Commercial Hotel 2017 Limited v Gibson
[2023] NZHC 951
•28 April 2023
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2021-404-1548
[2023] NZHC 951
BETWEEN THE COMMERCIAL HOTEL 2017 LIMITED
First PlaintiffPARMINDER SINGH TAKHAR
Second PlaintiffSUNIL NAIR
Third PlaintiffJASWINDER SINGH SETHI
Fourth PlaintiffAND
CLAIRE PATRICIA GIBSON
First DefendantMICHAEL GIBSON
Second Defendant
Hearing: 20 April 2023 Appearances:
J D Savage for the Plaintiffs MD Branch for the Defendants
Judgment:
28 April 2023
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 27April 2023 at 12.00 pm, pursuant to r 11.5 of the High Court Rules
Solicitors/Counsel:
Norris Ward McKinnon, Hamilton, Harkness Henry, Hamilton,
Registrar/Deputy Registrar Date
THE COMMERCIAL HOTEL 2017 LTD v GIBSON [2023] NZHC 951 [28 April 2023]
Introduction
[1] Claire Gibson, the first defendant, is sued in her capacity as a trustee of the Altitude Trust. Her husband, Michael Gibson, is the second defendant and a beneficiary of the Trust. In this proceeding, he is alleged to have acted as the Trust’s agent at all material times.
[2] The Altitude Trust once owned the Commercial Hotel in Te Awamutu. In 2017, the hotel was sold by the Trust and acquired by the first plaintiff, The Commercial Hotel 2017 Limited (TCH). TCH was incorporated for that purpose by Mr Parminder Takhar, Mr Sunil Nair and Mr Jaswinder Sethi, respectively the second, third and fourth plaintiffs.
[3] The plaintiffs allege that they have suffered losses as a result of misrepresentations made prior to the purchase, regarding the structural integrity of the hotel. The fourth amended statement of claim dated 5 August 2022 (the statement of claim) advances four causes of action:
(a)against Mrs Gibson, for misrepresentation in breach of s 35 of the Contract and Commercial Law Act 2017 (CCLA);
(b)against Mrs Gibson, for misleading and deceptive conduct in breach of s 9 of the Fair Trading Act 1986 (FTA);
(c)against Mr Gibson, for the tort of negligent misstatement; and
(d)against Mr Gibson, for the tort of deceit.
[4] Mr and Mrs Gibson have applied to strike out the statement of claim. However, if the plaintiffs are given an opportunity to re-plead, then Mr and Mrs Gibson seek an order that the plaintiffs are required to answer interrogatories.
Application to strike out the pleading
[5] When the application was filed, Mr and Mrs Gibson advanced numerous grounds in support of an order striking out all four causes of action as legally
untenable. One ground, which was advanced in respect of all four causes of action, alleged that each cause of action combined a claim by all four plaintiffs, and that the claims of each plaintiff needed to be separately pleaded.
[6] Prior to the hearing, Mr and Mrs Gibson abandoned their arguments that the four causes of action are legally untenable, and now only pursue their argument that the statement of claim is defective because the claims of the plaintiffs need to be pleaded in separate causes of action. Mr Branch, counsel for Mr and Mrs Gibson, accepted that this was a defect capable of remedy by an amended pleading.
[7] For the plaintiffs, Mr Scrivener argued that the statement of claim complies with the High Court Rules 2016 (HCR), and that combining the plaintiffs’ claims in each of the four causes of action was the most efficient way to progress the claim.
[8] Given that Mr and Mrs Gibson accept that any defect in the plaintiffs’ statement of claim can be remedied, there is no prospect of this Court striking out the claim. The only issues to be determined are:
(a)whether the pleading complies with the HCR; and
(b)if the pleading does not comply, to what extent the pleading needs to be amended.
The requirement to plead distinct causes of action
[9]Rule 4.2 of the HCR provides for plaintiffs to be named jointly or separately:
4.2 Plaintiffs
(1)Persons may be joined jointly, severally, or in the alternative as plaintiffs,—
(a)if it is alleged that they have a right to relief in respect of, or arising out of, the same transaction, matter, event, instrument, document, series of documents, enactment, or bylaw; and
(b)if each of those persons brought a separate proceeding, a common question of law or fact would arise.
(2)On the application of a defendant, the court may, if it considers a joinder may prejudice or delay the hearing of a proceeding, order separate trials or make any order it thinks just.
[10]The authors of McGechan on Procedure comment:1
Where there are multiple plaintiffs, there will usually be multiple causes of action … Although not prescribed by the rules, the usual drafting practice for pleadings involving multiple causes of action and multiple plaintiffs is for plaintiffs suing jointly on one cause of action to be jointly named in the heading as, say, “first plaintiffs”, those suing jointly on the next cause of action to be jointly named as “second plaintiffs”, and so on.
[11]Rule 5.17 of the HCR relevantly provides:
5.17 Distinct matters to be stated separately
(1) Distinct causes of action and distinct grounds of defence, founded on separate and distinct facts, must if possible be stated separately and clearly.
…
[12]The authors of McGechan on Procedure comment:2
The aim of the rule is to require a plaintiff to separate out into distinct sections of his or her statement of claim, different causes of action founded on different facts.
[13] In Yan v Mainzeal Property and Construction Ltd (in liq), the Court of Appeal observed:3
[494] The pleading rules are not arid technicalities. They give effect to fundamental requirements of natural justice protected by s 27 of the New Zealand Bill of Rights Act 1990. The courts rightly emphasise substance over form. But ensuring that a plaintiff has a proper opportunity to present their claim, and have their day in court, cannot take precedence over a defendant’s entitlement to procedural fairness including fair notice of the material elements of the claim they are required to meet. The High Court Rules 2016 in relation to pleadings are designed to strike that balance, and are flexible enough to do so in the wide range of circumstances that arise in civil trials.
1 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR4.2.06].
2 At [HR5.17.02].
3 Yan v Mainzeal Property and Construction Ltd (in liq) [2021] NZCA 99, [2021] 3 NZLR 598.
Discussion
[14] It is common ground that only Mr Takhar signed the agreement for sale and purchase of the hotel, and that TCH was nominated to complete the purchase as the acquiring entity. The statement of claim pleads that Messrs Takhar, Nair and Sethi were joint venturers. It is not expressly pleaded that TCH was incorporated to be the joint venture corporate vehicle, but that is implied in the statement of claim, which states:
After incorporation of the first plaintiff but prior to settlement the JV Partners agreed to vary the terms of the Joint Venture so that:
(a)The second plaintiff would be entitled to a 40% share in the first plaintiff;
(b)The third plaintiff would be entitled to a 30% share in the first plaintiff; and
(c)The fourth plaintiff would be entitled to a 30% share in the first plaintiff.
[15] It is common ground that the two documents that are alleged to include misrepresentations were provided to Mr Takhar. It is not pleaded:
(a)whether he passed those documents on to Messrs Nair and Sethi, and if so when; or
(b)whether he received those documents in his capacity as an agent for the joint venture between Messrs Takhar, Nair and Sethi, or as an agent for TCH, or both.
[16]All four causes of action share common issues of fact, including:
(a)the timing of the alleged misrepresentations;
(b)to whom the alleged misrepresentations were made;
(c)to whom the alleged misrepresentations were subsequently communicated;
(d)issues of reliance and inducement; and
(e)issues of agency between the plaintiffs.
[17] Mr Scrivener submitted that the statement of claim is clear that the allegation is that Mr Takhar signed the contract as an agent for the three joint venturers. The statement of claim does not, however, expressly plead agency relationships between:
(a)Mr Takhar as agent and the joint venture (Messrs Takhar, Nair and Sethi) as principal; or
(b)Mr Takhar as agent and TCH as principal; or
(c)Mr Takhar as sub-agent and Messrs Takahr, Nair and Sethi (in their capacity as the joint venturers) as agents, and TCH as principal.
[18]The agency issues are material:
(a)As a mere nominee, TCH may lack standing to bring a claim under s 35 of the CCLA. However, standing may exist if TCH was the undisclosed principal of either Mr Takhar as agent, or Mr Takhar as sub-agent and the joint venturers as agents.4
(b)If TCH lacks standing to recover the alleged losses under the CCLA, then the Court will need to examine the contractual positions of Messrs Takhar, Nair and Sethi. Their positions are not identical.
(c)Mr Takhar is the named contracting party, and as such he may be able to recover his losses under s 35 of the CCLA, notwithstanding that TCH completed the purchase as nominee.5 However, the intervention of an undisclosed principal seeking to enforce the contract may affect the
4 See Dangerous Goods Compliance Ltd v Farquhar Lelean Holdings Ltd (in liq) [2022] NZHC 3041 at [192].
5 See Do Yay Ltd (in liq) v Wei [2020] NZHC 759, [2021] 2 NZLR 351.
agent’s right to sue.6 Mr Takhar may need to sue as one of the principals.
(d)Messrs Nair and Sethi cannot recover under s 35 of the CCLA unless they were undisclosed principals. Their rights are therefore distinct from the rights of Mr Takhar and will be fact specific and dependent on the Court’s findings on the existence of agency relationships. TCH and the three joint venturers cannot both be the undisclosed principal.
(e)At present it is pleaded that if Messrs Nair and Sethi cannot recover under the CCLA in their own right, then Mr Takhar may be able to recover on their behalf, on the basis of an unspecified duty on the part of Mr Takhar to account to Messrs Nair and Sethi. It is not clear if this duty is alleged to arise as a term of the joint venture, or pursuant to an agency relationship, or both. The claim appears to be novel and needs to be separately pleaded if it is to be pursued.
(f)The considerations in (a) to (e) are also relevant to the plaintiffs’ FTA cause of action.7
[19] Additional issues that arise under the third and fourth causes of action against Mr Gibson, for negligent misstatement and deceit, include:
(a)To whom Mr Gibson owed a duty, if anyone?
(b)Whether any, or all, of the plaintiffs reasonably relied on the statements alleged to be made negligently or deceitfully?
[20] These issues will also require an examination of the facts relevant to any relationships of agency between the plaintiffs. The positions of Mr Takhar, TCH, and Messrs Nair and Sethi are not identical.
6 Atkinson v Cotesworth (1825) 3 B & C 647 (KB).
7 Particularly in regard to a claim for relief under s 43 of the FTA: see for example KA (Newmarket) Ltd v Hart HC Auckland CP467-SD01, 4 July 2002 at [23]–[24] and Swindle v Withers [2015] NZHC 888 at [91]–[93].
[21] At present, the tort claims are confined to Mr Gibson, on the basis that he is not the contracting party and because of s 35(1)(b) of the CCLA, which provides:
35 Damages for misrepresentation
(1)If a party to a contract (A) has been induced to enter into the contract by a misrepresentation, whether innocent or fraudulent, made to A by or on behalf of another party to that contract (B),—
(a)A is entitled to damages from B in the same manner and to the same extent as if the representation were a term of the contract that has been breached; and
(b)A is not, in the case of a fraudulent misrepresentation, or of an innocent misrepresentation made negligently, entitled to damages from B for deceit or negligence in respect of the misrepresentation.
…
[22] Any plaintiff who is a contracting party is precluded from bringing a tort claim against Mrs Gibson by s 35(1)(b) of the CCLA. Any plaintiff who is not a contracting party is free of the prohibition in s 35(1)(b). Alternative claims in tort may be available to some plaintiffs against Mrs Gibson. None are pleaded at present.
[23] The causes of action under the CCLA, the FTA and in tort need to be advanced as alternatives. Any material facts relevant to agency relationships should be pleaded. Any material facts relevant to reliance or inducement should also be pleaded. Separate causes of action should be pleaded by:
(a)TCH;
(b)Mr Takhar; and
(c)Messrs Nair and Sethi.
Interrogatories
[24] Mr and Mrs Gibson issued a notice to answer interrogatories, containing 43 interrogatories, to each of the four plaintiffs. Of those 43 interrogatories, Mr and Mrs Gibson have now withdrawn 12.
[25] The plaintiffs refused to answer the interrogatories, without setting out their grounds for doing so in respect of each individual interrogatory. The basis of the plaintiffs’ objections has now been made clear in counsel’s submissions. The primary objection is that the interrogatories call for evidence, which the plaintiffs are bound to adduce at trial to prove their claims. The plaintiffs also assert that some of the interrogatories are irrelevant to what the plaintiffs consider to be the legal issues.
[26]The interrogatories can be grouped into two categories:
(a)interrogatories 4(g) and 4(h)(i)–(v) are concerned with the issue of whether Mr Takhar was acting as agent for another party and are presumably aimed at disclosing facts to disprove an agency relationship between Mr Takhar and either TCH or Messrs Nair and Sethi (as joint venturers); and
(b)interrogatories 4(i)–(y) are concerned with the steps taken by the plaintiffs after Mr Takhar received the documents that are alleged to include misrepresentations. The interrogatories appear to be aimed at ascertaining whether Messrs Nair and Sethi directly relied on or acted on the alleged misrepresentations.
[27] I am not prepared to order the plaintiffs to answer the interrogatories at this stage of the proceeding for two reasons. First, the interrogatories are premature. Some of the interrogatories seek further particulars of the plaintiffs claim, and further particulars are better dealt with by an amended pleading. Secondly, some of the interrogatories seek specifics of evidence of what occurred during the dealings between the parties which go beyond material facts and stray into the domain of evidence.
Further observations
[28] As a result of the interrogatories and the defendants’ interlocutory application, the plaintiffs are well informed of the legal issues that the defendants intend to raise in respect of the plaintiffs’ causes of action. The plaintiffs should endeavour to provide particulars in the amended pleading that will fully and fairly inform the defendants of
the basis on which each of the plaintiffs contends that they have a cause of action to recover discrete losses, including where claims are alternatives. That includes pleading all material facts relevant to any allegations of agency.
[29] References in the amended pleading to “Partners” or “Partnership” should be avoided, unless there is an express pleading of a partnership governed by the Partnership Law Act 2019.
[30] Mr and Mrs Gibson previously sought further particulars of para 9 of the statement of claim. An explanation of the pleading has been provided by counsel for the plaintiffs, and a re-pleading of that paragraph is not required.
Costs
[31] After filing their application for strike out, the defendants abandoned all of their substantive grounds in support of a strike out, leaving only an argument about the adequacy of the plaintiffs’ pleading. The interrogatories were premature and unnecessary at this stage of the proceeding. Accordingly, this is a situation where the parties have had mixed success.
[32] The dispute over the adequacy of the plaintiffs’ pleading could have been resolved by memoranda and a ruling as part of the usual case management process. There was no reasonable prospect that the proceeding would be struck out.
[33] However, the genesis of the defendants’ application was a pleading that did not comply with the HCR; a pleading which the plaintiffs refused to amend.
[34] The interlocutory application and notice of opposition were relatively straight forward and no affidavit evidence was filed in support. The parties’ submissions were succinct, and the hearing took less than an hour.
[35] For the above reasons, the defendants are entitled to costs on the interlocutory application plus disbursements as fixed by the Registrar. I award costs on all steps on a 2B basis, except for the preparation of written submissions which only justifies costs
on a 2A basis. A 50 per cent reduction is appropriate to reflect the defendants’ mixed success. That results in a costs award of $2,330.25.
Result
[36] The plaintiffs are required to file an amended statement of claim, which shall include separate causes of action by:
(a)the first plaintiff;
(b)the second plaintiff; and
(c)the third and fourth plaintiffs.
[37] The plaintiffs are not required to answer the interrogatories served on them by the defendants to date. I will reserve leave to the defendants to issue interrogatories after the plaintiffs have filed their amended statement of claim.
[38] The plaintiffs are required to pay $2,330.25 in costs plus disbursements to the defendants.
Orders
[39]I make the following orders:
(a)the plaintiffs shall file and serve an amended statement of claim by
19 May 2023;
(b)the defendants shall file and serve an amended statement of defence by
2 June 2023;
(c)the defendants have leave to issue interrogatories after the plaintiffs have filed and served their amended statement of claim, interrogatories shall be served by 2 June 2023;
(d)any interlocutory applications shall be filed and served by
16 June 2023;
(e)the proceeding is adjourned for a case management conference on 23 June 2023 at 10.30 am. Counsel shall file a joint memorandum, or separate memoranda, by 21 June 2023. The memorandum should deal with:
(i)adequacy of the pleadings;
(ii)any issue regarding interrogatories;
(iii)a timetable for any interlocutory applications; and
(iv)outstanding schedule 5 matters.
Associate Judge Brittain
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