Body Corporate 449665 v CMP Construction Limited
[2023] NZHC 449
•9 March 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-2335
[2023] NZHC 449
IN THE MATTER OF negligence BETWEEN
BODY CORPORATE 449665
First Plaintiff
BISHOP GROUP LIMITED
Second PlaintiffAND
CMP CONSTRUCTION LIMITED
First Defendant
AUCKLAND COUNCIL
Second Defendant
Hearing: 8 November 2022 Counsel:
T M Bates for plaintiffs
P J Dale KC for first defendant
No appearance for second defendantJudgment:
9 March 2023
JUDGMENT OF ASSOCIATE JUDGE TAYLOR
[Summary judgment/strike out]
This judgment was delivered by me on 9 March 2023 at 4pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
T M Bates & Co, Auckland for plaintiffs
Knight Coldicutt Limited, Auckland for defendants
BODY CORPORATE 449665 v CMP CONSTRUCTION LTD [2023] NZHC 449 [9 March 2023]
Introduction
[1] The first defendant, CMP Construction Ltd (CMP), was the builder of a block of apartments at the Victoria Park Market complex.
[2] The plaintiffs are the body corporate (Body Corporate) for the block of the apartments and the registered proprietor of one of the principal units within the complex. They claim against CMP in negligence in relation to a failing waterproof membrane that has allowed water ingress into the building.
[3] CMP seeks summary judgment or strike out of the plaintiffs’ claim against it, citing a limitation defence under the Limitation Act 2010.
Background
[4] This proceeding is about the construction of the roof terrace in the Victoria Park Market complex built between 2011 and 2013. The plaintiffs claim the roof terrace was defective in that its waterproof membrane was installed incorrectly. They say the roof terrace has degraded and requires substantial repairs.
[5] The plaintiffs say CMP, as the head contractor for the building project, was negligent in that it contracted Aquastop Ltd to complete the waterproof membrane, and that it bears the risk of loss resulting from Aquastop Ltd’s failure to exercise reasonable skill and care in doing so.
[6] CMP denies the claim and says further that the plaintiffs were contributorily negligent.
Notice of application for summary judgment or strike out
[7]CMP seeks orders:1
(i)Entering summary judgment in favour of the first defendant against the plaintiffs in respect of all causes of action.
1 Notice of application by first defendant for (1) summary judgment; alternatively (2) strikeout dated 1 August 2022 at [1].
(ii)Alternatively striking out the plaintiffs’ claims against the first defendant.
(iii)Costs.
[8]The grounds on which the orders are sought are:2
(a)The building work the subject of the plaintiffs’ claim was completed between January 2013 and 23 November 2013.
(b)By an email dated 20 August 2018 the plaintiffs agent confirmed its awareness of the defects the subject of the plaintiffs’ statement of claim, or at least with sufficient knowledge that there was a likelihood of loss, that the first defendant was one of the parties that might be responsible, and that expert advice should be required.
(c)As a consequence the late notice limitation period referred to in section 11 of the Limitation Act 2010 commenced to run.
(d)The plaintiffs’ proceeding was not commenced until 6 December 2021 and was accordingly outside the statutory late notice period.
(e)Appearing in the affidavit of Andrew Quentin Moore sworn and filed herein.
Application for summary judgment
[9] Mr Bates, for the plaintiffs, submits that under r 12.4(3) of the High Court Rules 2016 a defendant is required, if making an application for summary judgment, to make the application at the time the statement of defence is served otherwise leave of the Court is required. Mr Bates submits that whether the Court grants leave is clearly discretionary and he refers to the decision in Stephens v Barron, in which he submits the Court of Appeal has emphasised that leave cannot be treated as a formality.3 Mr Bates submits that CMP has not sought leave to bring the summary judgment application, nor adduced any evidence to support a leave application to explain the reasons for the delay in bringing the application.
[10] Mr Dale KC, for CMP, at [2] of his reply submissions, acknowledges that leave was required to bring the summary judgment application and submits that the application before the Court is best characterised as a strike out application and so should proceed in any event.
2 At [2].
3 Stephens v Barron [2014] NZCA 82, (2014) 21 PRNZ 734.
[11] Mr Dale submits that the reason why the summary judgment application was not brought at the time of filing the statement of defence was because CMP made legitimate enquiries about the late notice date, which was information only within the knowledge of the plaintiffs. Finally, he submits that there is no prejudice to the plaintiffs by the short delay.
[12] My conclusion on this is that leave should be granted to CMP to bring the summary judgment application and I make an order at the end of this judgment accordingly.
Affidavit of Andrew Moore dated 29 July 2022
[13] Andrew Moore, commercial manager of CMP, has made an affidavit in support of CMP’s application. He deposes to his belief that the plaintiffs’ claim is statute-barred by reason of the Limitation Act. He says the proceeding was commenced on 6 December 2021 and that it concerns construction defects in respect of a building constructed between January 2012 and 23 November 2013 — on the face of it, outside the statutory six year period.4
[14] Mr Moore says that email correspondence shows the plaintiffs became aware of the alleged defects as early as August 2018, and that they therefore had knowledge more than three years before they issued proceedings. For that reason, he says CMP seeks an order entering judgment against the plaintiffs on all causes of action against CMP, or, in the alternative, an order striking out the plaintiffs’ claims against CMP.5
Notice of opposition to summary judgment or strike out application
[15] The plaintiffs oppose CMP’s application for summary judgment or strike out, on the following grounds:6
(a)The building works were completed between January 2013 and 23 November 2013 and the proceedings have been issued within the
4 Affidavit of Andrew Quentin Moore in support of first defendant’s application for: (1) summary judgment or alternatively (2) strikeout dated 29 July 2022 at [1]–[3].
5 At [5]–[12].
6 Plaintiffs’ notice of opposition to first defendant’s summary judgment/strike out application dated 19 August 2022 at [3].
long stop period as defined by section 11(3)(b) of the Limitation Act 2010;
(b)The plaintiffs did not have knowledge nor constructive knowledge of the facts more fully set out in section 14 of the Limitation Act 2010 as at 20 August 2018 such that this could constitute the late knowledge date.
(c)Specifically the plaintiffs had no knowledge that at the time or at any earlier date of the fact that the act or omission had occurred (s 14(a), the fact that the act or omission on which the claim is based was attributable to the First Defendant (s14(b), the fact that the Plaintiffs had suffered loss (s14(c), such that the late knowledge period did not commence until well after 6 December 2018, being less than 3 years before proceedings were issued.
(d)The First Defendant has not established that the Plaintiffs’ claim:
(i)is so clearly statute-barred as to establish it discloses no reasonably arguable cause of action;
(ii)is likely to cause prejudice or delay
(ii) is frivolous or vexatious;
(iv) is an abuse of process.
(e)Appearing in the Affirmation of Christopher John Stansfield in Support of Notice of Opposition to Summary Judgment/Strike Out Application dated 17 August 2022.
Affidavit of Christopher Stansfield dated 17 August 2022
[16] Mr Stansfield, facilities manager for the Body Corporate, has made an affidavit in support of the plaintiffs’ notice of opposition. He deposes that his role involves him being the person who is contacted by tenants, unit owners and the Body Corporate to address maintenance and repair issues. He says his first recollection of the issue involving the roof deck was in 2018, when a unit owner alerted him that water was leaking through the ceiling. Mr Stansfield says he attended the site and examined the area immediately above the location of the water ingress. He says that he then wrote an email of 20 August 2018 to Tony Howard of CMP, seeking the name of the waterproof membrane applicator. Mr Howard replied the same day.7
7 Affidavit of Christopher John Stansfield in support of notice of opposition to summary judgment/strike out application dated 17 August 2022 at [1]–[4].
[17] Mr Stansfield deposes that further leaks were reported to him later in 2018. He says he engaged Hailey Riley, the maintenance contractor for the complex, to conduct a repair in December 2018. Unfortunately, he says, this repair (and subsequent further repairs by Unique Services and Roof and Spouting Company) did not work. Mr Stansfield says that it was at this point that it became clear that the issue was not a minor maintenance problem, but something more systemic. He says he then prepared a report for the Body Corporate Committee (the Committee) dated 17 October 2019. A few days later, he wrote to Mr Howard explaining the continued problems and seeking the installer’s details again.8
[18] Mr Stansfield says the leaks were discussed at the Annual General Meeting on 22 October 2019. He says he later met with Mr Howard on site, who in turn engaged Equus to inspect the waterproof membrane. Equus reported back to CMP on or about 8 November 2019, and its report was forwarded to Mr Stansfield on 13 November 2019. Mr Stansfield says a further report was prepared by CoveKinloch and was provided to the Committee on 7 November 2019. He says the Committee thought that the CoveKinloch report had not gone far enough, and that it accordingly commissioned Maynard Marks to prepare a more in-depth report. The Maynard Marks report was received on or about 18 May 2020. Mr Stansfield says the Maynard Marks report identified that the waterproof membrane applicator had not followed the contract specifications and had attached the membrane by mechanical fixings rather than by using a torch. Maynard Marks had said this was a fatal change in terms of the membrane’s longevity. Mr Stansfield says it became clear at that point that complete replacement of the waterproof membrane was needed.9
[19] The Maynard Marks report was shared with CMP on 6 November 2020. Mr Stansfield says the release of the report to CMP seemed to spur it into action, with Mr Howard agreeing to secure a competitive quote. But the quote was not forthcoming, and Mr Stansfield wrote emails of 14 December 2020 and 20 January 2021 to Mr Howard to follow up. CMP advised in an email of 27 January 2021 that the hold up was with getting the original membrane applicator to visit with Equus. Mr Stansfield replied to say that he was seeking a quote to deconstruct the deck and
8 At [5]–[9].
9 At [10]–[13].
relay the membrane, which CMP acknowledged by reply email. He says the discussions with CMP ultimately came to nothing, and that the issue was thereafter elevated to his manager, Tyrell Snelling. Mr Stansfield says Mr Snelling wrote to Ron McCrae, the managing director of CMP, on 5 May 2021. The email placed responsibility for the failing deck membrane on CMP. Mr Stansfield says that, in a later phone call, Mr Howard made clear CMP did not see the issue as being its responsibility, and it was not interested in resolving the matter.10
[20] At that point, Mr Stansfield says, the matter was taken back to the Committee. The Committee sought legal assistance. After CMP failed to respond to a hold liable letter of 18 November 2021, the Body Corporate issued these proceedings on 6 December 2021.11
[21] Summarising, Mr Stansfield says the first time he had any understanding of the cause of the leaks was after the October 2019 inspection by Roofing and Spouting Company. He says it was not until after the Committee had received the Maynard Marks report of May 2020 that it was known that the membrane applicator had departed significantly from the specifications. And it was only after the Maynard Marks findings were brought to the attention of the unit owners at the Annual General Meeting that Body Corporate members were alerted to CMP’s responsibility for the membrane failings.12
Reply affidavit of Stephen Alexander dated 30 August 2022
[22] Mr Alexander, principal of ACL Building Science Ltd, has made an affidavit in reply to Mr Stansfield’s affidavit. As a preliminary matter, Mr Bates has objected to Mr Alexander’s affidavit being read by the Court on the following basis:
(a)Mr Alexander is purporting to give expert evidence outside of his area of expertise. Mr Bates submits that Mr Alexander is a building surveyor, able to give evidence addressing construction issues that fall within his area of expertise but gives evidence about what
10 At [15]–[18].
11 At [19].
12 At [20].
Mr Stansfield, as Body Corporate facilities manager, ought to have done in terms of instructing an expert.
(b)Mr Alexander’s affidavit breaches cls 1 and 3(c) of sch 4 of the Code of Conduct for Expert Witnesses.
(c)Mr Alexander’s affidavit is filed in reply to the plaintiffs’ evidence. Under r 12.11 of the High Court Rules, reply affidavits must be limited to new matters in the affidavit of the party opposing the application, but Mr Alexander’s evidence goes beyond reply evidence.
[23] Having reviewed Mr Alexander’s CV and his evidence, I am of the view that his expertise is wider than strictly that of a building surveyor and he has extensive experience in dealing with leaky building defects and dispute resolution relating thereto. Accordingly, I will allow the affidavit to be read.
[24] Mr Alexander deposes that he has given expert evidence on many occasions since 1997, when he began investigating building defects as his primary occupation. He says he has been asked to comment on what steps Mr Stansfield should have taken once he was made aware of the issues with the deck. He says he would expect a facilities manager who regularly works on properties that have a body corporate to be aware of issues around limitation periods. He says that once initial attempts at repair were unsuccessful, the manager should do a rough calculation to determine how much time is available before recovery against the defendants becomes out of time. And, he says, leaking membranes over habitable spaces is a common and often expensive problem to which facility managers should be attuned.13
[25] Mr Alexander says Mr Stansfield should not have thought that simply contacting CMP about the leaks would suffice to preserve the plaintiffs’ legal rights. Had Mr Stansfield sought advice from an expert on becoming aware of the leaks, the response would have been to have a proper survey undertaken immediately, and, if necessary, to commence legal proceedings to avoid any limitation problems in the
13 Affidavit of Stephen Ross Alexander in support of first defendant’s application for summary judgment and/or strikeout dated 30 August 2022 at [1]–[9].
future. He says that on the information available to him, Mr Stansfield should have more urgently sought proper investigation of the problem. And, he says, when time is of the essence and limitation dates looming, it is not necessary to even engage an expert and wait for a fully articulated report.14
Reply affidavit of Anthony Howard dated 1 September 2022
[26] Mr Howard has also made an affidavit in reply to Mr Stansfield’s affidavit. He says he and CMP believe the real cause of the problems with the building are a failure to install inspection hatches on the decks, as recommended by CMP at the time of construction, and a lack of maintenance. He says he does not know why Mr Stansfield did not obtain expert advice when he first became aware of the water ingress issues. He says Mr Stansfield never asked him to give any expert advice or to express a concluded view about the cause of the problems. And he says he is not surprised there were further leaks because of the lack of maintenance and other issues.15
Second affidavit of Andrew Moore dated 25 October 2022
[27] Mr Moore has made a second affidavit. In it, he confirms the contents of his first affidavit and attaches further correspondence between the parties’ solicitors.16
[28] Mr Bates objects to the Court reading the affidavit of Mr Moore on the basis that:
(a)the affidavit is filed in reply, but cannot be properly classified as replying to the evidence adduced by Mr Stansfield;
(b)the affidavit was filed outside the allowed timetable for reply affidavits, being sworn on 25 October 2022 and accordingly leave is required to file the affidavit and leave should not be granted.
14 At [11]–[16].
15 Affidavit of Anthony Bruce Howard in support of first defendant’s application for summary judgment and/or strikeout dated 1 September 2022 at [1]–[13].
16 Second affidavit of Andrew Quentin Moore in support of first defendant’s application for:
(1)summary judgment or alternatively (2) strikeout dated 25 October 2022 at [1]–[2].
[29] Mr Dale responds by submitting that Mr Moore’s second affidavit simply adduces recent correspondence between the parties so that the Court is fully aware of the discussions that have taken place between them, and submitted that nothing turns on the material other than that it evidences the plaintiffs being given every opportunity to produce evidence to support their claim about the late notice date.
[30] Having considered Mr Bates’ objections, and Mr Dale’s response, I will allow the affidavit of Mr Moore to be read. I accept Mr Dale’s submission that the affidavit does not contain anything contentious and simply puts recent correspondence between the parties before the Court.
CMP’s submissions
[31] Mr Dale submits that for CMP to succeed, it must show that the plaintiffs’ causes of action are so clearly time barred that they can properly be regarded as frivolous, vexatious, or an abuse of process. But if it demonstrates that the plaintiffs’ proceeding was commenced after the period allowed in the particular cause of action by the Limitation Act, CMP will be entitled to an order striking out the causes of action unless the plaintiffs can show an arguable case for extension or postponement, which would bring the claim back within time.17
[32] Mr Dale says the plaintiffs plead that the apartments were constructed between 2011 and 2013. The present proceedings, meanwhile, were not issued until 6 December 2021. Prima facie, the claim is time-barred. To establish otherwise, the plaintiffs must show that the late knowledge date is no earlier than 6 December 2018
— that is, three years prior to the filing of the proceedings. Mr Dale says CMP’s case is that the email dated 20 August 2018 constituted sufficient notice, in terms of the Limitation Act, to trigger the commencement of the late knowledge period. The plaintiffs’ claim is therefore time barred.18
17 Synopsis in support of first defendant’s application for: (1) summary judgment; alternatively (2) strikeout dated 25 October 2022 at [1]–[9].
18 At [10]–[20].
[33] Mr Dale says any doubt is removed by the further letter from Mr Stansfield to the Committee dated 17 October 2019. That letter suggested that as early as October 2018 there was a leaking problem known to the Body Corporate managers and, by imputation, the Committee. Mr Alexander’s expert evidence, meanwhile, is to the effect that the information then available to Mr Stansfield was such that he ought to have obtained expert advice to ensure that remedial work was undertaken as soon as possible. On the basis of that evidence, the plaintiffs’ claim is time barred.19
[34] Mr Dale submits the plaintiffs have not focused on proving when the cause of action accrued. He says it is necessary to consider the evidence only in relation to the August 2018 report — not only did the building managers see fit to engage an agent, but repairs were actually undertaken. He says the plaintiffs would only have done so because there was damage and loss. And, he points out, the plaintiffs have not produced any evidence from the membrane specialist or provided any detail of what work was done. So, on the evidence before the Court, the claim is time-barred. The plaintiffs have failed to discharge their onus to show otherwise.20
[35] Concluding, Mr Dale says CMP seeks an order that the plaintiffs’ claim against it is struck out, with costs to follow.21
Plaintiffs’ submissions
[36] Mr Bates submits that the burden of establishing the limitation defence remains with CMP. The key question, Mr Bates says, is at what point the plaintiffs knew, or ought reasonably to have known, that the water ingress was caused by the defective installation of the waterproof membrane at the time of construction. In other words, what was the date on which the Body Corporate knew, or ought reasonably to have known, what the problem or defect was that was causing the leaks to occur? That date will be the trigger for time to start running for the late notice period within which the Body Corporate could bring a claim. He submits that Mr Stansfield’s email of 20 August 2018 constituted only a preliminary inquiry, and there were many more subsequent developments that occurred before the Body Corporate gained a full
19 At [21]–[27].
20 At [33]–[36].
21 At [37]–[39].
understanding of what the problems were. It was not until the Maynard Marks report of 18 May 2020 that the Body Corporate learned that the membrane applicator had not followed the contract specification — this is the relevant late knowledge date on which the plaintiffs became aware of the act or omission on which its claim against CMP is based.22
[37] Mr Bates submits CMP’s attempt to peg the late knowledge date at August 2018 is untenable, and while Mr Stansfield became aware at that time that there was a leak problem, that cannot be conflated with knowledge of an act or omission that would form the basis of a legal claim. Mr Bates submits that Mr Stansfield had no actual or constructive knowledge at that time of an act or omission attributable to CMP, and there was no evidence at that point of damage or loss to the Body Corporate. Mr Bates submits that, properly construed, Mr Stansfield’s email of 20 August 2018 was only an information gathering exercise to determine who supplied and installed the membrane.23
[38] Next, Mr Bates submits CMP’s submissions are misconceived insofar as they suggest the plaintiffs bear the burden to establish that the date on which the claim was filed is at least three years after the late knowledge date. He submits the burden remains on CMP to establish that none of the causes of action can succeed because of the limitation defence. Put another way, CMP will need to establish that it is inarguable that the late knowledge date was within three years of 6 December 2021.
It cannot do so.24
[39] Concluding, Mr Bates reiterates that CMP is unable to meet its burden of showing that the late knowledge date arose more than three years before the filing of proceedings on 6 December 2021. It follows that the application for summary judgment and strike out must fail. The Body Corporate only became possessed of the facts necessary to trigger time running for filing a claim when the Maynard Marks report was received on 18 May 2020.
22 At [34]–[43].
23 At [44]–[57].
24 At [58]–[81].
Legal principles
Summary judgment
[40]Rule 12.2 provides, relevantly:
12.2Judgment when there is no defence or when no cause of action can succeed
…
(2)The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[41] As a general rule in determining summary judgment applications, the Court will refrain from attempting to resolve genuine conflicts of evidence or to assess the credibility of the parties’ statements in their affidavits. But that does not mean spurious defences or contrived factual conflicts are permitted to prevent judgment being obtained.25 A robust approach is to be taken, by which affidavits must have an aura of credibility.26
[42] The wording of r 12.2 (“may give judgment”) indicates a residual discretion in deciding whether to enter summary judgment. That approach applies equally to a defendant’s application under r 12.2(2).27
Strike out
[43]Rule 15.1 provides, relevantly:
15.1 Dismissing 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[.]
25 Robert Osborne (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR12.2.08], citing Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 (HC) at 14 and Pemberton v Chappell [1987] 1 NZLR 1 (CA).
26 At [HR12.2.08], citing Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
27 At [HR12.2.11].
[44]There are established criteria for strike out:28
(a)A strike out application proceeds on the assumption the pleaded facts are true, unless those pleaded facts are entirely speculative or without foundation.
(b)The cause of action or defence must be clearly untenable.
(c)The jurisdiction is to be exercised sparingly and only in clear cases.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law.
(e)The Court should be slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation.
Limitations
[45]Section 11 of the Limitation Act 2010 provides:
11 Defence to money claims filed after applicable period
(1)It is a defence to a money claim if the defendant proves that the date on which the claim is filed is at least 6 years after the date of the act or omission on which the claim is based (the claim’s primary period).
(2)However, subsection (3) applies to a money claim instead of subsection (1) (whether or not a defence to the claim has been raised or established under subsection (1)) if—
(a)the claimant has late knowledge of the claim, and so the claim has a late knowledge date (see section 14); and
(b)the claim is made after its primary period.
(3)It is a defence to a money claim to which this subsection applies if the defendant proves that the date on which the claim is filed is at least—
(a)3 years after the late knowledge date (the claim’s late knowledge period); or
(b)15 years after the date of the act or omission on which the claim is based (the claim’s longstop period).
28 Attorney-General v Prince & Gardner [1998] 1 NZLR 262 (CA) at 267; and Couch v Attorney- General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
[46]Section 14 continues:
14 Late knowledge date (when claimant has late knowledge) defined
(1)A claim’s late knowledge date is the date (after the close of the start date of the claim’s primary period) on which the claimant gained knowledge (or, if earlier, the date on which the claimant ought reasonably to have gained knowledge) of all of the following facts:
(a)the fact that the act or omission on which the claim is based had occurred:
(b)the fact that the act or omission on which the claim is based was attributable (wholly or in part) to, or involved, the defendant:
(c)if the defendant’s liability or alleged liability is dependent on the claimant suffering damage or loss, the fact that the claimant had suffered damage or loss:
(d)if the defendant’s liability or alleged liability is dependent on the claimant not having consented to the act or omission on which the claim is based, the fact that the claimant did not consent to that act or omission:
(e)if the defendant’s liability or alleged liability is dependent on the act or omission on which the claim is based having been induced by fraud or, as the case may be, by a mistaken belief, the fact that the act or omission on which the claim is based is one that was induced by fraud or, as the case may be, by a mistaken belief.
(2)A claimant does not have late knowledge of a claim unless the claimant proves that, at the close of the start date of the claim’s primary period, the claimant neither knew, nor ought reasonably to have known, all of the facts specified in subsection (1)(a) to (e).
(3)The fact that a claimant did not know (or had not gained knowledge), nor ought reasonably to have known (or to have gained knowledge), of a particular fact may be attributable to causes that are or include fraud or a mistake of fact or law (other than a mistake of law as to the effect of this Act).
Analysis
[47]The questions to be determined in this judgment are:
(a)Where does the onus of proof as to when the plaintiffs accrued “late knowledge” for the purposes of s 14 of the Limitation Act 2010 lie — with the plaintiffs or with CMP?
(b)At what date did the plaintiffs acquire “late knowledge”?
[48]I deal with each of these questions in turn.
Where does the onus of proof lie?
[49] Mr Dale relies on the decision in Murray v Morel & Co Ltd,29 and in particular the following passage from Justice Tipping’s judgment:
[34] In the end the Judge must assess whether, in such a case, the plaintiff has presented enough by way of pleadings and particulars (and evidence, if the plaintiff elects to produce evidence), to persuade the Court that what might have looked like a claim which was clearly subject to a statute bar is not, after all, to be viewed in that way, because of a fairly arguable claim for extension or postponement. If the plaintiff demonstrates that to be so, the Court cannot say that the plaintiff’s claim is frivolous, vexatious or an abuse of process. The plaintiff must, however, produce something by way of pleadings, particulars and, if so advised, evidence, in order to give an air of reality to the contention that the plaintiff is entitled to an extension or postponement which will bring the claim back within time. A plaintiff cannot, as in this case, simply make an unsupported assertion in submissions that s 28 applies. …
[50] Mr Dale submits that it ought to be up to the plaintiffs to establish the basis for the statutory exception of late knowledge. He submits that only the plaintiffs will have that knowledge and, other than by way of discovery or interrogatories, a defendant will not know what information it is that is relied upon by a plaintiff to say the exception to the primary period applies.
[51] Mr Dale submits that the Murray v Morel & Co Ltd decision is consistent with the decision in Driver v Radio New Zealand Ltd,30 and in particular submits that Justice Clark applied the Murray v Morel & Co Ltd test.31 Justice Clark said:32
[20] Importantly for the purposes of this strike-out, the plaintiff bears the onus of establishing an arguable case that there is a late knowledge date and that date was within two years from when the claim was made.
[52] Mr Bates on the other hand submits that the onus of establishing that the late knowledge statutory exception does not apply rests on CMP. He refers to the Laws of New Zealand:33
29 Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721.
30 Driver v Radio New Zealand Ltd [2019] NZHC 3275, [2020] 3 NZLR 76.
31 At [19]–[20].
32 Footnote omitted.
33 J C Corry Laws of New Zealand Limitation of Civil Proceedings (online ed) at [48] (footnotes omitted).
The onus of proving that the date on which the claim is filed is at least three years after the late knowledge date is on the defendant.
However, the plaintiff must first prove that at the close of the start date of the claim’s primary period (the date of the act or omission on which the claim is based or other prescribed start date) the plaintiff neither knew nor ought reasonably to have known all of the five facts.
[53] Mr Bates submits that the Driver decision does not automatically mean Murray v Morel & Co Ltd should be applied to s 14 of the Limitation Act and it is necessary to work through the elements of s 14. He submits that s 11(3) makes clear that the burden of proof is with CMP:
11 Defence to money claim filed after applicable period
…
(3)It is a defence to a money claim to which this subsection applies if the defendant proves that the date on which the claim is filed is at least—
(a)3 years after the late knowledge date (the claim’s late knowledge period); or
…
Conclusion in relation to the burden of proof
[54] In my view, Mr Bates is correct that the final burden of proving that the statutory exception for late knowledge does not apply rests with CMP. This is made clear by s 11(3) of the Limitation Act. However, common sense dictates that once the defendant has alleged that the claim was filed more than three years after the late knowledge date, there is clearly some onus on the plaintiff to adduce evidence to demonstrate its state of knowledge at the relevant date. In my view, this onus, consistent with the principles of summary judgment and strike out, is that it is necessary for the plaintiffs to establish that it is reasonably arguable the claim was brought within three years of the late knowledge date.
At what date did the plaintiffs acquire late knowledge?
[55] Mr Dale submits that the late knowledge date is 20 August 2018. This is based on an email sent by Mr Stansfield to Mr Howard of CMP. As this email is critical to CMP’s case, it is worth repeating in full in this judgment:
We are having some issues with leaks through the membrane under the decks of Tom Tom and La Zeppa. Could you please forward to me the contact details for the company that supplied and installed the membrane? We have had one of our general contractors inspect the problem but this is really a specialist problem, and he is not a membrane specialist.
[56] Mr Dale submits that at that point Mr Stansfield had sufficient knowledge and ought to have obtained expert advice in order to ensure that remedial work was undertaken as soon as possible.
[57] Mr Dale submits that Mr Stansfield may not have been in a position to determine the seriousness of the problem at that time but ought to have immediately sought expert assistance or advised his client to do so. He submits that this is consistent with the findings of the Privy Council in Invercargill City Council v Hamlin.34 Mr Dale points to the evidence of Mr Alexander that a competent facilities manager would have sought expert advice at that point.
[58] Mr Bates, on the other hand, submits that the correct date at which the plaintiffs acquired late knowledge was the date the plaintiffs received the Maynard Marks report, being 18 May 2020. Mr Bates analyses the plaintiffs’ state of knowledge upon receipt of the Maynard Marks report, as assessed against the requirements of s 14, as follows:
(a)Section 14(1)(a) – the plaintiffs were aware the act or omission had occurred and that there were various widespread defects in the installation of the membrane on the Tom Tom deck where the leaks had been occurring since mid-2018.
(b)Section 14(1)(b) – the plaintiffs were aware of the fact the act or omission on which the claim was based was attributable (whether wholly or in part) to, or involved, CMP. The defects were clearly attributable to CMP or CMP was “involved” with causing them in its former role as head contractor overseeing the original construction of the deck.
34 Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC).
(c)Section 14(1)(c) – the plaintiffs were aware they had suffered a loss. The Maynard Marks report was clear that proper repair of the deck was an entire replacement of the membrane and at this point it was clear the plaintiffs had suffered a loss, or would do so, as costly repairs were contemplated.
[59] Mr Dale submits that as at August 2018, the only thing Mr Stansfield knew was that there were leaks coming through from above unit 65 and he was investigating a problem by seeking the membrane installer’s name from the head contractor. Mr Bates submits that this was just information-gathering by Mr Stansfield. At that point there was no act or omission on which a claim might be based, as mere knowledge of a leak cannot be conflated with knowledge of the act or omission which would comprise the basis of the claim, namely that the membrane was incorrectly installed. He also submits that at this time there was no actual or constructive knowledge of the fact that the act or omission was attributable to CMP.
[60] Mr Bates refers to the decision in Rea v 360 Degrees Ltd.35 He submits that in Rea there appear to have been a number of efforts to remediate apparently minor issues with the plaintiffs’ house over a period of about two years before a full inspection report was completed by expert building surveyors and structural engineers. The Judge held the plaintiffs’ late knowledge period in that case started when they received the structural engineers’ report pinpointing the structural and weather-tightness defects. Mr Bates submits there are parallels to be drawn with the knowledge of the plaintiffs in this case, being the receipt by the plaintiffs of the Maynard Marks report.
[61] Mr Bates submits that at August 2018, while Mr Stansfield had knowledge of the leaks, knowledge of the leaks cannot be conflated with knowledge of the defects causing the leaks. These defects were not known until the Maynard Marks report in May 2020. He submits that the plaintiffs did not have, and could not reasonably have had, that level of knowledge in August 2018 after a single inspection of the decks and roof terrace by Mr Stansfield and the maintenance contractor, Hailey Riley.
35 Rea v 360 Degrees Ltd [2022] NZHC 916.
[62] Mr Bates submits that the earliest possible late knowledge date was October or early November 2019 when Mr Stansfield became aware that this was no longer a minor maintenance problem but something more systemic. This arose from the second visit of the Roof and Spouting Company when their investigation revealed that water ingress was discovered to have occurred via the failed lap joints and water was migrating under the membrane with egress via the floor waste penetration and joint between the hollow core panels. Mr Bates submits that even at this point, although the element in s 14(1)(a) was present at this time (knowledge of the act or omission giving rise to the claim), the remaining elements, being likely culpability of CMP for the omission (s 14(1)(b)) and knowledge of damage (s 14(1)(c)), were still missing and, in his submission, were not known until the Maynard Marks report was delivered in May 2020.
[63] Mr Bates also rejects the allegation that the plaintiffs were “shutting its eyes to the obvious”.36 He submits that the plaintiffs called in contractors who had identified and attempted to fix what they believed to be the causes of the leaks and it was not until later, when these repairs failed, that the existence of the actual latent defects in the membrane stemming from its installation became apparent.
[64] Mr Bates refers to the decision in Driver v Radio New Zealand Ltd, and in particular the following passages from the judgment:37
[31] A plaintiff cannot postpone the start of the limitation period by shutting her or his eyes to the obvious. …
[32] As to the degree of certainty and detail required before it can be said a plaintiff has knowledge, in Haward v Fawcetts, Lord Nicholls observed, by reference to the earlier guidance of Lord Donaldson in Halford v Brookes:
… knowledge does not mean knowing for certain and beyond possibility of contradiction. It means knowing with sufficient confidence to justify embarking on the preliminaries to the issue of a writ, such as submitting a claim to the proposed defendant, taking advice, and collecting evidence: “Suspicion, particularly if it is vague and unsupported, will indeed not be enough, but reasonable belief will normally suffice.” In other words, the claimant must know enough for it to be reasonable to begin to investigate further.
36 Invercargill City Council v Hamlin, above n 34, at 526.
37 Driver v Radio New Zealand Ltd, above n 30 (citations omitted).
[65] In Mr Bates’ submission, applying the principles from the Driver decision, as at 20 August 2018 all Mr Stansfield knew was that there were leaks occurring, but there was no further understanding as to what was causing them and there was not even a suspicion of any culpability on the part of CMP at that point. He certainly did not know enough at that point to embark upon the preliminary investigations to issue a claim against CMP.
Conclusion in relation to the late knowledge date
[66] In my view, it is reasonably arguable by the plaintiffs that the earliest date upon which the plaintiffs acquired late knowledge was October/early November 2019. This was the point in time at which the Roof and Spouting Company investigation revealed that there was a systemic problem with the membrane. At this point, in my view, Mr Stansfield knew enough to obtain expert advice. Even though the plaintiffs did not fully understand the cause of the defects, being the incorrect installation of the membrane by the membrane installer until receipt of the Maynard Marks report, there was arguably sufficient information available to Mr Stansfield to constitute constructive knowledge of the issues underlying the claim.
[67] In relation to the submission that as at 20 August 2018 Mr Stansfield should have sought expert advice, I am unconvinced by Mr Alexander’s evidence. In my view, it is reasonably arguable by the plaintiffs that Mr Stansfield did not have sufficient information to seek expert advice, as at that stage the leaks were being treated as localised leaks with potentially minor repairs only required.
Result
[68] As a result of my conclusions at [55], [67] and [68], I am of the view that it is reasonably arguable that the earliest the plaintiffs acquired late knowledge was October/early November 2019 and not 20 August 2018. Accordingly, CMP has not discharged the burden of proving for the purposes of s 11(3) of the Limitation Act that the plaintiffs acquired late knowledge earlier than three years before the proceedings were filed.
[69]CMP’s applications for summary judgment and strike out should be dismissed.
Orders
[70]I make the following orders:
(a)Pursuant to r 12.4(3) of the High Court Rules, CMP is granted leave to bring the summary judgment application after filing its statement of defence.
(b)CMP’s application for summary judgment and/or strike out is dismissed.
(c)Costs are reserved. Counsel are to endeavour to agree costs and failing agreement being reached within 20 working days of the date of this judgment, counsel for the plaintiffs will file a memorandum as to costs (not exceeding five pages) within five working days of expiry of the 20 working day period, and counsel for CMP will file a reply memorandum (not to exceed five pages) within five working days of receipt of counsel for the plaintiffs’ memorandum.
Associate Judge Taylor
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