Laurenson v Smith & Partners [2012] NZHC 2919 (5 November 2012)

High Court of New Zealand

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Laurenson v Smith & Partners [2012] NZHC 2919 (5 November 2012)

Last Updated: 8 November 2012

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2012-404-001206 [2012] NZHC 2919

BETWEEN ALAN JOHN LAURENSON Plaintiff

AND SMITH & PARTNERS Defendant

Hearing: 5 November 2012

Appearances: A J Laurenson, plaintiff in person

P J L Hunt/A L Priaulx for defendant

Judgment: 5 November 2012

_{(ORAL) JUDGMENT OF ASSOCIATE JUDGE ABBOTT}

Solicitors:

P Hunt/A Priaulx, McElroys, PO Box 835, Auckland

Copy for:

A J Laurenson, 112 Hobsonville Road, Hobsonville, Waitakere

ALAN JOHN LAURENSON V SMITH & PARTNERS HC AK CIV 2012-404-001206 [5 November 2012]

Introduction

[1] This is a claim for alleged negligence in legal services provided to the plaintiff, Mr Laurenson, by the defendant firm, Smith & Partners. The services were provided in relation to a dispute between Mr Laurenson and a co-shareholder in a company, Pali Posts Limited (the company), which arose in 2004. The dispute came before the Court in a proceeding filed by the co-shareholder, a Mr Iremonger, on 29

November 2004 seeking orders under s 174 of the Companies Act 1993. That proceeding was determined by a judgment of this Court given on 16 May 2005.

[2] Mr Laurenson filed this proceeding on 5 March 2012 alleging that the defendant firm was negligent in several respects in its conduct of that proceeding. The firm has applied to strike out the claim on the basis that it is clearly statute barred,[1] and in light of that time bar can properly be regarded as frivolous, vexatious, or an abuse of process.

[3] Mr Laurenson appeared at the hearing. At the end of the parties’ oral submissions I indicated the difficulties that his claim faced. He did not wait to receive this oral judgment.

Background

[4] Mr Laurenson and Mr Iremonger were each directors and 50 per cent shareholders in the company. They ran into difficulties, and Mr Iremonger issued his proceeding on 29 November 2004 seeking orders for Mr Laurenson’s shares to be valued, for Mr Laurenson to offer his shares for sale at the price determined by the valuation and directing the company to purchase the shares and onsell them to Mr Iremonger, and for Mr Laurenson to be removed as a director.

[5] Mr Laurenson sought advice from the defendant as to how he should respond to the claim. The defendant filed a statement of defence on his behalf. In February

2005 the Court ordered a valuation of Mr Laurenson’s shares to be obtained, and directed that a hearing be allocated.

[6] Mr Laurenson provided the defendant with information about an asset of the company which would not appear in the company accounts (an agency for a post- making machine) which Mr Iremonger had taken to a different company. Apart from that he appears to have left matters in the defendant’s hands. In that respect I note correspondence before the Court (to which I will come back) which indicates that the defendant had made it clear to Mr Laurenson that his best response to the claim was to establish finance which might enable him to purchase Mr Iremonger’s shares, or at least assist in getting a realistic price for his shares.

[7] The valuer completed his valuation on 22 April 2005. The matter came back before the Court at the hearing allocated earlier, being 16 May 2005. The proceeding was determined by the making of orders that the company purchase Mr Laurenson’s shares at the price determined by the valuation and onsell those shares to Mr Iremonger, that Mr Laurenson be removed as a director, and that Mr Laurenson pay Mr Iremonger’s costs on a scale basis. There was also an order in respect of the payment of the valuer’s account.

[8] The defendant sent a copy of the judgment to Mr Laurenson on 10 June 2005, and advised him of his appeal rights. Mr Laurenson did not instruct the defendant to appeal.

[9] The judgment was sealed by the Court on 22 August 2005. That included sealing of costs as determined by the Registrar. On the same date Mr Laurenson resigned as a director of the company. His shares were later transferred to Mr Iremonger.

The existing pleading

[10] Mr Laurenson’s claim is put forward in an amended statement of claim dated

11 October 2012. He says that he became a client of the defendant in 2001, and the defendant was instructed that year to form the company. He refers to the proceeding

brought by Mr Iremonger, and states that he consulted the defendant as to the best way to defend that application.

[11] He pleads the following allegations of negligence:

(a) The defendant filed a statement of defence and counterclaim on his behalf, but did not prepare and file an affidavit by him in support of that defence.

(b) After the order had been made appointing the valuer, he provided the plaintiff with the information about the acquisition of the concrete making machine (and the fact that the expenses of acquiring that machine had been paid by the company), and was assured that the defendant would forward that information to the valuer as a factor relating to the value of the shares. This information was not provided to the valuer.

(c) Approximately a month before the hearing, and four days before the valuer produced his valuation, he arranged for an offer by potential investors to be sent to the defendant, which offer was never forwarded to the valuer.

(d) The members of the firm who had been advising him did not appear for him at the hearing (although another employee did).

[12] Mr Laurenson then pleads that the Court gave an oral judgment in favour of Mr Iremonger on 16 May 2005. He acknowledges that the defendant subsequently advised him on the possibility of an appeal and the costs of doing so. He states that he asked the principal of the defendant with whom he was dealing why the counter offer had not been forwarded to the valuer but received no answer.

[13] Mr Laurenson seeks judgment for the losses that he says he has incurred by reason of the alleged negligence. They are the loss of the value of the shares (said to be $468,135.97), the costs awarded against him on Mr Iremonger’s proceeding

($15,895.26) and the loss of business opportunity in respect of the business of the company.

The present application

[14] The defendant says that the claim is time barred by s 4(1)(a) of the Limitation

Act 1950:

4 Limitation of actions of contract and tort, and certain other actions

(1) ... 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:

...

[15] The defendant takes that position on the basis that Mr Laurenson’s loss arose as at the date of the judgment on 16 May 2005, and this proceeding was clearly issued well after six years from that date (the Court record shows that the proceeding was commenced on 5 March 2012).

[16] Mr Laurenson disputes that starting point for the six year limitation period. He argued that the period did not start to run until he was informed by the defendant (by a letter dated 7 March 2006) that the defendant would not enter into any further correspondence with him, because it appeared that he was raising allegations of negligence. Mr Laurenson contended that in the period between receiving advice of the judgment and receiving that letter he had been trying to obtain an explanation from the defendant as to his matters of complaint (summarised above), but without success. As I understood his submission, it was that he was not in a position to take any steps until he had that explanation.

[17] Although strike out applications are usually determined on the basis of the pleadings, both parties have filed affidavits setting out what appear to be uncontroversial facts to assist the Court in understanding the background to the present pleading.

[18] The issue on the present application is whether the claim that Mr Laurenson commenced on 5 March 2012 is time barred.

Principles for strike out

[19] The principles on which a Court acts in deciding a strike out application are well settled,[2] and do not need to be traversed in any detail.

[20] Mr Laurenson did not challenge the summary of the relevant principles provided by counsel for the defendant, which I adopt for the purpose of this application:

(a) the Court proceeds on the basis that the facts pleaded in the statement of claim are true;

(b) the causes of action will be struck out only where they are so clearly untenable that, even on the most favourable interpretation of the facts pleaded or available, they cannot possibly succeed;

(c) the jurisdiction is to be exercised sparingly and only in clear cases where the Court is satisfied that it has both the material and the assistance from the parties required for a definite conclusion; and

(d) an application containing difficult questions of law and requiring extensive argument does not exclude jurisdiction.

The start of the limitation period

[21] I have already set out the terms of s 4(1)(a) of the Limitation Act. The present claim is pleaded as one of negligence. Even if it were to be considered as being capable of being recast as a claim in contract, the same limitation period (six years) applies and the date of breach in any contract claim will be no later than the

_{time that loss was suffered in the tort claim (the date of the adverse judgment).}

[22] I will focus, however, on the pleaded claim in negligence. The law is clear that a cause of action in negligence arises when the plaintiff first sustains a loss attributable to the alleged breach of duty. As a consequence, the question in this case is when recoverable loss attributable to the negligent advice was first suffered.[3]

[23] The cause of action has been said to arise:[4]

... as soon as the plaintiff who relied on the advice is “financially worse off”, even if quantification is difficult and its measure in a particular case may ultimately depend on further contingences.

[24] I have mentioned above that the losses claimed by Mr Laurenson are for the value of shares, the loss of business opportunity that was available from the shareholding, and the costs that were awarded against him. If one turns to the largest of those claims (the loss of value of the shares) it is clear from the independent valuation produced by Mr Laurenson that the loss that accountant was required to calculate was in respect of the defendant’s role “in the events that led to Alan Laurenson’s 500 shares in the company being awarded to Peter Iremonger”. It is also clear from the valuation report that all of the matters that went into the valuation were matters prior to the hearing on 16 May 2005.

[25] The same can be said of the other elements of loss: the loss of business opportunity, which fell away with the order that the shares be transferred, and the costs that were awarded.

[26] In my view, any claim Mr Laurenson had (and I note here that the defendant strongly contests the allegations made by Mr Laurenson about breach of duty) lay in the advice and services provided up to or at the hearing of 16 May 2005, leading to the decision that day. As a consequence the cause of action accrued on that date. To that extent it is time barred, and accordingly must be considered as vexatious or an

_{abuse of process given that it cannot succeed.}

[27] I have also given consideration to Mr Laurenson’s contention that he was not in a position to take any steps in relation to that decision, and perhaps to avert that loss. That contention could be considered in two ways:

(a) First, that there was potential to avert the loss by appeal. This would appear to be on the basis that the information which Mr Laurenson says should have been given to the valuer could, on appeal, have led to a ruling that the valuer revisit his determination. Even if that was an appropriate way to consider the accrual of the cause of action, it does not assist Mr Laurenson in that the appeal period had well and truly expired before he issued this proceeding.

(b) The second possible construction on Mr Laurenson’s contention is that he was insufficiently aware of these issues, and did not reach a point where he had all the possible information until the defendant informed him in March 2006 that it would not engage in any further correspondence. There are two answers to this point. The first is that there is no longer a test of reasonable discoverability generally in

claims for negligence[5] (and the circumstances of this case go nowhere

near any of the exceptional circumstances which might allow extension of the time period on the basis of discoverability). The second is that the facts in the present case would not support any later date in any event: there is no doubt that Mr Laurenson knew what had happened, at the very latest, when he received the judgment in mid- June 2005.

Decision

[28] I take the view that the present claim is clearly time barred, and cannot succeed. It is struck out accordingly.

[29] The defendant has produced a schedule of costs being sought on a scale 2B

_{basis (an amended schedule handed to the Court in the hearing). It appears to be in}

conformity with Schedule 3 of the High Court Rules for a claim for the hearing today (though it contains a claim for a one day hearing (the time allocated) whereas the hearing has only taken half a day). I make an order that Mr Laurenson pay the defendant’s costs on this application on a scale 2B basis, leaving it to the Registrar to

_{finalise the costs on the basis of the (amended) schedule produced by the defendant.}

Associate Judge Abbott

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[1] Limitation Act 1950, s 4(1)(a).

[2] Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.

[3] _{Davys Burton v Thom [2008] NZSC 65, [2009] 1 NZLR 437 at [15].}

[4] Ibid at [16].

[5] Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721 at [69]- [76].