ANZ Bank New Zealand Limited v Frost & Sutcliffe
[2014] NZHC 1640
•14 July 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2013-404-001380 [2014] NZHC 1640
BETWEEN ANZ BANK NEW ZEALAND LIMITED Plaintiff
ANDFROST & SUTCLIFFE Defendant
Hearing: 19 June 2014
Counsel: MJ Tingey and NFD Moffatt for Plaintiff
P Hunt and D Turnbull for Defendant
Judgment: 14 July 2014
JUDGMENT OF ASHER J
This judgment was delivered by me on Monday, 14 July 2014 at 3pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Bell Gully, Auckland.
McElroys, Auckland.
ANZ BANK NZ LTD v FROST & SUTCLIFFE [2014] NZHC 1640 [14 July 2014]
Introduction
[1] On 2 March 2006 the National Bank of New Zealand (now the plaintiff, the ANZ Bank) forwarded a discharge of mortgage to Frost & Sutcliffe solicitors on the basis that they would not release it until Frost & Sutcliffe’s client had executed a replacement security and Frost & Sutcliffe’s solicitor’s certificate was available. Frost & Sutcliffe, however, released the discharge without obtaining an executed replacement security and without making available a solicitor’s certificate.
[2] In this proceeding the ANZ Bank claims against Frost & Sutcliffe on the basis of breach of undertaking and breach of contract. There was also a claim based on negligence which the ANZ Bank says will not be pursued if this application is successful. In an interlocutory judgment of 21 February 2014, at the request of the ANZ Bank, Associate Judge Abbott struck out Frost & Sutcliffe’s affirmative defence of contributory negligence against the ANZ Bank. The Associate Judge, however, dismissed ANZ’s application for further particulars of Frost & Sutcliffe’s defence based on lack of causation.
[3] Both Frost & Sutcliffe and the ANZ Bank have applied to review the judgment, each challenging the decisions that were determined adversely against them.
Background
[4] In November 2005 the National Bank of New Zealand (now the ANZ Bank)
had advanced $976,000 on a first registered mortgage over a property at 10
Middlemore Road, Otahuhu. The mortgagor, Twenty-First Century Ltd, was a client of Frost & Sutcliffe. The sole director of Twenty-First Century was Duong Hai Ha who guaranteed the mortgage.
[5] It was then agreed between the ANZ Bank, Twenty-First Century and Mr Ha that the terms of the loan would be varied to enable the sale of the Middlemore Road property, and this would include substitution of a property in Alfriston Road for the Middlemore Road property as security for the loan.
[6] On 24 February 2006, Frost & Sutcliffe wrote to the ANZ Bank seeking a discharge of the mortgage on the basis that they undertook not to deal with the documents until they had accounted to the ANZ Bank for all monies it required to be paid under the mortgage.
[7] On 2 March 2006, the ANZ Bank responded in a letter I will consider in detail. The ANZ Bank agreed to discharge the mortgage provided that Frost & Sutcliffe did not release the discharge documents until the replacement security had been executed and its solicitor’s certificate was available.
[8] At the same time a general letter of instructions to Frost & Sutcliffe was sent by the ANZ Bank. That letter has not been found by either the ANZ Bank or Frost & Sutcliffe. For the purposes of the application it has been accepted that the letter would have been sent in the form of a standard template letter of instructions on similar terms to letters of instructions given at the time.
[9] Despite the express instruction of 2 March 2006 Frost & Sutcliffe released the discharge of mortgage with a transfer of Middlemore Road to the purchaser of that property, and the sale of Middlemore Road proceeded. No replacement mortgage was executed over the Alfriston Road property. Frost & Sutcliffe did not have available or provide to the ANZ Bank a solicitor’s certificate. Frost & Sutcliffe then released the net proceeds of sale to Twenty-First Century. The effect of this was to leave the ANZ Bank unsecured.
[10] Frost & Sutcliffe accepts that it did not have authority from the ANZ to release the discharge before it held the executed replacement security. It accepts that it was in breach of contract in failing to do so.
[11] Twenty-First Century was put into liquidation in October 2011. Mr Ha has been adjudicated bankrupt. Because the mortgage had not been executed, the ANZ Bank was an unsecured creditor and sought to prove in the liquidation for
$922,388.78. There is no prospect of any recovery from the liquidation. To
compound the ANZ Bank’s difficulties the liquidators have sought the recovery of
payments totalling $248,252.95 made to the ANZ Bank by Twenty-First Century, alleged to be a voidable transaction.
The strike out of the contributory negligence defence
[12] Frost & Sutcliffe pleaded that any loss that flows from its breach of contract is subject to a deduction for contributory negligence by the ANZ Bank. The ANZ Bank says that this defence cannot be raised in answer to claim for breach of a strict contractual obligation, and that the letter of 2 March 2006 imposed such an obligation on Frost & Sutcliffe. Frost & Sutcliffe say in answer that the retainer did not impose a strict obligation, but rather a contractual duty to exercise the care of a prudent and competent solicitor, and that as a consequence the defence must be available.
[13] The Associate Judge accepted the ANZ Bank’s argument. After traversing the relevant statutory authority and case law, he accepted that a Court should be slow to pass the whole risk of breach over to a solicitor in the absence of clear language. However, he determined that there was clear language in the letter which imposed strict liability. It being one of those “rare cases” imposing strict liability, the affirmative defence of contributory negligence was not available.
Approach to strike out and judicial review
[14] Like the Associate Judge I apply the statement of principles applying to strike out set out in Attorney-General v Prince:1
(a) The Court proceeds on the basis that the facts pleaded in the statement of defence are true.
(b)The defence will be struck out where it is clearly so untenable that it cannot succeed.
(c) The jurisdiction is one to be exercised sparingly.
1 Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267, endorsed by the Supreme Court in
Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
(d)The Court can exercise this power even where it requires determination of difficult questions of law, requiring extensive argument.
[15] I add that it has become clear from recent decisions that if the area of law is developing, and there is a possibility that a claim or defence could succeed, then the proceedings should not be struck out.2
[16] Frost & Sutcliffe have the burden of persuading the Court that the Associate Judge’s decision was wrong in that it rested on unsupportable findings of fact or applied the wrong principles of law.3 The Court’s will apply the approach of Austin, Nichols & Co Inc v Stichting Lodestar and will make its own assessment on the material before it.4
The decision
[17] In a carefully reasoned judgment, the Associate Judge analysed the commentary and case law in New Zealand and England relating to the availability of a plea of contributory negligence. He noted that the ANZ Bank undertook not to pursue its claim in negligence if the defence of contributory negligence was struck
out in relation to the claim in contract. He observed:5
Commentators have summarised the outcome of these cases as follows:
(a) Professional retainers do not normally impose strict duties to achieve a specified result. Instead, a strict duty will be imposed only where justified by an express undertaking or by necessary implication from the facts. Otherwise the retainer will be construed as imposing a duty of care.
(b) An instruction to a professional will normally be construed as defining scope of the duty of care rather than imposing a strict duty unless it is clear that the instruction is intended to create an independent strict duty.
(c) Most cases have concluded that the duties imposed on solicitors by express instructions from lending institutions and the undertakings that
2 Couch v Attorney-General, above n 1, at [33]; Blain v Evan Jones Construction Ltd [2013] NZCA 680 at [19].
3 Midland Metals Overseas Pte Ltd v Christchurch Press Co Ltd (2002) 16 PRNZ 107 (HC) at
[13].
4 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
5 ANZ Bank NZ Ltd v Frost &Frost & Sutcliffe [2014] NZHC 245 at [33].
the institutions require are qualified (by a duty to use reasonable care and skill) rather than absolute obligations, and it is likely to be a rare case where a court will impose an absolute obligation.
(d) Notwithstanding that it is likely to be in rare cases only, the court will find that a solicitor’s obligation is strict (and regardless of whether the solicitors were at fault) where that is the proper construction of the retainer.
(footnotes omitted)
[18] He found that the case was one of the “rare cases” for imposing strict liability.6 He considered that the instruction from the bank was unqualified and imposed a strict obligation upon Frost & Sutcliffe to observe its terms. He concluded that the affirmative defence of contributory negligence was not available, and that the strict obligation imposed excluded any application of common law principles by way of analogy.7 Given his finding that the defence was clearly not available, he considered it appropriate to strike out that cause of action even though it did not resolve the case as a whole.
[19] In relation to the request for an order for particulars, the Associate Judge dealt with this shortly and found that Frost & Sutcliffe had done enough to provide the necessary particulars of its defence in relation to causation, and that the ANZ Bank could prepare properly for trial. Thus, the ANZ Bank failed in that aspect of the application.
Is the defence of contributory negligence plainly untenable?
[20] Section 3(1) of the Contributory Negligence Act 1947 (“the Act”) provides:
3 Apportionment of liability in case of contributory negligence
(1) Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the Court thinks just and equitable having regard to the claimant's share in the responsibility for the damage:
Provided that—
6 At [53].
7 At [58].
(a) This subsection shall not operate to defeat any defence arising under a contract;
(b) Where any contract or enactment providing for the limitation of liability is applicable to the claim, the amount of damages recoverable by the claimant by virtue of this subsection shall not exceed the maximum limit so applicable.
[21] “Fault” is defined in s 2:
Fault means negligence, breach of statutory duty, or other act or omission which gives rise to a liability in tort or would, apart from this Act, give rise to the defence of contributory negligence.
[22] To an extent the definition of “fault” is open ended. It is stated to mean certain things but is also asserted that it means anything which could give rise to the defence of contributory negligence. The parameters of contributory negligence have, therefore, been established by case law. In Forsikringsaktieselskapet Vesta v Butcher
the English Court of Appeal affirming the decision of Hobhouse J8 held that, in a
case concerning insurance brokers, the Law Reform (Contributory Negligence) Act
1945 (UK), which the Contributory Negligence Act 1947 is modelled upon,9 applies when there is the same liability for negligence in tort and contract. The Act applies in cases of concurrent sources of duty.10 The Forsikringsaktieselskapet Vesta v Butcher case was applied by the Court of Appeal in Vining Realty Group Ltd v Moorhouse11 where the Court of Appeal held that the Act was not available because there had been a misrepresentation that amounted to a term of the contract under the Contractual Remedies Act 1979, and which did not involve negligence.12
[23] I agree with the Associate Judge that it is now well established that s 3(1) of the Act will not apply where the claim is for breach of a strict contractual duty.13 In Barclays Bank Plc v Fairclough Building Ltd the English Court of Appeal considered the point in relation to the English equivalent to the Act.14 It was observed by Simon
Brown LJ:15
8 Forsikringsaktieselskapet Vesta v Butcher [1986] 2 All ER 488 (QB)
9 Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852 (CA).
10 Mouat v Clark Boyce [1992] 2 NZLR 559 (CA) at 564–565.
11 Vining Realty Group Ltd v Moorhouse (2010) 11 NZCPR 879 (CA).
12 At [66].
13 ANZ Bank NZ Ltd v Frost & Sutcliffe, above n 5, at [30].
The very imposition of a strict liability on the defendant is to my mind inconsistent with an apportionment of loss.
In that case a building contractor who failed to comply with statutory regulations was held to be in breach of a building contract, and that this was a breach of a strict contractual duty.
[24] There have been a number of English cases which have expressly dealt with the issue of whether contributory negligence is available when there are allegations of breaches of lenders instructions and required undertakings.16 These cases were
analysed by the Associate Judge in his decision.17 I refer in particular to Midland
Bank Plc v Cox McQueen.18 A customer of the defendant’s solicitors had sought finance from the bank. The bank had instructed those solicitors to obtain signed security documents and explain their implications. A solicitor’s certificate was required. In fact the signature of one of the clients was forged. The Court construed the instructions as imposing a qualified rather than an absolute duty to obtain the signed security. The Court commented on the “extremely limited value” or precedent in this area where a document must be construed, and distinguished other cases observing:19
Those cases are interesting illustrations of the approach of the Court to the construction of a solicitor’s retainer, but the respective texts and context were significantly different from the relevant material in this case. Neither decision governs this case.
It was noted:20
If commercial institutions such as banks wish to impose an absolute liability on members of a profession they should do so in clear terms so that the solicitors can appreciate the extent of their obligation which they are accepting … unless the language used in a retainer clearly has this consequence, the Court should not be ready to impose obligations on solicitors which even the most careful solicitor may not be able to meet.
16 Mortgage Express Ltd v Newman & Co [1996] PNLR 603 (Ch D); Barclays Bank Plc v Weeks
Legg & Dean (a firm) [1999] QB 309 (CA); Zwebner v Mortgage Corporation Ltd [1998] PNLR
769 (CA); Midland Bank Plc v Cox McQueen (a firm) [1999] PNLR 593 (CA); and UCB Corporate Services Ltd v Clyde & Co [2000] Lloyd’s Rep PN 653 (CA).
17 ANZ Bank NZ Ltd v Frost & Sutcliffe, above n 5, at [34].
18 Midland Bank Plc v Cox McQueen, above n 16.
[25] The Court distinguished Zwebner v Mortgage Corporation Ltd.21 In that case the vendor required the solicitors to provide a standard form report as to title including an undertaking that all appropriate documents would be executed on or before completion. Again a client had forged a signature, this time on the release of mortgage. It was held that the undertaking was a clear and unqualified warranty that the mortgage deed had been properly executed, and that contributory negligence was not available. It was held that the vendor’s solicitors would normally in any event have been liable on an implied warranty of authority if on completion they had handed over a transfer or conveyance with a forged signature.
[26] Decisions based on English conveyancing practice must be treated with caution. Nevertheless, the English approach is applied in New Zealand.22 Any contract that can be construed as imposing strict liability should be given its natural meaning, and the Contributory Negligence Act should not be used as a means of defeating that contractual intention. The fact that a plaintiff with a strict contract claim may have an alternative claim arising from the same events based on negligence should not have the result of placing that plaintiff in a worse position. The point was graphically made by Simon Brown LJ in Barclays Bank Plc v Fairclough Building Ltd:23
The very imposition of a strict liability on the defendant is to my mind inconsistent with an apportionment of the loss. And not lease because of the absurdities that the contrary approach carries in its wake. Assume a defendant, clearly liable under a strict contractual duty. Is his position to be improved by demonstrating that besides breaching that duty he was in addition negligent? … Is this contract really to be construed so that the defendant is advantaged by an assertion of its own liability in nuisance or trespass as well as in contract? Are we to have trials at which the defendant calls an expert to implicate him in tortuous liability, which the plaintiff’s expert seeks paradoxically to exonerate him. The answer to all these questions is surely “No”.
[27] Mr Hunt in his submissions in support of the application did not seek to contest the applicability of this line of English authority to New Zealand. Instead he
submitted that the Courts will rarely find a professional retainer imposing a strict
21 Zwebner v Mortgage Corporation Ltd, above n 16.
22 Vining Realty Group Ltd v Moorhouse, above n 11; Mouat v Clark Boyce, above n 10.
liability in cases involving professional duties arise. He referred to the statement of
Lord Denning in Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners:24
Apply this to the employment of a professional man. The law does not usually imply a warranty that he will achieve the desired result, but only a term that he will use reasonable care and skill. The surgeon does not warrant that he will cure the patient. Nor does the solicitor warrant that he will win the case.
He submitted that the Associate Judge erred in his finding that Frost & Sutcliffe owed the ANZ Bank a strict obligation in respect of the release of the discharge. Mr Tingey on the other hand submitted that if it is a proper construction of the retainer that the liability was strict, that is sufficient and such a construction was properly applied by the Associate Judge.
Contractual analysis
The letter of 2 March 2006
[28] The two causes of action of the plaintiff are breach of undertaking and breach of contract. A third cause of action based on negligence will not be pursued. The ANZ Bank supports its claim relying on the following statements in its letter of instruction of 2 March 2006 (the letter) sending a discharge addressed to Frost & Sutcliffe which provided:
Replacement Security – The above documents are forwarded to you on your undertaking that you will not release the documents and on the basis that the release/discharge documents is not effective, until our replacement security has been executed and your certificate for our security over the property at 1265 Alfriston Road, Alfriston, Auckland is available (refer to our letter dated 02/03/2006 for instructions).
[29] It is significant that ANZ characterised the Frost & Sutcliffe obligation not to release the documents until execution of the replacement security and provision of the certificate as “your undertaking”. There was no specific reply to this letter. However, Frost & Sutcliffe proceeded to act on the ANZ Bank’s instructions and must be seen as having accepted its terms. It is common ground that in breach of the
stipulations in the letter the discharge was released and the mortgage released,
24 Greaves & Co (Contractors) Ltd v Baynham Meikle & Partners [1975] 1 WLR 1095 (CA) at
1100D.
without the replacement security being executed or the solicitor’s certificate made available. However, it is denied by Frost & Sutcliffe that this was a breach of undertaking.
[30] There was also a second standard letter of instruction provided by the defendant on the same date. The actual letter could not be found but the parties agreed on the form that the letter would have followed. That second letter also referred to the fact that “replacement security has been given to the bank in return for a discharge of existing security” and that “you must not release the existing security until the new security is signed and the bank has received your solicitor’s certificate”.
[31] Read objectively, the letter of 2 March 2006 placed a clear and absolute contractual obligation on Frost & Sutcliffe, which it accepted in proceeding with the transaction. It did not demur from either of the two strict requirements. Frost & Sutcliffe could not release the documents until the two stipulated events had occurred. The use of the word “undertaking” connoting as it does not only
contractual but absolute professional obligations, makes the position very clear.25
Under no circumstances whatsoever were the documents to be released unless the conditions were fulfilled. There was thus no leeway for professional judgment. Even a reason for releasing the documents that might have appealed to an experienced and competent solicitor could not justify a departure. The security could not be released unless the conditions were met.
[32] The wider factual matrix is relevant to this interpretation exercise. The ANZ Bank was providing a document that would have lethal commercial consequences to the commercial viability of the transaction for them if it was misused. The situation was akin to the provision of a blank cheque. Frost & Sutcliffe had a document that they could use, without further reference to the ANZ Bank, to destroy their security.
Indeed this is what happened. The ANZ Bank had placed itself entirely in Frost &
25 Rule 10.3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules
2008 provides that “A lawyer must honour all undertakings, whether written or oral, that he or she gives to any person in the course of practice.” I do not need to decide on whether or not this amounted to a professionally binding undertaking.
Sutcliffe’s hands. In return they were imposing the strictest obligation on Frost & Sutcliffe.
[33] Mr Hunt argued that the letter should be construed in accordance with the standard instructions sent on the same day and that if this were done the contractual duty was not strict. However, the standard instructions were clearly apart from the strict requirements set out in the letter of 2 March 2006. Those strict requirements are distinguished by them being the only obligations referred to in that first letter. All the other obligations involving matters of professional judgment are dealt with in the second letter and attachments.
[34] Mr Hunt argued that the reference to the solicitor’s certificate in the letter of
2 March 2006 brought the notion of the prudent and competent solicitor into the contract. I disagree. The terms of the solicitor’s certificate stood apart from the specific undertakings required in that letter. Thus the form of solicitor’s certificate refers to the bank providing “valid and enforceable securities”. This is a different type of obligation to the strict obligation imposed in the first letter.
[35] There were in the letter no subjective assessments to be evaluated against standards of good practice and skill. The two requirements to obtain an executed replacement security and prepare and hold a solicitor’s certificate were in themselves relatively mechanical. They did not involve any issues of particular experience or competence. A secretary could obtain execution. The solicitor’s certificate had to be available, but did not need to be accurate in its contents. It did not need to be correct.
[36] Given the importance of the task, and the straightforward nature of the professional obligation, it is unsurprising that the stipulations were expressed in the absolute terms of undertakings. That is not to examine the issue from the point of view of the breach of undertaking action, which is different from the contract claim, and which is contested as to liability. The significance of the word “undertaking” is in its contractual implication. The letter of 2 March 2006 was requiring Frost & Sutcliffe if it proceeded to provide the most strict contractual warranty as to how it would act.
[37] Undoubtedly if there had been an issue with the validity of any of the securities, the ANZ Bank would have been able to pursue Frost & Sutcliffe under the solicitor’s certificate, and Frost & Sutcliffe would have been able to raise contributory negligence. In that area ANZ was seeking the comfort of Frost & Sutcliffe having carried out its professional obligations. This was a separate matter from the core issues dealt with in the letter of 2 March 2006.
[38] Mr Hunt argued that a finding that contributory negligence was not available would mean that solicitors when faced with this sort of requirement would face great difficulties. They would have to make a judgment on whether a particular obligation is strict. However, given that the obligation is expressed in terms of an undertaking, a law firm would have no difficulty in understanding the nature of its obligation. It would be up to the law firm as to whether to accept or reject that strict obligation. Viewed objectively, Frost & Sutcliffe would have had no doubt about the nature of the obligation it was accepting if it accepted the ANZ Bank’s retainer.
[39] Mr Hunt submitted that the Associate Judge failed to give weight to contributory negligence cases where the Courts had found an analogous apportionment with the Contributory Negligence Act. I agree with Mr Tingey’s analysis that the cases referred to by Mr Hunt were not cases dealing with breaches of strict contractual duties. Mr Hunt also relied on a statement in Mouat v Clark
Boyce of Cooke P that:26
… apportionment in accordance with true responsibility will always be available and required by the justice of the case. It does not depend solely on the Contributory Negligence Act, although the Act may be used by analogy in developing case law in fields not covered by it.
It has been observed by the learned authors of Burrows Finn & Todd The Law of
Contract in New Zealand that “[t]here has been little further support for this view.” 27
This statement has not been interpreted in New Zealand as excluding or modifying the authorities indicating that contributory negligence can be excluded by strict contractual obligations. Further, as the Associate Judge noted, in his earlier decision
in Day v Mead, Cooke P had qualified his position that there was an attraction in the
26 Mouat v Clark Boyce, above n 10, at 566.
27 Burrows Finn & Todd The Law of Contract in New Zealand (4th ed, LexisNexis, Wellington
2012) at [21.2.5].
same duty of care arising in both tort and contract by saying that this was subject to any special contractual term.28
[40] When I asked Mr Hunt what would be necessary to impose strict liability, he submitted that it would be words to the effect of “this is a strict obligation which is not subject to standards of reasonable skill and care”. In my view the words in the letter of 2 March 2006, referring as they did to undertaking to meet the two requirements, had the same effect.
[41] I conclude that this is a case where a contracting party has placed an explicit and strict obligation on a professional advisor to carry out particular tasks, and that this strict contractual obligation cannot be compromised by the Contributory Negligence Act or any analogous apportionment. It follows therefore that I agree with the Associate Judge’s conclusion that contributory negligence is not available to Frost & Sutcliffe as a defence.
[42] I also agree with his assessment that the striking out of this defence at this stage will have practical implications. The standards of a competent bank in assessing lenders and making loans will not be at issue, as they would be if the pleading of contributory negligence was available.
Request for particulars
[43] The second aspect of the judgment under appeal that is challenged is the Associate Judge’s refusal to order particulars. Frost & Sutcliffe had raised lack of causation of loss as a defence to all of the ANZ Bank’s causes of action. It stated:
(1) ANZ would have suffered some loss due to a fall in the value of
Alfriston Road as a result of the global economic crisis;
(2) There would always have been a shortfall between:
(a) The full amount 21st Century owed ANZ under the Loan
Agreement; and
(b) The proceeds of any recovery action against 21st Century and
Mr Ha (which would have been nil, although legal costs would
28 Day v Mead [1987] 2 NZLR 443 (CA) at 450.
have been incurred) and the net proceeds of the sale of Alfriston
Road after deduction of the costs and expenses of the sale.
Mr Tingey for the ANZ Bank submits that this pleading does not inform it or the Court of the loss that Frost & Sutcliffe assert that the ANZ Bank would have suffered, even if it had received the mortgage over the Alfriston property.
[44] It is necessary first to understand the statement of claim before the defendant’s response can be analysed. Here there is a problem as the figures in the ANZ Bank’s statement of claim are not transparent. It is said that the indebtedness set out in the ANZ Bank’s proof of debt is $922,388.78. It is also asserted that the liquidators of Twenty-first Century Investments Ltd have declared void payments to the ANZ Bank of $248,252.95. However, the amount claimed is $1,179,927.22. There is no obvious correlation between the amounts, and Mr Tingey was not able to explain it to me in argument.
[45] In that context it is unsurprising that the defendant’s should challenge the quantum of loss in the statement of defence. To prove its loss the ANZ Bank will need to show what it would have recovered should Frost & Sutcliffe had met its obligations. It will be for it to prove that but for the Frost & Sutcliffe breach of contract it would have achieved a better recovery. It may be that this is not straightforward given that this will turn on the amount that could have been recovered from the securities that should have been provided. The value of the land at the relevant time will be important.
[46] Thus, Frost & Sutcliffe, in pleading as they do that while the ANZ Bank would have suffered some loss there would be a shortfall between the full amount that Twenty-First Century Ltd owed and the potential proceeds of recovery from the security that should have been executed, were doing no more than expressing that which the ANZ Bank would have to prove in any event. To require Frost & Sutcliffe to particularise this pleading is to effectively ask them to set out for the ANZ Bank how it will prove its claim. It is the ANZ Bank that carries the burden of establishing this loss, not Frost & Sutcliffe to show that no loss occurred.
[47] Mr Tingey submits that the pleading was “fundamentally evasive, as it avoids setting out what the loss and value was”. However, this is a matter for the ANZ Bank to prove, not for Frost & Sutcliffe to disprove. Frost & Sutcliffe are not at this point relying on any specific loss or value. They are effectively putting the ANZ Bank to proof and giving it notice of where the area of dispute will lie. This is a fair use of the pleading process.
[48] Mr Tingey argues that Frost & Sutcliffe have not led any evidence that they are unable to determine the value of Alfriston Road following the fall in property values. However, it is not up to Frost & Sutcliffe to provide evidence of the value of Alfriston Road. The primary obligation to do this falls on the ANZ Bank, if it wishes to establish loss.
[49] Thus, I accept Mr Hunt’s submission that Frost & Sutcliffe have provided fair notice of its defence in the statement of defence, but have no obligation to provide further particulars. The evidence on which causation and loss turn will be adduced in the first instance by the ANZ Bank. It can be expected that the parties will understand each others position after the exchange of briefs. In the meantime, to require Frost & Sutcliffe to give further details of a matter on which they are rightly able to put the ANZ Bank to proof, would be to misuse the particulars procedure. The issue is adequately defined and that is all that is necessary. The ANZ Bank has sufficient material to adequately prepare their trial briefs.
[50] For these reasons I agree with the Associate Judge’s decision dismissing the application for further particulars.
Costs before the Associate Judge
[51] Mr Tingey also challenged the Associate Judge’s refusal to make any order for costs. He submitted that the greater part of the argument related to the affirmative defence of contributory negligence and that therefore the ANZ Bank was entitled to a significant order for costs to reflect that fact.
[52] I agree that the Associate Judge’s decision to let costs lie where they fall was generous to Frost & Sutcliffe. However, it was the exercise of a discretion and I do
not consider it to have been clearly in error or to meet the other requirements for appellate review of a discretion. Each side had succeeded in part. It is, however, a background factor that the ANZ Bank’s victory was the more time consuming to achieve that I will take into account in assessing costs in this hearing.
Summary
[53] In my view the Associate Judge was correct in rejecting both applications. [54] Thus, each of the applications for review brought by each party fail.
[55] I see no reason to interfere with the costs order that was made.
Costs in this hearing
[56] By far the greater amount of argument before me concerned the contributory negligence point. So, in my judgment, did the background research and the preparation of submissions. The particulars issue was narrow in its compass, and without complexity.
[57] Given that a generous order for costs was made by the Associate Judge in the hearing before him in favour of Frost & Sutcliffe, in this Court the fair result is to award the costs of this hearing to the ANZ Bank who have succeeded on the primary issue.
[58] The defendant is to pay the plaintiff’s costs of this review hearing on a 2B
basis.
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Asher J
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