H & H Contractors Limited v Leighton Contractors Pty Limited
[2013] NZHC 2225
•29 August 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-004637 [2013] NZHC 2225
BETWEEN H & H CONTRACTORS LIMITED Plaintiff AND
LEIGHTON CONTRACTORS PTY LIMITED and DOWNER EDI WORKS LIMITED (together as an unincorporated joint venture called LEIGHTON WORKS) First Defendant
WORKS INFRASTRUCTURE LIMITED Second Defendant
Hearing: 20 May 2013 Appearances:
D M Connor and R A Dellow for Plaintiff
S C Price and G R White for DefendantsJudgment:
29 August 2013
JUDGMENT OF ELLIS J
This judgment was delivered by Justice Ellis on 29 August 2013 at 4.45 pm
pursuant to R 11.5 of the High Court Rules
Registrar / Deputy Registrar
Date………………………
H & H CONTRACTORS LTD v LEIGHTON CONTRACTORS LTD & Or [2013] NZHC 2225 [29 August
2013]
Leighton Works (LW).1
Background
[2] On or about 5 February 2008 a works contract was signed between H&H and LW whereby H & H would perform drainage and earthmoving work on the Manukau Extension (State Highway 20) at Auckland.2 The works contract contained clauses dealing with the process to be followed in the event of a dispute. In particular, cl 45.1 provided that H & H was not entitled to make any claim:
(a) In respect of a matter:
(i) arising out of or in connection with a breach of the Works
Contract by LW;
(ii) arising out of or in connection with the subject matter of the
Works Contract; or
...
(b) In respect of a claim or proposed claim by the Contractor:
(i) under or in connection with any provision of the Works
Contract;
(ii) for any payment under the Works Contract;
…
(v) for damages or any other remedy under any statute; or
(vi) for quantum meruit or for restitution or based on unjust enrichment
unless the claim ... within 15 working days after the first day upon which [H&H] could reasonably have been aware of the matter at issue [H&H] has submitted to LW a prescribed notice.
A prescribed notice is a notice titled “prescribed Notice” which includes
particulars of the following:
(c) The breach, act, omission, direction, approval or other circumstances or event on which the claim is or will be based;
1 H & H Contractors Ltd v Leighton Contractors Pty Ltd [2012] NZHC 2502.
2 The main contract for the completion of the Manukau Extension was between Leighton Works
Pty Ltd (one of the parties to the joint venture) and Transit New Zealand.
(d) the provision of the Works Contract or any other basis for the claim or proposed claim; the quantum or likely quantum of the claim; and
Any measures taken by the Contractor to reduce the impact of the circumstances or event on which the claim is based.
...
[3] And cl 45.3(b) provided:
Unless stated otherwise, if [H & H] submits a notice or a claim in respect of a matter later than the time for submission of such notice or claim stated in the Works Contract, such matter shall be time barred and [H & H] shall be deemed to have waived its entitlement (if any) in respect of such matter.
[4] It is the operation of this time bar, due to H & H’s alleged non-compliance with the stipulated 15 working day time limit for submitting a prescribed notice that was at the heart of the application to strike out.
[5] Also relevant, however, is cl 46 of the works contract, which provided that:
(a) It was the parties’ intention that, in the event of a “dispute, difference, controversy or claim arising out of or relating to the performance of the Works Contract or the breach, rectification, termination, frustration or invalidity thereof” every endeavour would be made to resolve the dispute on its merits by negotiation.
(b)A party claiming that a dispute had arisen was to notify the other party in writing. Such a notice was (inter alia) to “adequately describe the particulars of the alleged dispute including but not limited to the amount of the dispute”.
(c) If the amount involved was less than $300,000 and the dispute could not be resolved by negotiation then it was to be settled by expert determination.
(d)If the amount involved was more than $300,000, there was to be a meeting to discuss within five working days of the notification “as a condition precedent to commencing any other proceeding”. If the
submitted to some form of alternative dispute resolution (“ADR”).
(e) If ADR was not agreed or if one party formed the view that the other party was not making reasonable efforts to resolve the dispute, either party could (within 5 days of the failure or perceived failure of the procedure) require the dispute to be litigated.
[6] The key events following the execution of the contract were as follows:
(a) Very soon after the contract was signed, on 27 February 2008, LW gave notice to H & H requiring it to remedy “all material breaches” at its own cost within five days.3
(b)On 5 March 2008 LW issued a notice to H & H (purportedly under cl 10.2(b) of the works contract) advising that LW intended to employ another drainage contractor to maintain the contract programme in order that H & H could concentrate on remediation and other programmed works.
(c) On 4 April 2008 Mr Van Uden, H & H’s managing director, wrote to LW noting what had occurred and observing that H&H had a contract for the entire drainage works on the project. He said that in the event that LW withdrew work or cancelled the contract without a valid reason H & H would be entitled to claim for loss of profits. He asserted that LW had no reason to use another contractor to carry out parts of the drainage works and asked for a work programme going forward.
(d) On 8 April 2008 LW replied to Mr Van Uden saying:
3 H & H denies any such breach.
of drainage works against our ARC winter works application
and other key project milestones. Unexpectedly this does not provide the sustainable levels of work that were envisaged. Although we will continue to assess the programme further, it is clear that an unavoidable cessation of works over the winter months and possibly longer will be encountered.
(e) No work pursuant to the contract was done by H & H over the winter of 2008.
(f) In November 2008, Mr Van Uden inquired about when and where H
& H would be required to continue the works but got no reply.
(g) On 28 January 2009 LW sent an email to H & H which stated:
We have not called H & H Contractors to return to this project as a result of performance issues relating to health and safety, environmental and quality. Ongoing breaches with H & H became a constant issue and these breaches reflected badly on the job.
As a result of this, we were left with no alternative but to engage another contractor who thus far, has performed better in all of these areas.
Current resource levels across the project are sufficient to meet program and no further assistance is required.
(h)On 5 February 2009 Mr Van Uden replied, seeking confirmation from LW about whether the works contract had been terminated or whether “LW had reduced the scope of the works to nothing”.
(i) On 19 February 2009 LW responded as follows:
At present we are reviewing work areas undertaken by H & H where we believe were not [significance] completed by you or defective. As soon as this review is complete next week we shall revert back to you.
As already explained to you by Glenn H & H were not called back to this project as a result of performance issues relating to health and safety, environmental and quality.
and early March, no response from LW was received.
(k)On 23 March 2009 H & H served a “prescribed notice” on LW. In the notice H & H claimed that there had been a breach of express and implied terms of the contract and other acts of prevention. It claimed that the LW’s acts and omissions had been motivated by collateral and irrelevant considerations “namely obtaining completion of the works
… to save costs”. It advised that the likely quantum of the claim would exceed $1 million.
(l)On 21 April 2009 LW wrote to H & H recording its view that H & H were prohibited from issuing a prescribed notice by the time limits in cl 45 and asking that it be withdrawn. LW nonetheless agreed to meet with H & H on a without prejudice basis to discuss the dispute.
(m)H & H sent further notices of dispute throughout 2009. There were sporadic meetings between the parties but nothing was resolved. LW advised that the contract was terminated on 23 August 2009.
Pleadings and procedural matters
[7] These proceedings were filed in 2010. H & H’s statement of claim contains
three causes of action, namely:
(a) breach of the works contract;
(b) wrongful repudiation of the contract; and
(c) breach of the Fair Trading Act 1986 (the FTA).
[8] H & H contends that, had the contract been permitted to run its course, it would have earned profits in the region of $5 million. H & H seeks an account of profits and claims damages in that amount.
[9] The statement of defence pleaded an affirmative defence based on H & H’s failure to comply with the timeframes and process set out in cl 45 and also on cl 33, which governs the valuation of any loss and damage arising from breach of the works contract “or otherwise”. LW contended that the remedies sought by H & H are consistent with (and not permitted by) cl 33.4
[10] No reply to those defences was filed.
[11] The learned Associate Judge struck out the contractual causes of action on the basis of cl 45, but declined to strike out the claim under the FTA.5
Applications for review and recall
[12] On 26 November 2012:
(a) H & H applied for a review of the strike out decision; and
(b)LW applied for recall of the Associate Judge’s decision in relation to his refusal to strike out the FTA cause of action and in relation to certain consequential discovery orders that he made.6
[13] The parties are agreed that this judgment should deal with both these applications.
[14] Notwithstanding the considerable detail of H & H’s application for review, Mr Connor also raised, orally, further grounds for review (as to which, see the discussion at [16] – [21] below). By way of summary, however, H & H’s position before me was that the learned Associate Judge was wrong to hold that its
contractual claims were precluded by cl 45 because:
4 LW accepted, however, that this was a defect that could be cured by repleading. In the end, Associate Judge Doogue did not need to make any conclusive finding on this issue and it has not been necessary for me to do so either.
5 The relevant parts of his judgment will be referred to in the discussion that follows.
6 It seems that an application for recall rather than an appeal was filed because LW was of the view that the refusal to strike out the FTA claim was essentially per incuriam. I discuss this later below.
(a) time should not run (and a prescribed notice could not be issued) under cl 45 until clarification had been forthcoming about LW’s intentions, namely whether LW wished simply to “reduce the scope of work to nothing” or to terminate the contract;
(b) cl 45 does not operate to bar an account of profits claim; (c) cl 45 is an exclusion clause which:
(i) should be interpreted contra proferentem;
(ii)should be read down, in circumstances where its application would be inconsistent with the object and intent of the contract;
(iii) does not apply in circumstances where (as here, H & H says)
there has been a fundamental breach of contract;
(iv)does not apply where (as here, H & H says) there has been fraud or wilful misconduct;
(d)LW’s equivocal and ambiguous conduct contributed to the delay and estops them from requiring strict compliance with cl 45.
Approach on review
[15] The approach to an application for review of an Associate Judge’s decision is, essentially, appellate.7 An applicant has the burden of persuading the Court that the decision was wrong; that is, that it rested on unsupportable findings of fact and/or applied wrong principles of law.8 The Court is required to make its own assessment
about whether the original decision was wrong.9
7 High Court Rules, r 2.3(4).
8 Andrew Beck McGechan on Procedure (online looseleaf ed, Brookers) at [HRPt2.3.02(1)(a)].
9 Burmeister v O’Brien [2008] 3 NZLR 842 (HC) at [29].
Preliminary point: the new claims of estoppel and fraud
[16] The two new grounds for review that were raised by Mr Connor orally at the hearing before me were those I have summarised at [14(c)(iii)] and [14(d)] above, namely estoppel and fraud. Those matters were not referred to in either the notice of opposition to the strike out or the application for review. And, as I have already noted, H & H did not file any reply to the affirmative defences raising those matters either.
[17] As far as estoppel is concerned, it appears that some sort of argument based on “equitable principles” was advanced before the learned Associate Judge, although H & H contends that he misunderstood it. While that does not cure the pleading deficiency (although the deficiency may explain any misunderstanding) I heard submissions on the issue from Mr Price and I am prepared to consider the argument on its merits, and do so at [45] and [46] below.
[18] But the absence of any pleading of fraud cannot so easily be put to one side. It is trite that, because of the seriousness of such an allegation, it must not only be pleaded but fully particularised. And even if fraud has been formally alleged, it gives rise to an exception to the usual strike-out rule that pleaded facts asserted by the plaintiff must (generally, at least) be assumed to be true. In other words, if an allegation of fraud was to be relied upon by H & H in defending the strike out, the
onus was on H & H to file cogent evidence in support of it.10
[19] Rather than filing such evidence, however, Mr Connor included in the common bundle (prepared just before the review hearing) a selection of documents obtained on discovery upon which he said he wish to rely and which (he said) showed that LW had never intended to use H & H for the drainage work, even at the time of entry into the contract. The documents were not annexed to an affidavit but he submitted that they could be admitted without the need for a witness to produce them, pursuant to s 130 of the Evidence Act 2006. Mr Price objected to any reference being made to these documents, and I indicated that if it became necessary,
I would rule on the matter.
10 Commissioner of Inland Revenue v Redcliffe Forestry Venture [2013] 1 NZLR 804 (SC) at [33].
[20] Because of the pleading failure to which I have already referred necessity does not require me to make that ruling. For completeness, however, I record my views that:
(a) To the extent that s 130 might assist (and I do not think that it does)
the process envisioned by that section was not complied with.
(b)Even if fair notice in writing had been given to LW, I would not have permitted the documents to be admitted. They are plainly (given the nature of the submission sought to be made in relation to them) not the kinds of documents that are of a formal and non-controversial nature. They are therefore ill-suited to the s 130 procedure. A witness would be required to produce them.
(c) In any event, the procedure governing the admission of new evidence on a review of an Associate Judge’s decision ought, in my view, be analogous to the procedure governing the admission of new evidence on an appeal. It seems to me therefore that an application for leave should be made and a threshold of cogency and freshness would likely be applied.
(d)If that threshold were to be applied, it would not be met. The documents in question are not “new” and their contents are, without more, ambiguous. They certainly would not have sufficed as a foundation for the serious allegation of fraud that Mr Connor sought to advance.
[21] For all those reasons I consider that it was not open to H & H to argue fraud on the review application and I do not propose to deal with the fraud submission further. The remainder of this discussion focuses, therefore, on the issues raised by Mr Connor about the interpretation and application of cl 45, together with the question of estoppel.
Clause 45
When did time begin to run and when should a prescribed notice have been issued?
[22] Associate Judge Doogue found that the 15 working day period began running with the transmission of LW’s email on 28 January 2009. That email advised that “no further assistance” was required by LW from H & H. On that analysis, the 15 working day period expired on 18 February – over a month before H & H submitted the prescribed notice.
[23] Mr Connor’s contention was that the Judge was wrong in this because time could not run until clarification had been forthcoming from LW about its intentions, namely whether LW wished simply “to reduce the scope of work to nothing” or to terminate the contract. He submitted that the learned Associate Judge misunderstood the relevance of the difference between “reduction in scope” and termination. The relevance was (he said) that unless and until H & H knew what LW’s intentions were it could not issue a prescribed notice because it could not adequately identify the precise nature of the dispute and the remedy it sought. He said that cl 45 required such specificity.
[24] But, for a number of reasons, I do not accept that submission.
[25] First, I agree with Associate Judge Doogue that the 28 January communication was clear in its terms and that H & H should reasonably have been aware on receipt of it that LW no longer required its services pursuant to the contract. This was the relevant “matter at issue” in terms of cl 45.1.
[26] Secondly, H & H’s position is belied by the undisputed facts. That is because H & H did not actually obtain the information it says it wished to receive from LW before submitting the prescribed notice on 23 March. Although a further email was received from LW on 19 February, it merely reiterated what had been said earlier
(“As already explained to you ...”).11 There were no more communications of
relevance prior to 23 March. Accordingly, H & H submitted the notice without first achieving the clarity it now says it was waiting for.
11 A prescribed notice was not submitted by H & H within 15 working days of that email, either.
[27] Thirdly, as Mr Price said, it seems to me that the point of the procedure contained in, and contemplated by, cl 45 is (at least at the early stage of a dispute) to enable a party to notify the other of a problem in a quick and informal way with a view to its immediate and practical solution, if possible. Such a process is, in my view, entirely consistent with the wider commercial context. A method of dispute resolution that, in the first instance, requires the parties to act speedily and inexpensively makes particular sense against a background of major and multifaceted construction work such as the Manukau extension. Such work no doubt involves a number of different sub-contractors with interdependent roles. If a party to one such sub-contract was permitted to delay taking steps to resolve a dispute there would be a very real prospect of unnecessary disruption to the wider project
and prejudice to other contractors and third parties.12
[28] For these reasons, I also consider that cl 45 cannot be read as requiring that the precise basis for a legal claim or a specific legal remedy be articulated at this early stage. Clause 46 makes it clear that the dispute resolution process is an evolving one - from negotiation at the outset through to expert determination, to ADR, and then (if necessary) litigation. I would expect that the precision with which the legal nature and parameters of a dispute are defined would also develop throughout such a process, and in accordance with the dictates of the particular
dispute resolution mechanism that had been engaged at any particular point.13
[29] Lastly, there is the argument that the termination/reduction of work distinction is relevant because the termination of a contract brings not only the contract but any exclusion clause contained in it to an end. I am not certain whether Mr Connor ultimately maintained that argument. But if he did, I simply note that that proposition was been expressly rejected by the House of Lords in Photo
Production Ltd v Securicor Transport Ltd.14
12 Associate Judge Doogue makes the same point at [25] to [27] of his judgment.
13 The requirement for weekly updates as to quantum contained in cl 45 also suggests that the definition of the nature and parameters of a dispute is seen as part of an evolutionary process.
14 Photo Production Ltd v Securicor Transport Ltd [1980] 1 All ER 556, [1980] AC 827, [1980] UKHL 2.
Does cl 45 apply to a claim seeking an “account of profits”?
[30] Mr Connor did not address this issue orally before me. I have, however, considered it. In the end, however, my conclusion, and the reasons for it, are the same as Judge Doogue’s;15 even accepting that such an account can be ordered as a remedy for breach of contract, the underlying (breach of contract) claim is clearly barred by cl 45.1(a) and/or (b).
Is cl 45 an exclusion clause?
[31] I accept Mr Connor’s submission that an exclusion clause is commonly understood to be one which “excludes or modifies an obligation ... that would otherwise arise under the contract by implication of law.”16 Under that definition a provision such as cl 45, which operates to bar the usual legal remedies unless certain procedural hoops are jumped through (and time limits complied with) can be seen as falling within its ambit.17
[32] I also accept that there have been, and are still, rules of construction that may limit the operation of such an “exclusion” clause in a contract. The reason for this was explained by Lord Diplock in Photo Production Ltd v Securicor Transport Ltd as follows:18
Since the presumption is that the parties by entering into the contract intended to accept the implied obligations, exclusion clauses are to be construed strictly and the degree of strictness appropriate to be applied to their construction may properly depend on the extent to which they involve departure from the implied obligations. Since the obligations implied by law in a commercial contract are those which, by judicial consensus over the years or by Parliament in passing a statute, have been regarded as obligations which a reasonable businessman would realise that he was accepting when he entered into a contract of a particular kind, the court’s view of the reasonableness of any departure from the implied obligations which would be involved in construing the express words of an exclusion clause in one sense that they are capable of bearing rather than another is a relevant consideration in deciding what meaning the words were intended by the parties to bear.
15 See [56] to [64] of his judgment.
16 Photo Production Ltd v Securicor Transport Ltd above n 14 at 567 per Lord Diplock.
17 For that reason I do not entirely agree with Mr Price that “exclusion clause” is a misnomer insofar as cl 45 is concerned. I consider that the term includes what he called “condition precedent” clauses.
18 At 567-568.
[33] Then, however, his Lordship then went on to say:19
But this does not entitle the court to reject the exclusion clause, however unreasonable the court itself may think it is, if the words are clear and fairly susceptible of one meaning only.
My Lords, the reports are full of cases in which what would appear to be very strained constructions have been placed on exclusion clauses, mainly in what today would be called consumer contracts and contracts of adhesion. As Lord Wilberforce has pointed out, any need for this kind of judicial distortion of the English language has been banished by Parliament's having made these kinds of contracts subject to the Unfair Contract Terms Act
1977.20 In commercial contracts negotiated between businessmen capable of looking after their own interests and of deciding how risks inherent in the
performance of various kinds of contract can be most economically borne
(generally by insurance), it is, in my view, wrong to place a strained construction on words in an exclusion clause which are clear and fairly
susceptible of one meaning only even after due allowance has been made for
the presumption in favour of the implied primary and secondary obligations.
[34] Both Lords Diplock and Wilberforce in Photo Production made it clear that whether and to what extent an exclusion clause applied in any given case was simply a matter of construction of the clause at issue, and the contract as a whole.21
Is it possible to interpret cl 45 contra proferentem?
[35] It is not, I think, disputed that there is a principle of construction that a contractual clause that appears to exclude liability or to permit a party to escape the consequences of its own clear wrongdoing is to be construed strictly and contra proferentem.22
[36] At the outset I should note that while I have accepted that cl 45 is an exclusion clause in the broader sense of that term, it does not, on its face, permit LW to escape the consequences of its own wrongdoing.23 In this respect it is to be
contrasted with the clause at issue in the case relied upon by Mr Connor, Alghussein
19 At 568.
20 The New Zealand equivalent of the Unfair Contract Terms Act 1977 is, no doubt, the Credit
Contracts and Consumer Finance Act 2003.
21 Lords Hobhouse, Keith of Kinkel and Scarman concurred.
22 See for example Photo Production, above n 14 at 564 per Lord Wilberforce.
23 It only does so if the potentially “wronged” party (ie the party wishing to raise a dispute) does
not do so in the way or within the time specified.
Establishment v Eton College.24 That said, however, I accept that cl 45 should be strictly construed.
[37] But I do not think that strict construction is of any assistance to H & H here. That is because the words of cl 45 are, in my view, clear and unambiguous; a party to the contract may not make a claim against the other party unless it complies with the contractual procedures and time frames.
[38] The only argument advanced on behalf of H & H which focused on the actual wording of cl 45 was that cl 45.1(a) and (b) should be read conjunctively rather than disjunctively. Mr Connor submitted that such a reading would mean that H & H’s claim would not be time barred.
[39] I must confess that I struggle with the logic of this submission. It does not seem to have been addressed by the learned Associate Judge and I am not sure if it was advanced before him. Even if paragraphs (a) and (b) were to be read conjunctively I cannot see how that would assist H & H here; in my view its claims based on LW’s refusal to call H & H back to the site or to give the company further works would fall within both (a) and (b). And nothing that Mr Connor said would, in my view, justify transmogrifying the word “or”, as it appears between paragraphs (a) and (b), into the word “and”.
Can cl 45 be read down because it is not consistent with the object and intent of the works contract?
[40] Mr Connor’s submission in this respect was founded of the decision of the Privy Council in Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd.25 There, Lord Denning noted that the exclusion clause at issue “on the face of it, could not be more comprehensive” but declined to interpret it as absolving the shipping company from
liability. He said:26
24 Alghussein Establishment v Eton College [1991] 1 All ER 267 (HL). The contractual provision in that case (arguably) enabled the party in default to obtain a benefit under the contract by virtue of its default. And in the Photo Production case, the clause at issue excluded all vicarious liability by Securicor for the deliberate and wrongful (but unforeseeable) acts of its employees.
25 Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576 (PC).
26 Ibid at 587.
If such an extreme width were given to the exemption clause, it would run counter to the main object and intent of the contract. For the contract, as it seems to their Lordships has, as one of its main objects, the proper delivery of the goods by the shipping company, “unto order or his or their assigns”, against the production of the bill of lading. It would defeat this object entirely if the shipping company was at liberty, at its own will and pleasure, to deliver the goods to somebody else, to somebody not entitled at all, without being liable for the consequences. The clause must therefore be limited and modified to the extent necessary to enable effect to be given to the main object and intent of the contract ...
[41] In the present case, however, and by contrast with the clause at issue in Sze Hai Tong, cl 45 does not completely exclude liability for failing to do the thing that was contracted to be done. Indeed, liability is not excluded at all, provided the contractual processes are followed. Moreover, the potential limits on the parties’ ability to make a claim for breach under cl 45 are, in my view, consistent with the wider commercial context in which the parties were operating. It is difficult to see, therefore, how its application could properly be seen as clearly contrary to the object and intent of the contract.
[42] Moreover, to the extent the Sze Hai Tong suggests that the plain meaning of an exclusion clause can be overlooked or “modified”, it is (with respect) wholly out of line with more recent authority which is overwhelmingly of the view that the application (or not) of an exclusion clause in any given circumstance must be determined as a matter of orthodox interpretation, albeit of a strict kind.27
Does cl 45 apply in the face of a fundamental breach?
[43] Mr Connor also submitted that cl 45 could be read down because (it must, for strike out purposes, be assumed that) LW breached the works contract in a fundamental way, namely by not permitting H & H to do the work it had contracted to do.
[44] It is fair to say that the proposition that a party to a contract who breaches it
“fundamentally” will be deprived of the benefit of an exemption or limitation clause obtained some traction in a line of English cases during the 1960s and 1970s. But
27 The parallel between the interpretive approach espoused in Sze Hai Tong and the (since discredited) doctrine of “fundamental breach” (which is discussed at [43] – [44] of this judgment) seems to have been acknowledged by Lord Denning at the end of the decision.
the two leading judgments in Photo Production to which I have already referred dealt a death blow to that doctrine.28 As I have noted at [33] above, exclusion clauses may not be given strained or artificial meaning. They are to be interpreted within their contractual contexts in the ordinary way. And here, in my view, the terms of cl 45 are unambiguous.
Estoppel
[45] H & H says that LW’s equivocal and ambiguous conduct during 2008 and/or early 2009 contributed to H & H’s delay in submitting the notice and estops LW from requiring strict compliance with cl 45.
[46] The immediate problem with this is obvious. Estoppel requires an unambiguous statement or unequivocal conduct, reliance upon which is therefore regarded as reasonable. Here, the conduct relied upon is, by H & H’s own admission, equivocal and ambiguous. It follows that any reliance by H & H or any assumption by the company that cl 45 would not be relied upon would not have been reasonable. Accordingly, and even putting the absence of pleading to one side, there is therefore no tenable foundation for an estoppels claim here.
Defendant’s application for “recall” of refusal to strike out FTA claim
[47] The learned Associate Judge described the FTA claim as follows:
[80] … Essentially what the plaintiff is saying is that it was lulled into a false sense of security about the security it enjoyed in its position as a contracted party to the State Highway 20 Project. Had it known otherwise, it would have promptly issued a prescribed notice of claim when the defendant made its position explicit which it did by sending the email dated 28 January
2009. ... There is no doubt that even if the statement of claim is presently deficient because it fails to set out an explicit statement of the link which the plaintiff will seek to draw between the deceptive conduct and the loss that that could be done in an amended pleading. ...
[48] Then, he concluded:
... There is no question, either, that cl 45 of the contract does not bar a claim under the FTA and nor is there any issue about the claim having been commenced in time under that Act.
28 Above n 14.
[81] There are no grounds that I can discern which would justify an order striking out this part of the statement of claim.
[49] But in my view, Mr Price is correct in his submission that the FTA claim is, on its face, barred by cl 45.1(b). It is not clear from Associate Judge Doogue’s judgment why he did not reach that conclusion, although the absence of any reference in his reasoning to cl 45.1(b) suggests that it may have been an oversight.
[50] Mr Connor nonetheless submitted that it is not possible to contract out of the FTA and that cl 45.1(b) could not therefore operate to defeat H & H’s claim in this regard. That submission is based not on any provision in the FTA itself but the line of cases which has its origin (I think) in this Court’s decision in Smythe v Bayleys Real Estate Ltd.29 There, Thomas J said (at p 472):
I do not consider, however, that these clauses have the effect of excluding the operation of the Fair Trading Act. The requirements of the Act are mandatory. In enacting the legislation, Parliament sought to protect the consumer from unfair trading and it would be inconsistent with that objective to permit a person engaged in trade to exempt him or herself from liability under the Act. In effect, this would be to allow such persons to opt out of the operation of the Act and the regime decreeing fair trading in the public interest (see Henjo & Investments Pty Ltd v Collins Marrickville PtyLtd (supra) and Clark Equipment Australia Ltd v Covcat Ply Ltd (1987) ATPR 40-768).
[51] But there are, in my view, two difficulties with Mr Connor’s submission.
[52] First, it seems to me that cl 45.1(b) does not purport to preclude a claim under the FTA. It merely places procedural and time constraints on such a claim.
[53] Secondly, appellate doubt has more recently been cast on the universal
application of Thomas J’s dictum. In David v TFAC Ltd the Court of Appeal said:30
[60] The Courts have long held that it is not possible to contract out of the FTA — see, for example, Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83; [1988] ATPR 49,142 (FCA), at pp
98-99; pp 49,155-49,156, Picture Perfect Ltd v Camera House Ltd [1996] 1
NZLR 310 (HC), at p 317, and Cornfields Ltd v Gourmet Burger Co Ltd
(2000) 9 TCLR 698 (HC), at para 35. The justification given for this is that as the FTA is consumer protection legislation, it would be contrary to its
29 Smythe v Bayleys Real Estate Ltd (1993) 5 TCLR 454 (HC).
30 David v TFAC Ltd [2009] 3 NZLR 239 (CA).
protective policy to allow contracting out — see Smythe v Bayleys Real
Estate Ltd (1993) 5 TCLR 454 (HC), at p 472.
[61] While that justification has force in relation to consumer transactions, it has less force in the context of commercial transactions involving substantial independently advised parties negotiating from positions of equality. In the latter case, any resulting contract can be expected to reflect the parties’ wishes as to the allocation of risk and it is difficult to see why they should not be permitted to allocate risks between them by contracting out of the FTA.
[54] The present case is not a case of a consumer contract in which one of the parties has limited or no bargaining power. The parties here are significant commercial entities who can be assumed to have negotiated from positions of equality and with the benefit of independent advice. If I were of the view that cl 45 did represent a “contracting out” clause (which I am not) I would therefore be minded to hold that it was not prohibited and could be enforced.
[55] I consider that the FTA claim should also be struck out.
Conclusions
[56] In summary I consider that:
(a) the learned Associate Judge was right to strike out the two contractual causes of action;
(b)the learned Associate Judge was wrong not to strike out the FTA cause of action as well; and
(c) in light of these conclusions, any issues about discovery are moot. [57] All of H & H’s claims against LW are to be struck out.
[58] 2B costs should follow the event in the usual way. If the parties cannot agree,
memoranda may be filed.
Rebecca Ellis J
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