Ashdale Levin Limited v Horowhenua District Council
[2022] NZHC 498
•17 March 2022
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA
TE PAPAIOEA ROHE
CIV-2021-454-000062
[2022] NZHC 498
BETWEEN ASHDALE LEVIN LIMITED and SRINAGAR LIMITED
Plaintiffs
AND
HOROWHENUA DISTRICT COUNCIL
Defendant
Hearing: 4 February 2022 (by AVL) Appearances:
J W Maassen for Plaintiff
S M Bisley and J Maltby for Defendant
Judgment:
17 March 2022
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 17 March 2022 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
ASHDALE LEVIN LTD v HOROWHENUA DISTRICT COUNCIL [2022] NZHC 498 [17 March 2022]
[1] The plaintiffs, Ashdale Levin Ltd (Ashdale) and Srinagar Ltd (Srinagar) are land developers who are together undertaking a residential subdivision in Levin. They consider that under a Heads of Agreement (HOA), to which the Horowhenua District Council (HDC) and Srinagar are parties, HDC is liable to pay them costs they have incurred (and will incur in the ongoing stages of the subdivision) to provide oversized stormwater infrastructure in their development (the additional works). HDC denies the HOA imposes any payment obligation upon it.
[2] The plaintiffs plead causes of action against HDC based on the HOA. They have also made claims in restitution and alleging breach of statutory duty. HDC considers it has arguable defences to all of the claims, but goes further and asserts that four of the five pleaded causes of action are not reasonably arguable and should be struck out.
[3]This judgment concerns competing applications by:
(a)The plaintiffs for summary judgment on their causes of action that are based on the HOA ; and
(b)HDC to strike out four causes of action in the statement of claim.
The context
[4] The plaintiffs are undertaking, as a joint venture, a residential subdivision of land at 136 Roslyn Road, Levin. Roger Truebridge is a director of both companies and also a director of Truebridge Associates Ltd, a land surveying and land development firm, providing services to the plaintiffs.
[5] HDC is a territorial authority under the Local Government Act 2002 responsible for issuing the resource consents in respect of the subdivision.
[6] In recent years, HDC has taken steps to upgrade stormwater infrastructure in the north-east Levin development area, where the plaintiffs’ subdivision is situated, to alleviate flooding and provide for the demands of future development.
[7] In 2019, Srinagar and another developer, Fairfield Estate Ltd (Fairfield), applied to HDC for resource consent to subdivide and develop their respective land.
[8] In July 2019, GHD Ltd (GHD), a professional services firm, submitted a proposal to HDC to advise on stormwater disposal options for the developments.
[9] On 21 August 2019, HDC, Srinagar and Fairfield entered into the HOA.1 The HOA provided the parties would share the costs of obtaining a concept stormwater design report from GHD for the disposal of stormwater falling onto the individual sites. It was intended to allow HDC to investigate “the option of contributing to the costs of upsizing the stormwater infrastructure that would have otherwise been sized only for the individual developments.”
[10] Of particular significance are cls 3 and 4 of the HOA, which I set out in full below:
3The Council may exercise its discretion to contribute to the additional costs of works to increase the capacity of the stormwater piping network to be installed within one or both developments beyond what they would otherwise require. If Council does not contribute to the cost of any additional works to increase the capacity of the stormwater piping infrastructure above that required by an individual development then the developer of that property shall only install such infrastructure as required for their own development based upon the GHD report.
4The Council will enter into individual negotiations with each party of the agreement to determine an agreement to share costs where the Council will contribute to the increased costs in the supply of any pipeline that is larger than that that would have otherwise been required for the servicing of that development alone.
[11] HDC approved Srinagar’s application for resource consent to undertake the subdivision. The terms of HDC’s approval are dated 2 September 2019 and included a condition the development was to be undertaken in accordance with an approved stormwater design, submitted by Srinagar, and approved by the Council Development Engineer. The approved design was to:
1 Ashdale was not a party to the HOA and, while HDC has negotiated with both Srinagar and Ashdale for a cost-sharing agreement, it does not accept Ashdale has any rights under the HOA.
… take into account and be in line with the stormwater study carried out by GHD consultants as previously agreed to by the heads of agreement signed by the applicant and HDC.
[12] GHD’s report was completed in December 2019. It provided concept designs based on several scenarios which included a scenario 2B, described as an unmitigated full-flow development. It would allow the developments to discharge stormwater, and to connect to a wider stormwater network and necessary additional works.
[13] On 24 December 2019, Srinagar submitted engineering plans to HDC for approval.
[14] In an email of 4 February 2020, Neil Hammer, a Development Engineer at HDC, advised Mr Truebridge that HDC was “proposing to participate” in scenario 2B from the GHD report “for the wider NE Levin Catchment” but that to achieve this HDC would need to obtain a full, detailed design which would include a design for a section passing through Srinagar’s development. He said he would advise as soon as he had further information and proposed a meeting at that point to discuss the designs.
[15] Srinagar was concerned about delays in approving its engineering design. On 28 February 2020, Mr Truebridge emailed Mr Hammer requesting a meeting, noting HDC had had the engineering design since 24 December 2019, and Srinagar had sale and purchase agreements on sections with sunset clauses in them.
[16] On 3 March 2020, there was a meeting between representatives of HDC and Srinagar. The purpose of the meeting was to discuss the way forward for the construction phase identified as stages 1 and 2 on Srinagar’s resource consent and engineering plans. No agreements were reached at this meeting as to the infrastructure to be installed or any cost-sharing in relation to additional works.
[17] On 16 April 2020, Srinagar submitted further engineering plans to HDC, adopting scenario 2B. These were not approved by HDC. On 5 May 2020, they were returned to Srinagar. Further amended designs were submitted by Srinagar on 6 May 2020, but these were also not approved by HDC. On 15 May 2020, HDC’s solicitors, Buddle Findlay, wrote to Srinagar’s counsel, John Maassen, summarising the
engineering design issues, history and process that had been followed. Notably, Buddle Findlay advised that HDC did not consider the drawing layout, accuracy, level of detail, and clarity in the designs/plans submitted by Srinagar met the standards that were expected and necessary. The letter stated that HDC recognised there were “wider issues” and, in particular, “HDC needs to proceed with the stormwater pond and pipe work, and sewer infrastructure and the cost-sharing process between the parties associated with these.” Buddle Findlay proposed, as a way to move forward, that Srinagar’s engineering designer meet with HDC development engineers to discuss technical amendments required to the designs submitted by Srinagar, agree a timeframe for their amendment and subsequent approval by HDC. It also proposed that, separately, Srinagar’s directors meet with HDC executives to discuss a cost- sharing agreement. Srinagar agreed to that approach.
[18] The technical meeting was held on 26 May 2020. Following the meeting, Srinagar amended and resubmitted its designs which continued to be prepared on the scenario 2B basis. On 5 June 2020, HDC approved the designs.
[19] On 18 June 2020, HDC executives and Srinagar directors met. Minutes of the meeting record its purpose was to, “Discuss principles of a fair costs share agreement for the development”. From HDC’s perspective, it was accepted that Srinagar would pay for the installation of scenario 2B stormwater infrastructure and HDC would pay for certain off-site works. The respective costs would be off-set against each other. One of the agreed outcomes of the meeting was that HDC was to produce a written cost-sharing agreement for consideration.
[20] On 10 July 2020, HDC sent Srinagar a draft, written cost-sharing agreement for its consideration. On 20 July 2020, Srinagar wrote to HDC with a revised draft cost-sharing agreement. It said the HDC’s proposed cost-sharing agreement was unnecessarily complicated. The letter included a cost comparison for work to be undertaken by the plaintiffs and by HDC. The letter stated:
… all the Agreement needs to say that Ashdale will construct the works in the approved plans within its site and Council will do everything else… We know that the estimates are realistic and reveal that this is a fair arrangement …
[21] On 7 August 2020, the parties met again. The plaintiffs presented new cost estimates. The estimated costs had increased significantly and the plaintiffs were asking HDC to pay $211,284. HDC considered these new costings following the meeting and did not agree with them.
[22] On 7 September 2020, HDC sent its response to the plaintiffs’ new cost estimates for discussion at a meeting to be held on 11 September 2020. HDC estimated the parties’ respective costs would be similar and offered to reconcile them at nil. It proposed that, if its estimates were not accepted, an independent engineer could determine the matter using the costings provided by the parties as the basis for assessment.
[23] At a meeting on 11 September 2020, the plaintiffs presented a further set of cost estimates. This meeting was contentious and very brief. There are different views as to what occurred. HDC’s witnesses say a proposal it had made, and included as part of its proposed cost-sharing agreement, that an independent engineer be appointed to determine costs, was again rejected. The plaintiffs’ witnesses say HDC would not consider its revised cost estimates and that Mr Macguire, the Group Manager for Infrastructure Development at HDC, threatened HDC would withhold the issue of a s 224 Resource Management Act certificate if additional works were not installed. Mr Macguire denies this, and says, as a matter of law, HDC could not issue a s 224 certificate if the works undertaken did not comply with the resource consent conditions and approved engineering designs.
[24] Later that day, the directors of Ashdale wrote to HDC about the meeting and its position. They asserted Srinagar’s resource consent imposed no conditions regarding cost-sharing, nor any requirement to build infrastructure that was to benefit neighbouring properties. They said they were participating in discussions with HDC on a voluntary basis and were prepared to allow HDC to construct infrastructure it considered beneficial for future development, but the calculation and sharing of costs “remains a live issue”.
[25] Between August 2020 and June 2021, the plaintiffs carried out stages 1 and 2 of their subdivision in accordance with HDC approved designs. HDC has issued a certificate under s 224 Resource Management Act in respect of the works.
[26] The plaintiffs have not yet commenced the remaining stages of their development. On 5 July 2021, Buddle Findlay sent Mr Truebridge a letter stating it was understood work on these stages was about to commence and that HDC would not accept any reduction in services from those set out in the approved designs.
[27] On 21 July 2021, Mr Truebridge wrote to HDC noting that no cost-sharing agreement had been reached. He enclosed a further draft cost-sharing agreement proposing HDC pay $168,303.81 for additional works installed in stages 1 and 2 and
$810,909.10 for additional works to be installed in the remaining stages. He threatened court proceedings if the agreement was not executed by 28 July 2021.
[28] The parties then agreed to meet again on 6 October 2021. Before the meeting, this proceeding was filed and the meeting was cancelled.
The summary judgment application
[29]The statement of claim contains five causes of action as follows:
(a)The first cause of action alleges that in breach of the HOA, HDC has failed to pay for the additional works for stages 1 and 2 of the subdivision. Judgment is sought for $367,584.63.
(b)The second cause of action is in restitution2 and pleads HDC received additional works beyond those necessary to serve the subdivision and it is unconscionable for HDC to retain the benefit of them without payment. Judgment is again sought for $367,584.63.
2 I presume this is intended as an alternative to the first cause of action.
(c)The third cause of action alleges that in breach of the HOA, HDC has not agreed to reimburse the plaintiffs to install the additional works for future stages of the subdivision. Judgment is sought for 357,935.88.
(d)In the alternative to the third cause of action, the fourth cause of action seeks a declaration the plaintiffs are not required to install the additional works for future stages of the subdivision.
(e)The fifth cause of action alleges improper use by HDC of its statutory powers. No statutory powers are referred to. I understand it is alleged HDC is refusing to issue a s 224 certificate for just sufficient, not oversized, infrastructure.
[30] At the hearing, Mr Maassen advised summary judgment was sought in respect of the first, third and fourth causes of action only. Further, the plaintiffs are not seeking immediate judgment in a monetary sum. Rather, what the plaintiffs seek is a decision that HDC elected for the installation of additional works and was obligated under the HOA to contribute to the costs of them in an amount to be assessed.
Summary judgment principles
[31] The plaintiffs’ application is brought pursuant to r 12.2(1) of the High Court Rules 2016. It provides:
The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
[32] The Court may give judgment in relation to a part of a claim only if the plaintiff cannot prove the whole of it. Further, the Court may give judgment on liability and order a trial on the issue of amount if the party applying for summary judgment satisfies the Court that the only issue to be tried is one of the amounts claimed.
[33] An oft cited summation of the correct approach to summary judgment applications is contained in Krukziener v Hanover Finance Ltd as follows:3
[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA) . The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[34]I emphasise the following:
(a)the plaintiff must satisfy the Court that the defendant has no arguable defence to its claim. The issue is whether there is a real question to be tried;
(b)the onus remains on the plaintiff throughout, but where the plaintiff’s unchallenged evidence is sufficient to convince the Court the defendant has no arguable defence, the defendant will have to respond with evidence of an arguable defence in order to defeat the application;
(c)it is generally not possible to determine disputed issues of fact based on affidavit evidence alone, particularly when issues of credibility arise;
(d)issues of law, even though they may be complex can, however, be determined in an application for summary judgment;
(e)the Court is not required to accept possible defences which are not bona fide, credible or are lacking in detail. The Court should adopt a robust and realistic approach to the assessment of evidence but, nevertheless,
3 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307.
summary judgment may be inappropriate where the ultimate determination turns on a judgment that can only properly be reached after a full hearing of all the evidence; and
(f)the Court’s power to enter summary judgment is discretionary, but the discretion is of a residual kind. There is also little scope for exercising the discretion not to grant summary judgment where there is no suggestion of injustice.
The plaintiffs’ submissions
[35] Mr Maassen submits the HOA is a side agreement of the kind recognised by the Supreme Court in Waitakere City Council v Estate Homes Ltd. 4 It must, he submits, be interpreted in light of its commercial purpose and statutory resource management context. This relevant context is said to include the “self-evident” proposition a local authority cannot require a developer to install services of greater capacity than is required by the subdivision, to confer benefits on other land, without meeting the additional costs of the excess capacity.
[36] Mr Maassen contends that looking at the matter objectively, the HOA and the parties’ subsequent conduct shows they intended to enter into a binding contract,5 the commercial purpose of which was to facilitate the subdivision by Srinagar by giving HDC an election to require additional works. He submits, once it is determined the parties intended to enter into a contract, the Court will do its best to give effect to that intention.6
[37] The plaintiffs argue the first sentence of cl 3 of the HOA contemplates a decision by HDC to approve additional works, which carries with it an inevitable consequence that HDC shall contribute to the cost of those works. They submit it is not reasonable to interpret the sentence as meaning HDC could decide whether or not it wished to contribute to additional works even though it required them to be installed.
4 Waitakere City Council v Estate Homes Ltd [2006] NZSC 112, [2007] 2 NZLR 149 at [77]-[79].
5 Fletcher Challenge Energy Ltd v ECNZ Ltd [2002] 2 NZLR 433 at [53]-[54].
6 At [58].
[38] The plaintiffs contend HDC required them to install oversized services and therefore must pay for them. In support of the submission, the following were identified as key:
(a)The resource consent of 2 September 2019, containing a condition requiring the engineering design to take account of GHD’s stormwater study, and requiring that, “the development shall be undertaken in accordance with the approved detailed stormwater design”.
(b)The GHD report containing the scenario 2B design.
(c)Mr Hammer’s email of 4 February 2020 which, it is argued, was the unequivocal election by HDC that the scenario 2B option was to be applied.
(d)HDC’s approval of the engineering design, prepared on the basis of the scenario 2B option, which noted two sizes of pipe. One size was the oversized services, and the second only sufficient for the subdivision, if HDC were unwilling to contribute.
(e)Buddle Findlay’s letter of 5 July 2021 which states it was critical to HDC that the design in the approved plans was retained for the later stages of the subdivision and that HDC would not accept any reduction in services from those set out in the approved plans.
[39] The plaintiffs contend the absence of written agreement on actual costs is not significant as, based on the evidence of Mr Truebridge and Garth Flores (presently an employee of Truebridge Associates Ltd and the author of the GHD report), HDC’s contribution would be allocated on a proportional basis after construction “in the usual way”. In the alternative, it is said HDC must at least have an obligation to pay reasonable costs.7
7 There are no such pleadings in the statement of claim.
[40] Mr Maassen’s oral presentation focused on the position HDC has taken that it can set-off, against Srinagar’s costs of the additional works, costs it incurs for certain off-site works. He argues this approach cannot be correct. The HOA does not, he submits, address a financial contribution for off-site works and HDC cannot legally require a developer to agree to pay a financial contribution for off-site works under the relevant statutory provisions governing the imposition of financial requirements of that nature. He also argues HDC’s position is not rational because if it requires additional works it must pay for them, but in doing so it does not lose any rights it might have to claim off-site costs.
My assessment
[41] The plaintiffs have failed to establish that HDC does not have an arguable defence to each of its claims.
[42] The starting-point is that the causes of action based on alleged breach of the HOA cannot assist Ashdale, who was not a party to the HOA. That Ashdale has entered into a joint enterprise with Srinagar does not give it rights to sue on the HOA.8
[43] There was no attempt to argue that Ashdale may enforce the HOA under ss 12- 17 of the Contract and Commercial Law Act 2017 and I do not see how it can do so. Section 12 of the Contract and Commercial Law Act 2017 provides:
Deed or contract for benefit of person who is not party to deed or contract
(1)This section applies to a promise contained in a deed or contract that confers, or purports to confer, a benefit on a person, designated by name, description, or reference to a class, who is not a party to the deed or contract.
(2)The promisor is under an obligation, enforceable by the beneficiary, to perform the promise.
(3)This section applies whether or not the person referred to in subsection
(1) is in existence when the deed or contract is made.
[44] Under s 12(1) designation is a core requirement. As the authors of Burrows Finn and Todd on the Law of Contract in New Zealand note, “Persons who happen to
8 Cedenco Foods v Akiaki Ltd HC Napier CIV-2007-441-439, 21 November 2007.
benefit from the performance of a contract, but who are not sufficiently designated by it, cannot sue”.9 Ashdale is not designated by name, description, or reference to a class, as a non-party beneficiary under the HOA and cannot sue upon it.
[45] The next matter is whether the parties intended cls 3 and 4 of the HOA to create binding obligations upon them. In my view, it is arguable cls 3 and 4 of the HOA were not intended to create a binding contractual obligation on HDC to contribute to the cost of additional works.
[46] Giving the judgment of the majority in Fletcher Challenge Energy Ltd v ECNZ, Blanchard J noted the prerequisites to the formation of a contract are, first, an intention to be immediately bound at the point in time when the bargain is said to have been agreed and, second, agreement, express or found by implication (or the means of achieving an agreement) on every term which was legally essential to the formation of such a bargain, or was regarded by the parties themselves as essential to their particular bargain.10 Whether parties intended to enter into a contract and whether they have succeeded in doing so are questions to be determined objectively. It is permissible for the Court to look beyond the words of the parties’ “agreement” to the background circumstances from which it arose, as well as their subsequent conduct towards one another, including what they said to each other after the date of the alleged contract.11 The Court takes a neutral position when determining whether the parties intended to enter into a contract, but having decided that they had that intention, it will do its best to give effect to their intention and, if at all possible, to uphold the contract despite any admissions or ambiguities. The intention of the parties, as discerned by the Court, to be bound or not to be bound, should be paramount.12
[47]However, relevantly in relation to this last point, Blanchard J said:13
But even where the parties are ad idem concerning all terms essential to the formation of a contract – the basic structure of a contract of the type under negotiation is found to have been present in the terms which have been agreed
– they still may not have achieved formation of a contract if there are other
9 Jeremy Finn, Stephen Todd, and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th ed, LexisNexis, Wellington, 2018) at 570.
10 Fletcher Challenge Energy Ltd v ECNZ Ltd, above n 5, at [53].
11 At [54] and [56].
12 At [58] and [60].
13 At [52].
unagreed matters which the parties themselves regard as a prerequisite to any agreement and in respect of which they have reserved to themselves alone the power of agreement. In such cases, what is missing at the end of the negotiation is the intention to contract, not a legally essential element of a bargain.
[48] Here, the HOA provides no formula or mechanism for determining the amount of HDC’s contribution to the cost of additional works. Mr Maassen submits the amount can be calculated on the basis of methodologies proposed by the plaintiffs, or by what the Court considers reasonable in the circumstances. I do not accept this submission. It appears to me that under the HOA, the parties reserved to themselves alone the task of negotiating an amount that HDC might contribute to the cost of additional works. That is made clear by the words, “The Council will enter into individual negotiations with each party … to determine an agreement to share costs”. This is consistent with how the parties conducted themselves. Furthermore, the plaintiffs’ case has not been pleaded on the basis they now advance.
[49] The next matter is the interpretation the plaintiffs seek to put on cl 3 of the HOA. The proper approach to contractual interpretation is an objective one. The Supreme Court noted in Firm PI 1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand, that the aim is to:14
... ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.” This objective meaning is taken to be that which the parties intended. While there is no conceptual limit on what can be regarded as “background”, it has to be background that a reasonable person would regard as relevant. Accordingly, the context provided by the contract as a whole and any relevant background informs meaning.
(footnotes omitted)
[50] While the Supreme Court in Firm PI 1 Ltd accepted that in interpreting commercial contracts the Courts should have regard to the commercial purpose and
14 Firm PI 1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand [2014] NZSC 147, [2015] 1 NZLR 432 at [60] citing Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912 per Lord Hoffmann.
structure of the parties’ bargain “to the extent that they can reliably be identified”,15 it emphasised that the “text remains centrally important”.16 It said:17
If the language at issue, construed in the context of the contract as a whole, has an ordinary and natural meaning, that will be a powerful, albeit not conclusive, indicator of what the parties meant. But the wider context may point to some interpretation other than the most obvious one and may also assist in determining the meaning intended in cases of ambiguity or uncertainty.
[51] I do not accept that cl 3 of the HOA necessarily contemplated that HDC would either “approve” or “require” additional works with the inevitable consequence HDC would pay the cost of such works. The interpretation the plaintiffs advance is not supported by the text of the HOA, the prior negotiations between the parties, nor their subsequent conduct. In my view, another interpretation is not only arguable but, on what is before me, preferable.
[52] Beginning with the text, the HOA states the purpose of obtaining the GHD report was so the parties could receive concept plans for the disposal of stormwater to the development sites, and to allow HDC to, “investigate the option of contributing to the costs of upsizing the stormwater infrastructure that would have otherwise been sized only for the individual developments”. The only decision cl 3 contemplates HDC making is whether it is prepared to contribute to the costs of additional works. In the event that it was, it would enter into negotiations “to determine an agreement” as to the amount of its contribution. The amount it might contribute is to be a product of a separate agreement and not the HOA. In my view, it is certainly arguable the HOA does not contain or impose any payment obligation upon HDC in respect of additional works; rather such payment obligation could only arise following a decision by HDC that it was prepared to contribute to the cost of the works and the negotiation between the parties of a subsequent agreement determining the amount of such contribution.
[53] In Bathurst Resources Ltd v L & M Coal Holdings Ltd, the Supreme Court held that evidence of the parties’ prior negotiations may be admitted into evidence to assist
15 At [79]
16 At [63].
17 At [63].
with the interpretation of the text of the contract where it tends to objectively prove what the parties intended the words of the contract to mean.18 Unsurprisingly, in this summary judgment context, there is only limited evidence of the parties’ prior negotiations, but there is a prior HOA submitted to HDC by Mr Truebridge on behalf of Srinagar. Notably, that draft HOA provided as follows:
The Horowhenua District Council also agrees that any subsequent design criteria put forward by GHD as a result of the report that requires the upsizing of infrastructure within … Srinagar land over and above that that would be required to service just those areas of land on their own, that the Council will pay for the additional cost involved.
The Council may exercise its discretion as to whether or not the work required to increase the infrastructure size is carried out at the time of development of the Srinagar ... lands OR [land].
[54] The draft HOA contemplated HDC could require the installation of additional works and imposed a payment obligation upon HDC. HDC did not accept the draft HOA. That such an agreement was rejected by HDC is significant. A notional, reasonable person might well conclude from this the parties did not intend to impose a payment obligation under the HOA.
[55] As far as the parties’ subsequent conduct is concerned, in Bathurst Resources Ltd, the Supreme Court held that the parties’ subsequent conduct (referring to conduct in undertaking contractual obligations after an agreement has been entered into) may be admissible where it tends to prove anything relevant to the objective approach to interpretation. Subsequent conduct need not necessarily be mutual.19 The Court noted that care will be needed to assess the probative value of such evidence, particularly when the conduct occurs after a dispute has arisen.20
[56] There is evidence as to how these parties conducted themselves following the making of the HOA which is inconsistent with the interpretation the plaintiffs advance. From the beginning of March 2020, the parties undertook six months of negotiations in an attempt to conclude a cost-sharing agreement. It is significant, in my view, that prior to 11 September 2020, the plaintiffs were apparently content that HDC off-set
18 Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85 at [77].
19 Bathurst Resources Ltd v L & M Coal Holdings Ltd, above n 18, at [89].
20 At [90].
against the cost of additional works its costs for off-site works. That was the proposal the plaintiffs put to HDC in the letter of 20 July 2020 and the amended draft cost allocation agreement that accompanied it.
[57] I do not accept either, on the evidence presently before me, the submission that HDC “required” the plaintiffs to install the additional works. Ultimately, it was for Srinagar to apply for subdivision consent upon terms it considered appropriate. Insofar as it considered the conditions of consent unacceptable, or the HDC was imposing unlawful requirements, it had legal remedies.21
[58] Further, while I accept HDC undoubtedly wished to take the opportunity to provide for future development and growth, none of the documents the plaintiffs rely upon establish HDC imposed a requirement upon the plaintiffs to install additional works.
[59] The condition in the resource consent of 2 September 2019 predates the GHD stormwater study. The condition the engineering design would take account of GHD’s stormwater study was agreed to by Srinagar; indeed it appears it was substantially drafted by Mr Truebridge and sent to HDC in an email of 12 August 2019.
[60]The GHD report imposed no obligations on any of the parties.
[61] Mr Hammer’s email of 4 February 2020 did not unequivocally elect the scenario 2B option. It said HDC was “proposing” to participate in the installation of a full-flow stormwater system based on the GHD report, but this was subject to further discussions with its own designers and Srinagar. Subsequent emails from Mr Truebridge to the Council make it clear he did not consider Srinagar was required to accept HDC’s proposal. In an email to Mr Hammer of 28 February 2020, and following receipt of advice from Mr Maassen, he expressed concerns about delays in approval of Srinagar’s engineering designs and said:
If agreement is not reached on the method and cost allocation of infrastructure beyond that necessary to serve the subdivision then our client will have to insist on approval of designs sufficient only to serve its subdivision
21 See for instance the comments of the Supreme Court in Waitakere City Council v Estate Homes Ltd, above n 4, at [53].
[62] HDC’s approval of Srinagar’s engineering design was against a background where Srinagar was aware, based on advice from Mr Maassen, that HDC was obliged to approve engineering plans sufficient to serve only the subdivision in the absence of agreement on an increase in the level of service of the network and growth provisions including a decision about the allocation of cost and responsibility for construction of the works. Furthermore, the parties were, at that time, in negotiations in an attempt to reach an acceptable cost-sharing agreement and the plaintiffs were aware that no commitment had been made by HDC to contribute to those costs.
[63] Buddle Findlay’s letter of 5 July 2021, stating it was critical to HDC that the design in the approved plans was retained was, at least arguably, no more than recognition of the fact that Srinagar was required to comply with the terms of its resource consent.
[64] In relation to the remaining cause of action for which summary judgment is sought (seeking a declaration the plaintiffs may install infrastructure only sufficient to service the subdivision) Mr Maassen argues that such relief must be available, pursuant to the terms of the HOA, in circumstances where HDC has indicated it will not contribute to the cost of additional works. I do not accept that submission. The asserted entitlement to the declaration sought is based on cls 3 and 4 of the HOA. I have already held that it is arguable cls 3 and 4 were not intended to create binding contractual obligations. Further, even if I had thought otherwise, it would be inappropriate for the Court to make such a declaration and I would refuse to do so. In undertaking the subdivision, the plaintiffs are required to comply with the conditions of the resource consent. Whether that entitles them to install different services than they have to date intended, is a matter of construction of the resource consent. It is not a matter of contract between the parties. Whether, ultimately, the plaintiffs are able to obtain a variation to the terms of the resource consent to allow the installation of different services, may depend on a host of matters of which I have insufficient knowledge.
[65]The application for summary judgment will be dismissed.
The strike out application
[66]HDC applies to strike out all but the second cause of action.
[67] HDC relies upon r 15.1(a)-(d) of the High Court Rules. It permits the Court to strike out all or part of a pleading in specified circumstances and provides:
15.1Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it
---(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
(2)If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3)Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4)This rule does not affect the court’s inherent jurisdiction.
[68] The Court will exercise its power to strike out a pleading sparingly and only in clear cases. Further, the Court has traditionally been wary of the potential inefficiency of applications to strike out part of a pleading, but that may be justified if it could substantially reduce the burden of trial or preparing for trial.22
[69] I accept the general approach in Attorney-General v McVeagh, where the Court of Appeal said:23
The Court is entitled to receive affidavit evidence on a striking out application, and will do so in a proper case. It will not attempt to resolve genuinely disputed issues of fact and therefore will generally limit evidence to that which is undisputed. Normally it will not consider evidence inconsistent with the pleading, for a striking out application is dealt with on the footing that the pleaded facts can be proved; see Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641, 645-646, Southern Ocean Trawlers Ltd v
Director-General of Agriculture and Fisheries [1993] 2 NZLR 53 at pp 62-
22 ANZ Bank New Zealand Ltd v Frost and Sutcliffe [2014] NZHC 245 at [24].
23 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.
63, per Cooke P. But there may be a case where an essential factual allegation is so demonstrably contrary to indisputable fact that the matter ought not to be allowed to proceed further.
The first and third causes of action
[70] All causes of action are brought by the plaintiffs jointly. The first and third causes of action plead breach of an alleged payment obligation under the HOA. For the reasons I have given above, the HOA cannot be relied upon by Ashdale. The pleadings of these causes of action are defective for another reason. The breach of the HOA is said to be the failure to pay the cost of the additional works. Clauses 3 and 4 of the HOA are quoted in full, but absent is any pleading as to how those clauses give rise to a payment obligation on behalf of HDC.
[71] HDC argues it is not a tenable construction of the HOA that it contains an express and immediately binding obligation on HDC to pay the cost of additional works and all it requires is that the parties reach a separate and subsequent agreement. It does not accept, either, that there is any basis to argue that it is an inevitable consequence of the HOA that HDC will be a net payer under any agreement reached.
[72] I consider that insofar as Ashdale is concerned, the claim is untenable and must be struck out. As far as Srinagar is concerned, despite the obvious strength in HDC’s position, I am not able to accept, to the high standard required, that a claim based on breach of the HOA is untenable. While, as things stand, the pleading does not identify such a claim, I consider that it could be argued (I put it no higher than that) that a decision by HDC to contribute to the cost of additional works gives rise to an obligation to pay “the increased costs in the supply of any pipeline that is larger than that that would have otherwise been required…”. It may also be arguable that if the parties were unable to agree on such an amount by negotiation (as the HOA contemplates), the Court might imply means to determine the issue.
[73] For those reasons, the claims by Ashdale shall be struck out but, as against Srinagar, the application shall be adjourned with respect to these causes of action with leave reserved to HDC to bring it on again following the filing of an amended statement of claim, as I shall direct below.
Fourth cause of action
[74] The fourth cause of action is also based on the HOA. Again, Ashdale is not a party to the HOA. In any event, the claim is untenable in my view. The HOA does not entitle the plaintiffs to install infrastructure. The infrastructure to be installed is governed by the terms of the consent Srinagar obtained under the Resource Management Act. To satisfy the conditions of consent the development must be carried out in accordance with the approved designs. It is not the case, as the plaintiffs appear to believe, that if they submit amended designs showing downsized infrastructure, HDC “must approve them”. This cause of action shall be struck out.
Breach of statutory power
[75] This pleading is defective. The plaintiffs do not identify any statutory power that has been improperly used. HDC sought further particulars of what statutory powers HDC has allegedly improperly used. In their response, the plaintiffs failed to identify any statutory power and instead rely upon the statement allegedly made by Mr Maguire at the meeting of 11 September 2020, that HDC would not issue a certificate under s 224 if they did not install the additional works. I do not consider it arguable that Mr Maguire has purported to or in fact exercised a statutory power, and no such statutory power has been identified. Further, in respect to stages 1 and 2 of the subdivision, HDC has issued a s 224 certificate. The plaintiffs have not completed the later stages of the development and have not applied for a s 224 certificate, so there has been no relevant exercise of a statutory power. In addition to all of that, if such a claim could be made, it would be most appropriately determined by judicial review. This claim should also be struck out.
Result
[76]The application for summary judgment is dismissed.
[77] In relation to HDC’s application for strike out of the first, third, fourth and fifth causes of action in the statement of claim:
(a)In relation to Ashdale, its first and third causes of action are struck out.
(b)In relation to Ashdale and Srinagar jointly, the fourth and fifth causes of action are struck out.
(c)In respect of Srinagar, the application to strike out its first and third causes of action shall be adjourned, with leave granted to HDC to bring the application on again following the filing of an amended statement of claim which is required hereunder, if it is considered that no cause of action is disclosed in any respect.
[78] The plaintiffs shall file an amended statement of claim within 28 days of the date of this judgment. HDC shall file an amended statement of defence 28 days thereafter.
[79] Following the filing of the amended pleadings under [78] above, the case is to be set down before an Associate Judge for further case management. Counsel shall file memoranda at least three working days prior to the next conference with a full suite of proposed timetable directions.
[80] Costs are reserved. If there is no agreement on costs, memoranda may be filed of no more than five pages and I shall determine costs on the papers.
O G Paulsen Associate Judge
Solicitors:
Willis Legal (Justin Cameron), Napier Buddle Findlay, Wellington
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