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Cross v Queenstown Lakes District Council [2016] NZHC 2503 (20 October 2016)

Last Updated: 21 October 2016


IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY



CIV-2015-425-000097 [2016] NZHC 2503

BETWEEN
ADRIAN JOHN CROSS,
GLADYS SARAH CROSS AND BRONYN MARY TEAT AS TRUSTEES OF THE N R & G S CROSS TRUST Plaintiffs
AND
QUEENSTOWN LAKES DISTRICT COUNCIL
Defendant


Hearing:
11 October 2016
Appearances:
M R C Wolff & Ms OʼBrien for the Plaintiffs
R M Saunders & A Walker for the Defendant
Judgment:
20 October 2016




JUDGMENT OF NATION J



[1] The defendant, the Queenstown Lakes District Council (the Council), has applied to strike out the claim of Adrian John Cross, Gladys Sarah Cross and Bronyn Mary Teat as trustees of the N R and G S Cross Trust (the plaintiffs).

Background

[2] The claim is made in an amended statement of claim dated 1 February 2016. In that statement of claim, the plaintiffs say:

(a) they are the registered proprietors of a property at 14 Sunrise Bay Drive, Sunrise, Wanaka (the property) as trustees of the N R and G S Cross Trust (the trust);

(b) the Council issued a building consent for the construction of a dwelling with double garage on the property on 1 May 2003;


CROSS & ORS v QUEENSTOWN LAKES DISTRICT COUNCIL [2016] NZHC 2503 [20 October 2016]

(c) the dwelling was constructed between May 2003 and June 2006. Prime Building Compliance Ltd (PBC), a private certification company, carried out various inspections of the property between 29 January 2004 and the final inspection on 9 March 2005;

(d) on 25 March 2005, PBC notified the Council that its authority to inspect the dwelling was limited and that it would not be completing the inspections of the property;

(e) the Council inspected the property on 6 May 2004 and 7 June 2006;

(f) on 8 June 2006, the Council issued a code compliance certificate for the work undertaken pursuant to the dwelling building consent;

(g) on 4 April 2007, Norman John Cross and Gladys Sarah Cross were registered on the certificate of title as trustees of the trust;

(h) on 18 January 2008 the Council issued a building consent for the construction of a new garage at the property;

(i) the garage was constructed between February 2008 and December 2011;

(j) the Council undertook inspections of the property on 28 February 2008 and on 12 December 2011, and on the latter date issued a code compliance certificate for the work undertaken pursuant to the garage building consent;

(k) on 25 August 2014, Bronyn Mary Teat and Adrian John Cross were registered on the title as trustees of the trust;

(l) the dwelling and garage were constructed with defects, as detailed in the amended statement of claim;

(m) the plaintiffs have suffered loss, being the cost of the remedial works currently estimated at $560,823.76 (including GST) and consequential losses to be particularised prior to trial;

(n) the Council owed the plaintiffs a duty to exercise reasonable care in carrying out functions under the Building Act 1991 and the Building Act

2004 with regard to its inspection of work relating to the two consents and issuing the code compliance certificates;

(o) the Council breached that duty and was negligent in ways detailed in the amended statement of claim;

(p) the plaintiffs suffered distress, anxiety and inconvenience arising from the discovery of defects and the need to carry out remedial works; and

(q) the plaintiffs claim special damages in the sum of $560,823.76 and general damages in the sum of $35,000, interest and costs.

[3] On 27 May 2016, Associate Judge Matthews made a direction in accordance with a consent memorandum that interlocutory applications had to be filed and served by 8 June 2016. On 6 July 2016, the Council filed an interlocutory application for an order striking out the plaintiffs’ claim and for an order granting leave to make that application. The plaintiffs filed notices of opposition to both applications.

[4] The delay in making the application was modest. In the circumstances, leave is granted.

[5] The strike out application was made on the basis:

(a) the amended statement of claim disclosed the plaintiffs had no reasonable cause of action against the Council because the plaintiffs have not provided any evidence that they own the property in question in their capacity as trustees and have no locus standi in relation to the claim; and

(b) the claim will prejudice the Council as it has lost the ability to seek a contribution from joint tortfeasors due to the plaintiffs’ delay in bringing the claim. The plaintiffs were on notice of the alleged defects in December 2014 but did not file proceedings until November 2015, at

which point the Council asserts that all claims against other potentially liable parties were time-barred.

Principles of strike out

[6] Counsel agreed as to the relevant principles against which I must consider the application:1

(a) pleaded facts are assumed to be true but this does not extend to pleaded allegations which are entirely speculative and without foundation;

(b) the cause of action must be clearly untenable. The Court must be certain it cannot succeed;

(c) the jurisdiction is to be exercised sparingly and only in clear cases; and

(d) the jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.

[7] I also accept the submission of Mr Wolff that, while the Court is entitled to receive affidavit evidence on a strike out application, it should not attempt to resolve genuinely disputed issues of fact. In Attorney-General v McVeagh, the Court of Appeal observed:2

The Court is entitled to receive affidavit evidence on a striking-out application, and will do so in a proper case. It will not attempt to resolve genuinely disputed issues of fact and therefore will generally limit evidence to that which is undisputed. Normally it will not consider evidence inconsistent with the pleading, for a striking-out application is dealt with on the footing that the pleaded facts can be proved.

Do the plaintiffs have standing?

[8] For the Council, Ms Saunders submitted that, for the plaintiffs to have a cause of action against the Council, they must own the property as trustees of the

trust and the property must have been acquired in 2006 by Mr and Mrs Cross in their

  1. Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267; Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33] per Elias CJ.

2 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.

capacity as trustees of the trust. She argued there was no evidential basis on which these facts could be established.

[9] In making that submission, she noted that, in their initial statement of claim dated 12 November 2015, the plaintiffs had pleaded simply that on 4 April 2007 Mr Norman Cross and Mrs Cross were registered on the certificate of title. Primarily, her argument relied on the fact that the Council had made an issue over whether the plaintiff trustees had standing to bring the claim in that capacity. This had been noted by the Associate Judges in minutes of 4 April 2016 and 19 July 2016. The Council had also, through correspondence from its solicitors, made an issue as to whether the trustees were bringing their claim in their capacity as trustees, arguing that it was not apparent from the certificate of title that they owned the property as trustees. They asked for documentation supporting the plaintiffs’ assertions as to the property being owned by trustees. Although the plaintiffs confirmed they had made full discovery of relevant documents, very few documents indicative of the property being owned by either Mr and Mrs Cross or the plaintiffs as trustees had been produced.

[10] The solicitors also asserted in a letter of 17 June 2016 that it appeared Mr and Mrs Cross had purchased the property as joint tenants. They said this “suggests that the property was purchased by the Cross’ in their personal capacities in 2007 and transferred to the trust on 25 August 2014”. They referred to the fact the title showed that:

(a) on or about 4 April 2007, the property was purchased by Norman and

Gladys Cross;

(b) on 6 March 2012, ownership was transmitted to Mrs Cross as survivor;

and

(c) on 25 August 2014, the property was transferred to Mrs Cross, Mrs Teat and Mr Adrian Cross.

[11] Ms Saunders also relied heavily on evidence presented by way of an affidavit in reply from Mr Logan. He is an experienced Christchurch solicitor, well qualified to give expert evidence as to documentation that one might expect to see associated

with the purchase and continued ownership of a property by trustees. It was his opinion that there was very little, if any, such documentation in existence. Ms Saunders’ argument was that there cannot be substance without form and with there being, in her submission, no documentation consistent with the property being owned by a trust, there could be no evidential basis on which ownership by the plaintiffs as trustees could be established. She argued that this meant they could have no standing to bring the claim.

[12] Ms Saunders acknowledged there is no authority directly on point which establishes a precedent for striking out a claim in these circumstances. She relied heavily on statements made by Andrew Beck in his book Principles of Civil Procedure, in particular his discussion as to objections to standing and his statement “the standing of a plaintiff is part of its cause of action. If it cannot be established when challenged, the claim must be dismissed”.3

[13] As traversed fully by Mr Wolff in his submissions for the plaintiffs, there are a number of difficulties which arise with the submissions made for the Council.

[14] A strike out application is to be determined on the basis the pleadings of the plaintiffs are true. In the amended statement of claim, the plaintiffs assert that Mr and Mrs Cross were registered on the certificate of title on 4 April 2007 as trustees of the trust. They also plead that on 25 August 2014, Bronyn Mary Teat and Adrian John Cross were registered on the title as trustees of that trust.

[15] As Ms Saunders acknowledged, it is neither necessary nor normal for the title to a property to show that the registered proprietors were the owners of the property as trustees, rather than personally. Thus, the description of the various plaintiffs as registered proprietors without any reference to that being in their capacity as trustees is consistent with the property being owned by all such people as trustees.

[16] Given Mr and Mrs Cross were registered as the joint proprietors of the property in 2007, Mrs Cross was entitled to become the sole proprietor by


3 Andrew Beck Principles of Civil Procedure (3rd ed, Thomson Reuters, Wellington, 2012) at

[3.2.6].

survivorship, as she did in 2012. That was not inconsistent with Mr and Mrs Cross originally acquiring title to the property as trustees.

[17] Although there is an absence of documentation that might often exist when a property is acquired or owned by a trust (for example deed of nomination, minutes of trustees and resolutions), that absence of documentation in all the circumstances of this case is not necessarily going to be conclusive.

[18] Initially, in support of its application, the Council relied on an affidavit from a solicitor with the Council. She referred to the correspondence the Council’s solicitors had engaged in over discovery, the absence of documents and what was shown by the title.

[19] In opposition to the application, the plaintiffs filed an affidavit from Mr and Mrs Cross’ daughter, Bronyn Teat. She said in that affidavit that she is a registered proprietor of the property as a trustee of the trust. She said her mother is 94 years old and in about October 2014 was diagnosed with the onset of dementia and was unable to provide an affidavit in support of their opposition to the Council’s application. Mrs Teat explained that in 2006 she was helping her parents to purchase a new home. She says that on 29 July 2006 she entered an agreement to purchase the property with the ability to nominate an alternative purchaser, and that it was always her intention to nominate the trust to purchase the property. She asserts that the purchase was settled in April 2007 with her parents registered on the title. Her father died on 30 May 2011. She said that, due to her mother’s failing memory, she and her brother were appointed trustees of the trust, as recorded in a deed of appointment of new trustees dated 21 May 2014. The appointment was made by Mrs Cross as a continuing trustee with the power to appoint under the trust deed dated 6 November 1998. She says, as confirmed by the title, that on 25 August 2014 she and her brother were registered as proprietors of the property and that her mother had remained as an owner of the property as a trustee of the trust throughout.

[20] Given the Council’s position, on Mrs Teat’s evidence, there is a disputed evidential issue as to whether the property was originally acquired by Mr and Mrs Cross as trustees and whether the plaintiffs currently own the property as trustees.

While it can be said there is a dispute over the plaintiffs’ claim in this regard, it is not for the Court to resolve a disputed evidential issue on a strike out application.

[21] The plaintiffs’ claims as to how the property was acquired and how it is currently owned cannot be said to be entirely speculative and without foundation.

[22] It is apparent from documents before the Court that, at the time Mrs Teat entered into the agreement to purchase the property, Mr and Mrs Cross owned their former home at Wanaka as trustees of the trust. In August 2006, the BNZ offered a housing loan to assist Mr and Mrs Cross with the purchase of the new property. The disclosure statement dated 25 August 2006 was sent to Mr and Mrs Cross as borrowers and as trustees of the trust. The disclosure statement recorded their acknowledgement that they were signing the loan as trustees.

[23] The BNZ wrote to the solicitors Gallaway Cook Allan, who were handling the purchase of the property, on 23 August 2006. The fax was headed “Urgent – N R and G S Cross Family Trust”. The fax stated:

Further to our discussion in regards to Mr and Mrs Cross, I was wondering if you could please have your office forward a copy of the trust deed via your Wanaka office for receipt tomorrow ... Mr Cross has advised this afternoon that they are looking to proceed on the Sunrise Bay purchase and wants the documentation in place just in case they are successful.

[24] On 15 August 2007, Gallaway Cook Allan wrote to Mr and Mrs Cross at the address of the property. The letter read:

YOUR TRUST’S SALE AND PURCHASE

We enclose a statement of account together with a note of our costs in connection with the sale of 59 Wanaka – Mt Aspiring Road and the purchase of 14 Sunrise Bay Drive.

You will see from the statement that the balance due from you is $1,491.25.

[25] In his affidavit, Mr Logan referred to the fact that only one matter or trust account ledger number was used for the mortgage and sale of Mr and Mrs Cross’ former home and then the purchase of the new property. As Ms Saunders acknowledged, that would be consistent with their former home being sold by Mr and Mrs Cross as trustees, and the new property also being owned by them as

trustees so that monies received from the sale could be credited to them on the purchase.

[26] The evidence currently before the Court strongly suggests the plaintiffs are all currently registered as owners of the property as trustees of the trust. There is Mrs Teat’s evidence to that effect and the reasons for it. There is a deed by which Mrs Teat and her brother were appointed as additional trustees and then not long afterwards registration of a document showing all three present trustees as the owners of the property. There is no document or any other evidence suggesting that Mrs Teat and Adrian Cross acquired title to the property in any other capacity or through any other transaction.

[27] It may also not matter whether the plaintiffs currently own the property as trustees or personally. Mr Wolff referred me to the observation in the High Court that, unlike a company or an incorporated society, a “trust” is not a legal person recognisable as distinct from the humans who direct its affairs.4 The Court of Appeal in Byron Avenue approved those statements and said:5

Just as a trustee is presumptively liable on contracts because there is no difference in legal status between the individual as trustee and in his or her own right, so also for the purpose of the law of tort that status does not alter when the person transfers an asset to him or herself as trustee. Both liability for tort and entitlement to sue in tort remain unaltered.

[28] Mrs Cross has been an owner of the property from the time of settlement of the purchase in 2007 until right through to the commencement of proceedings and remains an owner now. Any one of the present owners would be entitled to sue on behalf of all the owners.6

[29] In support of her argument that the distinction as to capacity was important, Ms Saunders referred to the Court of Appeal judgment in Cowan v Martin.7 The Court of Appeal was there concerned with a different situation. There the claim was

in contract. The appellants’ contract was with trustees. The respondents had not

4 NZHB Holdings Limited v Bartells (2004) 5 NZCPR 506 (HC).

5 O’Hagan v Body Corporate 189855 [Byron Avenue] [2010] NZCA 65, [2010] 3 NZLR 445 at

[52].

6 Visini v Cadman [2012] NZCA 122, (2012) 21 PRNZ 70.

7 Cowan v Martin [2014] NZCA 593, [2015] NZAR 1197.

been trustees when the contract was entered into. The Court of Appeal held that the respondents’ issuing of proceedings in their own names was a misnomer rather than a misidentification. The Court of Appeal upheld the High Court’s refusal to dismiss the respondents’ claim, on the basis the claim would be amended with the plaintiffs alleging they were making the claim as agents for the trustees.

[30] Andrew Beck, in his text, does say that the standing of a plaintiff is part of its cause of action and, if it cannot be established when challenged, the claim must be dismissed. It is open to the Council to try and have the claim dismissed on that basis when this claim comes to be dealt with at trial but Andrew Beck was not saying the challenge should be made and determined in the context of a strike out application. He does discuss what process should be adopted where this issue arises. In that

regard, he said:8

There remains the possibility of an application to strike out the pleading as disclosing no reasonable cause of action under r 15.1 HCR; this would be feasible only where the lack of standing appeared clearly from the pleadings. Given the broader approach of the courts and the tendency to look at the whole context, the opportunities for using the striking out procedure are fairly limited.

[31] Ms Saunders did refer to two cases where the courts had effectively brought proceedings to an end because of the plaintiff ’s lack of standing. Ronald Young J in the High Court was prepared to deal with a strike out application pre-trial to resolve whether the plaintiff had standing to bring each of the identified causes of action.9

There was no suggestion from the plaintiff in the proceedings that there was any

factual inadequacy which would hamper decision-making. The Judge was satisfied that all the relevant facts were known. Ms Saunders accepted that the plaintiff’s lack of standing was apparent from pleadings in that case.

[32] The High Court struck out the plaintiff’s claim for declarations as to the effect of a lease between a landowner and the defendant and for other relief on the basis the plaintiff was not a party to the lease, had no special rights with respect to

the lease and thus had no standing to sue.10


8 Beck, above n 3, at [3.2.6] (citations omitted).

9 Greymouth Petroleum Holdings v Todd Taranaki Ltd [2005] NZAR 747 (HC).

10 At [26]-[32].

[33] In Inland Revenue Commissioners v National Federation of Self-Employed and Small Businesses, the House of Lords denied the respondent federation standing to challenge the decision of the Inland Revenue to overlook some of the tax owed by casual newspaper workers (the “Fleet Street Casuals”).11 It appears from the judgments in the House of Lords that, by that point of the proceedings, the courts had very detailed evidence relevant to the issue of standing. A majority of the House

of Lords reversed a decision of the Court of Appeal and restored a judgment of the Divisional Court holding the Federation had no power to bring the judicial review proceedings. However, Lord Wilberforce, for the majority, stated that it was unfortunate locus standi had been treated as a preliminary point. He said the question of standing in such proceedings should not be considered in the abstract but

must be taken with the legal and factual context.12

[34] These are very different proceedings. On the pleadings and on the evidence which is currently before the Court, the plaintiffs do have an interest as the owners of the land. Nevertheless, Lord Wilberforce’s observations as to the desirability of determining the issue of standing when all the relevant evidence is before the Court are pertinent.

[35] For all the above reasons, I have not been persuaded the plaintiffs’ cause of action against the Council must fail on the grounds the plaintiffs cannot prove that when they filed the amended statement of claim they owned the property as trustees.

Is the pleading likely to cause prejudice or delay?

[36] Rule 15.1(1)(b) of the High Court Rules permits the Court to strike out a pleading if it is likely to cause prejudice or delay.

[37] Ms Saunders detailed what she argued was the plaintiffs’ delay in bringing the proceedings. She argued that, because the claim has not been brought by the plaintiffs in their capacity as trustees, the claim needs to be amended. She argues

that, in the circumstances, such an amendment would amount to the substitution of a


11 Inland Revenue Commissioners v National Federation of Self-Employed and Small Businesses

[1981] UKHL 2; [1982] AC 617 (HL).

12 At 630.

new party, in which case the present proceedings ought to be discontinued and new proceedings begun. She submitted that, because the code compliance certificate was issued in 2006, such new proceedings would be time-barred. To allow a substituted party would also defeat limitation rules and would be unfairly prejudicial to the Council. She submitted this delay has caused significant prejudice to the Council because it is now unable to seek contribution from joint tortfeasors as it would have been able to do had the plaintiffs continued with a claim before the Weathertight Homes Tribunal (the Tribunal).

[38] As to this ground for seeking strike out, Ms Saunders relied on the affidavit of Bronyn Teat. Mrs Teat said that she and her brother did not discover the alleged defects in the property until after they were appointed as trustees in May 2014. They then commissioned an assessment of the property and received a report indicating there were weather-tightness issues in December 2014. The trust made a claim with the Ministry of Business, Innovation and Employment in April 2015. It received an assessor’s report from the Weathertight Homes Resolution Services (WHRS) dated

12 June 2015 and sought advice from solicitors in August 2015. The report identified a number of parties that were responsible for various elements of the construction of the property and could potentially be parties to any proceedings. The plaintiffs did not file these proceedings in the High Court until 13 November 2015.

[39] Ms Saunders said the requesting of the WHRS report in April 2015 stopped time for the purposes of bringing a claim before the Tribunal. Had the plaintiffs continued with a claim in that Tribunal, the Council would have been able to seek contributions from other parties. She argued that, in deciding to bring proceedings in the High Court and not filing those proceedings until November 2015, the plaintiffs had prejudiced the Council because it was unable to seek a contribution from joint tortfeasors. She submitted this prejudice was significant in that it has been said, in cases where a contribution from other parties is sought before the Tribunal, the

standard liability of a local authority is generally only 15 to 20 per cent.13 She

submitted this prejudice was of the sort which has been considered on an application for dismissal due to want of prosecution. She submitted that to allow the plaintiffs to

remedy what she said was a fundamental defect in the proceedings, rather than to

13 Auckland Council v Weathertight Homes Tribunal [2013] NZHC 3274 at [29].

strike out the claim, would be to defeat the limitation rules and would be contrary to the approach which the Court would normally take on a request for such an amendment.14

[40] I find myself unable to accept these submissions for a number of reasons, again carefully traversed by Mr Wolff in his submissions.

[41] For reasons discussed above, the plaintiffs do not accept their present pleadings are defective or need to be amended in any way. I therefore do not have to consider what prejudice might be caused to the Council if, at some later stage, the plaintiffs do seek to amend their pleadings.

[42] The Council is complaining of delay before the issue of proceedings. Mr Wolff referred me to the judgment of Eichelbaum CJ in Lovie v Medical Assurance Society New Zealand Ltd where he had to consider an application for review of a Master’s decision striking out proceedings for delay.15 The Chief Justice referred to a judgment of the House of Lords in Birkett v James and noted the point made by Lord Diplock that “[t]o justify dismissal of an action for want of prosecution the delay relied upon must relate to time which the plaintiff allows to lapse unnecessarily after the writ has been issued”.16 He also noted Lord Diplock’s observation, after referring to earlier authorities, that once it was accepted that the Limitation Act conferred a right upon the plaintiff to commence his action at any time up to the expiry of the statutory limitation periods, it followed that he had a right to continue to prosecute it to trial so long as he did so with reasonable diligence. He noted that this approach had been confirmed by the House of Lords in Department of Transport v Chris Smaller (Transport) Ltd where Lord Griffiths had said:17

The courts must respect the limitation periods set by Parliament; if they are too long then it is for Parliament to reduce them. I therefore commence my assessment of the present regime by concluding that the plaintiff cannot be

14 Referring to Registered Securities (in liq) v Jensen Davies & Co Ltd [1999] 2 NZLR 686 (CA);

Cowan v Martin, above n 7, at [56].

15 Lovie v Medical Assurance Society New Zealand Ltd [1992] 2 NZLR 244 (HC).

16 At 250, citing Birkett v James [1978] AC 297 (HL) at 322.

17 At 251, citing Department of Transport v Chris Smaller (Transport) Ltd [1989] AC 1197 (HL) at

1207.

penalised for any delay that occurs between the accrual of the cause of action and the issue of the writ provided it is issued within the limitation period.

[43] After a careful review of New Zealand authorities, Eichelbaum CJ summarised what he regarded as the principles applicable to the issue of whether proceedings could be struck out for delay:18

(1) By itself, delay prior to the issue of proceedings cannot constitute inordinate and inexcusable delay for purposes of a striking out application.

(2) If such delay has occurred, further delay after issue of proceedings will be looked at more critically by the Court, and will be regarded more readily as inordinate and inexcusable than if the proceeding had been commenced earlier.

(3) The defendant must show prejudice caused by the post-issue delay. If however the defendant has suffered prejudice as a result of pre-issue delay, he will need to show only something more than minimal additional prejudice to justify striking out the proceeding.

(4) An overriding consideration is whether justice can be done despite the delay. As to that, all factors, including pre-issue prejudice and delay, have to be taken into account.

[44] The delay which the Council complains of is entirely delay prior to the issue of proceedings. Consistent with authority, that cannot by itself justify the striking out of proceedings.

[45] The only rule to which the Council has referred me in relation to this ground for strike out is r 15.1. That rule permits the Court to dismiss a pleading if it is likely to cause prejudice or delay or is otherwise an abuse of the process of the Court. The express reference there to prejudice or delay is with regard to those factors going forward, not pre-issue prejudice or delay.

[46] The Court of Appeal discussed r 15.1(1) in the Commissioner of Inland Revenue v Chesterfields Preschools Limited.19 It stated the grounds of strike out listed in r 15.1(1)(b)-(d) concern “the misuse of the court’s processes”.20 In that

discussion, the Court of Appeal also emphasised that an important qualification to

18 At 253.

19 Commissioner of Inland Revenue v Chesterfields Preschools Limited [2013] NZCA 53, [2013] 2

NZLR 679 at [87]-[89].

20 At [89].

the grounds of strike out listed in r 15.1(1) is that the jurisdiction to dismiss proceedings is to be used only sparingly, properly and for bona fide purposes. I do not consider that the plaintiffs’ commencement of a claim in tort against the Council within the applicable limitation period can be considered a misuse of the Court’s processes.

[47] Ms Saunders argued there would be significant prejudice through the Council being unable to seek indemnity or contribution from other tortfeasors. I questioned whether any applicable limitation applied to claims against potential third parties. Ms Saunders later referred me to s 34 of the Limitation Act 2010. This states that, where a claim is being made by a defendant for contribution from another joint tortfeasor, the cause of action accrues when the defendant’s liability to the plaintiff is

quantified by an agreement, award or judgment.21 From such date, the defendant has

two years to file its claim for contribution. On that basis, there would be no bar to the Council joining as third parties the architect or any other person or company which the Council considered had been negligent and had caused the defects and loss for which the plaintiffs are seeking damages.

[48] Section 393 of the Building Act 2004 might bring a different statutory limitation period into play, although Mr Wolff suggested this might not be clear from judgments where that limitation period has been of concern.22 Section 393 prevents any claim being made in relation to a building for which a council has issued a building consent or code compliance certificate once 10 years has elapsed from the issue of that consent or certificate. Ms Saunders did not make any submissions in relation to that section.

[49] If, contrary to current expectations or intentions, the plaintiffs do decide at some later time that they need to file an amended statement of claim and, at that

21 Limitation Act 2010, s 34(4).

22 See Cromwell Plumbing Drainage & Services Ltd v De Geest Brothers Construction Ltd (1995)

9 PRNZ 218 (HC); Body Corporate 330324 “City Gardens Apartments” v Auckland City Council [2015] NZHC 995 at [35]. But, in contrast, see Dustin v Weathertight Homes Resolution Service HC Auckland CIV-2006-404-276, 25 May 2006; Carter Holt Harvey Ltd v Genesis Power Ltd HC Auckland CIV-2001-404-1974, 29 August 2008; Davidson v Banks HC Auckland CIV-2006-404-6150, 23 March 2009; Lee v North Shore City Council HC Auckland CIV-2009-404-2091, 12 April 2010; Body Corporate 169791 v Auckland City Council HC Auckland CIV 2004-404-5225, 17 August 2010; and Perpetual Trust Ltd v Mainzeal Property and Construction Ltd [2012] NZHC 3404.

point, the Council would not be able to join alleged joint tortfeasors as third parties, this would not necessarily require the Court to disallow the amendment.

[50] While such potential prejudice might have to be taken into account, a Judge considering an application for leave to amend would also have to consider the effect of in solidum liability.23 On that principle, which is the law in New Zealand, the Council could potentially be wholly liable for the plaintiffs’ loss regardless of who else might be joined as parties and found to be jointly and severally liable for the same loss.24 It was because of that principle the High Court refused to review a decision by the Tribunal not to remove the Council from proceedings in the Tribunal where delay had led to the Council being unable to join other respondents with whom it might potentially have been able to share any liability to the claimants.25

[51] I do not consider the potential prejudice that might be suffered by reason of the Council being unable to join and seek contribution from other parties would justify striking out the plaintiffs’ claim. This will become an issue only if there is an application to amend the pleadings. It is not clear there would be prejudice on that basis and it is likely there would have been the same prejudice as a result of the pre- issue delay. Such prejudice, as discussed, cannot be a basis for striking out the proceedings for delay.

[52] There is also force in Mr Wolff’s submission that, for delay to justify the striking out of proceedings, it must be inordinate, inexcusable and have caused serious prejudice.26 Mrs Teat, in her affidavit, has explained how, when the trustees became concerned about potential defects in the buildings, they sought expert advice, registered with the WHRS, obtained a report from that service and then sought legal advice. I accept Mr Wolff’s submission that, given the risks and costs associated with litigation and the seriousness of the claim, it was prudent and appropriate for the plaintiffs to ensure that the merits of the claim were well considered before commencing proceedings. Against the evidence of Mrs Teat, there

is no evidence from the Council that the delay of five months between receiving the

23 Minister of Education v Warren and Mahoney Architects Ltd [2015] NZHC 2724.

24 Auckland Council v Weathertight Homes Tribunal, above n 13, at [27].

25 At [26]-[33].

26 Stewart v Grey River Gold Mining Ltd HC Christchurch A517/78, 19 December 1991 at 5.

report from the WHRS and the commencement of proceedings was inordinate, unreasonable or inexcusable.

[53] Without such evidence and given what would appear to be an understandable time taken to commence proceedings, I am not willing to deal with the strike out application on the basis that the delay in commencing proceedings was inordinate or inexcusable. In this context, it must again be remembered that the delay complained of is pre-issue delay.

[54] For all the above reasons, the Council is not entitled to a strike out of the

plaintiffs’ claim on the second ground it has relied upon.

Admissibility of evidence

[55] The plaintiffs, through counsel’s submissions, objected to much of Mr Logan’s evidence in reply on the basis that it was contrary to r 7.26 of the High Court Rules. Mr Wolff also objected to part of the letter from the Council’s solicitors of 17 June 2016 to the plaintiffs’ solicitors being produced as an annexure to the affidavit of A H Balme, the initial affidavit relied upon by the Council in support of its strike out application. Part of that letter was redacted because it referred to a without prejudice settlement proposal.

[56] To the extent there were arguments advanced in the unredacted portion of that letter as to the merits of the plaintiffs’ claim, they have been of no relevance to the issues I have had to consider on this strike out application. It will be apparent from this judgment that the plaintiffs have not been prejudiced through my reading the material which has been objected to. I have been assisted by Toogood J’s discussion

as to the admissibility of evidence in reply in The Commissioner of Police v TRS.27

In the circumstances, I am not ruling any of the evidence objected to as inadmissible.

Conclusion

[57] The Council’s application to strike out the proceedings is dismissed.



27 The Commissioner of Police v TRS [2014] NZHC 1116 at [17]-[22].

[58] The plaintiffs will be entitled to costs. If no agreement can be reached over costs, a memorandum is to be filed by counsel for the plaintiffs by 4 November

2016. A memorandum for the Council is to be filed by 18 November 2016 and any reply by 2 December 2016. The memoranda are to be no longer than five pages.










Solicitors:

Grimshaw & Co., Christchurch

Lane Neave, Christchurch.


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URL: http://www.nzlii.org/nz/cases/NZHC/2016/2503.html