Body Corporate 384825 v Queenstown Lakes District Council
[2021] NZHC 1157
•21 May 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2016-425-000029
[2021] NZHC 1157
BETWEEN BODY CORPORATE 384825
First Plaintiff
AND
GEORGE FRASER RALSTON & ORS
Second Plaintiffs
AND
QUEENSTOWN LAKES DISTRICT COUNCIL
First Defendant
AND
YEO CONTRACTING LIMITED
Second Defendant
AND
JK’s & WBE LIMITED
Third Defendant (DISCONTINUED)
AND
STUART IAN CRUICKSHANK
Fourth Defendant
AND
PAREMATA CONSTRUCTION LIMITED
Fifth Defendant
AND
HOLMES STRUCTURES LIMITED
(in liquidation) Sixth Defendant
AND
ARCH UNDERWRITING AT LLOYD’S LIMITED
Seventh Defendant
AND
ASTA MANAGING AGENCY LIMITED
Eighth Defendant
AND
HARDY UNDERWRITING AGENCIES LIMITED
Ninth Defendant
AND
LIBERTY MANAGING AGENCY LIMITED
Tenth Defendant
BODY CORPORATE 384825 v QUEENSTOWN LAKES DISTRICT COUNCIL [2021] NZHC 1157 [21 May
2021]
AND STEPHEN BRUCE MCLEAN
First Third Party
AND
ELLIOTT ARCHITECT LIMITED
Second Third Party
AND
ROSS MCGREGOR WENSLEY
Third Third Party
AND
ARCH UNDERWRITING AT LLOYD’S LIMITED
Fourth Third Party
AND
ASTA MANAGING AGENCY LIMITED
Fifth Third Party
AND
HARDY UNDERWRITING AGENCIES LIMITED
Sixth Third Party
AND
LIBERTY MANAGING AGENCY LIMITED
Seventh Third Party
Hearing: 20 April 2021 Appearances:
G B Lewis and D J Powell for Plaintiffs
C M Meechan QC and J R Halligan for First Defendant
Judgment:
21 May 2021
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 21 May 2021 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
The application
[1] The body corporate and proprietors of units in an apartment complex allege the building was constructed with significant building defects. They bring this proceeding to recover their losses. The first defendant, Queenstown Lakes District Council (the Council) is the relevant local authority. It is sued on the basis that it was negligent in the exercise of its statutory functions as they related to the construction of the building. The Council’s statement of defence contains several bare denials of the plaintiffs’ allegations and, in addition, pleads six affirmative defences. The plaintiffs apply under r 5.21 High Court Rules 2016 for further and better particulars of the Council’s statement of defence, both in relation to the bare denials and the affirmative defences.
Background
[2] The first plaintiff is a body corporate (the Body Corporate) constituted under the Unit Titles Act 1972 for the 44 unit development known as Oaks Club at 171-179 Frankton Road, Queenstown. The second plaintiffs are members of the Body Corporate and owners of units in Oaks Club.
[3] The plaintiffs allege Oaks Club was constructed between January 2006 and November 2007 with major weathertightness, non-weathertightness, fire, structural and other defects requiring repair.
[4] The Council is sued as the local authority responsible for issuing the building consent for Oaks Club, inspecting the building work and issuing a code of compliance certificate upon completion of construction under the Building Act 1991 and Building Act 2004. It is alleged the Council failed to perform its functions with reasonable skill and care causing the plaintiffs loss. The performance of those functions by the Council is not disputed. It denies however, amongst other things, that it failed to exercise reasonable care and skill in doing so or has any liability to the plaintiffs.
[5] The statement of claim is a comprehensive pleading with 15 schedules. There have been many iterations of it. At an earlier stage, the Council successfully applied
for further and better particulars of the plaintiffs’ then statement of claim.1 The plaintiffs provided the particulars as ordered by the Court in an amended statement of claim dated 20 November 2020. The Council filed an amended statement of defence dated 11 December 2020. On 15 December 2020, the plaintiffs served a notice under r 5.21 High Court Rules requiring further and better particulars of that statement of defence. The Council did not provide the particulars required by the notice. On 23 December 2020, the plaintiffs applied to the Court for an order that the Council provide further and better particulars of its statement of defence as required by the notice.
[6] Adding to the procedural complexity, the plaintiffs then filed a further amended statement of claim dated 28 January 2021 (the statement of claim) and the Council responded with a further amended statement of defence dated 15 February 2021 (the statement of defence). That statement of defence provided some of the further particulars the plaintiffs sought in their application of 23 December 2020. It also removed an affirmative defence (reducing them to six). It did not, however, satisfy all of the plaintiffs’ requirements. The result of all this is, it is the Council’s statement of defence of 15 February 2021 that is the pleading that is in issue in relation to this application. On 17 February 2021, in accordance with a Court direction, the plaintiffs filed an amended red-lined application for further and better particulars of the statement of defence reflecting the changes in the pleadings.
[7] This application comes before the Court at a late stage. The case has been set down for a trial commencing in September 2021, possibly running for 16 weeks. Detailed pre-trial directions have been made. The plaintiffs have already provided their briefs of evidence. The defendants’ evidence is expected to be provided by 16 June 2021. The plaintiffs are to exchange briefs of evidence in reply by 13 August 2021 following which the experts are to confer in their various areas of expertise prior to 27 August 2021. The proximity of the hearing has required a pragmatic approach to this application which ensures the pleadings are adequate without interfering with the parties’ trial preparation.
1 Body Corporate 384825 v Queenstown Lakes District Council [2020] NZHC 2591.
[8] The application is made in reliance upon r 5.21 High Court Rules. Rule 5.21(3) provides, where are a party who has been served with a notice requiring further particulars or a more explicit pleading neglects or refuses to comply with the notice the Court may:
… if it considers that the pleading objected to is defective or does not give particulars properly required by the notice, order a more explicit pleading to be filed and served.
[9] The primary functions of pleadings are to define the issues, limit the matters to be put in issue at trial, inform the parties in advance of the hearing of the case they have to meet, and enable the parties to take steps to deal with the case they are facing by beginning preparation ahead of the formal exchange of evidence.2 Pleadings also provide a basis for pre-trial settlement discussions.3
[10] In Price Waterhouse v Fortex Group Ltd, the Court of Appeal noted pleadings are an essential roadmap for the Court and the parties that establish the parameters of the case against which the briefs of evidence are or should be prepared.4 The Court and opposite parties are entitled to be advised of the essential basis of a claim or defence, and all necessary ingredients of it, so that subsequent processes and the trial itself can be conducted against recognisable boundaries.
[11] The modern approach to pleading emphasises full disclosure of each party’s case to secure the just, speedy, and inexpensive determination of any proceeding, consistent with r 1.6 High Court Rules. Litigation is to be conducted fairly, openly, without surprises, and in a way which reduces hearing time and saves costs.5
[12] Rule 5.48 sets out the essential requirements for a statement of defence. It provides:
5.48 Requirements of statement of defence
(1)The statement of defence must either admit or deny the allegations of fact in the statement of claim, but a defendant does not have to plead to an allegation that does not affect that defendant.
2 Marley New Zealand Ltd v Skellerup Rubber Services Ltd [2013] NZHC 1653 at [12]-[13].
3 Platt v Porirua City Council [2012] NZHC 2445 at [19].
4 Price Waterhouse v Fortex Group Ltd CA 179/98, 30 November 1998 at 17 -18.
5 Marley New Zealand Ltd v Skellerup Rubber Services Ltd, above n 2, at [13].
(2)A denial of an allegation of fact in the statement of claim must not be evasive. Points must be answered in substance. If for example, it is alleged that the defendant received a sum of money, it is not sufficient to deny receipt of the particular amount. Rather, the defendant must deny receipt of that sum or any part of it, or set out how much was received. When a matter is alleged with circumstances it is not sufficient to deny it as alleged with those circumstances. In all cases a fair and substantial answer must be given.
(3)An allegation not denied is treated as being admitted.
(4)An affirmative defence must be pleaded.
(5)The statement of defence must give particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances sufficient to inform the court, the plaintiff, and any other parties of the defendant’s defence.
[13] An issue arising in this case is whether it is sufficient for a defendant to provide bare denials to paragraphs in a statement of claim containing more than one allegation. The answer is generally that in such circumstances a bare denial will not be sufficient. That is because a bare denial may not answer the allegations in substance and be evasive. Helpful guidance was provided by Wylie J in Marley New Zealand Ltd v Skellerup Rubber Services Ltd who made the following observations:6
(a)The modern approach to pleading requires a proper disclosure of the defendant’s case and all the avenues it intends to pursue.
(b)A statement of defence which consists of a series of denials which do no more than put the plaintiff to proof and provide no answer in substance to what is alleged [is not generally acceptable under principles of modern pleading].
(c)Where a statement of claim contains more than one allegation in a single paragraph, it is generally necessary for the defendant to isolate every allegation made by the plaintiff and either admit or deny it.
(d)If a defendant is denying an allegation, the denial should answer the substance of the allegation without evasion. It should be clear as to how far the allegation has been admitted or denied.
(e)Evasive answers, as a result of which uncertainty exists as to what extent allegations in the statement of claim have been admitted … are prohibited by r 5.48(2). A defendant is required to expressly answer each point in substance.
6 At [17]-[19] (footnotes omitted).
(f)Defendants are not required to plead to particulars in a statement of claim, but only to material facts.
[14] Pleadings are not, however, an area for mechanical approaches, pedantry or prolixity. What is required is an assessment based on the principle that a pleading must, in the individual circumstances of the case, state the issue and inform the opposite party of the case to be met.7
[15] The standard of particularisation required will vary with the facts and circumstances of an individual case. In Price Waterhouse v Fortex Group Ltd the Court observed “a common-sense and balanced judgment based on experience as to how cases are prepared and trials work is required”.8 Ultimately, the pleader or the Court has to ask, “in the circumstances of this claim, is that statement sufficiently detailed to state a clear issue and inform the opposite party of the case to be met?”9
Submissions
[16] For the purposes of considering the submissions it is convenient to draw a distinction between the particulars sought of:
(a)the bare denials of whole paragraphs in the statement of claim; and
(b)the affirmative defences.
Bare denials
The plaintiffs’ position
[17] The plaintiffs argue the Council has adopted a “tactic” of putting them to the proof of the allegations in the statement of claim. They contend this involves denying all matters including those that are known to the Council or are obvious, and is neither in keeping with the objectives of the High Court Rules nor an appropriate approach to litigation nowadays. They challenge the probity of the Council denying allegations
7 Price Waterhouse v Fortex Group Ltd, above n 4, at 19.
8 At 19.
9 At 19.
which it knows or should know to be correct. The Council’s approach, the plaintiffs say, also fails to narrow the issues, prevents effective trial preparation, is likely to extend the duration of the trial and creates a risk they will be taken by surprise at trial.
[18] The plaintiffs submit the Council’s bare denials (which relate to the existence of defects and damage, the need and scope of repairs, the amount and nature of losses suffered and the manner in which the Council is said to have breached its duty of care) do not comply with r 5.48 High Court Rules and, in particular, the requirements that a defendant answer the plaintiff’s allegations in substance and with answers that are not evasive.
[19] The statement of claim is necessarily technical and detailed. Many paragraphs in the statement of claim contain multiple allegations. There are incorporated lengthy particulars by reference to the schedules. The plaintiffs say bare denials of entire paragraphs containing many allegations are evasive because it is not clear to what extent the allegations are denied or admitted. They rely on Holden v Knight10 and Dougall & Co Nominees Ltd v Copeland11 where bare denials of pleaded allegations were considered evasive.
[20] By way of example, the plaintiffs say a bare denial of the allegations in para 36 of the statement of claim the Oaks Club was constructed with a defect that balcony and side roofs over living spaces on levels four to nine allow for the penetration of water in breach of clauses E2, B1 and B2 of the Building Code (defect 1 in sch 5) is evasive. Does the Council deny there are balcony roofs and side roofs over living spaces on levels four to nine? Does it deny there is water penetration? Does it deny the water penetration is a breach of the Building Code? If so, which of the clauses in the Building Code are breached? Does it deny the locations at which water penetration has occurred are correct?
[21] The plaintiffs rely on Ash v Singh as authority that a bare denial of a plaintiff’s negative allegation is evasive. This is because when a defendant denies an allegation that something did not happen, it means that it did occur and the defendant must state
10 Holden v Knight [1956] NZLR 253 at 255.
11 Dougall & Co Nominees Ltd v Copeland [1981] 2 NZLR 437 at 440.
what it was that happened and give details of it.12 It is therefore necessary, the plaintiffs say, that the Council isolate every allegation made against it in the statement of claim and either admit or deny it with reasons for doing so.13
The Council’s position
[22] The Council acknowledges a statement of defence should comprise a concise statement of the allegations in the statement of claim that are admitted and, to the extent they are denied, the principal reasons why they are denied.14
[23] The Council argues further particulars of its statement of defence are not required to inform the plaintiffs of the “line” the Council is running. It contends a bare denial puts everything in issue. It also rejects any suggestion that the plaintiffs may be taken by surprise at trial given the pre-trial exchange of evidence and that expert witnesses are to confer before trial.15
[24] Fundamental to the stance it has adopted, the Council submits that many of the matters upon which the plaintiffs’ case is founded, and which it has denied, are not within its knowledge. It accepts it is putting the plaintiffs to proof of the allegations in the statement of claim and says this is not a tactic or evasive but a reflection of its lack of knowledge of those allegations. On this basis, the Council distinguishes both Holden16 and Dougall & Co Nominees Ltd.17
[25] Relevant to this, the Council notes that under the High Court Rules a defendant is required to file a statement of defence 25 working days after service of the statement of claim.18 It submits a defendant is required to plead to the claim based on its knowledge at that time and the fact it subsequently obtains further knowledge does not change its pleading obligation.
12 Ash v Singh [2019] NZHC 2790 at [20].
13 Marley New Zealand Ltd v Skellerup Rubber Services Ltd, above n 2 at [18].
14 NZX Ltd v Ralec Commodities Pty Ltd [2015] NZHC 3041 at [80].
15 Referring to BNZ Investments Ltd v the Commissioner of Inland Revenue HC Wellington CIV 2004-485-1059 at [45], 4 February 2008.
16 Holden v Knight, above n 10.
17 Dougall & Co Nominees Ltd v Copeland, above n 11.
18 High Court Rules 2016, r 5.47(2).
[26] The plaintiffs’ arguments, the Council contends, fail to recognise that they have the onus to prove all allegations in the statement of claim and conflate the purpose of a statement of claim with that of a statement of defence. While a statement of claim must encapsulate the plaintiffs’ entire case, a statement of defence is responsive to the allegations in the statement of claim. A bare denial, it says, is an acceptable response unless the denial is evasive. Therefore, the Council contends, while a plaintiff is required to provide particulars whose function is to fully and fairly inform the defendant of the case the plaintiff is running, there is no “quid pro quo” in terms of the defendant having to respond in kind.
[27] As an example, the Council argues it may deny the plaintiffs’ allegations as to the scope of repairs required to the building and is under no obligation to provide in its statement of defence any particulars of an alternative repair proposal. It says the proper place for any argument over the appropriate repair methodology is in the parties’ evidence and/or legal submissions. Similarly, as another example, the Council contends it cannot be expected to review the plaintiffs claimed losses and provide any alternative loss calculations.
[28] The Council asserts the position is no different when the defendant responds to a negative allegation in the statement of claim.19 It submits the plaintiffs’ reliance upon Ash v Singh is misplaced.20 Ash v Singh, the Council argues, is not authority that a defendant will be required to give particulars of a denial of a negative allegation. There, Associate Judge Bell said that particulars of denials of allegations in the statement of claim are not often ordered and he did not, in fact, order particulars of negative allegations to be provided. Furthermore, although the Judge did state a denial of a negative allegation may be evasive he also recognised pragmatism may be required where pressing a defendant to give a more informative response which would make no difference to how the case is run or how the plaintiff prepares its case.21
19 Weinberger v Inglis [1918] 1 Ch 133 at 137.
20 Ash v Singh, above n 12.
21 At [20] and [102].
Affirmative defences
The plaintiffs’ position
[29] The plaintiffs argue affirmative defences must be pleaded specifically and with sufficient detail to avoid surprise and allow them to properly prepare their evidence in rebuttal prior to trial. They say the Council’s pleading of its affirmative defences contain insufficient particulars to allow this.
[30] In addition to the absence of particulars, several affirmative defences relate to the circumstances of only some of the individual second plaintiffs, yet there is no apparent link between the allegations and those second plaintiffs.
[31] The Council’s position that the plaintiffs will receive the information they seek when the Council’s evidence is served, the plaintiffs submit, misconceives the role and importance of proper pleadings and briefs of evidence are not an acceptable substitute for an adequate pleading.
The Council’s position
[32] The Council accepts any affirmative defence must be pleaded with proper particulars given and an approach similar to that taken in respect of a plaintiff’s statement of claim is required.22 It argues, however, that further particulars beyond those already provided in respect of the affirmative defences are not required in order for the plaintiffs to understand the essential basis of each affirmative defence and the necessary ingredients of it. What is being sought by the plaintiffs, the Council says, is in the nature of legal submission or evidence which will be provided when the Council’s briefs of evidence are provided on 16 June 2021.
Discussion of the Council’s approach
[33] In several instances the Council responds to detailed allegations in the statement of claim with bare denials and no reasons. It argues it cannot provide anything other than bare denials because the matters alleged are “solely within the
22 Work v IAG New Zealand Ltd [2020] NZHC 1870 at [10].
knowledge of the plaintiffs”. So, in relation to the plaintiffs’ allegation in para 36 of the statement of claim identifying 13 specific defects in the building, the Council argues there is nothing evasive or objectionable in it pleading, in essence, “we are unaware these ‘defects’ exist”. This is also the position the Council takes in relation to the plaintiffs’ request for particulars of bare denials of paras 37, 38, 39, and 40 of the statement of claim. I do not accept the Council’s stance.
[34] The Council is not a stranger to the building. It admits its role in the approval of building plans, the issue of a building consent, conducting inspections during construction and issuing the code of compliance certificate. This proceeding has been ongoing for more than five years, it is factually complex and involves a very large sum. Consistent with those matters, the litigation is keenly fought and the Council has insisted upon the plaintiffs providing detailed particulars of their claim. It has sought the Court’s assistance to obtain particulars and has been successful in this. The particulars sought have largely been ordered and provided to the Council. The plaintiffs’ evidence (including experts’ evidence) has been provided to the Council. The Council has instructed its own experts whose evidence is to be provided shortly. The Court has ordered the experts to confer. There is soon to be a trial that the Council says may last 16 weeks. How could it be the Council still has no knowledge of such fundamental matters as whether the alleged defects exist?
[35] Even less do I accept the Council’s related submission that a defendant’s pleading obligation calcifies when it is files its first statement of defence. In a case such as this, it can be expected the parties’ knowledge will over time through discovery, inspection, the briefing of witnesses, the engagement and advice of experts and the exchange of evidence. Through that process the real issues are identified. All of this should be reflected in the parties’ pleadings. Given the modern approach that litigation will be conducted with “cards spread face up on the table” the submission advanced by the Council cannot be justified.23
23 Burgess v Monk [2016] NZHC 527 at [7]; [2016] NZAR 438.
Particulars sought
Paragraph 36 of the statement of claim
[36] Paragraph 36 of the statement of claim pleads that the Oaks Club was constructed with defects as set out in sch 5 to the statement of claim. Schedule 5 is a table containing a description of 13 defects (in some instances with particulars) along with a reference to the Building Code clauses that are said to have been breached and the location of each defect in the complex. The Council responds to para 36 with a bare denial.
[37] The plaintiffs require further particulars of which defects the Council admits and denies, as follows:
(a)Whether the Council admits that any of the building work was constructed as pleaded; and if so:
(i)What pleaded building work it admits;
(ii)What is the location of this building work;
(iii)Whether this building work results in any breaches of the Building Code, and if so the relevant clauses.
[38] I accept the plaintiffs’ submission that the Council’s bare denial does not directly or substantially answer the allegations in para 36 and is evasive. There has been no attempt to narrow the issues for trial and this is likely to prolong the duration and the cost of the trial. The particulars sought of para 36 are to be provided.
[39] The Council may of course maintain that the alleged defects do not exist or that it has no knowledge of them. However, what is required of it is that it makes its position clear whether or not it accepts that a pleaded defect exists and, if so, whether or not it accepts the defects location and that it breaches the relevant provision of the Building Code. None of this is onerous.24
Paragraph 37 of the statement of claim
[40]Paragraph 37 of the statement of claim pleads that:
24 ResMed Ltd v Fisher & Paykel Healthcare Ltd [2017] NZHC 2954 at [43].
As a result of the Defects, Oaks Club failed to comply with:
(a)The building code as set out in Schedule 5;
(b)Section 7 of the Building Act 1991 and section 17 of the Building Act 2004 (collectively the Building Acts);
(c)The Building Consent:
Particulars of non-compliance with the Building Consent:
(i)The Building Consent provided the building work was to comply with the provisions of the Building Code (the Consent Building Code Requirement). In that respect, all of the Defects are instances of non-compliance with the Building Consent;
(ii)The Building Consent provided that the building work carried out under it was to be in accordance with the plans and specifications. The building work was not carried out in accordance with the Building Consent plans and specifications, including the plans and specifications set out below….
[41] Paragraphs 37(c)(ii)(1) to (24) of the statement of claim provide particulars of the allegation the building work was not carried out in accordance with the Building Consent plans and specifications. It is accepted, I understand, the Council is not required to plead to those particulars. The Council’s response to para 37 is a bare denial.
[42]The plaintiffs require particulars as follows:
The plaintiffs require particulars of precisely which parts of the [Defects] pleading the first defendant admits and denies, including:
(a)Whether it admits any of the pleaded building works failed to comply with the Building Code, and if so, which work and the relevant Building Code clauses;
(b)Whether it admits any of the pleaded building works failed to comply with section 7 of the Building Act 1990 2001 or section 17 of the Building Act 2004, and if so, which work and the details of the non-– compliance;
(c)Whether it admits any of the pleaded building work failed to comply with the Building Consent, and if so, what work and the relevant provisions of the Building Consent.
[43] As with para 36, the Council’s bare denial of para 37 of the statement of claim is evasive because it is does not respond to the allegations made in substance. The particulars sought of para 37 are to be provided.
Paragraph 38 of the statement of claim
[44] Paragraph 38 of the statement of claim deals with the damage caused to Oaks Club as a result of the defects and identifies the specific defects causing damage. It pleads:
As a result of the Defects:
(a)There is corrosion to structural steel elements, efflorescence and corrosion staining, splitting and tearing to waterproof membranes on the balconies, decay to timber, water damage, decay, and mould to floor, wall and ceiling linings in units adjacent to and below the balcony roofs and cantilevered balconies (arising from defects 1-3).
(b)There is undue dampness, corrosion to structural steel, water damage, decay, mould to wall and ceiling linings to the units below the level 9 roof (arising from defect 4).
(c)There is water damage and decay to timber and internal linings to units and units below bathrooms and cracking to bathroom tiles to units (arising from defect 10 and 11).
(d)There is accumulation of moisture within the cladding cavity and degradation of building elements such as plywood substrate on the northern elevation of level 9 (arising from defect 12).
(e)There is corrosion to structural steel elements, decay to timber, water damage, decay, and mould to floor, wall and ceiling linings to units adjacent to and below the driveway including unit 1000 and the laundry and to the structural steel and timber to the level 4 and 5 carpark (arising from defect 13).
[45] The statement of defence contains a bare denial of para 38 and then goes on to plead a limitation defence in respect of “new causes of action” the Council says accrued more than six years before the claims were filed. It identifies what it says are five new causes of action in respect of fire, non-weathertightness, structural and miscellaneous defects introduced in several amended statements of claim.
[46] The plaintiffs require particulars of the Council’s bare denial of para 38 as follows:
(a)Whether the first defendant admits there is any damage as pleaded, and if so:
(i)What damage it admits;
(ii)What is the location of this damage;
(b)What cause(s) of action it states are out of time for the purposes of the Limitation Act 1950, including full particulars of the basis for this allegation.
[47] The Council’s pleading suffers from the same deficiency as discussed earlier. It provides a bare denial of multiple allegations and it is not clearly stated what the Council’s position is in relation to the existence of the damage. The Council should provide the particulars sought in (a)(i) and (ii) above.
[48] In relation to the Council’s limitation defence, the plaintiffs argue that the pleading is contrary to authority and incoherent in that it fails to distinguish between concepts of “causes of action” and “defects”. The Council argues a new cause of action arises where significant new facts are pleaded which involve the investigation of an area of fact of a new and different nature. It says that the non–weathertightness defects pleaded in various amended statements of claim served after the initial pleading fall into the latter category of new causes of action.25 The merits of the parties’ respective positions in relation to the limitation defence are a matter for legal submission at trial not of pleading. The basis of the Council’s limitation defence is sufficiently clear and no further particulars are required of it.
Paragraph 39 of the statement of claim
[49] Paragraph 39 of the statement of claim pleads that the plaintiffs have undertaken remedial works to certain stated units and will need to carry out further repairs to Oaks Club in order to address the defects and damage. Schedule 7 to the statement of claim provides detail of the repair work said by the plaintiffs to be necessary to address the defects and damage. The Council’s response to para 39 is a bare denial.
25 Body Corporate 346799 v KNZ International Co Ltd [2016] NZHC 1523 and ISP Consulting Engineers Ltd v Body Corporate 89408 [2017] NZCA 160.
[50]The plaintiffs require further particulars of the statement of defence as follows:
(a)Whether the first defendant admits the plaintiffs will need to carry out any of the repairs to Oaks Club set out in Schedule 7; and if so
(b)What repairs it admits the plaintiffs will need to carry out.
[51] The Council’s bare denial of para 39 is evasive. I consider the Council can reasonably be expected to provide a substantive pleading to the allegation that repair work as set out in sch 7 is required to repair the defects and damage. The Council is to provide the particulars sought in para (a) above. This does not require a line by line analysis. In so far as the Council does not accept the repairs are necessary it should provide reasons for that.
[52] I do not consider the Council is required to provide the particulars sought in para (b) above. This request is directed towards any alternative repair proposal the Council may have. I agree with the Council’s submission that it is not required to provide details of any alternative repair proposal. I consider that goes beyond what is necessary to answer the substance of the allegations against it.
Paragraph 40 of the statement of claim
[53]At para 40 of the statement of claim the plaintiffs plead:
As a result of the Defects and Damage, the plaintiffs have suffered and/or will suffer losses, including but not limited to:
(a)The investigation, design and remedial costs incurred to date, which are $5,554,316 as set out in Schedule 9;
(b)The cost of carrying out the balance of the Repairs, which is estimated to be $58,368,247 as set out in Schedule 8;
(c)Lost rental income during the Repair of $7,651,905 as set out in Schedule 10;
(d)Consequential losses of $1,085,561.80 for moving, storage and cleaning of chattels during the Repairs and cleaning of the units and common property after the Repairs are complete as set out in Schedule 11;
(e)Profits lost by the hotel management company and registered proprietor of units 607, 608, 700, 709, 800 MH Management (NZ) Limited, as a result of units not been available for letting to guests
during the course of the Repairs of $1,015,874.17 as set out in Schedule 12.
[54]The Council’s response to para 40 is a bare denial.
[55]The plaintiffs require further particulars of the statement of defence as follows:
The plaintiffs require further particulars of whether the first defendant admits the plaintiffs have suffered and/or will suffer any losses as a result of the Defects and/or Damage, and if so:
(a)The estimated costs of any repairs with a breakdown of the extent to which those costs relate to investigations, design and the repairs;
(b)In relation to alternative accommodation costs and lost rental income, the rates and periods in respect of which the losses will be incurred for each unit;
(c)In relation to lost business income, the periods in respect of which the loss will be suffered in the amount per unit;
(d)Moving and storage costs per unit;
(e)Cleaning costs per unit.
[56] The Council’s bare denial is evasive but the plaintiffs’ request for particulars goes too far. The Council is required to make its position clear whether it accepts or denies the plaintiffs have suffered each item of claimed loss in para 40 of the statement of claim and in the amounts claimed. In so far as it does not accept the plaintiffs have suffered such loss or does not accept the quantum claimed it should provide reasons. The Council is not required to go through the schedules and “tick or cross” each of the hundreds of invoices claimed by the plaintiffs. The order I have made does not require the Council to “tick or cross” each invoice nor is it required provide its own estimate of the plaintiffs’ losses to answer in substance the plaintiffs’ allegations.
Paragraph 51 of the statement of claim
[57]At para 51 of the statement of claim the plaintiffs plead:
In breach of its duty, the Council and/or its agents:
(a)Failed to undertake a sufficient inspection regime and/or failed to undertake sufficiently thorough inspections so as to ensure that the building work complied with the requirements of the Building Consent and the building code;
(b)Failed to identify the Defects;
(c)Failed to take steps to ensure the Defects were rectified;
(d)Issued the Code Compliance Certificate when it did not have reasonable grounds to be satisfied that the building work complied with the building code and/or the Building Consent.
Particulars of lack of reasonable grounds …
[58] There follows at para 51(d)(i) -(xiii) of the statement of claim particulars of the allegation that the Council did not have reasonable grounds to issue the code of compliance certificate. The Council responds to para 51 as follows:
It denies paragraph 51 and says further that:
(a)to the extent that defects are alleged for the first time after 13 November 2017, including those pleaded at paragraph 38(d) and (e), they amount to a new cause of action and are out of time under the long-stop in s 393 of the Building Act 2004; and/or
(b)to the extent that defects are alleged for the first time on a date that is more than six years after the date of discoverability or reasonable discoverability, including those pleaded at paragraph 38(d) and (e), they are out of time under the Limitation Act 1950.
[59]The plaintiffs seek further particulars of the statement of claim as follows:
(a)Precisely which parts of the breach of duty pleading the first defendant admits and denies, including:
(i)Particulars of the bases upon which the first defendant says, in issuing the Code Compliance Certificate, it had reasonable grounds to be satisfied the building work pleaded at paragraph 51(d)(i)-(xiii) complied with the Building Code and/or the Building Consent (with particular reference to the plans, specifications, inspection records and other information before the first defendant at the time it issued the Code Compliance Certificate).
(ii)Which cause(s) of action the first defendant alleges are outside the limitation periods in the Building Act 2004 and Limitation Act 1950, including full particulars setting out the basis for this allegation.
[60] For reasons that have already been given, the Council is required to make its position clear whether it accepts or denies each of the alleged breaches of duty and provide reasons. I do not, however, consider the Council is required to plead to paras 51(d)(i)-(xiii) of the statement of claim as these are particulars of the alleged breaches.
There is no obligation upon the Council to plead to particulars. The Council is entitled to assume that allegations identified as particulars are not intended as allegations of material fact but to inform it of the detail of the claim and that they do not require an answer.26
[61] As far as the Council raises limitation defences its pleading is deficient. It is not clear whether the Council relies only on the defects identified in para 38(d) and (e) of the statement of defence or it will argue there are claims made in respect of other defects that are also out of time. If that is the case the defects are to be identified. The particulars sought in (a)(ii) above should therefore be provided.
Affirmative defences
Limitation Act 1950
[62] The Council raises a limitation defence under the Limitation Act 1950. It is poorly drafted and not easy to understand. It alleges the defence arises in two ways as set out in para 63 of the statement of defence as follows:
If the first defendant is liable to the plaintiffs (denied) the first defendant says that the plaintiffs’ claim is statute-barred under the Limitation Act 1950 to the extent that the cause of action in negligence:
(a)Accrued more than six years before the plaintiffs’ subsequent claims, which included new allegations as to the existence of defects, were made for the first time as pleaded at paragraph 64 below.
(b)Accrued prior to 14 March 2010 as a result of the matters pleaded in paragraphs 63(a), 64(a) and 65.
[63] The limitation defence in para 63(a) alleges the plaintiffs’ claims accrued more than 6 years before “subsequent claims” which it is said include “new allegations” as to the existence of defects. Paragraph 64 of the statement of defence contains details of the “new allegations including the allegations as to the existence of defects” referred to in para 63(a). The new allegations are said to have been raised by the plaintiffs in several amended statements of claim from 5 August 2016 and more than six years after the plaintiffs commenced this proceeding on 14 March 2016.
26 Walker v Bennett (2009) 19 PRNZ 350 (HC).
[64] The limitation defence in para 63(b) of the statement of defence alleges the plaintiffs cause of action accrued prior to 14 March 2010 as a result of matters raised in paragraphs 63(a), 64(a) and 65 of the statement of defence. It appears the intention is to repeat the first limitation defence but add an additional allegation against the first plaintiff and named second plaintiffs (owning 13 units listed in sch one of the statement of defence) that they “could have been aware, or ought reasonably to have been aware of the defects prior to 14 March 2010.”
[65] The Council then pleads at para 65 of the statement of defence that those plaintiffs could or ought reasonably to have been aware of the existence of defects as a consequence of:
(a)Interactions with consultants and contractors.
(b)Various reports provided to, or obtained by, the first and/or second plaintiffs: including [a list of inspection, pre-purchase and builders reports and correspondence follows] …
(c)Concerns raised regarding the condition of the property within the body corporate.
(d)Inspections by contractors.
[66]The plaintiffs require particulars of the statement of defence as follows:
(a)The facts and circumstances giving rise to the allegation the plaintiffs’ cause of action against the first defendant accrued prior to 14 March 2010.
(b)With respect to new allegations in subsequent statements of claim:
(i)…
(ii)How the new allegations gave rise to the cause of action in negligence against the first defendant being statute-barred;
(iii)If the first defendant alleges that only part of the cause of action in negligence against the first defendant is a statute-barred, the parts of the cause of action that are and are not statute-barred and the basis for alleging that part of a cause of action only may be statute-barred.
[67] The plaintiffs argue the pleading at para 63(a) of the statement of defence suffers from the same problems as para 38 of the statement of defence in that the
Council lists alleged new defects not new causes of action. It argues the Council should provide particulars of the alleged new causes of action. For the reasons given in [48] I do not agree. I do not require the Council to provide the particulars sought in (b) above.
[68] The situation is different in respect to the limitation defence raised in para 63(b) of the statement of defence. The plaintiffs say the facts and circumstances at paras 65(a), (b), (c) and (d) giving rise to the allegation the plaintiffs could have been aware or ought reasonably to have been aware of the defects is inadequate because:
(a)There is no link between any of the plaintiffs and the reports, directions, concerns or inspections.
(b)There are no details of the “interactions”, “concerns” or “inspections” alleged.
(c)The building reports referred to do not clearly set out any pleaded defects.
(d)There are no particulars of how the “interactions”, “concerns” and/or “inspections” gave rise to or should have given rise to knowledge of a defect including which defect.
[69] I agree with the plaintiffs’ submission. There is no detail provided of the “interactions”, “concerns” or “inspections” relied upon in paras 65(a), (c), and (d) of the statement of defence from which the plaintiffs could determine what is being alleged against them. Similarly, it is not adequate that in para 65(b) of the statement of defence the Council simply lists reports and/or correspondence without identifying which of the plaintiffs were provided with that report/correspondence, when and what content of the report/correspondence it is said put the plaintiffs on notice of the existence of defects. I do not accept the Council’s submission that what is sought is in the nature of evidence and/or legal submission. Without the particulars sought the plaintiffs have no way of knowing what is alleged against each of them nor can they prepare for trial. The further particulars sought in (a) above are to be provided.
10 year limitation defence under the Building Act
[70] At para 67 of the statement of defence, the Council pleads to the extent the plaintiffs’ claims were commenced more than 10 years from the act or omission on which the proceedings are based under s 91 of the Building Act 1991 and s 393 of the Building Act 2004 those claims are statute-barred.
[71] At para 68 of the statement of defence the Council lists the claims it says were commenced more than 10 years after the act or omission on which the proceedings are based. Those claims relate to the same “new causes of action” and “new allegations
… as to the existence of defects” relied upon in paras 38 and 64 of the statement of defence.
The plaintiffs require particulars of the statement of defence as follows:
(a)With respect to each such claim:
(i)Particulars of the acts or omissions upon which it is alleged the claim is based, including the dates of the acts or omissions.
[73] The Council responds that the acts or omissions on which the claims are based refers back to the plaintiffs’ pleading. The last act or omission in time the plaintiffs rely upon is the issue of the code compliance certificate, which the plaintiffs plead in para 31 of the statement of claim was issued on 13 November 2007. I accept that submission and no further particulars are required.
Contributory negligence
[74] This affirmative defence applies to the first plaintiff and to named second plaintiffs (owning 35 units listed in sch two of the statement of defence).
[75]At para 69 of its statement of defence the Council pleads that:
If it is held that the plaintiffs have suffered, or will suffer, the Economic Losses as a result of the existence of the defects (which is denied)… to the extent that such Economic Losses have been caused or contributed to by the conduct of the plaintiffs identified in paragraph 70 below, or their agent(s), any damages should be proportionately reduced under s 3 Contributory Negligence Act 1947.
Particulars
(a)The plaintiffs acquired their properties without undertaking proper pre-purchase checks and failed to make proper inquiry into the condition of their properties (which inquiry could reasonably have been made to the first plaintiff) and/or they (or their agents) knew, or ought to have known, the defects existed when they acquired their properties.
[76] The plaintiffs argue the Council’s pleading does not inform them of the nature of the defence raised against them. To emphasis the point, Mr Powell referred to evidence that some plaintiffs had acquired units unconditionally “off the plans in 2004.” He submitted there can be no basis upon which those plaintiffs could be said to be at fault in not obtaining pre-purchase reports or in failing to make enquiries of the Body Corporate because the building was not constructed and the Body Corporate did not exist.
[77] I consider the plaintiffs request for particulars goes too far. The plaintiffs are in a position to prepare their evidence in so far as it relates to whether they obtained pre-purchase checks or made other inquiries concerning the condition of their properties prior to purchase. If they did not do so they will be in a position to explain why.
[78] However, the Council’s allegation that plaintiffs “(or their agents) knew, or ought to have known, the defects existed when they acquired their properties” is of a different character. The plaintiffs are not in a position to respond to this allegation without proper particulars.
[79] Accordingly, in respect to each plaintiff against whom this defence is pleaded the Council is to provide particulars of:
(a)Whether it is alleged they and/or their agents either knew or ought to have known defects existed when they acquired their properties; and
(b)In so far as it is alleged that the plaintiffs and/or their agents ought to have known of the existence of defects the facts and circumstances giving rise to that allegation.
[80] Contrary to Mr Powell’s submission, I do not consider the Council is required to plead an amount or percentage figure by which it says the damages of the plaintiffs should be reduced. It is for the Court to make some apportionment to the extent “the court thinks just and equitable having regard to the claimant’s share in the responsibility for the damage.”27 I do not see how the plaintiffs will be assisted by the Council advancing its view of the matter. Mr Powell was also unable to refer me to any authority where such particulars have been required and I have not found any.
Failure to mitigate
[81] At para 71 of the statement of defence the Council pleads a failure to mitigate on the part of the plaintiffs. The pleading is made against the first plaintiff and named second plaintiffs (owning 16 units listed in sch three of the statement of defence). The pleading reads as follows:
If it is held that there are defects (which is denied), and such defects are the cause of the alleged damage and were caused by any breach of duty by the first defendant (which is also denied) then:
(a)Any resulting loss or damage has been caused or contributed to by the plaintiffs’ failure to mitigate their loss and damage.
(b)Any award of damages should be reduced to the extent that the plaintiffs were responsible for their own loss or damage.
Particulars
(a)Failing to address in a timely way the issues identified with the property in reports prepared by consultants and contractors.
(b)Failing to require contractors to return and address issues identified with the property within the defects period provided for in the original construction contract.
[82]The plaintiffs require particulars of the alleged failure to mitigate as follows:
(a)What loss or damage has been caused by the alleged failure to mitigate loss and damage, including particulars of:
(i)The plaintiff(s) concerned;
(ii)With respect to each such plaintiff:
(1) How the plaintiff failed to mitigate their loss and damage;
27 Contributory Negligence Act 1947, s 3(1).
(2) When the plaintiff failed to mitigate the loss and damage;
(3) How such failure caused the loss and/or damage;
(4) What the loss and/or damage was;
(5) The reduction sought for the alleged failure to mitigate.
(b)What loss or damage has been contributed to by the alleged failure to mitigate loss and damage, including particulars of:
(i)The plaintiff(s) concerned;
(ii)With respect to each such plaintiff:
(1) How the plaintiff failed to mitigate their loss and damage;
(2) When the plaintiff failed to mitigate their loss and damage;
(3) How such failure contributed to loss and/or damage;
(4) What the loss and/or damage was;
(5) The reduction sought for the alleged failure to mitigate.
[83] Again, the Council’s pleading is deficient but the particulars sought by the plaintiffs go too far.
[84] The Council argues this as a standalone pleading which puts the plaintiffs on notice that mitigation is a live issue in relation to the steps taken to address defects identified by the plaintiffs in a timely and appropriate way. It says the details of the allegations are matters of evidence and it is not necessary or appropriate to overload the pleading with greater detail. I disagree. The Council makes positive allegations that plaintiffs failed to address in a timely way issues identified in reports prepared by consultants and contractors and failed to require contractors to return and address issues identified within the defects period in the original construction contract. The plaintiffs cannot meaningfully prepare their evidence for trial without further particulars of these allegations.
[85] The Council must provide the following particulars of the allegations in para 71 of the statement of defence as follows:
(a)Details of the reports prepared by consultants and/or contractors in which it is alleged issues were identified with the property. The details would include the date of the reports, who prepared them and for whom they were prepared;
(b)What issues were identified with reference to those reports;
(c)Which plaintiffs are said to have been made aware of those issues;
(d)When and in what circumstances were the plaintiffs made aware of those issues.
[86] I do not consider the Council must go further and plead what loss or damage was caused by these alleged failures. The rules of mitigation avoids social waste by preventing the recovery of loss which a plaintiff could have avoided by taking reasonable action. It is for the plaintiffs to prove their loss.
Betterment
[87] At para 73 of the statement of defence the Council pleads betterment in these terms:
An award of damages on the basis of costs claimed by the plaintiffs should not be made in circumstances where to do so would result in betterment.
Particulars
(a)To the extent building elements had a 15-year lifespan and were replaced after close to 15 years, including:
(i)paint;
(ii)carpet;
(iii)floor coverings;
(iv)joinery; and
(v)fittings.
(b)To the extent building elements replaced, which render the building more valuable, were not present at the time the building was constructed, such elements including the exterior cladding system.
[88] The plaintiffs say this pleading is too vague as it does not specify the basis for saying building elements only had a 15 year lifespan, does not provide a definitive list of the elements with the 15 year lifespan, is not specific about which elements being replaced it refers to including the type and location of each element, which elements were not present at the time of the original construction and make the building more valuable, and the amount of the betterment for each item claimed.
[89] In my view the pleading is sufficient except in one respect. The pleading leaves open the possibility the Council may argue additional building elements not listed had a 15-year life span. If there are such additional building elements, the Council is to specify them as without that information the plaintiffs’ experts will not be aware of the scope of the argument being advanced. No further particulars are required.
Diminution in value
[90]At para 74 of the statement of defence the Council pleads as follows:
If it is held that there are defects (which is denied), and such defects are the cause of the alleged damage and were caused by any breach of duty by the first defendant (which is also denied), then the appropriate measure of the plaintiff’s loss as the diminution in value of Oaks Club, not the estimated cost of remedial work.
[91]The plaintiffs seek particulars of this defence as follows:
The plaintiffs require particulars of:
(a)The facts and circumstances giving rise to the allegation that the appropriate measure of loss is diminution in value;
(b)The amount of the diminution in value alleged for each unit in Oaks Club, including:
(i)The alleged unaffected value;
(ii)The alleged affected value.
[92] In my view the pleading is adequate. I agree with the Council’s submission that the appropriate measure of the plaintiffs’ loss is a matter for expert evidence and legal submission.
Result
[93] The plaintiffs’ application is successful. The Council is to provide further and better particulars of its statement of defence to the extent set out in [38], [43], [47], [51], [56], [60], [61], [69], [79], [85] and [89].
[94]The following timetable shall apply:
(a)the Council shall file an amended statement of defence providing the particular required by this judgment by 16 June 2021 (which coincides with the exchange of its evidence);
(b)the plaintiffs shall have until 14 July 2021 to file any reply.
[95] I regard the plaintiffs as having been successful on this application with this indication. I expect counsel will be able to resolve any issues of costs but if not they may file memoranda within 21 days. Memoranda should be no larger than 5 pages.
O G Paulsen Associate Judge
Solicitors:
Grimshaw & Co, Auckland (for Plaintiffs)
Wynn Williams, Christchurch (for First Defendant) Scholfield Cockroft Lloyd, Invercargill (for Third Defendant) Counsel: H M McIntosh, Barrister, Wellington
Mortlock McCormack, Christchurch (for Fourth and Fifth Defendants)
Counsel: K T Dalziel, Barrister, ChristchurchDLA Piper, Auckland (for Sixth to Tenth Defendants and Fourth to Seventh Third Parties) RVG Law (Stephen Brent), Christchurch (for First Third Party)
Counsel: Kelly Quinn, Bankside Chambers, Auckland Greig Gallagher & Co, Wellington (for Second Third Party) Counsel: J M Morrison, Barrister, Wellington
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