Body Corporate 325261 (C-Vu Apartments) v McDonough [2014] NZHC 2306 (23 September 2014)

Last Updated: 3 November 2014

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-8000 [2014] NZHC 2306

IN THE MATTER	Known as “C-Vu Apartments”
BETWEEN	BODY CORPORATE 325261 First Plaintiff RODNEY WILLIAM COOKE AND OTHERS Second Plaintiffs
AND	JAMES McDONOUGH First Defendant Continued...

Hearing:	25 and 26 August 2014
Counsel:	G J Kohler QC and C Baker for Plaintiffs S Mills QC and B O’Callahan for Sixth and Seventh Defendants
Judgment:	23 September 2014

_{JUDGMENT OF KATZ J}

This judgment was delivered by me on 23 September 2014 at 11:00 am

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: Price Baker Berridge, Auckland

Simpson Grierson, Auckland

Carter Kirkland Morrison, Auckland

Duncan Cotterill, Auckland

Counsel: G J Kohler QC, Shortland Chambers, Auckland

_{S Mills QC, Shortland Chambers, Auckland}

BODY CORPORATE 325261 v COOKE AND McDONOUGH & ORS [2014] NZHC 2306 [23 September

2014]

MAUNGA MAUNGA REI NZ LIMITED

Second Defendant AUCKLAND COUNCIL Third Defendant

GARY BICKERTON Fourth Defendant RACHEL VENABLES Fifth Defendant

STEPHEN MITCHELL ENGINEERS LIMITED

Sixth Defendant

STEPHEN ROBERT MITCHELL

Seventh Defendant

MACDONALD BARNETT PARTNERS LIMITED, Eighth Defendant

MICHAEL SIMPSON

Ninth Defendant

FRAMERITE INSTALLATIONS LIMITED

Third Third Party

Introduction

[1] The first plaintiff is the body corporate of a unit title development known as the C-Vu apartment building, which is on the corner of Hopetoun and Day Streets in Auckland. The second plaintiffs are the owners (or former owners) of the 130 apartments in the building.

[2] Due to a recent settlement between the plaintiffs and seven of the nine defendants, the only remaining claims are against the building’s structural engineers, Stephen Mitchell Engineers Limited and Stephen Robert Mitchell (together referred to as “SML”). As a result of the settlement, the original July 2014 trial date was adjourned. The hearing of the plaintiffs’ claims against SML is now scheduled to proceed in July 2015 (although I note that the plaintiffs have raised some concerns regarding that date).

[3] Following the settlement, leave was granted to file a 10th amended statement of claim (“10AMSOC”) focussing solely on the claims against SML. SML now seeks orders striking out parts of that document or, alternatively, requiring SML to provide further particulars and/or a more explicit pleading (“pleadings application”). Further, SML seeks to strike out parts of the plaintiffs’ reply briefs (“evidence application”) on the basis that some of that evidence is not strictly in reply or is irrelevant to the claims against SML.

[4] I will consider each application in turn. First, however, I will consider what the general approach to interlocutory and case management issues should be, now that the claims against most of the defendants have settled and the trial against SML is not due to take place until July 2015.

The current status of the proceeding and the appropriate way forward

[5] The proceeding was initially commenced as a leaky building claim. Claims relating to structural defects were subsequently added, and Stephen Mitchell Engineers Limited and Stephen Mitchell were joined as further defendants.

[6] The trial was originally scheduled to commence on 14 July 2014, with an estimated hearing time of 10 weeks. As a result of slippage in the original timetable, the plaintiffs’ reply evidence on structural engineering issues was not due to be served until the end of the third week of trial. The timetable then provided for an experts’ conference on structural engineering issues over the course of the following week, culminating in a joint expert’s report. It was hoped that the joint expert’s report would significantly narrow the scope of the structural engineering issues for trial. Although challenging, this timetable was potentially workable if the first half of the trial had focused primarily on the weathertightness issues against the non-SML defendants, as was initially envisaged.

[7] As I have noted above, however, shortly before the trial was due to commence, the plaintiffs settled with all of the defendants save for SML. This resolved most or all of the weathertightness issues. As a result of the settlement, the trial commencement date was adjourned for three weeks. This was to enable the settlement agreements to be finalised, the pleadings to be appropriately amended, and the parties to review the evidence and prepare for a much more narrowly focussed trial, involving the plaintiffs and SML only.

[8] An application for leave to amend the pleadings was required, given that the pleadings had closed. Many of the proposed amendments were uncontroversial, as they were simply a consequence of the settlement that had been reached. Other proposed amendments were of an updating or corrective nature. Indeed some of the changes resulted in a reduction of the claim against SML. Several changes were, however, objected to by SML on the basis that they either introduced new causes of action or were otherwise unfairly prejudicial to SML, given the imminence of the trial date.

[9] The plaintiffs’ application for leave to file the 10AMSOC was heard on 28 and 29 July 2014. I rejected SML’s submission that the proposed 10AMSOC raised any new causes of action. Rather, I concluded that the core pleadings regarding the duties of care owed, the defects in the building, the alleged breaches by SML and the remedial works required, were the same in the proposed 10AMSOC as they had been in the ninth amended statement of claim (“9AMSOC”). I accordingly granted leave

to file the 10AMSOC, although I disallowed several, relatively minor, proposed amendments.

[10] As a consequence of the three week adjournment to the trial start date, the plaintiffs’ reply evidence on structural engineering issues was served on the Friday before the trial was due to start. SML’s expert witnesses reviewed that evidence over the weekend, ultimately concluding that it would not be possible to adequately deal with all of the matters raised within the existing trial window. Nor was it seen as realistic for the experts to have a conference and produce a joint report within the first week of the trial window. SML accordingly sought, and was granted, an adjournment of the trial date. In my minute of 4 August 2014 I recorded the reasons for the adjournment as follows:

[2] The structural engineering reply briefs were not due to be served until last Friday, 1 August 2014. The timetable then provided for an experts’ conference this week, culminating (hopefully) in a joint expert’s report. It was anticipated that that report would significantly narrow the issues for trial.

[3] It is now apparent from the reply evidence that the structural engineering issues in this case, which have always been recognised as complex, are perhaps even more complex than they initially appeared.

[4] There is some dispute as to whether the reply evidence that was served last Friday is strictly in reply or not. Obviously that may need to be resolved at some stage, given the potential costs implications. The key issue at present, however, is that SML’s experts are not going to be able to properly analyse the structural engineering reply evidence and respond to it within the trial window. Further, an experts’ conference within the next week, or so, culminating in a joint report, is simply unrealistic.

[5] Accordingly, in the interests of ensuring that the real issues are able to be determined at trial, an adjournment is necessary.

[11] A new trial date has since been allocated, in July 2015. SML’s view is that, notwithstanding the year long adjournment, the existing close of pleadings date should be retained. In its view the plaintiffs should only be able to make any further amendments to the pleadings if they apply for, and are granted, leave of the Court.

[12] SML takes a similar position in relation to the evidence. It accepts that, given the lengthy adjournment, it would be appropriate for there to be some rationalisation of the existing briefs (for example merging multiple briefs from the same witness

together into one brief). It submits, however, that any procedural “tidying up” of the evidence should not impact on its underlying content. Rather, the content of any revised briefs should be restricted solely to evidence that has already been served (albeit excluding any “reply” evidence that is not strictly in reply).

[13] The guiding principle in civil litigation is that the parties should have every opportunity to ensure that the real controversy goes to trial so as to secure the just determination of the proceedings. The High Court Rules provide a framework that is intended to achieve this outcome in a way that is as just, economical and prompt as the circumstances allow.

[14] To maximise the prospects of the real controversy being determined, parties are at liberty to amend their pleadings prior to the close of pleadings date. After that date, however, leave is required. This reflects that the trial date is imminent and allowing any late amendments to the pleadings at that stage may cause injustice, as it could jeopardise the trial date or otherwise prejudice an opposing party. Different considerations apply when a trial date is not imminent.

[15] The practical reality in this case is that, shortly before trial, most of the case settled. Of the original nine defendants, only SML remains. As a result of the settlement, the pleadings required fairly radical revision. That revision was undertaken under considerable time pressure, given that (at the time) the trial had only been adjourned for three weeks. The plaintiffs therefore endeavoured to limit any amendments to the pleadings as much as possible, to avoid any claim of prejudice by SML. This has resulted in a pleading which largely mirrors the structure and content of the 9AMSOC, with most of the paragraphs relating the defendants who have settled simply being deleted. It is fair to say that, as a result of this approach, the 10AMSOC is a somewhat cumbersome and inelegantly drafted document.

[16] Now that the proceedings have been adjourned until July 2015, there is ample opportunity for a more comprehensive redrafting of the pleading to take place, in order to ensure that the claims against SML are expressed with a greater degree of precision and clarity, rather than being cluttered by “orphan” paragraphs or sentences

from the 9AMSOC whose precise relevance to the claims against SML are not clear. Further, the pleadings need to properly reflect the settlement that has occurred and the future implications of that settlement. By the time of trial in July 2015 (or possibly later) matters will have moved on significantly. For example, the remedial works agreed as part of the settlement with the other defendants will have been progressed. The plaintiffs will have to address the structural defects as part of the remedial works that are being undertaken. As a result, damages will be able to be approached on an actual, rather than a hypothetical, basis.

[17] Obviously, the plaintiffs are not entitled to plead any new causes of action that are time barred. However, there is considerable scope for the existing causes of action to be “tidied up”. The prospect of the real controversy between the parties being determined will be maximised if the pleadings are put into the best shape possible prior to trial. SML’s preferred course of retaining the existing close of pleadings date would mean that any further amendments to the pleading could only be made with leave of the Court. Based on the previous interlocutory history of these proceedings, any such leave application may well be opposed, save in relation to the most minor or routine of amendments. As a result, if the pleadings remained closed, then considerable court resources may be required to micro-manage the re-drafting process. This in itself could result in significant further delays.

[18] Such a course would run contrary to the objectives of the efficient, expeditious and economical management of proceedings. The proceedings cannot be simply frozen in time as at July or August 2014. Rather, appropriate directions must be made to enable the parties to get the proceedings in the best possible shape for trial in July 2015, with (hopefully) a minimum of court intervention being required. This requires that a new close of pleadings date be set and new timetable directions be made.

[19] Against these background observations as to the appropriate approach to interlocutory and case management issues in all the circumstances of this case, I now turn to consider the two specific interlocutory applications that are before the Court.

The pleadings application

[20] SML seeks orders that certain parts of the 10AMSOC be struck out and that further and better particulars or a more explicit pleading be provided in relation to other parts of the document. SML submitted that the 10AMSOC does not comply with the requirements of r 5.26, because it does not state the plaintiffs’ claim in an accurate, clear and intelligible manner that enables SML and the Court to be fairly informed of the claims made. Further, the challenged parts of the claim are said to be likely to cause prejudice or delay, or are otherwise an abuse of the process of the Court.

[21] I have already observed that the 10AMSOC is a cumbersome document. While there was a clear rationale for trying to keep changes to a minimum when the trial date was imminent, that is no longer the case. The adjournment of the trial date provides the opportunity for a significant “tidy up” of the pleadings. The plaintiffs should be given an opportunity to put the pleadings in the best shape possible prior to trial. If SML still has concerns once the plaintiffs have done so (for example if it believes a new cause of action has been pleaded, that is statute barred) then it will be able to raise such concerns by way of further application.

[22] SML’s pleadings application does, however, identify a number of areas where the current pleading could be significantly improved to ensure that both SML and the Court are properly informed of the claims made. I will summarise these below.

[23] The statement of claim originally pleaded 48 specific defects in respect of which one or more of the nine defendants was said to be liable. Only a subset of these was specifically pleaded against SML (“SML defects”). The remaining defects were pleaded against other defendants (“other defects”). Some of the other defects are, however, still referred to in the 10AMSOC. The reasons why the other defects are said to be relevant to the claims against SML is, for the most part, unclear. During the course of the hearing Mr Kohler QC explained that some of the other defects impact indirectly on the claim against SML, even though the relevant defect is not a result of any negligence on the part of SML. For example, the existence of

other defects could increase the costs that will be incurred when remediation of the structural defects for which SML is responsible is undertaken.

[24] It is open to the plaintiffs to argue at trial that some of the other defects are relevant to their claims against SML. The pleading needs to make clear how this arises. A clear distinction needs to be drawn, for liability purposes, between the SML defects and other defects. In relation to any other defects that are said to be relevant to the claims against SML, any amended pleading needs to clearly set out why and how they are so relevant. Any defined terms need to avoid confusing the two different categories of defects. Clarifying these issues will hopefully also clarify the related Building Code references, and their precise relevance to SML, in paragraphs 27(c) – (f) of the 10AMSOC. These are unclear in the current pleading.

[25] I also accept SML’s related submission that there is a lack of clarity in the

10AMSOC between the SML defects and the damage that is said to arise from those defects. This arises in part from definitions of “Defects” and “Damage” which are carried over from the 9AMSOC and are therefore much more broadly focussed than the current pleading requires. This gives rise to a lack of conceptual clarity, now that the claim is focussed solely on SML. Similarly, the current definition of “Remedial Works” is also somewhat confusing in the context of a claim where SML is the sole defendant. A clear distinction needs to be drawn between the entirety of the remedial works being undertaken and that portion of them that SML is said to be liable for. Put simply, the pleading must make it clear exactly what damages are sought against SML and the causal nexus between those damages and any wrongdoing on SML’s part.

[26] Further, to the extent that a claim is made against SML in relation to any weathertightness issues (as opposed to structural issues) the pleading should make it clear which of the SML defects (if any) have given rise to weathertightness issues and what the causal nexus is.

[27] In relation to the claims for post-remediation stigma, I have not been persuaded that the current pleading is deficient, although it could certainly be drafted with a greater degree of precision.

[28] In terms of the capital losses claimed at paragraphs 47 and 55 of the

10AMSOC (as particularised in Schedule G), Mr Kohler acknowledged that the figures are historic and will need to be updated to reflect the settlement reached with the other defendants. As a result of that settlement the focus of the claim is now squarely on remedial costs, although the plaintiffs are not willing at this stage to abandon an alternative claim for capital costs.

[29] These issues will need to be addressed in the further amended pleading that Mr Kohler has foreshadowed, along with any updated information on remediation works and so on.

Evidence application

[30] SML seeks a number of orders in relation to the further evidence that was served by the plaintiffs on 1 August 2014, purportedly in reply. Four expert briefs are involved. Three are from the plaintiffs’ structural engineering experts, Mr Pont, Dr Brooke and Mr Bradley. The fourth is from Mr Ewen, a quantity surveyor who has given evidence about the cost of the remedial work, based on the evidence of Dr Brooke.

[31] SML’s position is that significant parts of these further expert briefs are not in reply. Other aspects of the evidence are said to be irrelevant, based on the

10AMSOC. Further, SML seeks leave to respond to the further evidence, even if the Court accepts that it is properly in reply, on the basis that, to a significant extent, the plaintiffs’ real case is emerging for the first time in their reply evidence. In particular, SML says that the plaintiffs’ initial evidence proceeded on an incorrect basis. SML’s expert witnesses drew attention to this in their own briefs, which proceeded on the correct basis. As a result, SML says that those parts of SML’s further expert briefs which were in reply comprised evidence that should have been put forward from the outset. The interests of justice require that SML should be able to respond to some of that evidence.

[32] The plaintiffs submitted, on the other hand, that the further expert evidence was properly in reply and relevant. If the Court concludes otherwise, the plaintiffs submitted that the further evidence should be admitted as supplementary evidence.

The plaintiffs further submitted that, having obtained an adjournment of the trial to enable it to deal with the further evidence, it was not appropriate for SML to now object to the admission of that further evidence.

[33] The structural engineering evidence in this case is extremely complex. Indeed, the evidence is of such complexity that counsel has previously suggested that the Court may need to consider the appointment of a structural engineering expert to assist the Court at trial. In such circumstances it is extremely difficult for the Court to confidently determine, at this preliminary stage and without having actually heard from any of the relevant experts, the extent to which certain highly technical aspects of the plaintiffs’ expert evidence are strictly in reply or not. Fortunately, in light of the conclusions I have reached as to the appropriate way forward from a case management perspective, it is not necessary to do so.

[34] The practical reality is that SML sought an adjournment of the trial as a result of the filing of the plaintiffs’ further evidence, on the basis that it would be prejudiced if forced to continue to trial without an adequate opportunity to fully engage with that evidence. SML accepts that an adjournment would have been necessary even if the further evidence had been limited to those portions of the further briefs that SML accepts was genuinely in reply. It cannot therefore be said that the adjournment was caused by the plaintiffs’ inclusion of non-reply evidence in their further briefs (if that was indeed the case). Even if the Court had been able to identify and exclude that evidence, SML would not have been able to proceed to trial on 4 August 2014.

[35] Unfortunately, the risk that an adjournment might prove necessary was always inherent in a timetable which (due to earlier slippage) provided for very complex structural engineering evidence to be served during the course of trial. This is particularly so given that it was envisaged that the experts would confer and prepare a joint report during the trial window. That was a fairly challenging scenario in any circumstances, even more so once the weathertightness claims were settled and the sole focus of the trial became the structural issues.

[36] The current situation is that the trial has been adjourned for a year. There is now ample time for SML to properly analyse and engage with the further expert evidence, whether it is characterised as reply evidence or supplementary evidence. As I have noted, the guiding principle should be that the parties have every opportunity to ensure that the necessary evidence is before the Court to enable it to determine the real controversy between the parties and secure the just determination of the proceedings. Any attempt by the Court to “take a red pen” to the expert evidence at this preliminary stage and exclude parts of it on the basis that it may not have been strictly in reply would run counter to the objective of facilitating the just determination of the real controversy between the parties.

[37] In addition, further supplementary evidence will now be necessary to address the recent settlement and the remedial work agreed to be undertaken as part of that settlement, which is likely to be well underway prior to trial.

[38] It is neither efficient nor cost effective for the Court to micromanage the process of getting the evidence into proper shape, this far out from trial. Any potential prejudice to SML arising out of the content of the reply briefs has largely been addressed by the adjournment of the trial date, which provides SML with ample time to analyse and respond to it. Further, if the plaintiffs’ evidence (initial and reply briefs) are now amalgamated, to the extent that that is possible or appropriate, this will address SML’s concern that it has been prejudiced by the plaintiffs’ “real” case only emerging in their reply briefs. Such a rationalisation of the evidence will help ensure that the plaintiffs’ “real” case is properly set out in its initial briefs, which SML will then be able to respond to.

[39] As for issues of relevance, it is not appropriate at this preliminary stage to rule any of the plaintiffs’ evidence as inadmissible on grounds of lack of relevance. Issues of relevance cannot be determined until the final form of the pleadings has been settled. Further, given the complexity of the expert evidence, this may well be a case where issues of relevance are more appropriately dealt with at trial. At a pre-trial stage the Court would necessarily have to take a very cautious approach to determining that any particular expert evidence could not possibly be relevant at trial.

Summary and conclusion

[40] The guiding principle in civil litigation is that the parties should have every opportunity to ensure that the real controversy goes to trial, so as to secure the just determination of the proceedings. The High Court Rules provide a framework aimed at achieving this outcome in a way that is as just, economical and prompt as the circumstances allow.

[41] To ensure that the real issues proceed to trial, both the pleadings and the evidence will need to be revised to ensure that they are properly focussed and presented in a way that is accurate, clear and intelligible. This requires that a new close of pleadings date be set and new timetable directions made.

[42] The consequence of this approach is that the plaintiffs will be entitled to further amend their pleadings, without leave, until the new close of pleadings date. They have foreshadowed their intention to do so. In such circumstances, rather than attempt a line by line critique of the current pleading, I have endeavoured to provide general guidance as to the issues that will need to be addressed in any amended pleading. I have found that a number of SML’s concerns with the current pleading are well founded.

[43] In relation to the evidence application, I decline to make the orders sought by SML, for the reasons I have outlined. The exclusion of potentially relevant evidence would undermine the prospects of the real controversy being determined when the claims against SML proceed to trial. Given the recent settlement and the subsequent lengthy adjournment, the appropriate course is to make timetable directions that will enable each party to appropriately rationalise and re-work their evidence to attempt to ensure that the real issues in dispute are addressed in a clear and logical manner, and that SML has a proper opportunity to respond to the plaintiffs’ evidence.

[44] SML has been largely successful in its pleadings application (although I have taken a somewhat more global approach than that advocated by SML). On the other hand, SML has failed in its evidence application. In such circumstances my preliminary view is that costs should lie where they fall. Given, however, that I have not heard from the parties on costs issues, leave is reserved to file memoranda if

either party has a different view or costs cannot be otherwise agreed. Any such memoranda are to be filed by 17 October 2014, with any memoranda in reply to be filed by 31 October 2014.

Directions

[45] I direct as follows:

(a) The new close of pleadings date is 19 December 2014.

(b) The parties are to provide any updated additional discovery by

7 November 2014.

(c) The plaintiffs are to file and serve an amended statement of claim, addressing the matters identified at [24] to [26] and [28] above, by

7 November 2014.

(d) SML is to file a defence to the amended statement of claim by

28 November 2014.

(e) The plaintiffs are to file a reply by 12 December 2014.

(f) The plaintiffs’ revised briefs of evidence are to be served by

20 February 2015. Such briefs are to amalgamate the plaintiffs’ existing briefs (both initial and reply) to the extent appropriate and include any further relevant evidence (including updating evidence) that the plaintiffs wish to rely upon at trial.

(g) SML’s revised briefs of evidence are to be served by 27 March 2015.

(h) The plaintiffs’ briefs of evidence in reply are to be served by 17 April

2015.

(i) A case management teleconference is to be scheduled on the first available date after 2 February 2015 to review compliance with the timetable and

_{address any other issues that may arise.}

Katz J