Antons Trawling Limited v Dawson & Associates Limited
[2017] NZCA 237
•7 June 2017 at 11.30 am
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA269/2016 [2017] NZCA 237 |
| BETWEEN | ANTONS TRAWLING LIMITED |
| AND | DAWSON & ASSOCIATES LIMITED |
| Hearing: | 14 March 2017 |
Court: | Kós P, Miller and Asher JJ |
Counsel: | C M Meechan QC and A Borchardt for Appellant |
Judgment: | 7 June 2017 at 11.30 am |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe appellant must pay the respondent costs for a standard appeal on a band A basis with usual disbursements. We certify for two counsel.
____________________________________________________________________
REASONS
Kós P and Asher J [1]
Miller J [69]
KÓS P AND ASHER J
(Given by Asher J)
Introduction
In the High Court the respondent law firm, Dawson & Associates Ltd (Dawsons), was found to be negligent in failing to ensure that its client, the appellant Antons Trawling Ltd (Antons), received security for the purchase price of a trawler that it had sold.[1] However, despite that finding, Antons did not succeed in its claim against Dawsons. It was held that the cause of action based on this negligence was out of time, the limitation period having run. In this appeal Antons challenges that limitation finding and submits further, as it did in the High Court, that there were other later causes of action in negligence that were not time-barred.
Key facts
[1]Antons Trawling Ltd v Dawson & Associates Ltd [2016] NZHC 982.
The full facts were set out in detail in the High Court judgment of Brown J.[2]
The initial agreement
[2]At [15]–[111].
The Zlatno More was a 62 metre factory trawler, built in East Germany in 1985. It was purchased by Antons in June 2000. On purchase Antons refitted the Zlatno More and had a full class survey conducted under the Russian Maritime Register of Shipping in the Canary Islands.It was used for fishing in various parts of the world before Antons decided to bring it to New Zealand in early 2004. The vessel was then transferred from the Russian Register to the Lloyd’s Register. On arrival in New Zealand it was laid up because of reductions in New Zealand fishing quotas. Antons sought to sell it or successfully charter it inside or outside New Zealand. Almost four years went by. Antons was unable to find a commercial use or purchaser for the trawler.
In January 2008 negotiations to sell the Zlatno More commenced between Antons and Mr Igor Belik of Alye Parusa, a Russia-based company. There were discussions between Mr Belik and the principal of Antons, Mr Milan Barbarich. Mr Belik did not speak English and all communication with him was through a translator. Mr Barbarich engaged Mr Peter Dawson of Dawsons to provide legal services in relation to the sale. After a satisfactory inspection of the vessel a sale and purchase agreement between Antons as vendor and Severnyi Briz Co Ltd (Severnyi) as purchaser, a company apparently controlled by Mr Belik, was signed in early 2008. The agreement contained a warranty by Antons to Severnyi that at the settlement date the vessel would be in class with a new five-year Lloyd’s Class survey certificate.
The sale price was US$1,850,000, with a deposit of US$185,000 to be paid within five banking days after signature. The balance of US$1,665,000 was to be paid by way of an irrevocable letter of credit on 30 May 2008. Delivery was to be at the Port of Lyttelton on 30 May 2008 or any such other agreed date.
The deposit was received on 23 May 2008. However, progress towards completion stopped on 10 June 2008 when a Lloyd’s surveyor advised Mr Barbarich that the vessel was currently withdrawn from class. This was a significant setback as it meant that, before it could operate commercially, the Zlatno More had to be put back into an acceptable class. This would involve considerable expense. The position was, therefore, that Antons was in breach of its obligation to provide a vessel that was in class.
The renegotiated agreement
Mr Barbarich and Mr Belik met on 2 July 2008. Mr Belik was apparently willing to proceed with the purchase, but substantive issues had to be renegotiated. First, it was contemplated that the purchaser might take over the task of getting the vessel registered. The option was for it to complete a Russian Register class survey in Busan, Korea or some other suitable port. The second issue related to the financing of the transaction. It would now be necessary to reduce the price to accommodate the work that would have to be done to get the Russian survey completed.
During the negotiations it was decided that Antons would provide vendor finance for the sale using the funds from the letter of credit (see [5] above). Severnyi would pay an initial instalment with the balance payable in stages. Importantly, it was accepted between Mr Barbarich and Mr Belik, from the earliest stages of the negotiations, that the future payments would be secured by a mortgage over the vessel.
By the end of 2 July 2008 certain key terms had been agreed upon. There was to be a reduction of the sale price to US$1,100,000. The vessel would go to Busan, Korea and US$200,000 would be payable on the vessel’s arrival. Tranches of US$300,000 each were to be payable in three six-monthly instalments. Antons was to retain ownership of the vessel until it arrived in Korea, and it would hold a mortgage over the vessel until the full purchase price had been received.
Negotiations continued as to further terms, but no agreement was reached. There was then a face-to-face meeting attended by Mr Dawson, Mr Barbarich and Mr Belik on 17 July 2008. The negotiations were difficult and exhausting. Mr Belik produced a draft annex. A marked-up version of that annex was provided by Mr Dawson. It provided that, as security for the performance of the purchaser’s obligations, the purchaser would register a first priority ship’s mortgage in favour of the seller and that the purchaser would do all things necessary to effect that registration before the delivery of the vessel.[3] However, by the end of the day the clause that was ultimately agreed upon was on different terms. It read:
Immediately upon Registration of the vessel in the name of Buyer on the Russian Register, the Buyer shall do all things necessary and sign all documents to cause a first priority ship’s mortgage in a form to be agreed by the Seller. The mortgage is to be registered over the vessel in favour of the Seller.
[3]The mortgage could not be registered until the vessel was known to the Russian Register. Therefore, execution was to take place prior to delivery, and registration would be effected at a later date.
The crucial difference between this clause and that exchanged earlier in the day, was that the obligation moved from an obligation to provide security over the trawler for the outstanding purchase price on or before the delivery date, to an obligation to supply security upon registration of the vessel on the Russian Register. The first required security before handover and payment. The second did not, and left Antons unsecured when it delivered the vessel. The first sentence of this final clause was also plainly incomplete, in that it did not state what the buyer would ultimately “cause” in respect of the mortgage. This agreement was signed on 17 July 2008 and was thereafter binding on the parties.
Importantly, the Judge accepted Mr Barbarich’s evidence that, at the time of this negotiation, he had understood that Antons was to receive security in terms of the original clause. He did not realise that, under the final agreement, he would only have a right to security following registration of the vessel.
By the end of July, with the agreement executed and dry docking completed, the renegotiated vessel purchase was still conditional on a sea trial. This was carried out on 9 August 2008 and the vessel was accepted subject to some further repairs.
Mr Dawson and Mr Barbarich remained concerned about security. It is not particularly clear from the evidence exactly when it dawned on them that there was no satisfactory security clause. At meetings with Mr Belik on 11 and 12 August 2008 they proposed an amended security clause providing for security prior to the delivery and transfer of the vessel. However, Mr Belik would not agree to the inclusion of that term.
A further agreement was signed on 12 August 2008 recording that the vessel had undergone a sea trial. Severnyi confirmed its acceptance of the vessel, and there was some alteration to the terms of the payment instalments. The funds from the letter of credit were to be channelled through Antons, and then paid on to Severnyi as purchaser to enable it to obtain refunds for monies to be spent on completing a class survey. With a Russian crew and Antons’ chief engineer, the Zlatno More left Lyttelton for Busan, Korea on 14 August 2008. The voyage was expected to take approximately three weeks. It appears that Mr Barbarich agreed to part of the deposit being used to pay for the cost of the fuel for the delivery voyage.
The vessel ultimately arrived in Busan on 6 September 2008. In the meantime Dawsons and Mr Barbarich had been unsuccessfully endeavouring to get Mr Belik to sign a provision that would require the execution of a mortgage prior to delivery of the vessel. On 12 September 2008 Mr Barbarich flew to Busan with documents prepared by Mr Dawson. Mr Belik objected to various elements of Mr Barbarich’s latest proposals, including the requirement for execution of a deed of mortgage before delivery. Ultimately, no such mortgage clause was signed by Mr Belik.
On 15 September 2008 a remittance authority was signed by Mr Belik and Mr Barbarich in both English and Russian. This authorised Dawsons to remit the amount of the letter of credit (US$1,665,000), paying Antons US$442,120 and Severnyi the balance of US$1,222,880.
On 16 September 2008 the vessel was handed over by Antons to Severnyi. There was then a minor change to the remittance authority.
On 1 October 2008 Mr Dawson transferred the monies. Throughout this time there had been requests for a mortgage and, even on 1 October 2008 when he sent the bank’s confirmation of transfer, Mr Dawson asked Mr Belik to let Dawsons have the signed deed of mortgage as soon as possible. Mr Belik did not reply.
Severnyi now had possession of the vessel and the vendor finance funds, and no mortgage had been provided. The vessel was registered at the Harbour Master’s office in Petropavlovsk on 16 October 2008. In terms of the 17 July agreement, a mortgage should have then been provided by Severnyi, but it did not do so, and it thereafter defaulted on all payments. Antons made extensive efforts to recover the monies it was owed, first through communications with Mr Belik, which received no reply, and then by an attempt to arrest the vessel in Russia. In September 2009 it was discovered that, contrary to representations by Mr Belik, Mr Belik had already given a mortgage over the vessel to Master Bank. In that same month Antons commenced court proceedings in Russia. Then in November 2009 it commenced arbitration proceedings in London. There was protracted litigation, but no further monies were recovered from Severnyi or Mr Belik.
These proceedings were ultimately filed on 26 September 2014. Given the six‑year time limit in the Limitation Act 1950, the critical date for limitation purposes is therefore 26 September 2008.[4] Did a cause of action accrue after that date?
The High Court judgment
[4]Limitation Act 1950, s 4(1)(a).
In its first statement of claim, Antons alleged that Dawsons had negligently failed to include terms in the sale and purchase agreement that properly secured Antons’ interest in the vessel in the event of non-payment of all or any part of the purchase price, and failed to ensure that a properly registerable first mortgage was provided prior to Antons giving up possession. It was also pleaded that, on 1 October 2008, Dawsons negligently released monies when it knew or ought to have known that no mortgage in registerable form had been provided. An amended pleading filed during the course of the hearing expanded that pleading by inserting a specific allegation that Dawsons mis-advised Antons on Dawsons’ obligation to release the vendor finance funds.
Brown J found that at all relevant times Dawsons was retained to provide advice and assistance in relation to the evolving transaction, and owed a duty of care to Antons to exercise reasonable care and skill in doing so. He found that Dawsons had negligently failed to advise Antons to include appropriate terms in the sale and purchase agreement requiring Severnyi to execute a mortgage in registerable form prior to delivery. Mr Dawson had not ensured that the contract reflected the parties’ intention that, until the mortgage was provided in registrable form, the vendor finance funds would not be advanced. However, he found that this cause of action was time-barred, the loss having accrued when Antons entered into the flawed sale and purchase agreement on 17 July 2008.
Brown J went on to consider the other causes of action in negligence. He found that there was no negligent failure on Dawsons’ part to advise against the release of funds, and there was no negligence on Dawsons’ part in releasing the funds on 1 October 2008. Given the negligent drafting of the sale and purchase agreement, there was no basis on which Antons could withhold the funds until a mortgage was given.
This meant that all of Antons’ claims failed. The Judge nevertheless considered it appropriate, in the event that he was in error, to briefly consider the issue of loss, although not as comprehensively as if he had found in Antons’ favour. After traversing the evidence he found that, had a mortgage been obtained, the probability of Antons being able to enforce its mortgage would not have been high, given the existence of a competing first priority mortgage in favour of Master Bank. Exercising broad judgment, he estimated that the probability of recovery was no more than 40 per cent. He declined to find that any of the steps, or failures to take steps, by Antons amounted to contributory negligence.
Therefore, the end result was that the only claim on which Antons succeeded was time-barred. Therefore Antons failed in its claim, and was ordered to pay costs.
Accrual of the cause of action
The issue
Section 4(1)(a) of the Limitation Act provides that actions founded on simple contract or on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued.
The question is when the cause of action based on Dawsons’ failure to competently draft the sale and purchase agreement accrued. If it accrued prior to 26 September 2008, it is out of time. The difficulty faced by Antons is that the agreement, which omitted the requirement for a mortgage before delivery, was executed and became binding on 17 July 2008. The Judge considered that the cause of action accrued at this point, when Antons acquired a package of rights under the contract that was less valuable than it was entitled to expect. Given that the sale and purchase agreement was signed over two months prior to 26 September 2008, the cause of action was time-barred.
Ms Meechan QC submitted that the Judge had wrongly fixed the point at which the cause of action in negligence accrued. She argued that Antons did not suffer the losses it was claiming from Dawsons when it entered into the flawed sale and purchase agreement on 17 July 2008, but subsequently, when Antons met its commitment to advance vendor finance when no mortgage had been provided. This happened on 1 October 2008. Only then was there a quantifiable loss.
Ms Meechan submitted that Brown J had wrongly applied the approach taken by the Supreme Court in Davys Burton v Thom.[5] She submitted that there was a difference in nature between a transaction such as that between Antons and Severnyi, which is characterised by initial commitment and subsequent performance or non‑performance, and transactions of the type in Thom which are characterised by an agreement that is immediately dispositive of rights and obligations. She submitted that, unlike in Thom, there was a “second act” to the Antons transaction. Until the contract was performed, and Antons advanced the funds, there was no actual quantifiable loss which could be claimed. After the agreement was entered into on 17 July 2008 Antons could have repudiated the agreement by saying to Severnyi that without a mortgage it would not perform its end of the bargain, and avoided the loss altogether. Therefore, at the time that the agreement was signed there was no actual loss, only a prospective loss.
Analysis
[5]Davys Burton v Thom [2008] NZSC 65, [2009] 1 NZLR 437.
A cause of action arises when all the facts that are required to prove a particular head of claim come into existence. In the context of negligence, there must be a duty of care, a breach of that duty of care, and loss or detriment suffered by a plaintiff by reason of that breach. Without such loss or detriment the cause of action is incomplete, and time will not start to run for limitation purposes.
We accept that where there is no actual loss, but only a contingent loss, time will not start to run. In Gilbert v Shanahan a client sued a solicitor for negligence in failing to advise him that he was not legally bound to sign a personal guarantee of his company’s obligations under a lease.[6] The guarantee specifically stated that Mr Gilbert would be deemed to be a principal debtor. This Court drew a distinction between loss in the form of incurring a present liability which falls due in the future versus incurring a contingent liability:[7]
The former is and remains a liability until discharged at the future time. The latter is a prospective or potential liability which may or may not have to be discharged depending on whether or not the contingency occurs.
On the facts, it was held that upon signing the guarantee Mr Gilbert incurred a present liability for the rent, albeit that the liability was dischargable in the future when the rent fell due. He therefore suffered actual loss upon signing the guarantee. The claim was held to be time-barred.
[6]Gilbert v Shanahan [1998] 3 NZLR 528 (CA).
[7]At 539.
In Wardley Australia Ltd v State of Western Australia the State of Western Australia had given an indemnity to a bank in reliance on misrepresentations as to the financial position of the borrower.[8] The High Court of Australia decided that the act of providing the indemnity did no more than impose a risk of future loss, which was contingent upon the borrower being unable to meet its obligations:[9]
The indemnity was not one of a kind which generates an immediate non‑contingent liability to pay upon execution of the instrument. It was neither a promise to meet a liability of the promisee to make a payment nor a promise to pay a debt owing by a third party to the promisee. In our view, the indemnity, on its true construction, was one which created a liability on the part of the respondent to the Bank to make payment if and when the Bank’s relevant “net loss” was ascertained and quantified, subject to the making of a demand for payment by the Bank. The liability was, therefore, in conformity with the opinion of the Full Court, contingent and executory.
There was no actual loss at the point of the provision of the indemnity. The High Court emphasised the need to focus on the particular circumstances of the transaction.[10] Brennan J observed:[11]
A transaction in which there are benefits and burdens results in loss or damage only if an adverse balance is struck. If the balance cannot be struck until certain events occur, no loss is suffered until those events occur … In other words, no loss is suffered until it is reasonably ascertainable that, by bearing the burdens, the plaintiff is “worse off than if he had not entered into the transaction”.
[8]Wardley Australia Ltd v State of Western Australia (1992) 175 CLR 514.
[9]At 524 (footnotes omitted).
[10]At 537.
[11]At 536–537 (footnotes omitted).
Gilbert and Wardley were discussed in the Supreme Court decision of Davys Burton v Thom.[12] Gilbert was approved.[13] Thom involved the giving of negligent legal advice with the result that the plaintiff’s matrimonial property agreement was not legally enforceable. The Court held that the plaintiff suffered actual loss upon receiving a damaged asset, namely an agreement that was not legally enforceable. This was notwithstanding the fact that the extent of the damage would not become clear until later. As Tipping J observed:[14]
That valuation exercise would not have been easy, but was conceptually possible. It would have involved an assessment of the likelihood of the marriage failing and the likelihood in that event of the court validating the agreement. But that type of contingency is not of the same kind as a contingency which results in the plaintiff not suffering any loss at all until the contingency is fulfilled. There is a material difference between contingencies relevant to existence of damage and contingencies relevant to valuation of damage. In short, if the defendant’s negligence damages an asset of the plaintiff, that damage is immediate and actual. If the negligence exposes the plaintiff to a contingent liability, there is no actual damage until the contingency is fulfilled.
[12]Davys Burton v Thom, above n 5, at [17]–[19] and [44].
[13]At [44].
[14]At [40].
We agree with Brown J that a loss was suffered, and the cause of action accrued, when Antons entered into the flawed sale and purchase agreement on 17 July 2008. The loss suffered by Antons on 17 July 2008 was at that point actual and measurable, although quantification of the loss would naturally occur at a later time. This is because the sale and purchase agreement between Antons and Severnyi was, on any objective reckoning, of less value to the vendor without a security clause than it would have been with a security clause. If someone was interested in buying the chose in action which constituted the sale and purchase agreement, that person could be expected to pay more if there was a security for the purchase price than if there was no security. In relation to the transaction to sell the vessel and receive payment there was, to adopt the phrase used by Brennan J, an adverse balance struck; the contract to sell the vessel was actually worth less to Antons than it should have been from the moment of its entry as there was no requirement for security for the purchase price prior to delivery.
We acknowledge that the agreement obliged Severnyi to provide a mortgage upon registration. Therefore it might be suggested that Antons’ loss was contingent upon Severnyi’s breach of that term. In other words, had Severnyi performed that obligation, the extent of the loss resulting from Dawsons’ negligence would be minimal. We consider this to be a contingency going to quantum rather than the existence of loss. The situation is analogous to a number of cases considered by the Supreme Court in Thom:[15]
[21] In Bell, the negligence of solicitors in not securing the position of the plaintiff on transfer of property to the sole ownership of the wife was held to make the plaintiff “actually, and not just potentially, worse off than if the solicitors had performed their task competently”, even though at the time the wife’s wrongful dealing in the property so as to defeat his unsecured interest (which made the breach irremediable) lay in the future. The negligence of the solicitors in D W Moore, in failing to provide an effective restrictive covenant, meant that the business which should have been protected by a valid restrictive covenant suffered immediate financial detriment, even though it was wholly uncertain at the time whether there would ever be occasion to invoke the covenant. In Knapp and in Iron Trade Mutual Insurance, where the negligence of the plaintiffs’ insurance brokers led to policies being voidable, the plaintiffs were held to have suffered immediate damage on entering into the policies because they did not get the protection they should have had, even though the eventual uninsured losses and the avoidance of the policies were wholly contingent at the time the insurance agreements were made and might never have eventuated. In all these cases, immediate quantifiable damage arose even though further damage arising from the flawed transactions remained contingent. Such further contingencies “only go to quantum … and [do] not affect the fact that the damages were suffered on [the date of the breach of duty] … because [the plaintiff] did not get what she should have got”.
[15]Davys Burton v Thom, above n 5 (footnotes omitted and emphasis added).
In each of these cases, a different outcome on the contingency in issue could have reduced the damage resulting from the solicitors’ negligence to a nominal amount. Likewise in Thom, had the home not been used as the matrimonial home, or had the marriage been successful, the loss consequent upon the solicitor’s negligence would have been nominal. The Supreme Court characterised these as cases where the plaintiff, through the negligence of the defendant, did not obtain the rights he or she should have obtained, or had imposed on him or her liabilities or obligations that should not have been imposed. In such cases the loss was immediate. We consider that the present case falls squarely within that category.
We are unable to agree with Miller J that Thom can be distinguished from the present case on the basis that, in Thom, the contingency of the failure of the marriage was expressly contemplated by the agreement. In all commercial agreements the possibility of adverse events, which include default, is contemplated. In transactions involving a sale and the passing of possession before payment, the prospect of default is the very purpose of including a term requiring security before handover. Failure to obtain a term providing that protection involves an immediate loss, because the lack of security devalues the purchaser’s promise to pay.
There was loss to Antons at the time it entered into the agreement, because of the absence of that security. As events transpired, the amount of that loss was significant, as Antons was entirely thwarted in its efforts to sue in Russia, and none of the monies that would have been secured were ultimately paid. While it could not be certain when the flawed agreement was signed that any enforcement action on the security would not have achieved recovery, that is a matter of quantum. As Brown J acknowledged in the section of his judgment dealing with damages, some loss in terms of the value of the chose in action constituted by the agreement can be assumed. As we see it, that loss in signing a contract to hand over a chattel without secured payment was much more than de minimis.
Ms Meechan argued that the loss could not have accrued prior to the release of the funds because, had Antons brought its negligence claim before a court prior to release, the court could not have granted judgment against Dawsons for money that was still in Antons’ pocket. This argument confuses the issue of immediate loss or damage, with the calculation of the ultimate quantum of that damage. As we have discussed, upon entering into the flawed variation of the sale and purchase agreement on 17 July 2008, Antons shouldered a liability to deliver a vessel and release the funds without first having received a mortgage. That liability was immediate, not contingent. From that date, Antons could claim in negligence against Dawsons for the difference in value between the flawed rights it received and the more valuable rights it ought to have received. Subsequent events merely altered the quantum of the claim, not when it accrued.
We conclude that all of the ingredients of the cause of action based on Dawsons’ negligent drafting of the sale and purchase agreement, including loss, came into existence on 17 July 2008. It follows that this cause of action is time‑barred. Further, even if this were not so, Antons’ position irrevocably changed for the worse on delivery, on 16 September 2008, as we set out in the next section of this judgment, and that delivery was also outside the limitation period.
Later causes of action
The next issue is whether Dawsons was negligent either in advising Antons in late September 2008 that the funds had to be released, or in releasing the funds on 1 October 2008, or both. We have concluded that Brown J was right to reject both propositions.
By the time that the advice was given and the money was transferred, the agreement of 17 July 2008 had been executed and was binding. That agreement contained no requirement for security prior to the release of the funds. Therefore, there was no legal basis to withhold the funds and demand security after the event. On 12 August 2008 there had been a further variation of the agreement setting out new details about receipt and payment of the bank funds. There was provision for delivery of the vessel and the provision of all documents relating to delivery. However, there was no attempt made by Dawsons or Mr Barbarich to require a mortgage before delivery. Mr Dawson suggested that a term be included requiring Severnyi to provide a guarantee of the amount of the purchase price from a first class bank prior to delivery of the vessel. However, Mr Belik would not agree to the inclusion of that term. It was not pleaded specifically that there was further negligence by Dawsons at this point, but in any event, this date was still out of the limitation period.
In relation to the allegation of negligent release of the funds on 15 September 2008, the remittance advice of Antons and Severnyi had been signed directing Dawsons to distribute the funds in accordance with that advice. Dawsons was bound to comply with those written instructions. In other words, Dawsons would have had to defy that express remittance advice if it had chosen not to pay out the funds.
Crucially, Antons delivered the vessel to Severnyi the next day on 16 September 2008. Antons did not plead a specific allegation of negligence by Dawsons in failing to advise against this, and in any event a cause of action accruing on 16 September 2008 would still be out of time. But it must be observed that this was an irrevocable change of position, where control of the vessel was lost, and Antons relinquished any ability to address the adverse balance struck by the flawed 17 July agreement. The loss, in terms of the value of the contract to sell the vessel, had now become greater again, with the vessel now under the control of the purchaser.
In relation to events in late September, Antons’ own expert, Mr Stollberger, had conceded in his evidence that a solicitor exercising reasonable care and skill could have acted as Mr Dawson did in advising that there was an obligation to pay out the funds. Mr Dawson had the remittance advice instructions to release the funds to Antons and Severnyi in the amounts set out in the instructions. Those instructions were not conditional on the prior execution of a mortgage. Mr Gresson, the expert for Dawsons, was also of the view that Mr Dawson’s actions in paying out the funds could not be criticised.
Ms Meechan invited us to find that Dawsons’ should have advised Antons to breach its contractual obligations and refuse to pay out the funds as a tactical step. We do not accept that proposition. While it was Dawsons’ negligence that had caused the problem of the lack of security, Dawsons could not fix this by recommending unilateral conduct that was in breach of contract. It would have involved defiance of the remittance advice signed by Antons and Severnyi. Matters could be made significantly worse by such an action. Certainly, it was not negligent for Dawsons to not recommend a deliberate breach of contract. For the same reason it was not negligent for Dawsons to release the funds. Antons was contractually bound to pay out the funds. There was simply no lawful ability to hold on to them on the basis that no security had been given, or that the contract should have been on different terms.
Given that Antons had no legal right to retain the funds, Antons’ argument on this point was effectively that Mr Dawson should have urged Antons to practice unlawful self-help. In our view Dawsons were not negligent in not taking any such action.
Therefore, Antons has failed to establish any negligent action by Dawsons within the limitation period. All the events that were arguably negligent, whether pleaded or not, culminating in delivery of the vessel on 16 September 2008, took place outside the limitation period.
It was not argued before us that cancellation on the basis of mistake was another possible option which might have been exercised at an earlier stage. There would have been difficulties in such a claim, given that Mr Belik was plainly and openly not prepared to proceed if he had to give security prior to delivery, which would make it hard to argue mistake. Moreover, even if it had been argued, any ability to effectively cancel the agreement was well and truly over by 16 September 2008, by which time the specific remittance advice had been signed by the parties, and the vessel had been delivered.
Failure to advise Antons to seek independent advice
After the commencement of the trial Antons applied to amend its pleading to introduce further particulars of negligence. Brown J granted leave to amend as to three particulars, but did not allow the addition of the following particular:
[Dawsons] failed to advise Antons that it should take independent advice in relation to the release of the funds and that Antons would have been entitled to issue proceedings, including interpleader proceedings and/or an application for interim injunction, in order to determine the issues in relation to the release of funds.
Brown J refused this amendment because he saw it as a new pleading of conflict of interest, rather than a refinement or particularisation of the negligence cause of action.[16] He regarded this new pleading as being a new legal claim of a failure to discharge an obligation which the defendant owed as an incident of its relationship as Antons’ solicitor. This was an allegation of breach of a fiduciary obligation and as such a new cause of action, and statute-barred. To allow the amendment would be contrary to r 7.77(2) of the High Court Rules, which prohibits the filing of amendments that introduce fresh causes of action which are statute‑barred.
[16]Antons Trawling Ltd v Dawson & Associates Ltd CIV 2014-442-070, 16 May 2016 (Reasons for Ruling (1) of Brown J) at [12].
Ms Meechan argued that this was an error. The new claim was not tantamount to an allegation of conflict of interest, but was only a refinement of the earlier negligence allegations.
The principles relating to whether a cause of action is fresh are set out in Transpower New Zealand Ltd v Todd Energy Ltd.[17] The test is whether the amended pleading is something essentially different. An amendment will be a new cause of action if it opens up a new area of factual enquiry.
[17]Transpower New Zealand Ltd v Todd Energy Ltd [2007] NZCA 302 at [61].
The amendment proposed by Antons would have undoubtedly introduced a whole new basis of claim, being breach of a duty to advise that independent legal advice should be taken. Whether this is appropriately categorised as a breach of fiduciary duty or a subset of negligence, or both, to allow the pleading would have opened up an entirely new area of factual enquiry. The focus shifts from whether Dawsons was negligent by not inserting an adequate security clause, to whether they should have advised Antons to get independent legal help from new lawyers.
Such a new pleading would have also placed Dawsons at a severe disadvantage. It would have faced a new allegation of professional malpractice, namely a failure to advise on the need for independent advice. Its experts had not been prepared on this topic. The case was underway at the time the application for amendment was made. Antons had already closed its case. Undoubtedly, if an amendment had been allowed, witnesses would have required further briefing. There would likely have been further cross‑examination, and further submissions would have been required. The trial was already on track to run over its scheduled seven days, and there was no excuse for the late amendments. We accept Mr Harris’ submission that Antons would have suffered unfair prejudice if the amendment had been allowed.
Finally, if this duty had arisen and had been breached, the cause of action is likely to have accrued prior to the limitation cut-off of 26 September 2008. By then the agreement was in final form, the remittance advice had been signed, and the vessel had been delivered. It was too late.
Having made these comments we would not wish to appear to be condoning Dawsons’ failure to advise on the need for independent advice following its negligence on 17 July 2008. In our view, in late August and early September it was plain that there was not going to be security prior to delivery. Given the unsatisfactory contractual position, Dawsons should have explained its failure to competently draft the agreement and advised Antons to take independent advice.
In the end, this application to amend the claim is just another aspect of Antons’ efforts to overcome the limitation problem it faces, arising out of the late filing of its claim. It has failed to show that this ground of appeal should be upheld.
We also record that we agree with a ruling of Brown J on the second‑to‑last day of trial in respect of a further application by Antons to amend its pleadings.[18] Antons sought to add a pleading that Dawsons had failed to advise Antons that it could repudiate the agreement. It was acknowledged at the time that, if the application was granted, the trial would have to be adjourned. This would have plainly involved unfair prejudice to Dawsons. In our view, the Judge rightly refused the amendment.
The refusal to grant leave to adduce additional evidence
[18]Antons Trawling Ltd v Dawson & Associates Ltd CIV 2014-442-070, 17 February 2016 (Reasons for Ruling (2) of Brown J).
Antons also appeals against a judgment given on 16 May 2016, almost three months after the trial had been completed, declining an application for leave to adduce further evidence subsequent to the trial.[19] The evidence that Antons wished to adduce was a digital recording of a telephone conversation between Mr Barbarich, Mr Dawson and Mr Baker of ASB Bank Ltd which had occurred on 8 September 2008. The evidence related to the allegation that Dawsons mis-advised Antons’ on its obligations to release the vendor funds. It was said that Mr Dawson had advised Mr Barbarich that he had given an “undertaking” to release the funds and that there was no legal basis upon which Dawsons could retain the funds.
[19]Antons Trawling Ltd v Dawson & Associates Ltd [2016] NZHC 980.
Mr Barbarich had given evidence that, in a telephone conversation on or about 30 September 2008, Mr Dawson had told him that he had to pay the money to Severnyi because he, Mr Dawson, had given an “undertaking” to do so. Mr Dawson denied saying this. In his substantive judgment Brown J expressed doubt as to whether Mr Dawson used the word “undertake” but, even if he did, it was no more than a description of an obligation which he considered the remittance authority imposed upon him.
We are unable to see how this new evidence of the 8 September 2008 conversation could have assisted the Judge. It was not evidence of the important telephone call on 30 September 2008. Given that there was no doubt that Mr Dawson was bound by the remittance authority that he had been given by the parties, the issue of whether Mr Dawson mentioned an “undertaking” is not relevant to the issues that have to be resolved. The application was rightly declined by the Judge.
Conclusion
The effect of our decision is that we agree with the High Court that Antons failed to bring its proceedings within time. It had a cause of action in negligence based on Dawsons’ negligent drafting of the sale and purchase agreement, but the limitation period on that expired on 17 July 2014, six years after the flawed sale and purchase agreement was signed. These proceedings were brought on 26 September 2014, approximately two months after the expiry of the limitation period on that cause of action.
The efforts to establish later causes of action have also not succeeded. Any later claims arose when Antons locked itself into a position of loss by signing the remittance advice and delivering the vessel. At the latest these claims accrued on or prior to 16 September 2008, outside the limitation period. We have also rejected the other subsidiary grounds of appeal relating to the refusal to grant an application to amend the pleadings, and to grant leave for the filing of further evidence after the trial.
Given the comprehensive failure of Antons’ appeal, we see no purpose in analysing the lengthy submissions filed on whether the Judge’s estimation of loss of chance at 40 per cent was too high or too low, although we would observe that we see no obvious error in his approach.
Result
The appeal is dismissed.
The appellant must pay the respondent costs for a standard appeal on a band A basis with usual disbursements. We certify for two counsel.
MILLER J
I concur in the result and agree with the reasoning of the majority except as follows.
I differ on the question of whether loss was suffered immediately when the agreement was signed on 17 July 2008. I agree that because the agreement introduced a contingent risk that the purchaser would fail to grant a mortgage after taking possession, Antons acquired a bundle of rights that was less valuable to a notional purchaser than it ought to have been. I also accept that diminution in value of an asset can be an actual loss for limitation purposes.[20] There is an element of judicial policy in the assessment, as the Court explained in Gilbert v Shanahan; to value a contingent loss can be to assume a major risk of over or undercompensating, and it can be unfair to expect a plaintiff to sue too soon.[21]
[20]Davys Burtonv Thom, above n 5, at [17] and [46].
[21]Gilbert v Shanahan, above n 6, at 540.
The line can be difficult to draw, and so it is here. I have reached the conclusion that economic loss on execution was not tangible or material enough to start time running on 17 July 2008.
I find Davys Burton v Thom distinguishable.[22] There the plaintiff entered an unenforceable contract the immediate consequence of which was that by operation of law his home would become matrimonial property when he and his wife moved into it. Realisation of the loss depended on a contingency, the failure of his marriage, but that contingency was expressly contemplated by the agreement. In this case, Antons would realise no loss at all from Dawsons’ negligence if the agreement was performed according to its terms. Thus the loss itself was contingent on a future event, the purchaser’s breach. For this reason, I find this case analogous to the indemnity cases such as Wardley Australia Ltd v State of Western Australia.[23]
[22]Davys Burtonv Thom, above n 5.
[23]Wardley Australia Ltd v State of Western Australia, above n 8. See also Gilbert v Shanahan, above n 6, at 542 in which Wardley was approved but a different conclusion was reached because the guarantee contained a principal debtor clause.
The point can be tested by asking what damages the purchaser would have won for breach had Antons advised on 18 July 2008 that it would deliver the vessel only if it first held a mortgage. Damages must have been nominal, because they would have been assessed at that time on the assumption that the purchaser would perform its side of the bargain.
For the avoidance of doubt, I am not suggesting that Dawsons were negligent to fail to advise Antons to demand a mortgage on delivery and risk proceedings and/or loss of the sale. There is no such pleading and no relevant findings. (It may be, for example, that the purchaser would have had remedies other than damages, or that Mr Barbarich would have been unwilling to risk losing the sale.) I am merely illustrating a point.
I agree with the majority that because it lost all leverage on delivery, Antons’ position irrevocably changed for the worse at that time. Realisation of loss still awaited the purchaser’s breach, but Antons’ bundle of rights was materially less valuable.
Solicitors:
Vlatkovich McGowan, Auckland for Appellant
Gilbert Walker, Auckland for Respondent
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