Body Corporate 366567 v Equus Industries Limited

[2022] NZCA 80

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

 CA21/2022
 [2022] NZCA 80

BETWEEN	BODY CORPORATE 366567 First Appellant AMER LIMITED & ORS Second Appellants
AND	EQUUS INDUSTRIES LIMITED Respondent

Hearing:	22 March 2022
Court:	Kós P, Woolford and Dunningham JJ
Counsel:	G B Lewis and S N Zellman for Appellants E-J M Tucker for Respondent C M Meechan QC and S C Price for Auckland Council
Judgment:	25 March 2022 at 3pm

JUDGMENT OF THE COURT

AThe appeal is allowed.

BThe appellants are granted leave to adduce the reply evidence tendered.

CThere is no order for costs.

____________________________________________________________________

REASONS OF THE COURT

(Given by Kós P)

1. This appeal concerns an $140 million claim alleging defective approval and construction of a large apartment block on Gore Street, Auckland.   Naturally, the primary defendant is the local authority.  Trial is expected to take 20 weeks.  Three prior fixtures have been vacated.  Trial is now due to commence in May 2022.  Exigency abbreviates this judgment.

2. The question here is whether the appellant plaintiffs should have leave to file evidence in reply to evidence filed by the respondent defendant, one of the building subcontractors.  The evidence filed by the respondent was to support an affirmative defence of contributory negligence.  Walker J declined the appellants leave to file reply evidence.[1] 

   [1]Body Corporate 366567 v Auckland Council [2021] NZHC 3578 [Judgment appealed]. The proceeding was filed in 2014, predating the Senior Courts Act 2016, so prior leave to appeal this interlocutory judgment is not required: Judicature Act 1908, s 66.

3. The primary defendant, Auckland Council (the Council), pleaded contributory negligence by the appellants in these terms, summarised by Lang J in a minute:[2]  

   In an amended statement of defence filed on the close of pleadings date in November 2018 the Council pleaded affirmative defences based on contributory negligence and voluntary assumption of risk.  It will argue that unit owners who obtained minutes of meetings of the body corporate held after 25 June 2009 acquired their units with knowledge of the defects and therefore voluntarily assumed risk when they did so.  It will allege that unit owners who failed to obtain copies of the minutes prior to acquiring their units are guilty of contributory negligence.

   [2]Body Corporate 366567 v Auckland Council HC Auckland CIV-2014-404-716, 28 June 2019 at [2]. The Council’s pleading is not before us.

4. The respondent however pleaded it in slightly different terms:[3] 

   If the plaintiffs are able to satisfy the Court that damage has been suffered (which is denied) then the plaintiffs have caused or contributed to their own loss in that they:

   (a)purchased the property without seeking appropriate expert advice in relation to the condition to the building prior to purchase; and

   (b) purchased the property at a time when there was a heightened awareness of defects to buildings and failed to protect themselves from that loss.

   [3]This is the current pleading, filed in January 2019.  The original was filed in December 2014.

5. The appellants failed to file a reply answering either affirmative defence, as required by r 5.62 of the High Court Rules 2016.  As a result, by r 5.63(2) and formally at least, the affirmative defences might be treated as admitted.  However, and as Woolford J noted in Craig v Social Media Consultants Ltd, the Court has a substantial discretion to do justice here, and the absence of a reply may not be determinative.[4]

   [4]Craig v Social Media Consultants Ltd [2017] NZHC 1315 at [16]–[18].

6. Here, this pleading omission does not seem to have been identified until late 2021.  We were advised by Mr Lewis, for the appellants, that applications to plead replies out of time were filed on 6 December 2021.  They have not yet been determined by the High Court.  However, it appears neither the Council nor the respondent object, no doubt on the basis that everyone had proceeded on the basis that the affirmative defences were live and contested. 

7. The respondent filed evidence in support of the affirmative defence, in the form of a supplementary statement from its expert, a Mr Hunt, on 2 November 2021.  It is commendably brief:  just seven paragraphs on the affirmative defence.  Mr Lewis was wont to protest that it raised new matters beyond the scope of the affirmative defence pleaded by the respondent.  Indeed it does, but those matters relate more to matters already put in issue by the Council’s affirmative defence.  We see neither error nor prejudice.

8. Two weeks later the appellants sought leave to file evidence in reply from its expert, a Mr Jones.  On the affirmative defence, it too is commendably brief.  Excluding quotation of the respondent’s pleading and evidence, it is just five paragraphs.  However, in a judgment largely concerned with other matters, that application was declined.[5]

   [5]Judgment appealed, above n 1, at [55].

9. We are satisfied the High Court erred in doing so and that this appeal must be allowed.  It may well be the following matters, exposed by our interrogation of counsel, are clearer now than they were in December.  First, the respondent has not stood on the r 5.63 point.  It has not sought to assert its affirmative defence is admitted by inaction.  Secondly, the respondent’s affirmative defence will be a live issue at trial.  Thirdly, the respondent has the burden of proof on its affirmative defence.  Fourthly, to discharge that burden it filed evidence in November to support the defence.  Fifthly, natural justice requires that the appellants be allowed to adduce evidence in response to that evidence unless, counterintuitively, to do so at this late stage would be contrary to the interests of justice.

10. Turning to the last point, the appellants must take some responsibility for what has occurred.  The evidence on both sides is late in part because of the appellants’ failure to plead to the affirmative defences.  But with the affirmative defences being live, evidence was always going to need to be filed by the defendants, including the respondent.  And justice requires that the appellants be able to adduce evidence of their own in reply.  We do not accept Ms Tucker’s submission that the appellants should have anticipated the respondent’s case, based on its very general pleading, and filed evidence before the respondent’s evidence.  That puts the cart firmly before the horse.  It was the respondent’s election to file evidence in November that has precipitated this application, and now appeal.  Nor do we see the receipt of this evidence being unduly onerous for the respondent.  Indeed, it is not onerous at all, given its tiny proportions.  There is no possibility its receipt might dislodge May’s fixture or otherwise render an injustice.  A mountain is being made of a molehill. 

11. We will therefore allow the appeal and grant leave for Mr Jones’ evidence in reply to be adduced.  However, given the fact this is an interlocutory appeal and the appellants must take some responsibility for what has occurred, we will make no order for costs.

Result

1. The appeal is allowed.

2. The appellants are granted leave to adduce the reply evidence tendered.

3. There is no order for costs.

Solicitors:
Grimshaw & Co, Auckland for Appellants
Gascoigne Wicks, Blenheim for Respondent