Easton v Larsen
[2013] NZHC 2859
•29 October 2013
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV 2009-454-549 [2013] NZHC 2859
BETWEEN IAN CHARLES EASTON First Plaintiff
EASTON AGRICULTURE LIMITED Second Plaintiff
ANDALAN McKENZIE LARSEN Defendant
Hearing: 29 October 2013 (Heard at Wellington)
Counsel: I W Thorpe for Plaintiff
S M Hunter with A T B Joseph for Defendant
Judgment: 29 October 2013
JUDGMENT OF THE HON JUSTICE KÓS (Amendment, adjournment and costs)
[1] On the first morning of trial, the first plaintiff sought leave to amend his statement of claim, increasing quantum exponentially. After hearing from Mr Thorpe in support of the application, and Mr Hunter in opposition, I declined the application to amend, with reasons to follow. After taking instructions, Mr Thorpe then sought adjournment of the trial fixture to enable application to amend to be renewed at a later date. That application I also declined. The plaintiffs then elected to discontinue the proceeding. My reasons for declining both applications, and costs order, follow.
Background
[2] This proceeding was filed in 2009. Until 22 October 2013 it was a claim avowedly brought by two plaintiffs, Ian Charles Easton, and Easton Agriculture
EASTON v LARSEN [2013] NZHC 2859 [29 October 2013]
Limited (a company owned by the plaintiff and his family), against the defendant accountant, Mr Larsen. There were two causes of action. First, both plaintiffs claimed against Mr Larsen on the basis of professional negligence. Secondly, Mr Easton alone claimed against Mr Larsen for breach of fiduciary duty and breach of trust in respect of his responsibilities as a trustee of the Moutoa Trust, settled by Mr Easton’s parents in 1997.
[3] But in opening submissions, filed and served by the plaintiffs a week ago on
22 October 2013, the first cause of action in negligence was formally abandoned. Today, Mr Thorpe explained that expert analysis established that the alleged negligence had caused the plaintiffs no loss at all.
[4] As a result of that abandonment the second plaintiff, Easton Agriculture Limited ceased effectively to be a plaintiff in this proceeding. The remaining, second cause of action is advanced by the first plaintiff, Mr Easton, alone.
Application for amendment
[5] An amended statement of claim was filed in April 2013. In June 2013 the plaintiffs received a brief of evidence from their expert accountant witness, Ms Kelly. It is apparent on the face of this document that her computation of loss did not match the claim pleaded in April. Yet only in opening submissions filed and served on 22 October 2013, one week before trial, did the first plaintiff signal a wish to amend further:
There has been no amendment of the first amended statement of claim. To the extent formally a [sic] necessary the plaintiffs will respectfully apply for an order amending the claim.
The exact terms of the proposed amendment were not the subject of notification prior to trial, or formal application.
[6] The prayer for relief in the second cause of action is as follows:
(a) Special damages:
(i) Additional and higher interest costs paid by the plaintiffs because of lack of title and the inability to offer the various farm blocks as securities – (from 2006/2007 financial year to date) $70,237.10;
(ii) Excessive accounting fees required because of unnecessarily complicated company/family trust structures put in place by the defendant – $35,074;
(iii) Cost of borrowing in the context of the abovementioned mediated settlement from 2006 to 21 February 2013 – $288,346.
(iv) Interest costs on 5,000 advanced by the first plaintiff to Guardian
Trust in respect of initial assessment of situation by Guardian Trust
– $340.79;
(v) Interest paid on loan funding by first plaintiff to Guardian Trust of
$100,000 to allow detailed investigations to be carried out by
Guardian Trust after its appointment as trustee – from 21 December
2011 to 21 February 2013 – $6,815.71; (b) General damages of $50,000;
(c) Interest; (d) Costs.
[7] This morning Mr Thorpe (who was engaged only in September 2013) sought to amend the prayer in two respects:
(a) to delete the word “interest” in paragraph (a)(i) – thus embracing a wider range of losses (in particular, rental costs); and
(b) to increase the sum claimed, $70,237.10, also in paragraph (a)(i), to
$970,500 – a fourteen-fold increase.
Submissions
[8] The precise amendments sought were worked out by Mr Thorpe as he went along in his submissions, and the figure of $970,500 is a compound sum incorporating four other numbers drawn from Ms Kelly’s brief. Yet Mr Thorpe submitted that the defendant still had had adequate notice of the nature of the claim it was facing, and the sums to be claimed, as from June 2013 when Ms Kelly’s brief was exchanged. He accepted, however, that no formal advice of any intended amendment had been given at that time. Nonetheless, he said, the defendant could have responded to Ms Kelly’s brief of evidence in reply and chose not to do so. The defendant was not prejudiced, and its opposition to the amendment was “purely technical”.
[9] Mr Hunter opposed the application to amend. He submitted that his client was prejudiced by the amendment now being sought. The first notification of amendment being sought was in the opening submissions served only on 22 October. Yet the plaintiffs had had Ms Kelly’s evidence since June 2013 and could have signalled amendment then (or on subsequent occasions where the case had been called before the Court). Mr Hunter was prepared to accede to amendment to the extent it was simply a matter of quantification change due to the passage of time, or other non-prejudicial change in computation. But, he said, a claim that is different in kind should not be countenanced. The largest single part of the additional claim here being made was for rental costs – some $687,100, and that had never been the subject of pleading. Further, according to Ms Kelly’s evidence those costs and all of the amended figure, apart from $91,700, were losses or costs incurred by the second plaintiff, Easton Agriculture Limited, which was no longer advancing any claim at all.
Discussion
[10] The continued importance of pleadings in defining what is, and is not, in issue in a proceeding was reinforced by the Court of Appeal in Price Waterhouse v
Fortex Group Limited.1 There the Court of Appeal said:
1 Price Waterhouse v Fortex Group Limited CA179/98, 30 November 1998.
It has become fashionable in some quarters to regard the pleadings as being of little importance. There was an echo of that approach in the implicit suggestion floated in this case that exchange of briefs of evidence before trial might be seen as curing any lack of particularity in the pleadings. Any such view is misguided. Pleadings which are properly drawn and particularised are, in a case of any complexity, if not in all cases, an essential road map for the court and the parties. They are the documents against which the briefs of evidence are or should be prepared. They are the documents which establish parameters of the case, not the briefs of evidence.
The Court went on to say that neither the Court nor opposing party should be required to deal with a proposition not adequately notified in pleadings. The giving of some sort of notice merely through a brief of evidence would not suffice. Although that judgment is some 15 years old, the principle stated remains true today.
[11] The power to amend under r 7.77 does not apply here: that rule applies only before trial. Once trial has commenced, r 1.9 applies. That permits amendment of “defects and errors in the pleadings”, or otherwise where both “necessary for determining the real controversy between the parties” and not resulting in injustice to other parties.2 In some limited circumstances it may be possible to amend the
statement of claim at trial to commence a new cause of action.3 Where, however, the
addition of a cause of action (or indeed any amendment) would cause material prejudice to the opposing party, a Court is most unlikely to grant amendment at trial. Parties are expected to have the real issues in order well ahead of trial. And those issues are defined by the pleadings.
[12] In applying r 1.9 the Court will also consider the circumstances that gave rise to the application. In this case the plaintiffs had had Ms Kelly’s brief since June. The computation in her brief plainly did not match that in the recently amended statement of claim. The defendant was entitled to call evidence to meet the claim advanced in the amended statement of claim, as opposed to some other claim that might conceivably be advanced on the basis of evidence subsequently exchanged. That is the effect of the decision of the Court of Appeal in Price Waterhouse v Fortex Group Limited, cited earlier. Then on 22 October 2013 the second plaintiff abandoned ship. Thus the Kelly brief, at most, now indicated a substantial
unclaimed amount by a plaintiff no longer pursuing any claim. The defendant was
2 Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA).
3 Elders Pastoral Ltd v Pemberton (1990) 2 PRNZ 188 (HC).
now entitled to disregard most of Ms Kelly’s brief, to the extent it articulated potential losses by the now abandoning second plaintiff.
[13] I accept that the defendant here would be prejudiced in facing a fourteen-fold increase to a significant head in the remaining plaintiff’s claim, advanced on the basis of a different kind of cost from that pleaded (rental rather than interest), and in circumstances where, on the face of Ms Kelly’s evidence, there is real doubt whether such claims could even be advanced by that party. Amendment here would create injustice to the defendant.
[14] For these reasons the application for amendment was dismissed.
Application for adjournment
[15] On advising my decision on the application for amendment, I gave Mr Thorpe 30 minutes to confer with the first plaintiff, who was in Court. On resuming, Mr Thorpe indicated, that his client would prefer not to proceed today. If need be he would discontinue his claim and refile it. Mr Thorpe considered that no
issue of limitations arose in relation to the fiduciary duty claim.4 However, the first
plaintiff’s preference was that I simply adjourn the trial date, in order (I gather) to enable a further and more fully considered application for amendment to the pleadings to be brought.
[16] Mr Thorpe submitted that his client was ready to proceed to trial. The reason why he was not proceeding was that his application for amendment had been opposed by the defendant, and refused by the Court. In Mr Thorpe’s view the more expeditious and efficient course of action would be to adjourn, presumably so that a fresh application for amendment could be brought, on a fully considered basis.
[17] Mr Hunter opposed the application for adjournment. He submitted that this was not a case in which the ordinary grounds for adjournment at trial could be said
to exist: i.e. unexpected circumstances outside the parties’ control. Here the matter
4 I record that Mr Hunter did not necessarily share that outlook.
was entirely within the plaintiff’s control. It was its failure to act promptly (or at all)
before trial that had caused its present problem.
Discussion
[18] After hearing counsel I declined the application for adjournment. My reasons are four.
[19] First, this is the second occasion on which trial adjournment has been sought by the plaintiffs. That in itself would not necessarily suffice for refusal. But on the last occasion when the matter was before me, and I granted adjournment, I made clear that I expected the case to proceed today.
[20] Secondly, I have made my ruling already on the question of amendment. I have refused leave to amend the claim. I am not prepared to grant adjournment simply to enable the plaintiff to re-run his amendment argument again. If he does not like my decision refusing amendment, the proper course is appeal, rather than adjournment and reapplication.
[21] Thirdly, adjournment of a fixture, once commenced, is highly unlikely to be granted, save in circumstances where some unexpected event has occurred beyond the control of the parties. The overriding consideration under r 10.2 is the interests of justice. That requires consideration of the interests of all litigants. The defendant is ready to proceed, on the unamended claim, and the first plaintiff is at liberty to run that claim today. This proceeding has already dawdled its way to trial, and the Court reorganised its roster to accommodate it after the earlier adjournment. In my view the defendant is entitled to a clear outcome, now. The only reason trial would not now proceed is the remaining plaintiff’s desire to enlarge his claim, from that pleaded, to his potential benefit. That is, as I have already said, a matter entirely consequential on the plaintiffs’ failure to address the scope of their pleading at an earlier stage. I endorse the observations of Associate Judge Bell in Commissioner of
Inland Revenue v Patel,5 where he said that a party that has not applied itself
5 Commissioner of Inland Revenue v Patel [2013] NZHC 477 at 33. See also ANZ Banking Group
(NZ) Ltd v Couchman HC Auckland CP 1823/91, 3 August 1992 at 4.
diligently and efficiently to bring its case on for hearing cannot expect adjournment to be granted, and must yield to the interests of other users of the Court.
[22] Fourthly, Mr Thorpe takes the view that there will be no prejudice (in terms of limitations) to the first plaintiff in discontinuing. Apart, that is, from costs. That is the price he must now pay for electing not to proceed.
[23] For these reasons the application for adjournment was denied.
Costs
[24] In the face of denial of both applications, the plaintiffs formally discontinued the present claim.
[25] The parties are agreed that costs on a category 2 band B basis should be awarded, with an allowance for second counsel for today only.
[26] There will therefore be an order for costs consequent on discontinuance in favour of the defendant on a category 2 band B basis, with an allowance for second counsel for day 1 of trial. Reasonable disbursements are to be agreed or otherwise fixed by the Registrar.
Stephen Kós J
Solicitors:
Rainey Collins, Wellington for Plaintiffs
Gilbert Walker, Auckland for Defendant
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