Daisley v Whangarei District Council
[2021] NZHC 1376
•10 June 2021
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI-TERENGA-PARĀOA ROHE
CIV 2015-488-109
[2021] NZHC 1376
BETWEEN MALCOLM JAMES DAISLEY
Plaintiff
AND
WHANGAREI DISTRICT COUNCIL
First Defendant
WAYNE WESLEY PETERS
Second Defendant
Hearing: 8 June 2021 Appearances:
E L Smith for the Plaintiff
P Robertson and S Mautner for the First Defendant No appearance for the Second Defendant
Judgment:
10 June 2021
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 10 June 2021 at 4:00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
DAISLEY v WHANGAREI DISTRICT COUNCIL [2021] NZHC 1376 [10 June 2021]
[1] The first defendant (the Council) applies for leave to file an amended statement of defence after the close of pleadings date. The plaintiff does not oppose leave being granted in respect of many of the proposed amendments, but does oppose leave in respect of amendments to 14 paragraphs of the Council’s defence. I must decide whether to grant leave on those amendments.
Plaintiff’s claim against Council
[2] The plaintiff purchased a property near Whangarei in December 2004. There was a quarry on the property.
[3] The plaintiff alleges that he purchased the property in reliance upon existing use rights to operate the quarry. At the time he was unaware, though he discovered many years later, that the quarry was subject to a 1988 land use consent granted under the Town and Country Planning Act 1977.
[4] After the plaintiff purchased the property he alleges that he was subject to various actions by the Council to prevent or prohibit him from operating the quarry. These actions continued for a period of years.
[5] It was only near the end of that period that the plaintiff says he discovered that the 1988 land use consent authorised him to operate the quarry. The plaintiff alleges that the Council took their actions against him despite knowing of, or having copies of, the 1988 land use consent.
[6]The plaintiff pleads three causes of action against the Council:
(a)Breach of statutory duty.
(b)Negligence.
(c)Misfeasance in public office.
[7] For each cause of action the plaintiff claims that he has suffered loss. The plaintiff’s pleading of loss, which is essentially the same for each cause of action, is:
(a)But for the Council’s interference in the plaintiff’s business operations the plaintiff would have operated the quarry as a commercial quarry, extracting and selling minerals on a commercially viable basis.
(b)In particular, the plaintiff would have had the opportunity to achieve the commercial potential of the quarry.
(c)As a consequence of the Council’s interference the plaintiff has suffered loss and damage totalling about $38.6 million.
[8] The plaintiff commenced this proceeding in 2015. His claim against the Council is now found in a fourth amended statement of claim dated 16 November 2018. The Council pleaded to that claim in a statement of defence dated 21 January 2020.
The Council’s application
[9] The close of pleadings date was 7 October 2020. On 16 November 2020, the plaintiff served his briefs of evidence. On 19 January 2021, the Council served its briefs of evidence.
[10] The same day it served its briefs, the Council advised the plaintiff that the Council intended to file and serve an amended statement of defence, to reflect the evidence it had just served. The Council sent the plaintiff a draft amended statement of defence on 10 February 2021. It became apparent that the plaintiff would not consent to the Council amending its defence. On 25 February 2021, the Council brought this application seeking leave to amend.
[11] When the Council made that application a three-week trial of this proceeding was scheduled to begin on 8 March 2021. The application was therefore made six working days before the trial.
[12] On 26 February 2021, the day after the Council made this application, the plaintiff served six supplementary briefs of evidence. These had not been timetabled. In part, the supplementary briefs responded to matters raised by the Council in its
proposed amended defence, as those matters had been addressed in the briefs served by the Council on 19 January 2021. Clearly, to the extent that the briefs responded to those matters, they were prepared under some time pressure.
[13] The trial was subsequently adjourned for reasons unrelated to the Council’s application (namely, further COVID-19 restrictions). The trial is now scheduled to begin on 2 August 2021.
[14] The Council’s application was originally scheduled to be heard on 7 May 2021. That hearing had to be adjourned, through no fault of either parties or counsel.
[15] The Council’s proposed amended defence has numerous amendments, many of which are of a minor nature. The plaintiff sensibly did not oppose many of the proposed amendments. At my request Ms Smith, counsel for the plaintiff, filed supplementary submissions dated 3 June 2021 identifying the amendments to which the plaintiff was opposed. This provided a helpful focus at the hearing before me.
Relevant legal principles
[16] There was no dispute about the relevant legal principles. The Council is required to obtain leave to file an amended defence after the close of pleadings date pursuant to r 7.7.
[17] In order to obtain leave to take steps after the close of pleadings it is necessary for the Council to “surmount the three formidable hurdles” by showing:
(a)That doing so would be in the interest of justice;
(b)It will not significantly prejudice the plaintiff; and
(c)It would not cause significant delay.1
1 Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA) at 385.
[18] The farther or closer the application for amendment is to trial, the less or more formidable those hurdles will be.2
[19] In Oraka Technologies Limited v Geostel Vision Limited the principles relating to the application of r 7.7 were summarised as follows:3
(a)The paramount consideration is that the parties should have every opportunity to ensure that the real controversy goes to trial so as to secure the just determination of the proceeding;
(b)Due regard must also be had to whether the proposed amendments will cause significant delay or prejudice to another party;
(c)Even where serious prejudice and significant delay will arise, an amended pleading may nevertheless be permitted if the proposed [defence] has substantial merit and will not cause injustice to the [plaintiff];
(d)The court should consider the merit, or absence thereof, in a proposed amended pleading.
Decision
[20] I begin with some general observations. First, sometimes any prejudice arising from a late amendment can be cured by an adjournment. Neither party suggested that the trial should be adjourned. They were right to refrain from doing so. This proceeding has been on foot for too long already. It needs to go to trial in August.
[21] Secondly, although the application was made very close to the originally- scheduled March trial, I have considered the application by reference to the new trial date. The plaintiff has had the Council’s briefs since 19 January 2021, and has had the Council’s proposed amended defence since 25 February 2021. These dates are many months before the August trial. The plaintiff will have this judgment more than seven
2 Lyttelton Port Co Ltd v Aon New Zealand [2019] NZHC 726 at [22].
3 Oraka Technologies Limited v Geostel Vision Limited [2015] NZHC 991 at [17].
weeks before the trial begins. All this diminishes the likelihood of the plaintiff suffering irremediable prejudice from the amendments.
[22] Thirdly, one of the grounds on which the Council sought leave to amend its defence was that the amended pleading brought up to date the information before the Court. Leave is readily granted for amendments of that type. I accept Ms Smith’s submission that, for those amendments that remain in issue, none of the amendments are simply ones that bring information up to date. Indeed, at the hearing Mr Robertson, for the Council, did not pursue this ground.
[23] But that was not the only ground on which the Council relied. Its primary ground at the hearing was that all of the amendments in issue are ones that will ensure that the real controversy goes to trial, and that the plaintiff will not be significantly prejudiced from the amendments. Whether that ground is made out is, in my view, the real question on this application.
[24]Counsel addressed the proposed amendments in several groups.
Amendments based on Crown ownership of minerals
[25] Some of the proposed amendments relate to affirmative allegations that minerals at the property were owned by the Crown: paragraphs 4, 5, 11(c) and 178(d).4 In summary, the Council wishes to allege that:
(a)Ownership of minerals at the property was vested in the Crown.
(b)No exploration or mining permits had been obtained from the Crown.
(c)If commercial quarrying took place it occurred without the appropriate permit from the Crown, and the Crown was not paid royalties due to it as the owner of the minerals.
4 All paragraph references are to the paragraphs as they are numbered in the marked up proposed amended defence that appeared at tab 3 of the Council’s bundle for the hearing.
[26] Mr Robertson explained that the allegation that the minerals were vested in the Crown was based on s 135 of the Land Act 1924. Section 135 is one of a series of provisions in successive Land Acts that have reserved minerals to the Crown on the alienation of land by the Crown. The Council says the 1924 Act was the one in force at the time of the relevant alienation of the land in question.
[27] Ms Smith said that the plaintiff would suffer prejudice if he had to respond to this new pleading. She said that the plaintiff would have to make investigations years into the past as to the ownership of the minerals. She said this would be difficult to do before the trial.
[28] In my view the issue of ownership of the minerals at the property is one that has to be confronted in order to achieve the just determination of this proceeding. It may go to the plaintiff’s entitlement to operate the quarry, or to the measure of his loss. Either way, it is an important issue. That is the paramount consideration.
[29] I do not accept that there is significant prejudice to the plaintiff. Whether the minerals were reserved to the Crown on the original alienation of the property will not be a difficult matter to determine. If the minerals were so reserved, but the plaintiff wishes to say that subsequently the Crown somehow divested ownership to the owner of the property, in my view that is a matter that the plaintiff always had it to establish as part of his claim against the Council.
[30]I therefore grant leave to the Council for this group of amendments.
Amendments alleging plaintiff ’s failure to take reasonable care when purchasing the property
[31] The Council proposes to allege that the plaintiff did not undertake due diligence before purchasing the property. In particular, the Council wishes to allege that the plaintiff did not undertake drilling or exploration to ascertain the volume of minerals on the property, and did not prepare any business plan. These proposed amendments are found in paragraphs 131, 178(b) and 178(c).
[32] These amendments need to be put in context. First, the Council has already been pleading a defence of contributory negligence. Secondly, the plaintiff himself pleads, at [33] of his fourth amended statement of claim, that he undertook “standard and reasonable due diligence in respect of the property prior to purchase”. The Council has already denied that allegation.
[33] Whether the plaintiff had exercised due diligence was therefore already in issue on the pleadings. There can be no prejudice to the plaintiff in allowing the Council to allege, elsewhere in its defence, that the plaintiff undertook no or inadequate due diligence.
[34] I also see no prejudice to the plaintiff in allowing the Council to allege that, as an aspect of the alleged failure to exercise due diligence, the plaintiff did not prepare a business plan prior to or after the purchase of the property. That seems to me a simple enough allegation for the plaintiff to deal with in the time before the trial. Indeed, it appears that the plaintiff responded to that allegation through the supplementary briefs he served on 26 February 2021.
[35] As to the proposed amendment alleging that the plaintiff did not undertake drilling or exploration to ascertain the volume of minerals on the property, it should be easy for the plaintiff to deal with whether or not there was any drilling or exploration. I accept Ms Smith’s submission that the plaintiff may also have to prepare additional expert evidence dealing with whether such work was something that a reasonable purchaser of this type of property would have undertaken prior to purchase. But there has been, and still will be, ample time for such evidence to be prepared. I do not see significant prejudice to the plaintiff.
Amendments relating to the viability of the quarry and hence quantum of lost profits
[36] In paragraph 132 the Council wishes to amend by adding that it “says further that there is no evidence that the Knight Road property would have been a viable commercial quarry able to supply the Auckland market, let alone the local market”. That is a submission. It has no place in a pleading. The same is true of the proposed amendments at paragraphs 147(k), 153(k), 157(k), 165(k), and 171(k). Leave is denied in respect of all those paragraphs.
[37] In paragraphs 147(l), 153(l), 157(l), 165(l), and 171(l) the Council wishes to allege that the plaintiff has not, when calculating his alleged loss, taken into account the cost of transporting rock from the property to Auckland. I cannot see any prejudice to the plaintiff in allowing this amendment. The burden is on the plaintiff to prove that he has suffered loss, and the quantum of that loss. Strictly speaking, therefore, I doubt that the Council even has to plead particular reasons why it contests the plaintiff’s quantum of loss. I allow these amendments.
Amendments alleging lack of causation of loss
[38] In response to the plaintiff’s allegation that he suffered loss from the Council’s alleged wrongs, the Council wishes to allege that the liquidations of the plaintiff’s other business interests were not caused by the Council and were due to events not linked to the quarry, but rather to the plaintiff’s borrowings from a bank. These amendments are in paragraphs 147(j), 153(j), 157(j), 165(j), and 171(j).
[39] The burden has always been on the plaintiff to prove causation as part of his case against the Council. The Council had already put causation in issue in its previous statement of defence. I therefore cannot see any prejudice to the plaintiff from these amendments. I allow them.
Miscellaneous amendments
[40] In paragraph 34(a) the Council wishes to make the positive allegation that it had no knowledge of a quarry operation at the property. This is only a slight change from the previous affirmative allegation, which was that the Council had no “reference to” a land use consent for a quarry at the property. Moreover, this paragraph responds to an allegation by the plaintiff that the Council had knowledge of the operation of the quarry. That allegation had already been denied. The Council’s proposed amendment therefore does not really add anything to what it had already pleaded. It cannot cause any prejudice to the plaintiff. I allow this amendment.
[41] At paragraph 44(g) the Council had proposed to plead that it had, when taking various regulatory and enforcement actions, obtained and followed legal advice. The Council no longer pursues leave for this amendment.
[42] The final proposed amendment is at paragraph 141(d) of the proposed defence. Here the Council denies the plaintiff’s allegation that it was aware that the quarry had been operated as a commercial quarry. The Council then makes the positive allegation that “the rating valuation was a mistake made by Quotable Value and not the council”. Ms Smith’s opposition to this amendment, as expressed to me at the hearing, was that there is no evidence to support that the rating valuation was a mistake at all. This suggests to me that the plaintiff is already in a position to respond to the allegation. I cannot discern, given the time left to trial, any prejudice to the plaintiff from allowing this amendment. I allow it.
Reply and supplementary briefs
[43] As will be clear, an important consideration in granting leave for most of the amendments is that the plaintiff still has time to deal with them, given the time to trial. I will be requiring the Council to file and serve its amended defence promptly. I will then allow the plaintiff ten working days to file and serve a reply to the amended defence, and further time to serve supplementary briefs that address the matters raised by the amendments.
[44] The supplementary briefs may, if the plaintiff wishes, be in substitution for those served (under considerable time constraint) on 26 February 2021. Mr Robertson accepted that if the plaintiff follows that course it was appropriate that the Council not be able to cross-examine on any differences between the briefs, to the extent that the briefs address the matters raised by the Council’s amendments.
Costs
[45] The Council has been granted an indulgence. The plaintiff acted reasonably in response to the application, opposing only a limited number of the amendments. There was no adequate explanation from the Council for its failure to raise these matters earlier. In these circumstances this is a clear case for the Council, despite being the successful party, having to pay the costs of the application to the plaintiff.
[46] Those costs should be paid by 30 June 2021. Counsel should be able to agree quantum. If not, memoranda of no more than two pages (excluding any annexures or schedules) are to be filed: the plaintiff by 17 June 2021, the Council by 22 June 2021.
Result
[47] I grant leave to the Council to amend its defence, except in respect of the amendments proposed at paragraphs 44(g), 132, 147(k), 153(k), 157(k), 165(k) and 171(k).
[48]I direct that:
(a)The Council is to file and serve its amended statement of defence by 14 June 2021.
(b)The plaintiff is to file and serve a reply to the amended statement of defence within 10 working days of the Council filing and serving its amended defence.
(c)The plaintiff is to serve any supplementary briefs (addressing the matters raised by the amendments) by 12 July 2021.
(d)The plaintiff may, if it wishes, serve those supplementary briefs in substitution for one or more of those that were served on 26 February 2021. If the plaintiff does so, then to the extent that a new brief addresses matters raised by the Council’s amendments, the Council may not cross-examine the witness on the earlier supplementary brief.
[49]The Council is to pay the plaintiff the costs of this application.
Campbell J
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