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High Court of New Zealand Decisions |
Last Updated: 12 April 2014
IN THE HIGH COURT OF NEW ZEALAND GISBORNE REGISTRY
CIV-2011-416-211 [2013] NZHC 3244
BETWEEN PROPRIETORS OF MARAETAHA NO.
2 SECTIONS 3 AND 6 BLOCK INCORPORATED
Plaintiff
AND TIMOTHY NOLAN WILLIAMS AND JENNIFER WILLIAMS
Defendants
Hearing: 31 July 2013
Appearances: I Thorpe for plaintiff
R C Laurenson for defendant
Judgment: 5 December 2013
JUDGMENT OF ASSOCIATE JUDGE SARGISSON [on application to strike
out]
This judgment was delivered by me on 5 December 2013 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:................................
Solicitors: Woodward Chrisp, Gisborne
Egan & Kite, Gisborne
PROPRIETORS OF MARAETAHA NO. 2 SECTIONS 3 AND 6 BLOCK INC v WILLIAMS [2013] NZHC
3244 [5 December 2013]
Background
[1] The plaintiff is an incorporated body and the proprietor of the
land known as “Greenlake”. By a lease dated
29 June 2000 the
plaintiff leased Greenlake to the defendants, Mr and Mrs Williams for their
farming operations.
[2] The lease was a renewal of the original lease the parties entered
into in 1994 and was for a term of five years from 1 July
2000. The lease
included a right of renewal (subject to compliance with the covenants in the
lease) for a further five year term,
by way of a “further
lease”.1 The defendants were obliged to pay an annual rent
and were bound by certain maintenance and repair covenants as set out in the
lease.
[3] In January 2004 the plaintiff served a notice under s 118 of the
Property Law Act 1952 on the defendants to notify them
of breaches of the lease
and require them to remedy the breaches. In July 2004 the plaintiff issued
proceedings in the District Court
in respect of those breaches seeking judgment
to bring the lease to an end and damages for the breaches.
[4] The ensuing dispute was settled at mediation on 22 February 2005
and the parties recorded their settlement terms in a Deed
of Settlement
(settlement agreement). Relevantly, the settlement agreement states:
The Lessors and Lessees agree that this Deed of Settlement records
settlement of all issues in respect of the breaches referred
to in the draft
amended statement of claim and Memorandum for Mediation ... and that none of the
Lessees or the Lessors may bring
any further claim in respect of those
breaches.
[5] The settlement agreement records the parties’ agreement
that:
(a) They would sign a renewed lease “materially similar” to the
original lease for the five year term beginning on 1 July
2005;
and.
1 As set out in Schedule D to clause 7 of the lease.
(b) The renewed lease was to be on the same terms as the 2000 lease
but subject to the provisions of the settlement deed. These
provisions
included:
(i) The lessees would pay the lessors $30,500 and this money would be
used by the lessors to eradicate scrub and blackberry;
(ii) The lessees would bear no responsibility for any blackberry or
scrub control;
(iii) The lessees were required to fix any leaks in the toilet and the
kitchen of the house within three months of the date the
settlement agreement
was signed.
(iv) The lessees were placed under an obligation to paint the house but
no notice of default was to be given until May 2008.
[6] The renewed lease began 1 July 2005 and was terminated before expiry by
agreement in 2008.
[7] On 14 October 2011 the plaintiff commenced this proceeding.
Statement of claim
[8] The plaintiff’s statement of claim contains two causes of action
– the first alleging that:
(a) On commencement of the original lease Greenlake was in
“generally good, immaculate order and condition ...”
(b) There were breaches by the defendants of the lease - essentially twofold:
(i) First, the defendants “did not maintain Greenlake and failed
to yield up the same in like order and repair as on
commencement”;
and
(ii) Secondly, they failed to apply fertilizer at the annual
rate specified in the lease (250 kg of superphosphate or
equivalent per hectare
of grazing land).
[9] Particulars of the first breach set out six alleged areas of
failure to maintain and yield up in the required condition.
These relate to
fences; deer and wool shed yards; the wool shed; the house and garage; the deer
unit; and tracks, dams, bridges,
and gateways. The six alleged areas of
failure are either based on a failure to maintain over the period of the lease
(fences,
tracks, dams, bridges and gateways) or a failure to repair or replace
on yielding up.
[10] The second cause of action pleads that there were breaches of the
lease – which are stated in terms that essentially
mirror the allegations
of breach and the particulars of breach in the first cause of
action.
[11] Materially, however, the second cause of action describes the
condition of the property upon commencement in different terms
to those used in
the first cause of action. It omits the term “immaculate” and
states that on commencement of the renewed
lease (entered into by Deed of
Renewal on 1 July 2005), Greenlake was “deemed as between the parties to
be in generally good
order and condition, any actual defects in their
condition having arisen as a result of breaches by the defendants of
the original lease”.
[12] The principal breach under both leases, as pleaded in the two causes
of action, relates to the covenant, common to both leases:
At all times to repair and keep and maintain in good and substantial order and repair all buildings and other erections fences gates hedges culverts dams drains crossing fixtures stockyards and every description of improvements now or hereafter standing or being upon or growing on the premises and to renew all such parts thereof as become decayed or unserviceable and at the end or sooner determination of the term to yield up the same in like order and repair ... PROVIDED THAT nothing herein
shall require the Lessee to repair and maintain nor to yield up to the Lessor
any of the same in a better order condition or state
of repair than the same
were in at the commencement of the term.
[13] The relief the plaintiff seeks, as set out in the statement of claim,
is:
(a) In the first cause of action damages, or an enquiry into damages,
plus interest and costs.
(b) In the second cause of action $619,557.27 special damages,
plus interest on that amount and costs.
[14] The global amount of $619,557.27 claimed in the second cause of action
is broken down as follows:
(a) $231,479.92 is allocated to the alleged failure to apply fertilizer
in the required quantity for the period December 2000
to June 2008 (excepting
2001 and 2002). This sum appears to be what the plaintiff saved by reason of
the deficit.
(b) The balance is allocated to three broad categories: fences and
gates -
$176,905.65 based on average annual maintenance costs since 2000; tracks,
bridges, dams and gateways - $34,212.20 the basis for which
is unexplained; and
damages to buildings - $176,959.17 based on repairs to the house and wool shed,
landscaping costs and other items.
(A “60% neglect factor” of
$57,687 (excluding GST) is included in the category comprising fences and
gates).
The defendants’ application
[15] In their application the defendants seek various orders in the
alternative. It is the alternative orders they now pursue. These
are orders
to:
(a) Strike out the first cause of action. (They rely on the settlement agreement).
(b) Strike out the claim for damages in the second cause of action.
(They rely on lack of particulars of the damages claimed).
(c) Stay the proceedings pending provision of particulars (by way of a
fresh pleading) of the breaches claimed in the second
cause of action and the
claimed damages flowing from such breaches.
Additionally at the hearing counsel indicated that if the application to
strike out the first cause of action fails the defendants
seek particulars of
damages in the first cause of action.
Should there be an order to strike out the first cause of
action?
[16] The application to strike out the first cause of action relies on r
15.1 of the
High Court Rules. Relevantly, r 15.1 states:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case
appropriate to the nature of the pleading; or
...
(d) is otherwise an abuse of the process of the court.
[17] The general principles applying to strike out applications are well
settled:2
(a) Pleaded facts are assumed to be true.
(b) The cause of action must be clearly untenable. The Court must be
certain that it cannot succeed.
(c) The jurisdiction is to be exercised sparingly and only in clear
cases, reflecting the court’s reluctance to terminate
a claim short of
trial.
2 Couch v A-G [2008] NZSC 45 at [33].
(d) The jurisdiction is not excluded by the need to decide
difficult questions of law, requiring extensive argument.
(e) The court should be particularly slow to strike out a claim in any
developing area of the law.
[18] Bearing in mind that the onus is on the defendants, the
issue for determination is whether as the defendants
contend, the first cause
of action is clearly untenable because it seeks to re-litigate the same breaches
that were settled in
the settlement agreement.
[19] Mr Williams deposes in support it is his understanding that all
issues in respect of the alleged breaches and the respective
rights and
obligations of the parties were settled by the settlement agreement and the
renewal of the lease. He adds:
I further dispute ... Mr Maynard’s ... allegation that our agreement
was that the condition of the farm at the end of the 2005
lease was to be the
same as it should have been at the end of the 2000 lease. Rather, the 2005
settlement and lease obliged the
plaintiff/lessor to take care of weed control.
My obligation was to maintain the farm to the same condition that it had been in
at the beginning of the 2005 lease. The parties’ respective obligations
are clearly set out in the 2005 lease.
[20] The defendants’ basis for strike out is essentially an abuse of process argument that there has been a settlement that extinguishes all breaches right up to the end of the term of the 2000 lease and varies the duty to yield up the property in like repair as at commencement.3 Counsel for the defendants recognised the settlement could only apply to breaches up to settlement date (February 2005) and that the settlement agreement does not contain an explicit provision that settles future breaches.4 He argues that this is not a bar to striking out. He relies in support on a comparative analysis to show that all the breaches in the current statement of
claim were settled in the settlement agreement. Additionally, he submits
that it is
3 It is useful to note that if a maintenance claim is brought after the end of the lease it will be treated as a failure to yield up: Lord Justice Lewison and others (ed) Woodfall: Landlord and Tenant (online looseleaf ed, Westlaw) at [13.081].
4 At [13.052] - A previous claim for failure to keep the property in repair does not deprive the
lessor from the right to bring a claim for failure to yield up the property in repair, although it may affect the amount the damages. See also Ebbetts v Conquest [1990] 82 LT 560.
inherently improbable that there are any breaches left outstanding or that
there were any breaches during the remainder of the term.
[21] The argument is conclusory and begs the question whether any live
breaches remain. It is impossible on the evidence that
is currently before the
Court to identify whether the breaches settled in the settlement agreement
exhaustively cover all the breaches
in the current statement of claim. The
breaches are described in dissimilar terms and the language of the settlement
agreement is
not all encompassing. In the absence of an express provision that
encompasses all past and future breaches it must be a matter of
fact whether the
settlement agreement covered all breaches up until settlement date and whether
any breaches occurred from settlement
date to the end of term. Evidence is
required to understand the nature of the breaches and to determine what has been
settled and
what is now claimed by way of breach and whether one equates exactly
to the other. The fact finding exercise required indicates
that strike out is
not appropriate.5
[22] I am satisfied therefore that counsel for the plaintiff is correct
in his broad submission that strike out for the reasons
the defendants rely on
is not appropriate. I turn next to the issues relating to damages.
Should the plaintiff be required to provide further particulars of the
damages claims in the two causes of actions?
[23] The defendants’ statement of defence seeks particulars of the
damages sought under both causes of action. The plaintiff
has refused to comply,
stating “adequate particulars of the plaintiff’s pleadings have
already been provided.”
The defendants argue that the damages for both
causes of action need to be particularised6 failing which there
should be orders striking out the claims.
[24] Given my finding in respect of the first cause of action the issue
of damages remains a live issue for both causes of action.
6 This claim although not in the application was discussed at the hearing.
[25] Rule 5.27(3) requires that if a statement of claim contains two or
more causes of action it must specify separately the relief
or remedy sought on
each cause of action immediately after that cause of action. Rule 5.28(1)
requires that the relief claimed must
be stated specifically. Rule 5.33
requires that a plaintiff must state the nature, particulars, and amount of
special damages in
its statement of claim. A plaintiff seeking special damages
must particularise quantum in relation to each cause of action to the
extent
that it can.7
[26] Before turning to the effect of these principles on the
plaintiff’s damages claims, I pause to comment on the nature
of the
measure of damages that is apposite to the nature of the plaintiff’s
case.
[27] The measure of damages for breach of the duty to repair depends on whether the lessor brings the claim during the lease or after the lease has expired.8 When the claim for breach is brought during the term the measure of damages is the diminution in value of the lessor’s reversion as a result of the failure to repair.9
However as held in Joyner v Weeks, when the claim for breach of the
repair covenant is brought after the lease has expired, meaning a breach for the
covenant to yield
up the property in repair, the rule is that “the lessee
must pay what the lessor proves to be a reasonable and proper amount
for putting
the premises into the state of repair in which they ought to have been
left.”10 However if the landlord does not intend to carry
out repairs, “then the true measure of his loss should on the face of
things
be the amount by which the value of the reversion has been
diminished.”11 This amount may be affected by prior claims
for breach of the covenant to repair.12
[28] Joyner is also apposite in respect of damages for the failure to apply fertilizer. In Honeybun v Harris an award for damages was held to be calculated in error when
the arbitrator took the annual cost of applying fertilizer and
multiplied it by three
7 Platt v Porirua City Council & Ors [2012] NZHC 2445 at [36].
9 Conquest v Ebbetts [1896] AC 490; Sleeman v Colonial Distributors [1956] NZLR 188 (SC).
10 Joyner v Weeks [1891] 2 Q.B. 31; reaffirmed in Maori Trustee v Rogross Farms Ltd [1994] 3
NZLR 410 (CA).
12 Woodfall: Landlord and Tenant, above n 3, at [13.052].
calculating that amount to be the ‘value of three years
application’ and thus the damage of the breach of the covenant
to apply
fertilizer.13 The High Court held this was an incorrect approach
to damages in this situation. Joyner was held to be the appropriate
test.
[29] Materially, the plaintiff’s case is that it has two causes of
action, the first for breaches of the 2000 lease and
the second for breaches of
the 2005 renewed lease. Each cause of action relies principally upon breach of
the duty to yield up in
“like” order and repair as at the
commencement of the particular term, and upon a second breach: a failure to
apply
fertilizer in the quantity contracted for. There is no suggestion
that the plaintiff does not intend to repair the consequences
in accordance with
the approach set out Joyner. It is important therefore that the amounts
claimed in damages are truly the costs of rectification or repair to bring the
property
back to the relevant “like” condition and not the amounts
that represent diminution in value resulting from a failure
to maintain or
expend contractual sums for fertilizer or maintenance which the defendants
allegedly avoided.
[30] I return then to the damages claim in each cause of action and
whether further particulars should be pleaded.
Particulars – first cause of action
[31] The plaintiff has chosen to plead that it has a separate cause of action for breaches of the 2000 lease (including a failure to yield up like condition as at commence of the lease). It pleads, as it must, loss in relation to the alleged breaches but it fails to specify the special damages that arise from these breaches. Instead it relies on an inquiry to establish actual damages. I accept counsel for the defendant’s submission that the damages must reasonably represent the loss occasioned by the breaches alleged (the six areas of failure and failure to fertilize) and that this is not a situation where it is appropriate to plead for an inquiry into damages. The Court of
Appeal in Rod Milner Motors Ltd v A-G is
apposite:14
13 Honeybun v Harris [1995] 1 NZLR 64 (HC)
14 Rod Milner Motors Ltd v A-G [1999] 2 NZLR 568 (CA).
The importance of finality in litigation requires that where damages are
capable of straightforward assessment the appropriate evidence
should be called
and the issue resolved at trial. The jurisdiction to order an inquiry is to be
used where complex issues arise
which require the application of expertise not
available to the Court.
[32] The costs of rectification works to remedy the alleged breaches and
to bring the property back to “generally good,
immaculate order and
condition” as at commencement of the term ought in principle to be
particularised. Such works and the
related costs are capable of straightforward
assessment on evidence that can be called in the usual way at trial and the
plaintiff
should therefore be able to identify the specific losses that it
claims it has suffered well in advance of trial by an appropriately
particularised and pleaded damages claim. These issues are not so complex that
the costs involved cannot be resolved that way.
[33] However, the plaintiff does not, as the defendant contends, need to
separate the damages claimed into temporal periods (so
as to particularise the
“before and after” effect of the settlement agreement or the claim
for damages and for breach
of the 2000 lease). The plaintiff’s case as
pleaded in the first cause of action is that there have been breaches of that
lease. The effect of the settlement agreement on liability for those breaches
or its effect on the entitlement to damages is a matter
for the defence to
plead.
Particulars – second cause of action
[34] The plaintiff’s second cause of action states that by reason
of the alleged breaches of the 2005 lease the plaintiff
has suffered
loss entitling it to special damages amounting to $619,557.27. The
plaintiff pleaded a breakdown of this global
amount which is difficult to follow
– as it does not correspond in an exact way with the alleged particulars
of the breaches
of the 2005 lease.
[35] The breakdown does, however, provide a sum to compensate for the alleged annual deficit in the fertilizer applied to the farm over the years 2000 to 2008. It also provides a sum for fences and gates based on annual “district average” maintenance costs for the period from 2000 to 2005. Additionally, a sum is allocated to tracks, bridges, dams and gateways - though the basis for the allocation is unexplained. The
balance is allocated to “damage to buildings” for repairs to the
house, landscaping costs and other items.
[36] I agree with counsel for the defendant that this approach to damages
to deficient in a number of respects. I refer first
to the claim for damages in
relation to fences and gates.
Fences and gates
[37] As counsel for the defendant submits, the amount allocated to fences
and gates is unintelligible without further particulars
as:
(a) The claimed neglect factor is meaningless without some explanation
as to its nature;
(b) The allocation is for damage over an eight year period from 2000 to
2008 whereas the plaintiff’s own pleadings specifically refer
to damage that is consistent with a failure to maintain
“for the period of
the lease”.
(c) The allocation is based on an alleged deficit in expenditure on
maintenance for an eight year period and not the actual cost
of repair restoring
the property to “like” condition at the time of yielding
up.
(d) The claim fails to explain the essential factual and legal bases
for the allegation that the condition of the property at
the commencement of the
lease was “deemed” to be in generally good order.
Fertilizer
[38] Turning next to the claim for damages relating to the failure to
fertilize, I
agree with counsel’s contention that this is also
deficient:
(a) The damages claimed reflect the approach adopted in Honeybun
which the Court has held is not the correct approach to damages.
(b) Even assuming the claim to damages adopts the test in Joyner
it repeats the same failure to particularise the bases for the alleged
“deemed” condition and therefore the basis for
the resulting failure
to yield up in “like” condition is unclear.
Tracks, dams, bridges and gateways
[39] I agree that this aspect of the claim is also deficient:
(a) The claim is based on a failure to yield up in the
“deemed’ condition but there is the same failure to explain
the
basis for that “deemed” condition.
(b) It is also unclear whether the amounts claimed are for remedial
works as the nature of the damages is not specified.
Assuming these
amounts are claimed for remedial works, it is not clear whether they are to
remedy the deterioration over the
period of the 2005 lease or over the period of
both leases.
Damage to buildings
[40] I turn next to the claim for damages for “damage to
buildings”. I agree with counsel for the defendant that this
aspect of
the claim is deficient:
(a) Though the amounts claimed appear to be based on the actual cost of
rectification in accordance with the Joyner test the claim does not
specify what part of the cost reflects the cost to restore to the
“deemed” condition
or what the basis of the “deemed”
condition is.
(b) Additionally, it is unclear whether the claim is for deterioration in the term of the 2000 lease in addition to that occurring under the 2005 lease.
Conclusion as to damages
[41] I am satisfied that there is not sufficient compliance with the
obligation to specify and provide particulars of the relief
or remedy sought on
each cause of action. Each cause of action fails to state adequately the
nature, particulars, and amount of
special damages. It does not particularise
quantum to the extent that it can. In the case of the second cause of action,
as it
lacks particulars to explain the basis for the “deemed”
condition and claims “damages” from 2000 it conflates
the damages
for the first and second causes of action and in doing that, fails to seek a
separate remedy to the first cause of action.
It also adopts an inappropriate
or an unexplained approach to damages in respect of fences and gates; tracks,
dams, bridges, gateways;
and fertilizer.
Orders
[42] For these reasons, I am satisfied that the plaintiff must replead
its statement of claim to provide further particulars.
If the plaintiff’s
case is as it currently pleads that there were failures to yield up in
“like” condition in
2005 and 2008, the plaintiff must provide
particulars of the failures or non-compliances in each instance so as to put the
defendants
on notice of the case they are required to answer. For that purpose
the plaintiff must plead:
(a) What the condition was at commencement of the 2005 and 2008 lease
in a clear and comprehensible way. (If it relies on a
deemed condition at the
commencement of the 2005 lease that the parties have agreed upon it must plead
the essential factual and/or
legal basis on which it relies);
(b) The particular respects in which there was a “failure”
to deliver up in the relevant “like” condition
in each cause of
action; and
(c) The amount of the special damages claimed to remedy each such
“failure” so as to restore the property to the relevant “like” condition.
[43] An amended statement of claim is to be filed and served for that
purpose by
16 December 2013.
[44] I issue this judgment as an interim judgment so as to reserve leave
to seek further information if issues as to particulars
remain once the amended
statement of claim is filed. Costs are reserved in the meantime.
[45] Additionally I direct that a telephone case management conference is
to be allocated on the first available date in February
2014 for the purpose of
discussing directions to take this case through to trial. Counsel are to file
and serve memorandum as follows:
(a) The plaintiff – six working days prior to the
conference;
(b) The defendants – three working days prior to the
conference.
Associate Judge Sargisson
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