Fairview Park Limited v Harrison Grierson Consultants Limited HC Auckland Civ-2006-404-006588
[2011] NZHC 572
•14 June 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2006-404-006588
BETWEEN FAIRVIEW PARK LIMITED Plaintiff
ANDHARRISON GRIERSON CONSULTANTS LIMITED First Defendant
ANDRAYMOND GRANT ULYATE AND STANLEY IAN ROBERT BORWICK ULYATE
Second Defendants
ANDHICK BROS CIVIL CONSTRUCTION LIMITED
Third Defendant
Hearing: 13 June 2011
Appearances: S L Abdale for Plaintiff
S Lucas for First Derfendant
P M Hunter for Third defendant
Judgment: 14 June 2011
ORAL JUDGMENT OF WHATA J
Solicitors:
Hesketh Henry, Private Bag 92093, Auckland
Simpson Western, DX BX 10653, Takapuna
Copy to:
S Abdale, PO Box 46 281, Herne Bay, Auckland
FAIRVIEW PARK LIMITED V HARRISON GRIERSON CONSULTANTS LIMITED HC AK CIV-2006-404-
006588 14 June 2011
[1] This ruling concerns three applications:
(a) By the first and third defendant to file evidence out of time; and
(b) By the third defendant to file interlocutory application out of time;
(c) By the third defendant to seek leave to amend the statement of defence.
[2] Given that the trial has been set down to commence in three weeks, it has been necessary to deliver this judgment under some urgency. I am grateful to counsel for their helpful assistance.
Background
[3] The plaintiff, Fairview Park Ltd, makes various claims against the defendants for breach of contract and in negligence in the completion of a large subdivision. The first defendant, Harrison Grierson Consultants Ltd, is an engineering firm. The third defendant is Hick Bros Civil Construction Ltd, a construction company.
[4] For the purpose of the present applications, the plaintiff’s complaint concerns the misplacement of a retaining wall and the faulty construction of a storm water pond. The defendants deny any breach or negligence.
Procedural delay
[5] This is a very longstanding matter. The first conference occurred in January
2007. There have been numerous procedural issues since, and multiple case management conferences. In fact the matter was previously set down for hearing on
24 May 2010. Most relevant to the present ruling, Associate Judge Faire (as he then was) directed that any final amendments to the pleadings be made by the plaintiff by
12 November 2010 and by the defendants by 19 November 2010.
[6] It transpires that those amendments were not made by the defendants until
8 December 2010.
[7] There are still further case management conferences in 2011 which resulted in the direction that the defendants are to file their evidence by 2 May 2011. The defendants then failed to achieve that date for evidence exchange and by minute of
4 May 2011 leave to file evidence was extended to 13 May 2011. Still no evidence was forthcoming on 25 May 2011, being the date for a pre-programmed pre-trial conference. At that conference, counsel for the defendants agreed to file evidence on
27 May 2011 (the first defendant) and 30 May 2011 (third defendant). The basis for this is expressed in firm terms by Faire J as follows:
The orders made must be strictly complied with. A party who does not comply with these orders is given notice that they are at risk of an order being made pursuant to r7.48 striking out the non-compliant party’s pleading. Leave is reserved to a party to apply by memorandum, in the event that there is non-compliance, for such orders to be made. In that event every effort will be made to convene an urgent telephone conference to deal with the default.
[8] The first defendant did not file and serve its evidence prior to 5.00 p.m. on
27 May 2011 as required by the High Court Rules for service. It served its evidence at 6.31 p.m. that night with an index of exhibits. The exhibits followed later and reached the plaintiff on 1 June 2011.
[9] The third defendant did not file and serve its evidence prior to 5.00 p.m. on
30 May 2011, also as required by the Rules for the purposes of service. It served part of the evidence (without exhibits) at about 11.00 p.m. on 30 May 2011, with one further brief filed and served the following day. The exhibits did not get served until
10 June, though some, if not most of them have been served by the other defendants.
[10] The third defendant does explain that some delay was caused by it says, inactivity on the part of the plaintiff. But it accepts that it did not comply with an order made pursuant to its own agreement.
Application to file evidence out of time
[11] Having weighed the relevant prejudice to the plaintiffs and the defendants, I grant the extension of time to lodge the evidence. While it is most concerning that the defendants cannot meet their own timetable in a proceeding of such long gestation, the final breach is almost de minimis.
[12] I should note for completeness that, I was only persuaded to grant the indulgence on the proper indication from counsel for the plaintiff that her key expert could respond to the late evidence in time for the hearing.
[13] However, I have no hesitation in awarding costs to the plaintiff on a category
2B basis against the first and third defendants for the timetabling attendances related to this application and to the late exchange of evidence, commencing in May this year. Counsel are to lodge memoranda, hopefully by agreement on what those costs properly should be, within five working days.
Application for leave to lodge application out of time
[14] Somewhat perversely, the third defendant failed to lodge an application to amend its statement of defence within the time frame allocated for that application. The third defendant was required to file its application by 27 May 2011. It did not file that application until 1 June 2011.
[15] For the reasons I have already given in relation to the evidence exchange, I am prepared to grant the third defendant’s application to file its application to lodge amendments to its statement of defence. While significantly frustrating for the plaintiff, I see no serious prejudice to the plaintiff in allowing this modest extension of time to lodge the application.
[16] I have particular regard to the fact that an amended draft version of the amended statement of defence on which the application is based was in fact lodged and available to the plaintiff as early as 25 May 2011.
[17] To the extent that there are any additional costs associated with timetabling relating to this, I also make an order the third defendant for costs on a 2B basis relating to those additional attendances.
Application to file an amended statement of defence
[18] The third defendant seeks leave to file an amended statement of defence and counterclaim to the plaintiff’s claim against the third defendant after the proceedings have been set down for hearing.
[19] As set out by the third defendant, the background to this is that the plaintiff’s
claim against the third defendant has two distinct elements. Those two elements are:
(a) A claim relating to the alleged incorrect siting of a section of retaining wall between lots 28 and 39 in the new subdivision that the third defendant constructed on the plaintiff’s behalf; and
(b)A leak in a storm water pond which the third defendant constructed in accordance with the design prepared by, and under the supervision, of the first defendant.[1]
[1] Refer paragraph 16 of the third defendant’s submissions.
[20] The nature of the proposed amendments are also usefully set out by the third defendant as follows:
The third defendant seeks to introduce a new affirmative defence, which would read as follows, along with another very minor amendment:
“28.The plaintiff has failed to mitigate its loss because it failed to: A Lots 28 – retaining wall
(a) Move the retaining wall to satisfy the objections of the purchaser who had agreed to purchase Lot 28:
(b) Endeavour to negotiate a reduced purchase price with the purchase to induce him to settle his purchase of Lot 28;
(c) Agree to terminate the agreement for sale and purchase, refund the purchaser’s deposit and re-sell the property with the retaining wall in place;
B Storm water pond
(d) Investigate why the North Shore City Council had failed to refund the bond for the subdivision in full completion of the subdivision and take steps to satisfy the Council’s outstanding requirements sooner;”
[21] Counsel for the third defendant noted before me that the third defendant no longer had concerns with the negotiation process adopted by the plaintiff in respect of the retaining wall. He was now focused solely on the issue of whether or not the plaintiff sought independent advice on the option of moving the wall.
[22] The third defendant also seeks to amend its counterclaim by clarifying the basis upon which it seeks a remedy pursuant to the relevant construction contract.
[23] The proposed amendments in full are set out in a draft amended statement of defence of the third defendant attached to the interlocutory application on notice for leave to file amended statement of defence and counterclaim, dated 1 June 2011.
Threshold tests
[24] The third defendant submits that the proper threshold tests are set out in
Elders Pastoral Ltd v Marr[2] namely:
[2] Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA).
(a) That the amendment is in the interests of justice as it is necessary to determine the real controversy between the parties;
(b) That it will not significantly prejudice the other party; (c) That it will not cause delay in the proceedings.[3]
[3] Refer third defendant’s submissions at paragraph 14.
[25] The third defendant emphasised that very little weight can be placed on
disciplinary grounds as a basis for refusing the amendment.[4]
[4] Citing Elders Pastoral Ltd v Marr, at page 385.
[26] The plaintiff also cited Elders Pastoral Ltd as setting the appropriate threshold tests. The plaintiff, however, sought to overlay this with the approach taken by Ellis J in Body Corporate 177519 v Auckland City Council[5] and of Fisher J in Fordham v Xcentrix Communications Ltd.[6] In those cases, and in considering “where the justice lies” the Court had to consider whether the delay had been
reasonably caused and whether a substantial ground of defence had been disclosed.
[5] Body Corporate 177519 v Auckland City Council HC Auckland, CIV 2005-404-005563, 18 May 2011; Reasons 24 May 2011.
[6] Fordham v Xcentrix Communications Ltd (1996) 9 PRNZ 683.
[27] I accept that Elders Pastoral Ltd remains binding authority in terms of the proper threshold tests. I also accept that the matters or factors outlined in Body Corporate 177519 and in Fordham provide useful guidance in terms of the assessment of “where the justice lies”. I would add, however, that where the justice lies will depend, of course, on the facts of the individual case and the prejudice to the parties of making or not granting leave to amend.
Application of threshold tests
[28] I propose to address the question of leave in three parts, namely relating to each aspect of the proposed amendments.
Retaining wall
[29] Dealing first with the proposed affirmative defence in relation to the retaining wall.
[30] The key aspect of this proposed change is that it brings into focus the reasonableness of the plaintiff’s approach to mitigation and in particular whether or not the plaintiff should have relocated the wall rather than litigating the matter in the way that it did. It raises the prospect of inquiry into whether or not the plaintiff
sought independent advice, the nature of that advice and the quality of it.
[31] The third defendant impressed upon me that this is really quite a focused issue and that the plaintiff ought to be able to rely on its current experts to address this issue. The third defendant was also prepared to have me record that the inquiry would be limited solely to whether or not the plaintiff sought independent advice and if so, whether that advice was reasonably held.
[32] The plaintiff was concerned however that inevitably this amended pleading would require the plaintiff to prove, not only that it obtained independent advice, but that advice was of a reasonable professional standard. The plaintiff said it would inevitably need, in addition to the evidence that the plaintiff did receive independent advice, further independent expert evidence buttressing whatever advice was received.
[33] It transpires that the plaintiff did receive advice from the first defendant that the wall could not be relocated. This is recorded in a letter from the plaintiff’s solicitors to the first defendant recording the advice received. There was also produced to me a file note of a record of the discussion upon which the letter was based. While that note suggests that the advice was in fact received from another expert, currently retained by the plaintiff, the general gist is confirmed, namely that independent advice was received.
[34] When I pressed counsel for the third defendant as to whether or not that was sufficient for it in terms of its amended defence, he said it was not and that he would need to test the source and the reasonableness of the advice. This somewhat confirmed the concerns of the plaintiff that there would need to be a substantive inquiry, probably leading to the quality of the advice, whatever it was being tested and the requirement for the plaintiff to produce further evidence to support its position.
[35] I consider that it would be unfair to the plaintiff at this very late stage to assemble the resources that it would need to bring to bear to properly defend the amended statement of defence in relation to the retaining wall. That unfairness is compounded by the fact that the third defendant was on notice of the issues relating
to the retaining wall as early as July 2006.[7] It is somewhat remarkable that this line of inquiry and formal claim by the third defendant is raised nearly some five years later in any formal pleading sense. The concern I have here is not one of procedural efficiency, it is one of substantive unfairness, in the sense that the plaintiff has marshalled its case over a period of some four to five years on a particular basis, only to now find itself having to confront a fresh cause of action at the eleventh hour.
[7] Refer exhibit E, to the affidavit of S Belcic.
[36] I would note for completeness, that it still remains incumbent on the plaintiff to make out all the elements of the cause of action. It must establish the nexus between any negligent engineering and the loss suffered. To that extent it might be arguable that a blatant failure on the part of the plaintiff to mitigate its loss with an obvious solution might have a bearing on whether that nexus is properly established. The plaintiff accepts that, but says, and I agree, that that is something different from having to confront a fresh claim that reliance on independent advice is either unreasonable or that advice was unreasonable.
Storm water
[37] The essence of the third defendant’s claim in relation to storm water, is that the plaintiff should have been more proactive in seeking a remedy for the storm water issues and placed undue reliance on Harrison Grierson and the third defendant to remedy the issue.
[38] The plaintiff says, like the amendments in relation to the retaining wall, this raises fresh and substantive issues, that will require not only careful evidence and argument from the plaintiff as to what in fact occurred and why it occurred, but also will demand the need for further independent expert evidence to buttress their position.
[39] I agree with the plaintiff that this raises substantially the same issues as the late amendments in relation to the retaining wall. To allow this amendment at this late stage, would demand affording the plaintiff a full opportunity to respond, not
only with chronological evidence, (that is what the plaintiff in fact did or knew), but
also the substantive expert evidence as to whether the plaintiff could and should have done something different. The same compounding factor is present, namely that the plaintiff’s claim in relation to this issue was well known to the defendants for several years. It is substantively unfair, in my view, to require the plaintiff to again realign and marshal its resources in respect of its longstanding case to address a fresh claim against it at this very late stage.
[40] As I have said in relation to the plaintiff’s claim in respect of the retaining wall, the plaintiff still carries the burden of establishing an appropriate causal nexus between the alleged negligence and the loss claimed. The plaintiff will still need to overcome a claim of inordinate delay on the plaintiff’s part to act which might constitute a break in the chain of causation. The plaintiff accepts that it has this burden. This ameliorates any undue prejudice in my view to the third defendant.
Counterclaims
[41] I do not share the same concerns about the counterclaims. The underlying substance of the claims are already pleaded. The amendments are in the nature of refinements available to the third defendant. As the Court of Appeal noted in Elders Pastoral, there is a distinct difference between a completely fresh cause of action and clarification of an existing cause of action. The latter is permissible, while the
former might not be.[8]
[8] At page 384.
[42] I consider in the context of this case the refinements through the counterclaim are appropriate and may be granted without undue prejudice to the plaintiff.
[43] On the basis of the foregoing, I:
(a) Grant leave to file the evidence out of time;
(b) Grant leave to file an amended application out of time;
(c) Refuse to grant leave to make amendments in respect of either the retaining wall or the storm water pond;
(d)Grant leave to amend the counterclaim as sought by the third defendant.
Costs
[44] In terms of costs, as I have said, the plaintiffs are entitled to their costs in relation to the late filing of evidence and the late application to amend.
[45] Costs in relation to the application to amend are reserved.
Addendum
[46] I make the additional timetabling orders arising out of the grant of leave to file an amended counterclaim:
(a) Enlargement of the following matters to 29 June 2011: (i) Filing by the plaintiff of a bundle of documents;
(ii)Filing by the plaintiff of reply evidence in respect of counterclaims and cross-claims; and
(iii) Filing by the plaintiff of its defence to the counterclaim.
Whata J
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