Fairview Park Limited v Harrison Grierson Consultants Limited HC Auckland CIV 2006-404-6588

[2010] NZHC 836

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 Party

Hearing:         28 April 2010

Counsel:         M Borcoski for first defendant

PM Hunter for third party

Judgment:      3 May 2010 at 4:45pm

RESERVED JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application to set aside first defendant’s third party notice]

This judgment was delivered by me on 3 May 2010 at 4:45pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Hesketh Henry, Private Bag 92 093, Auckland for plaintiff

Kennedys, PO Box 3158, Auckland for first defendant

Carter & Partners, PO Box 2137, Auckland for second defendants

Simpson Western, Private Bag 93 533, North Shore City for third party

FAIRVIEW PARK LTD V HARRISON GRIERSON CONSULTANTS LTD HC AK CIV 2006-404-006588  3

May 2010

The application

[1]      The third party applies for an order setting aside the third party notice issued against it by the first defendant.  The application is made in reliance on r 4.16 of the High Court Rules.

Background

[2]      This proceeding relates to a subdivision which the plaintiff undertook on its land in Fairview Avenue, North Shore City.

[3]      The first defendant provided consultancy and project management services to the plaintiff in respect of the subdivision.

[4]      The second defendants own a property which adjoins the plaintiff’s land. The plaintiff and the second defendants are parties to an agreement which provide for the joint subdivision of their respective properties and to share development costs.

[5]      The plaintiff and the second defendants entered into a contract with the third party pursuant to which the third party was engaged to undertake earthworks for the stormwater pond and associated stormwater drainage for the subdivisions.

[6]      The plaintiff claims against the first defendant approximately $1,224,709. That part of the claim which involves the third party is not particularised separately by the plaintiff.   The third party claims it can  be no  more than  approximately

$25,000.

The claim in relation to the third party

[7]      The plaintiff claims that the stormwater pond has failed.  It claims damages from the first defendant, who the plaintiff claims had an obligation to manage and supervise the construction of the stormwater pond by the third party.  It is arising out

of this part of the claim against the first defendant that the first defendant claims contribution from the third party for any amount which it is found liable to pay to the plaintiff.

Priority hearing of this application

[8]      This proceeding has been allocated seven days for trial starting on 24 May

2010.  Lang J directed a priority hearing for this application at a conference he held on 31 March 2010.

Applications to set aside third party notices – the law

[9]      Rule 4.16 gives the court a discretion to set aside a third party notice.  The relevant part of r 4.16 provides:

4.16     Setting aside third party notice

(3)      In either case, the court may—

(a)      set the third party notice aside and dismiss the defendant's statement of claim against the third party—

(i)        on the merits; or

(ii)       without prejudice to the right of the defendant to pursue that claim against the third party in an independent proceeding; or

(b)      give other directions.

[10]     Although r 4.16 gives the court a discretion, it is possible to extract guidance from the authorities on the important factors which should be taken into account in the  exercise  of  that  discretion.    What  I list  is  by no  means  intended  to  be  an exhaustive list but simply a guide as to what has been found to be important.  Those matters include:

a)       Whether the claim pleaded in the third party notice meets the criteria set  out  in  r 4.4(1)  for  the  issue  of  a  third  party notice:  Green  v SG Harvey Ltd;[1] and

[1] Green v SG Harvey Ltd (1991) 3 PRNZ 139.

b)Whether the third party has established one of the grounds specified in r 15.1 justifying a strike out of the proceeding: Equiticorp Industries Ltd (in Stat Man) v Hawkins (No 4).[2]

[2] Equiticorp Industries Ltd (in Stat Man) v Hawkins (No 4) (1992) 5 PRNZ 484.

Grounds advanced in support of the application

[11]     Mr Hunter acknowledged that the claim against the third party as drafted meets the criteria for the issue of a third party notice set in r 4.4(1)(b) and cannot be struck out on one of the grounds specified in r 15.1.

[12]     He submitted that the court should exercise its discretion to set aside the third party notice because:

a)       At  best  the  evidence  of  breach  by  the  third  party  in  relation  to construction of the pond is weak;

b)Money is owed by the plaintiff to the third party which, although it cannot be set-off, leads to a position where the plaintiff has suffered no loss in relation to the pond; and

c)       The stormwater issue is peripheral to the main proceeding and could be dealt with in a separate proceeding between the first defendant and the third party.  That would save the third party being involved in an extensive trial involving many issues which do not relate to the third party.

[13]     Ms Borcoski drew attention to the general position which the court adopts in applications such as this.  The court will not, generally, investigate disputed facts if a

prima facie case has been made out to bring the proposed third party within the scope  of  the  rules.    That  applies  if  the  allegations  against  the  third  party  is sufficiently credible in law: Kupe Group Ltd v Ariadne Australia Ltd (No 2).[3]

[3] Kupe Group Ltd v Ariadne Australia Ltd (No 2) HC Auckland CL 151-88, 20 April 1990.

[14]     On the pleadings here there is a prima facie case for the issue of a third party notice.   The plaintiff has pleaded against the first defendant in relation to the stormwater pond that it failed to exercise all due professional care and skill in the design of the stormwater pond and in relation to the management and supervision of the construction of the stormwater pond.   The third party was responsible for the construction of the stormwater pond.   Prima facie, therefore, there is a basis for a claim for contribution pursuant to the Law Reform Act 1936, s 17.  This is clearly a case where the first defendant is seeking relief from the third party which is related to, and connected with, the subject matter of the proceeding.

[15]     Mr Hunter acknowledged that there was no basis for set-off.   The fact that money may be owed by the plaintiff to the third party, in my view, does not answer the claim for contribution in this case.  No basis was put to me by which it could be said that the first defendant has an answer to the plaintiff’s claim arising from the fact that some moneys are due by the plaintiff to the third party.  Those questions are quite discrete and, in fact, cannot answer the matters raised by the third party notice.

[16]     The next matter raised relates to the size of the claim in relation to the stormwater pond when compared to the much larger claim between plaintiff and first defendant.  It is unfortunate that a third party can be involved in a proceeding which involves many issues additional to the specific issue which justifies the inclusion of a third party in the proceeding.  However unfortunate that is, what is important to note is that there will be an examination of responsibility in relation to the construction of the pond between plaintiff and first defendant.  There is, in fact, no other practical way of  involving  the  third  party in  that  determination  outside  the  third  party’s agreement to be bound by findings of fact in the main proceeding.   Mr Hunter certainly was not prepared to make that commitment on behalf of his client.  That, then, inevitably drives me to the position that the issue relating to responsibility for any defective construction of the pond which involves both plaintiff, first defendant

and third party is one which should be resolved in this proceeding and therefore it would be wrong to exercise the discretion to set aside the third party notice and require the issue to be determined between two of the three relevant parties in some other proceeding.

[17]     Accordingly, I conclude that the third party’s application must be refused.

Orders

[18]     I dismiss the third party application.   If counsel cannot agree on costs, in respect of which Category 2 Band B would seem to be appropriate, memoranda shall

be filed in support, opposition and reply at seven-day intervals.

JA Faire

Associate Judge