advise that the defendant no longer wished to be part of the High Court litigation. A copy of the e-mail was produced in evidence. In the e-mail, the solicitors said that the defendants had advised Grimshaw & Co “in late 2007” that they did not wish to participate in the litigation, and yet they were still receiving invoices. Mr Leishman then advised Grimshaw & Co on 25 January 2009 of the position, and invited them to notify when a discontinuance had been filed in the proceedings so far as they related to the defendants.
[64] Given the absence of the documentary evidence to the contrary, I am not prepared to accept that it remains a live issue in the proceeding, and therefore the basis for an arguable defence, that the defendants later reversed the position which they took “in late 2007”.
[65] I understand that the defendants may believe that because they made at least some payment under the contribution and distribution agreement, they are entitled to participate in the amounts recovered. However, this does not give rise to an arguable defence in this proceeding. The reasons for my views are as follows. It is possible that parties to a contract can arrange for its discharge by agreement. In this case, the notification by the defendants that they were no longer willing to be part of the claim against the North Shore Council would seem to have been accepted both by the solicitors who had been instructed to advance the claim, and also by the other parties to the contribution and distribution agreement. The financial consequences of such
an agreement, though, are not straightforward. In order for a party to be entitled to participate in the settlement funds, it would seem to be necessary for that person to have remained a party to the contribution and distribution agreement and to be a member of it at the time when the settlement was reached.
[66] An alternative view is that the defendants repudiated their obligations under the contract they entered into with the other claimant-owners, and the solicitors representing them, and that such repudiation was impliedly accepted through the conduct of the other parties not attempting to take any steps to enforce further contributions on the part of the defendants.
[67] The defendants cannot claim that the other parties to the contribution and distribution agreement, or the plaintiff who held and distributed the funds from settlement, were in breach by not paying to the defendants a portion of the settlement funds. It is possible that the defendants would be entitled to reimbursement of all or part of any contribution that they might have made to the costs of bringing the claim. That, however, would depend upon what the defendants’ contributions were used for. If for example, such contribution as the defendants made were applied as a pro rata share in the costs of an initial enquiry into the feasibility of a claim the owners agreed to commission and the solicitors to undertake, it may be open on the facts that the defendants obtained what they contracted for, namely an investigation of a possible claim and an assessment of the likely merits of it. If that is so, it may well be that such contribution as they made was exhausted by the time when the parties agreed that the defendants would not continue as parties to the action. What would not be correct would be the proposition that once the defendants made any contribution, no matter of what size, they became entitled to a share of the compensation recovered. Such a suggestion is implicit in the cross-claim.
[68] It is no more than a theoretical possibility that they might have such a claim that could be deployed to set off against the plaintiff’s claim. Because of the absence of clarity and certainty about the nature of such a claim and its extent, it
cannot be said that the defendants are able to defeat the summary judgment application on the basis that they have a defence that should go to trial.4
Conclusion
[69] The conclusion that I have reached is that the plaintiff should be granted leave to bring summary judgment proceedings. The application for leave to bring summary judgment proceedings is granted as the liability but liability only. Quantum has not been satisfactorily established.
[70] The parties should provide memoranda not exceeding five pages on each side dealing with the following issues:
a) steps to be taken in the proceeding from this point forward; and b) costs.
[71] Memoranda are to be filed and served within 14 days of the date of this
judgment.
J.P. Doogue
Associate Judge
4 Krukziener v Hanover Finance Ltd, [2010] NZCA 307.
[1] Icepak Group Limited & Anor v QBE Insurance (International) Limited HC Auckland CIV 2011-
004-2704, 2 March 2012.
[2] Krukziener v Hanover Finance Ltd [2010] NZCA 307; (2008) 19 PRNZ 162 at [26]–[27].
[3] Australian Guarantee Corporation (NZ) Ltd v McBeth [1992] 3 NZLR 54 (CA) at 58.
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