Carroll v Wellington City Council [2012] NZHC 3441 (12 December 2012)

Last Updated: 3 February 2013

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-485-001387 [2012] NZHC 3441

BETWEEN ANDREW JOHN CARROLL, MELISSA MARIE CARROLL AND PETER JOHN MCLAREN

Plaintiffs

AND WELLINGTON CITY COUNCIL Defendant

AND GARY GEORGE CRAIG First Third Party

AND INTEGRATED PROTECTION SERVICES LIMITED

Second Third Party

AND EQUUS INDUSTRIES LIMITED Third Third Party

Hearing: 12 December 2012

Counsel: No appearance for Plaintiff

No appearance for Defendant

No appearance for First Third Party

No appearance for Second Third Party

Q A M Davies for Third Third Party

Judgment: 12 December 2012

Reasons: 17 December 2012

In accordance with r 11.5 I direct the Registrar to endorse this judgment with the delivery time of 2.45pm on the 17th day of December 2012.

_{REASONS FOR JUDGMENT OF COLLINS J}

CARROLL V WELLINGTON CITY COUNCIL HC WN CIV-2010-485-001387 [12 December 2012]

[1] On 12 December 2012 I granted:

(1) an application by Equus Industries Ltd (Equus) substituting Equus as the defendant in this proceeding by way of a new party order;[1] and

(2) judgment by default in favour of Equus against the first and second third parties (Mr Craig and Integrated Protection Services Ltd (Integrated)).

[2] I now briefly explain the reasons for my decisions.

Background

[3] The plaintiffs are the trustees of the Carroll Family Trust (the Trust). They own a house on land located at 16 Captain Edward Daniel Drive, Ngaio, Wellington (the property).

[4] On 20 July 2010 the Trust commenced a claim in relation to leaks in the property. The defendant was the Wellington City Council (WCC). The claim alleged that WCC had failed in its duty to exercise reasonable skill and care when issuing a building consent, conducting inspections and issuing code compliance in relation to the property.

[5] WCC filed a statement of defence and issued third party claims against Mr

_{Craig, Integrated and Equus.}

Mr Craig/Integrated

(1) Mr Craig is the sole director of Integrated. Mr Craig/Integrated carried out remedial plastering and waterproofing work at the property. It was also pleaded that Mr Craig/Integrated provided a guarantee for this work.

(2) Mr Craig/Integrated owed a duty of care to the Trust, and that if WCC were liable to the Trust then WCC was entitled to an indemnity and/or contribution from Mr Craig/Integrated.

(3) Mr Craig/Integrated misrepresented to WCC their remedial work was carried out in a way which met WCC’s concerns and that all products were applied in accordance with the manufacturer’s specifications.

Equus

(4) Equus manufactured and supplied the cladding system to the property.

It owed a duty to to WCC and the Trust, to ensure that the work performed at the property was carried out in accordance with the Building Act 1991 and/or the New Zealand Building Code.

(5) In December 2002 Equus misrepresented to WCC that the cladding and waterproofing was undertaken with reasonable skill and care and in accordance with its specifications and the New Zealand Building Code.

(6) That WCC was entitled to an indemnity and/or contribution from

Equus.

[7] The essence of the third party claim against Mr Craig and Integrated was that

WCC had relied on representations from Mr Craig and Integrated and that a cladding

system supplied by Integrated complied with the Building Code. The third party claim alleged that the representations made by Mr Craig and Integrated were not true and that it was foreseeable that if WCC relied on those representations it would be liable to plaintiffs such as the Trust.

[8] Equus filed a statement of defence. Neither Mr Craig or Integrated have taken any steps in the proceeding notwithstanding the fact that they were served with the proceeding.

[9] On 13 February 2012 a settlement was achieved between the Trust, WCC and Equus. That settlement involved Equus contributing $175,000 to the settlement sum of $850,000 paid by WCC and Equus.

[10] As part of the settlement WCC’s third party claims against Mr Craig and

Integrated were assigned to Equus.

[11] I will return to the facts later in this judgment.

New party order

[12] Equus applied to be substituted as the defendant in order to enable Equus to pursue WCC’s claim against Mr Craig and Integrated. Becoming substituted as defendant would also enable Equus to recover from Mr Craig and Integrated the

$175,000 it paid the Trust in settlement of the Trust claim against WCC.

[13] Equus has been assigned WCC’s rights to pursue the third party claims that WCC had against Mr Craig and Integrated. In effect, Equus wishes to continue the WCC proceeding against Mr Craig and Integrated by becoming the substituted defendant.

[14] The new party order application is made pursuant to r 4.52 of the High Court

Rules. Those rules provide:

4.52 New parties order

(1) Subclause (2) applies if, after a proceeding has commenced, there is an event causing a change or transmission of interest or liability (including death or bankruptcy) or an interested person comes into existence, making it necessary or desirable—

(a) that a person be made a party; or

(b) an existing party be made a party in another capacity.

(2) An application without notice may be made for an order that the proceeding be carried on between the continuing parties and the new party (a new parties order).

(3) The new parties order must, unless the court otherwise directs, be served on—

(a) the continuing parties to the proceeding; and

(b) each new party, unless the person making the application is the only new party.

(4) The new parties order is binding on a person served from the time of service.

(5) A person who is not already a party who is served with a new parties order must file a statement of defence in the same time frame and manner as a person served with a statement of claim.

[15] There are two issues raised by the present application:

(1) Is WCC’s third party claim against Mr Craig and Integrated

assignable?

(2) If so, has there been a valid assignment to Equus?

Is the third party claim assignable?

[16] WCC’s third party claim against Mr Craig and Integrated was based on two

causes of action:

(1) breach of a duty of care which Mr Craig and Integrated owed the Trust. WCC sought contribution from the third parties under s 117(c) of the Law Reform Act 1936;

(2) negligent misstatement based on a duty of care owed by Mr Craig and

Integrated to WCC.

[17] The third party claims are assignable if they are choses in action.

[18] Dr Fenton, the author of Garrow & Fenton’s Law of Personal Property in New Zealand explains the concept of a chose in action was once illustrated by reference to four illustrative categories, namely:

(1) debts;

(2) property not capable of physical possession; (3) equitable rights to property; and

(4) rights enforceable by action.

[19] However, these categories were always presented as convenient examples rather than as a limiting definition. Dr Fenton explains that now:

... the concept of a [chose in action] should be seen as pervasive, all- embracing and, subject to its own definitional restraints, almost unlimited in scope.

He explains that new choses in action are “constantly evolving”.[2]

[20] I am satisfied that rights to continue enforceable claims by action fit comfortably within the concept of a chose in action where the assignee’s claim is limited to the amount that they have paid or are liable to pay.[3]

[21] Furthermore, holding that assigned causes of action are assignable choses in action in this case does not offend the rules against maintenance and champety. This

_{is because:}

(1) Equus’ claim in the assigned action is limited to Equus’ liability to the

Trust;

(2) Equus had a genuine commercial interest in completing settlement and taking the assignment.[4]

Has there been a valid assignment?

[22] Under ss 50 and 51 of the Property Law Act 2007 it is no longer necessary for notice to be given to the debtor in order to perfect an assignment. Furthermore, if the assignment is in writing no inquiry into consideration is necessary. I was satisfied that the assignment in this case was in writing and meets the statutory requirements for a valid assignment.

[23] I accordingly ruled that Equus be substituted as defendant in the proceeding.

Judgment by default

[24] I read and considered the evidence for WCC and Equus which establishes that:

(1) Mr Craig and Integrated carried out remedial and plastering work at the property in 2002;

(2) Mr Craig and Integrated provided a guarantee to the Trust that the plastering and waterproofing work was in accordance with the manufacturer’s specifications, and was carried out in accordance with the Building Act 1991 and the relevant Building Code;

(3) Mr Craig and Integrated provided assurances to the WCC that the remedial plastering and waterproofing work that was carried out at

_{the property was undertaken in a manner that addressed WCC’s}

concerns about the adequacy of the remedial plastering and waterproofing work;

(4) In fact the remedial plastering and waterproofing work was not carried out in accordance with the manufacturer’s specifications and/or in accordance with the Building Act 1991 and the relevant Building Code.

[25] I was also satisfied that Mr Craig and Integrated owed a duty of care to the Trust and WCC and that they breached those duties. In breaching their duties Mr Craig and Integrated contributed to the losses suffered by the Trust.

[26] I was also satisfied that the settlement achieved between the Trust, WCC and Equus was fair and reasonable in the circumstances and that, had this matter proceeded to the point where it was necessary to give judgment, then Mr Craig and Integrated would in all likelihood have been liable to both the Trust and WCC.

[27] In these circumstances I considered it appropriate to give judgment to Equus as substituted defendant against Mr Craig and Integrated for the undisputed sum of

$175,000.

_{[28] Equus is entitled to costs on a scale 2B basis.}

_{D B Collins J}

Solicitors:

Grimshaw & Co, Wellington for Plaintiffs

Heaney & Co, Auckland for Defendant

Gascoigne Wicks, Blenheim for Third Third Party

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[1] High Court Rules, r 4.52.

[2] Garrow & Fenton’s Law of Personal Property in New Zealand (7th ed, LexisNexis, 2010,) vol 1 at [9.11].

[3] See for example, Fris Company Ltd (formerly The Northern Clinic Medical and Surgical Centre

Ltd) v Kingston HC Auckland CIV-2010-404-968, 24 May 2011.

[4] Refer Auckland City Council as Assignee of Body Corporate 16113 v Auckland City Council

[2008] 1 NZLR 838 (HC) at [47].