McDiarmid v Crum [2012] NZHC 1624 (9 July 2012)

Last Updated: 20 July 2012

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2012-488-59 [2012] NZHC 1624

IN THE MATTER OF of an Interlocutory Application for

Summary Judgment

BETWEEN MALCOLM JOSEPH MCDIARMID, JOSEPH MCDIARMID, TOMEIKE MCDIARMID AND H & A TRUSTEE COMPANY LIMITED

Plaintiffs

AND MATTHEW JOHN CRUM First Defendant

AND IAN PHILIP SCOTLAND Second Defendant

Hearing: 9 July 2012

Counsel: A Holgate for Plaintiff

A Easterbrook for Second Defendant

Judgment: 9 July 2012

ORAL JUDGMENT OF TOOGOOD J [SUMMARY JUDGMENT APPLICATION]

Solicitors:

G Swanepoel, SwanLaw, Whangarei: [e-mail]

A Easterbrook/W McKean, Webb Ross, Whangarei: [e-mail] [e-mail]

Copy:

A Holgate, Whangarei: [e-mail]

MCDIARMID & ORS V CRUM & ANOR HC WHA CIV-2012-488-59 [9 July 2012]

[1] The plaintiffs sue the second defendant, Mr Scotland, on the basis of a settlement agreement to which they say Mr Scotland was a party, and they seek summary judgment. Mr Scotland denies he was a party to the agreement and says that, at the very least, he has an arguable defence to the plaintiffs’ claim.

[2] This proceeding arises from claims before the Weathertight Homes Tribunal, under the Weathertight Homes Resolutions Services Act 2006, in which the plaintiffs sought compensation from a number of parties who were involved in the construction of a residential property at Matapouri. The parties included a Mr Crum, the director of one or two construction companies who had contracted to build the dwelling house, and Mr Scotland who was employed as a construction supervisor by one or both of the construction companies. Including Mr Crum and Mr Scotland, there were a total of 16 parties to the claims for compensation before the Tribunal.

[3] It appears from the evidence that Mr Scotland did not take any formal steps in the Tribunal proceedings, although he did apparently participate in a telephone conference related to it.

[4] The Tribunal proceedings went to mediation. Mr Crum attended with his lawyer, and Mr Scotland attended also. It seems likely, although it is not clear on the papers before me, that other respondents also took part in the mediation. The mediation itself did not produce any resolution of the plaintiffs’ claims and the claims were set down for a hearing before the Tribunal on 8 August 2011.

[5] After the mediation, Mr Crum apparently told Mr Scotland that he was going to organise things himself without a lawyer. Mr Scotland says in his affidavit in opposition to the summary judgment application that Mr Crum told him the construction company would settle any liability which he - that is, Mr Scotland - had to the plaintiffs.

[6] The plaintiffs allege that after the mediation and only a few days before the planned Tribunal hearing, Mr Crum and the other respondent parties reached a settlement with them and signed a settlement agreement dated 5 August 2011. Under

that agreement each of the respondents accepted some liability to make payments to the plaintiffs. The agreement itself was conditional upon the plaintiffs receiving a compensation payment from the Government scheme for compensation in such cases.

[7] In terms of the settlement agreement, Mr Crum, Mr Scotland and the two construction companies of which Mr Crum was a director, were committed to joint and several liability to pay the plaintiffs the sum of $55,000. That meant, in effect, that Mr Scotland would be liable to meet any liability up to that sum not met by either Mr Crum or his two companies. The agreement was signed by Mr Crum on behalf of the companies and himself, and he also placed his signature in the space for Mr Scotland’s signature adding the words “As Agent” beneath.

[8] The plaintiffs allege that the settlement agreement became unconditional at the end of October 2011 and they discontinued early in November the proceedings before the Tribunal. At the same time they requested payment of the $55,000 from Messrs Crum and Scotland and the two construction companies. Despite those and subsequent demands the plaintiffs have not been paid by any one of the four parties mentioned. These proceedings were issued against Mr Crum and Mr Scotland on

3 February 2012, the two companies being in liquidation. It seems that Mr Crum has no money either and there are bankruptcy proceedings against him.

[9] The plaintiffs have turned their attention to Mr Scotland, alleging that he is liable under the agreement notwithstanding that he did not actually sign it. They submit that Mr Scotland clothed Mr Crum with apparent authority to settle the claims by the plaintiffs on Mr Scotland’s behalf. They say that they reasonably inferred that to be the position; first, from his participation in a telephone conference with the Tribunal; second, from attending the mediation in circumstances where they believed Mr Crum, Mr Scotland and the two companies were acting together in concern; and third, they say that they infer that Mr Scotland had appointed Mr Crum his agent from Mr Scotland’s accepting Mr Crum’s assurance that the construction company would settle any liability Mr Scotland had.

[10] The plaintiffs point to a number of things done by Mr Scotland, namely participation in the telephone conference and the attendance at mediation, but particularly, by what was done by Mr Crum. First, in signing a notice of change of representation in the Tribunal proceedings in which Mr Crum gave notice that his former solicitor was no longer acting on behalf of Mr Crum, Mr Scotland and the two companies, and that Mr Crum would be representing himself, Mr Scotland and the companies. Then they have Mr Crum’s conduct at the time the settlement agreement was entered into the terms of the agreement, including a warranty that the parties were authorised to act; and then Mr Crum signing the document as agent for Mr Scotland. Against that background they say they were entitled to assume that Mr Crum had Mr Scotland’s authority to settle because Mr Scotland did nothing to disabuse them of that position. They say that they have acted to their detriment in relying upon the reasonable assumption that Mr Scotland had authorised Mr Crum to act and that it is too late now for Mr Scotland to deny that authority.

[11] Mr Scotland’s defence to the claim in this Court is quite simply that he never authorised Mr Crum to represent him in signing any settlement agreement. In his affidavit he says that after the failed mediation Mr Crum had told him he was going to organise things on his own without a lawyer and that Mr Crum would ensure that the construction company would settle any liability Mr Scotland had. He then says

this:[1]

11. I don’t know what occurred which led to the Settlement Agreement dated 5 August 2011 being drafted and signed. I wasn’t aware of the terms of the Settlement Agreement. I did not sign the Settlement Agreement. The signature above my name on the Agreement attached to the McDiarmid affidavit dated 3 February 2012 (exhibit C) is not mine. I did not give anyone authority to sign on my behalf.

12. I have never accepted I am liable to the plaintiffs for alleged defects in the construction of their home.

[12] Whether Mr Scotland did anything which gave rise to a reasonable assumption on the part of the plaintiffs that Mr Crum was authorised to enter into the

_{settlement agreement on Mr Scotland’s behalf is essentially a question of fact.}

[13] Under r 12.2 of the High Court Rules the Court may give judgment against a defendant if the plaintiff satisfies the Court that there is no reasonable ground of defence and no real question to be tried. The plaintiffs’ case rests almost entirely, if not entirely, on the drawing of inferences from actions taken by someone other than Mr Scotland. Mr Holgate has frankly accepted that the plaintiffs’ case rests on the argument that Mr Scotland, in the circumstances known to the plaintiffs, ought to have expressly indicated that anything Mr Crum did was not being done on Mr Scotland’s behalf. That argument depends, at least in part, on proof that Mr Scotland knew about the post-mediation negotiations which must have taken place leading to the settlement agreement in that he knew there was a possibility of settlement and that he might be implicated in it in some way. There is little evidence of that at this point.

[14] In the circumstances I am more than satisfied that Mr Scotland has an arguable defence. The application for summary judgment is accordingly dismissed.

[15] Costs are reserved on this application. Scale 2B is the appropriate allocation for the assessment of costs. Counsel are to confer. If they cannot agree on costs, the second defendant shall file an application within 10 days after the date of this judgment. The plaintiffs shall have a further 10 working days to file submissions in response.

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Toogood J

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[1] Affidavit of I Scotland dated 1 March 2012, paras 11-12.