Weaver v HML Nominees Limited [2016] NZHC 476 (18 March 2016)

Last Updated: 20 April 2016

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-3130 [2016] NZHC 476

BETWEEN	ANN-LOUISE EVELYN CHANTAL WEAVER AND GRAHAM WILLIAM ANDERSON Plaintiff
AND	HML NOMINEES LIMITED First Defendant HELEN MARTHA MOORE Second Defendant Continued ...

Hearing:	8 December 2015
Counsel:	M C Frogley for plaintiffs D J Barr for third defendant
Judgment:	18 March 2016

_{JUDGMENT OF KATZ J}

This judgment was delivered by me on 18 March 2016 at 4:45pm pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors: Rainey Law, Auckland LeeSalmonLong, Auckland Simpson Grierson, Auckland Wilson Harle, Auckland

Rice & Co, Auckland

Counsel: D R Bigio, Shortland Chambers, Auckland

N J Scampion, Shortland Chambers, Auckland

WEAVER & ANDERSON v HML NOMINEES LIMITED & ORS [2016] NZHC 476 [18 March 2016]

AUCKLAND COUNCIL

Third Defendant

STONESCAPES LIMITED (IN LIQUIDATION)

First Third Party

FLEXCO (NZ) LIMITED

Second Third Party

ASHTON MITCHELL ARCHITECTS LIMITED (DISCONTINUED)

Third Third Party

BUILDING CODE CONSULTANTS LIMITED (DISCONTINUED)

Fourth Third Party

KELVIN LEONARD WALLS (DISCONTINUED)

Fifth Third Party

COOPER ROOFING COMPANY (DISCONTINUED)

Sixth Third Party

FLEXCO (NZ) LIMITED

Seventh Third Party

MOHAN ROOFING SERVICES LIMITED

Eighth Third Party

POINT CONSTRUCTION LIMITED (DISCONTINUED)

Ninth Third Party

STONESCAPES LIMITED (IN LIQUIDATION)

Tenth Third Party

JACKSON CLAPPERTON AND PARTNERS LIMITED (DISCONTINUED)

Eleventh Third Party

Introduction

[1] The plaintiffs, Ann-Louise Weaver and Graham Anderson, suffered loss due to the defective installation of stone cladding on their house in St Mary’s Bay, Auckland.

[2] In my judgment of 28 August 2015 (“Judgment”) I found the previous owner of the property, HML Nominees Limited (“HML”) liable for the costs of remediating the stone cladding, because it had breached vendor warranties in the agreement for sale and purchase of the property. I also found the Council liable for the costs of remediating the stone cladding, because it was negligent in relation to its inspections of the property and the issue of a code compliance certificate.¹

[3] The plaintiffs were therefore entitled to seek to recover the costs of remediating the stone cladding (“the stone cladding award”) from either HML or the Council, or both of them, subject only to the requirement that the total sum recovered could not exceed the stone cladding award. Because HML is liable in contract, and the Council in tort, they have no rights of contribution against each other as joint tortfeasors.

[4] The plaintiffs reached a settlement with HML, post judgment, which did not involve any monetary contribution towards the stone cladding award. The plaintiffs then sought to enforce the entirety of the stone cladding award against the Council. The Council submits that the effect of the settlement agreement between the plaintiffs and HML is to satisfy the stone cladding award. As a result, any enforcement of the award against the Council would result in excessive recovery.

[5] The issue I must determine is whether the liability of both HML and the

Council, as concurrent wrongdoers in respect of the same loss, has been discharged by the settlement agreement between HML and the plaintiffs.

¹ Weaver v HML Nominees Ltd [2015] NZHC 2080.

Factual background

[6] HML undertook remedial work on the property in 2005 and 2006. HML is the corporate trustee of Helen Moore’s family trust. The plaintiffs issued proceedings against HML and Mrs Moore in relation to alleged defects in the remedial work. Auckland Council was joined as a third defendant.

[7] I awarded the plaintiffs damages of $118,525.20 consisting of:

(a) The costs of remediating defective stone cladding in the sum of

$96,406.22, plus interest. HML and the Council are each liable for the stone cladding award, in contract and tort respectively.

(b) General damages of $20,000. HML and the Council are separately liable for $10,000 each.

(c) Costs for remediating the chimney and flu vent in the sum of

$2,118.98. Only the Council is liable for this amount.

[8] At [184] of the Judgment I recorded that:

HML Nominees is liable in contract in respect of the stone cladding defects only. The Council is liable, in negligence, in respect of both the stone cladding and the chimney cap flashing and new flu vent. If the parties were joint tortfeasors I would likely have apportioned liability on a 50/50 basis. They are not, however, and there is no apparent legal basis for apportionment of liability between the Council and HML Nominees. Obviously, however, the plaintiffs cannot recover more than their total loss...

[9] Following delivery of the Judgement, the Council wrote to HML offering to split the stone cladding award equally. HML did not accept that offer, but instead entered into separate negotiations with the plaintiffs.

[10] Meanwhile, the plaintiffs filed a notice of appeal seeking an additional

$55,352.46 in damages, plus interest and costs. The appeal related to two claims that had been unsuccessful at trial, relating to the garage cladding and front entrance. The appeal was resolved as part of the settlement between the plaintiffs and HML. The key terms of the settlement agreement are that:

G. The parties wish to settle all issues between them arising out of the

proceeding...

...

(1) HML and Mrs Moore will pay the plaintiffs the following amounts:

(a) $10,000 being the amount that was awarded to the plaintiffs as general damages against HML in the judgment sum.

(b) $20,000 as a contribution to the cost of reinstating the garage cladding and the front entrance which were issues on which the plaintiffs were unsuccessful at trial and had intended to appeal to the Court of Appeal.² In the appeal the plaintiff would have been seeking the further sum of $55,352.46 plus interest and costs.

(2) In consideration for the above payments the plaintiffs:

(a) Agree not to appeal against any finding in or a party to the judgment; and

(b) Agree not to enforce the judgment against HML.

(3) In addition, the parties agree that they will not to [sic] seek any award of costs against each other in respect of the proceeding.

(4) This agreement shall not affect the plaintiffs right [sic] to enforce the judgment it has obtained against the Council or to seek costs from the Council in the proceeding.

The Council’s application

[11] As I have noted above, the plaintiffs sought to recover the full amount of the stone cladding award from the Council. The Council says that it has no obligation to make any payment at all towards the stone cladding award, and that if it were to do so, it would result in the plaintiffs making an excessive recovery. The Council relies on rule 17.4 of the High Court Rules, which provides:

No excessive recovery

(1) An entitled party is not entitled to recover a greater sum than the amount owing under the judgment or order, the costs and expenses of and incidental to issuing and effecting an enforcement process, and any interest due under the judgment or order.

² The reference to an “intention” to appeal appears to reflect that the notice of appeal was originally forwarded to the Court of Appeal with a request that it be “held” until the final day for filing an appeal. It was treated, however, in the normal way and registered for filing.

“Entitled party” is defined as including the judgment creditor.³

[12] The Council submits that, pursuant to the settlement agreement, the plaintiffs have received satisfaction (whether in cash or by some other benefit such as HML foregoing the right to seek costs) for the stone cladding award. It is not for the Court to inquire into the adequacy of that consideration. An agreement to not enforce the Judgment in consideration for payment of any amount is, the Council submits, a settlement of all the rights that the plaintiffs had against HML in respect of the stone cladding award. In essence, the Council’s position is that, upon payment of $30,000 by HML to the plaintiffs, the stone cladding award was satisfied. As a result, the plaintiffs cannot now seek to recover any further sum in respect of the award from the Council.

[13] The Council acknowledges that clause 4 of the settlement agreement expressly retains the plaintiffs’ right to enforce the Judgment against the Council. The Council submits that the provision is irrelevant, however, as the plaintiffs are only entitled to enforce the Judgment to the extent allowed by law. As the stone cladding award has been fully satisfied, it cannot be further enforced. There is no “loss” left for the plaintiffs to recover.

Does the settlement agreement between HML and the plaintiffs prevent the plaintiffs from enforcing the stone cladding award against the Council?

Relevant legal principles

[14] At common law, if the plaintiff released one joint tortfeasor, all the others were released as well (“the release rule”). The learned authors of Civil Remedies in New Zealand argue that this rule should now be regarded as abolished by statute,⁴

although they acknowledge that some doubt continues to linger on.5 Further, issues

have arisen as to the application of the release rule (if it still exists) to concurrent tortfeasors. Concurrent tortfeasors are tortfeasors who commit separate torts that

_{contribute to a single instance of damage to a victim.}

³ _{High Court Rules, r 17.1.}

⁴ Peter Blanchard (ed) Civil Remedies in New Zealand (2^nd ed, Brookers, Wellington, 2011) at

_{[15.4.1]; see Judicature Act 1908, s 94 Law Reform Act 1936, s 17.}

⁵ See the differing views in Robinson v Tait [2001] NZCA 217; [2002] 2 NZLR 30 (CA).

[15] In this case the Council and HML are neither joint nor concurrent tortfeasors. Rather, the Council’s negligence (tort) and HML’s breach of the vendor warranties (contract) have both separately contributed to the stone cladding defects. As a result they are both liable for the same loss (the cost of remediating the stone cladding), albeit based on entirely different causes of action. They are therefore concurrent “wrongdoers” rather than concurrent tortfeasors. In distilling the legal principles that should apply to the present application counsel for both parties have referred to the case law relating to concurrent tortfeasors, by analogy. I will do the same.

[16] The Council relied primarily on the decision of the House of Lords in Jameson v Central Electricity Generating Board.⁶ Mr Jameson issued proceedings in relation to a personal injury (asbestosis) he allegedly suffered in his work place. He settled with his employers, but his estate subsequently brought further proceedings against the owner of his work premises. The House of Lords held that the release rule applied to concurrent as well as joint tortfeasors and that the

settlement reached with Mr Jameson’s employers prevented him from making a further claim against the owner of the premises where he had allegedly come into contact with asbestos. As a result, Mr Jameson, having settled with one tortfeasor, was not entitled to re-open the question as to whether the amount which he had agreed to accept in full and final settlement represented full value for his claim, in subsequent proceedings against another tortfeasor.

[17] In Allison v KPMG Peat Marwick the New Zealand Court of Appeal distinguished Jameson on its facts and also strongly rejected the majority’s reasoning in that case. Thomas J stated that: ⁷

[the decision of the majority] departs from long-established, settled and sound principle that a release of one concurrent tortfeasor does not release another concurrent tortfeasor; it will in circumstances other than an exceptional factual situation of the kind which existed in that case be contrary to common notions of justice; it is inconsistent with the step which Parliament has taken in exempting joint tortfeasors from being bound by a settlement to which they are not a party in statutory developments which Parliament has seen fit to enact; it is not required to meet any development or need which has emerged in trade or commerce; it cannot be said to be necessary to meet the reasonable expectations of the community; it will, as

⁶ _{Jameson v Central Electricity Generating Board [2000] 1 AC 455 (HL).}

⁷ Allison v KPMG Peat Marwick [2000] 1 NZLR 560 (CA) at [160].

with any precedent arising out of hard facts, undoubtedly lead to further uncertainty and litigation as plaintiffs with separate causes of action against concurrent tortfeasors seek to carve out exceptions to a rule perceived to work an injustice; and, finally, it is unlikely to be followed in other common law jurisdictions such as Australia, Canada and the United States. Furthermore, as I have endeavoured to demonstrate in this judgment, the analysis and reasoning of the majority is not convincing.

[18] His Honour further observed that:

[142] At this point it is helpful to recollect that a release is not necessarily to be equated with the concept of satisfaction. If the basic rule is that a plaintiff cannot recover more by way of damages than the amount of the loss, the rule does not conceptually preclude the possibility of multiple proceedings to make up that loss. Indeed, it assumes such proceedings are possible. The term satisfaction as in accord and satisfaction is used in a particular sense and serves a different purpose. Accord and satisfaction as between the plaintiff and one tortfeasor does not automatically equate with the satisfaction of the entire loss. Where the settlement is for less than the full loss it cannot be suggested that a release of the settling tortfeasor represents satisfaction of the plaintiff’s claim against a different tortfeasor liable on a different cause of action arising out of a different obligation.

[19] Tipping J also made a number of observations that are potentially relevant to the current application, including that:⁸

Only if the plaintiff in the settlement reached with concurrent tortfeasor A has expressed the intention to release concurrent tortfeasor B, should B be able to rely on the settlement as a bar to proceedings against B.

[20] Jameson was revisited by the House of Lords in Heaton v AXA Equity & Law Life Assurance Society Plc.⁹ Lord Bingham of Cornhill noted that he had “gained much assistance from the clear and illuminating judgments of the New Zealand Court of Appeal in Allison v KPMG Peat Marwick....”¹⁰ Their Lordships confirmed that the release of one concurrent tortfeasor or contract breaker does not in law release any co-defendants and suggested that the decision in Jameson may have been misunderstood:¹¹

The majority decision of the House in Jameson v Central Electricity Generating Board [2000] 1 AC 455 appears to have been understood by some as laying down a rule of law that A, having accepted and received a sum from B in full and final settlement of his claims against B in tort, is

⁸ _{At [190].}

⁹ _{Heaton v AXA Equity & Law Life Assurance Society Plc [2002] EWHC 967; [2002] 2 AC 329 (HL).}

¹⁰ _{At [9].}

¹¹ At [6] and [9].

thereafter precluded from pursuing against C any claim which formed part of his claim against B. I do not think that my noble and learned friend Lord Hope of Craighead, in giving the opinion of the majority of the House, is to be so understood.

[21] Lord Bingham further observed that:¹²

While it is just that A should be precluded from recovering substantial damages against C in a case where he has accepted a sum representing the full measure of his estimated loss, it is unjust that A should be so precluded where he has not.

[22] The decision in Jameson was therefore explained on the basis that, on the particular facts of that case, the settlement was accepted by the parties as representing the full measure of the plaintiff’s loss. There was accordingly full satisfaction and nothing more for which the plaintiff could sue.¹³

[23] Determining whether there has been full satisfaction in any given case is ultimately a matter of interpreting the relevant settlement agreement, as Lord Hope stated in Jameson:¹⁴

The intention of the parties is to be found in the words of the settlement. The question is one as to the objective meaning of the words used by them in the context of what has been claimed.

[24] As for the relevance of an express reservation in a settlement agreement of a right to sue another tortfeasor, Lord Bingham observed that:¹⁵

While an express reservation by A of his right to sue C will fortify the inference that A is not treating the sum recovered from B as representing the full measure of his loss, the absence of such a reservation is of lesser and perhaps of no significance, since there is no need for A to reserve a right to do that which A is in the ordinary way fully entitled to do without any such reservation.

[25] In summary, a settlement with one tortfeasor will not release a concurrent tortfeasor unless it is clear that the settlement was intended by the parties to represent the full amount of the plaintiff’s loss. An express reservation of rights

_{against a concurrent tortfeasor in a settlement agreement with another tortfeasor will}

¹² _{At [5].}

¹³ _{At [8]-[9] and [79].}

¹⁴ _{Jameson v Central Electricity Generating Board, above n 6, at 476.}

¹⁵ Heaton v AXA Equity & Law Life Assurance Society Plc, above n 11, at [9].

tend to support an inference that the parties did not intend the settlement to be in

satisfaction of the full amount of the plaintiff’s loss.

Have the plaintiffs accepted a sum from HML/Ms Moore that was intended to represent the full measure of their loss in respect of the stone cladding?

[26] In order to determine the Council’s claim that there has already been satisfaction of the stone cladding award, it is necessary to answer the question posed by Lord Bingham in Heaton, namely, has the claimant accepted a sum which was intended to represent “the full measure of [the claimant’s] estimated loss”?¹⁶

[27] It is necessary to answer this question by interpreting the words used in the settlement agreement, in the light of the circumstances in which HML and the plaintiffs used them. In particular, two inter-related questions must be considered:

(a) Did the parties intend that the consideration provided by HML under the agreement would fully satisfy the stone cladding award?

(b) What did the parties intend should be the effect of the settlement agreement (if any) on the right of the plaintiffs to pursue enforcement of the award against the Council?

[28] In my view there is nothing in the terms of the settlement agreement, or in the surrounding circumstances, to suggest that the parties to the settlement agreement intended it to be in full and final satisfaction of the stone cladding award not only against HML, but against the Council as well. Indeed the contrary intention is evident in clause 4, which expressly provides that the agreement shall not affect the plaintiffs’ right to enforce the Judgment against the Council, or to seek costs from the Council in the proceeding. As noted by Lord Bingham in Heaton, an express reservation by a plaintiff of his right to sue a concurrent tortfeasor (or in this case a concurrent wrongdoer) will fortify the inference that the plaintiff is not treating the

_{sum recovered from the first tortfeasor as representing the full measure of his loss.}¹⁷

¹⁶ _{At [5].}

¹⁷ At [9].

[29] The agreement records that the parties wish to settle all issues between them arising out of the proceeding. HML and Mrs Moore agreed to pay the $10,000 in general damages owing under the Judgment, plus $20,000 as a contribution to the cost of reinstating the garage cladding and the front entrance which were issues on which the plaintiffs were unsuccessful at trial and had intended to appeal to the Court of Appeal. In consideration of those two payments the plaintiffs agreed not to pursue their appeal and not to enforce the judgment against HML.

[30] The settlement agreement does not constitute “satisfaction” of the Judgment as a whole. It is simply a promise not to enforce the judgment against HML. Words such as “full and final settlement” or “satisfaction” are not used. Rather, the agreement is framed, in effect, as a covenant not to sue HML or Mrs Moore, by enforcing the judgment against them.

[31] The express reservation of rights against the Council is consistent with the agreement being interpreted as a covenant not to sue HML/Mrs Moore, rather than being in full satisfaction of the Judgment. As the learned authors of Chitty on Contract observe:¹⁸

The courts generally construe a release as a covenant not to sue if it contains an indication of intention that the other debtors are not to be discharged. Moreover, even an accord and satisfaction with one joint or joint and several debtor will not discharge the others if the agreement, expressly or impliedly, provides that the creditor’s rights against them shall be preserved.

[32] The interpretation of the settlement agreement advanced by the Council is contrary to commercial sense and would require the Court to disregard the broader factual context. The plaintiffs have obtained judgment from both HML and the Council in respect of the stone cladding award (approximately $100,000) after protracted, expensive and hard fought litigation. They are entitled to enforce it against either or both of the judgment debtors. At least one of those debtors (the Council) is clearly solvent and judgment worthy. Yet, if the Council’s

_{interpretation of the settlement agreement is correct, the plaintiffs have agreed to}

18. AS Burrows “Joint Obligations” in Hugh Beale (ed) Chitty on Contracts (31^st ed, Sweet & Maxwell, London, 2012) vol 1 at [17-018] (footnotes omitted).

accept, in effect, no specific monetary payment at all (from either HML or the

Council) in respect of the stone cladding award as the “full measure of their loss”.

[33] The settlement agreement cannot reasonably be interpreted in that way. Rather, the agreement is clearly structured in such a way as to maximise the plaintiffs’ overall recovery in the litigation. They have elected to enforce the stone cladding award against the Council only, as they are entitled to do. They have agreed not to pursue HML in respect of the stone cladding award, provided that HML pays the general damages awarded against it and also contributes towards the costs of other remedial work, which was the subject of a (now abandoned) appeal. For the avoidance of doubt, I note that I am satisfied that the appeal against the Judgment was brought reasonably and in good faith. It raised tenable issues for

consideration by the Court of Appeal.¹⁹ The plaintiffs’ agreement to abandon the

appeal was therefore good consideration for the $20,000 payment made by HML and

Mrs Moore.

[34] It seems clear that at least one of the concerns driving the present application is the Council’s belief that the plaintiffs’ conduct in seeking the entirety of the stone cladding award from it is inherently unfair. From the Council’s perspective, the appropriate course would have been for the liable defendants (HML and the Council) to have shared responsibility for payment of the award equally, as it proposed to HML. Indeed, I noted in the Judgment that had HML and the Council been joint tortfeasors, I would have allocated liability 50/50. Because the Council and HML are not joint tortfeasors, however, the Council now faces paying the entirety of the stone cladding award, with no ability to seek a contribution from HML.

[35] The Council is not alone in its view that situations such as the present one are unfair. The Law Commission, in its 1992 Discussion Paper on Apportionment of Civil Liability, described the inability of defendants to seek a contribution from a co-defendant in these types of circumstances as “plainly unfair”.²⁰ The Law Reform

_{Commission of Hong Kong earlier reached a similar view (in 1984) stating that:}²¹

¹⁹ _{The plaintiffs set out their grounds of appeal in some detail in their submissions.}

²⁰ _{Law Comission Apportionment of Civil Liability (NZLC PP19, 1992) at [70].}

²¹ Law Reform Commission of Hong Kong Report on the Law Relating to Contribution Between

Wrongdoer (Topic 5, 1984) at [5.3].

We are in complete agreement with this extension of the right to contribution. The present restriction of the right to contribution to tortfeasors cannot be justified on any policy grounds, and is merely an accident of legal history. Furthermore, we see this reform as the most important of our recommendations.

[36] In England the Civil Liability (Contribution) Act 1978 addressed the anomaly by extending rights of contribution to all wrongdoers in respect of the same damage, whatever the legal basis of their liability (“whether tort, breach of contract, breach of trust, or otherwise”).²² This is also the position in Hong Kong, under section 2(3) of the Civil Liability (Contribution) Ordinance 1997. Other countries have enacted similar provisions, but New Zealand has not.

[37] As a result, both the Council and HML are liable for the entirety of the stone cladding award, but neither defendant has a right of contribution from the other. The plaintiffs were entitled to enforce the stone cladding award against either or both of HML and the Council, as they chose. In Malborough District Council v Altimarloch Joint Venture Ltd the majority of the Supreme Court held that there was no duty on the purchaser of a property to first recover from the vendor in contract before seeking to recover against the Council for a separate tort causing the same quantum

of loss.²³ The only caveat is that the plaintiffs cannot recover more than the

judgment sum.

[38] The plaintiffs elected to enforce the stone cladding award solely against the Council. They entered into a settlement agreement with HML in which they agreed not to enforce the Judgment against it in exchange for HML agreeing to pay the general damages owing and $20,000 in exchange for the plaintiffs abandoning their appeal rights. The agreement did not provide for HML to make any contribution to the stone cladding award.

[39] Regardless of any broader “fairness” issues, the present case turns simply on whether the plaintiffs accepted a sum from HML/Mrs Moore pursuant to the settlement agreement that was intended to represent the full measure of their loss.

_{For the reasons outlined above, I am satisfied that they did not. There will}

²² _{Civil Liability (Contribution) Act 1978 (UK), s 6(1).}

²³ Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR

726 at [201].

accordingly be no excessive recovery in terms of rule 17.4 if the plaintiffs enforce the stone cladding award against the Council. Any such enforcement will not result in the plaintiffs recovering a greater sum than the amount owing under the Judgment.

Result

[40] The Council’s application is dismissed. The interim order I made on

14 October 2015, restraining the plaintiffs from enforcing the Judgment against the

Council to the extent of $20,000 (only) is discharged.

[41] The plaintiffs, as the successful party, are entitled to the costs of this application on a 2B scale basis.

Katz J