Haden v Attorney-General HC Wellington CIV-2010-485-002380
[2011] NZHC 1432
•4 November 2011
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2010-485-002380
IN THE MATTER OF Section 40 of the Public Works Act 1981
BETWEEN BORIS LESLIE HADEN Plaintiff
ANDTHE ATTORNEY-GENERAL First Defendant
ANDNORTHLAND DISTRICT HEALTH BOARD
Second Defendant
ANDTHE CHIEF EXECUTIVE OF LAND INFORMATION NEW ZEALAND Third Defendant
ANDWHANGAREI DISTRICT COUNCIL Fourth Defendant
Hearing: 29 September 2011
Counsel: R C Laurenson with J L W Wass for Plaintiff
J R Burns with J S Andrew for First and Third Defendants
D M Grindle for Second Defendant
G J Mathias for Fourth Defendant
Judgment: 4 November 2011
JUDGMENT OF THE HON. JUSTICE KÓS [Separate Question and Strike-Out Applications]
Table of Contents
Introduction .................................................................................................................................. [1] Facts............................................................................................................................................... [5]
1942-1951: The original land held by the Hadens ................................................................. [12]
Summary of ownership and offers ........................................................................................... [17]
1993/94: Declaration of land surplus to requirements ........................................................... [19]
1997: The offer back by LINZ ................................................................................................. [21]
1997-2007: Negotiations with the Board ................................................................................ [24]
2008: Mediation and settlement ............................................................................................. [27]2008 – 2010: The dispute flares up again............................................................................... [30]
HADEN V THE ATTORNEY-GENERAL HC WN CIV-2010-485-002380 4 November 2011
Separate question application.................................................................................................... [34] Submissions ............................................................................................................................. [38] Analysis.................................................................................................................................... [45] Question One: Difficult demarcation issues? ......................................................................... [51] Question Two: Proceedings brought to an end? ..................................................................... [60] Question Three: Time saving? ................................................................................................ [62] Question Four: Appeals? ........................................................................................................ [65] Question Five: Any other practical considerations? .............................................................. [67] Conclusion ............................................................................................................................... [68]
Strike-out application ................................................................................................................. [70] Submissions ............................................................................................................................. [74] Analysis.................................................................................................................................... [76] Conclusion ............................................................................................................................... [82]
Disposition ................................................................................................................................... [83]
Introduction
[1] Near the Whangarei Hospital is a block of land. It was acquired for hospital purposes, sixty years ago, under the Public Works Act. A large part of it was declared surplus in 1994. In 1997 most of the surplus land was offered back to the plaintiff. He is the son of the former owner. The offer was made by LINZ,1 the relevant Government department. But negotiations were taken over by Northland Health Limited, a Crown Health Enterprise. It was willing only to return a smaller area to the plaintiff. A mediation took place, and a settlement agreement was entered. Under that agreement the plaintiff agreed to buy back the smaller area only.
The plaintiff now claims the agreement was entered into as the result of misrepresentation or mistake as to what land originally had been declared surplus. He says he is still entitled to be offered the other areas made surplus in 1994. The defendants say any such rights were conceded in the settlement agreement, and that there has been no mistake or misrepresentation.
[2] The defendants have some suggestions to accelerate, abbreviate, or perhaps avoid, trial. The first suggestion is that the Court set a separate question for
determination before trial.2 The proposed question is:
1 Land Information New Zealand (until 1987, known as the Department of Lands & Survey).
2 High Court Rules, r 10.15.
Accepting the allegations as to misrepresentation and mistake prior to 30
January 2008 (as pleaded in the amended statement of claim) as correct,3 is the plaintiff – due to its actions and conduct since 30 January 2008 – deemed
to have affirmed (including by waiver) the settlement agreement and/or is he
estopped from making the claims set out in the third to fifth causes of action?
The second defendant advances that application. It is the Northland District Health
Board (the Board).4 The Crown supports the application.
[3] The second suggestion is made by the fourth defendant. It is the Whangarei District Council. The Council applies to strike out the first and second causes of action – at least as against it. Those causes of action concern another part of the land, transferred to the Council’s predecessor as a recreation reserve in 1983. The plaintiff says that it should instead have been offered back to his family.
[4] This judgment relates only to these two interlocutory applications.
Facts
[5] In July 1942 Len and Renee Haden, together with their two sons Boris (the plaintiff in this proceeding) and Neil (now deceased) moved to Whangarei.
[6] Mr Len Haden had been dux of his primary school. But he did not have the means to seek higher education. So he farmed. Then came the First World War. He served overseas with the First NZEF, in Egypt and France. As Mr Boris Haden puts it in evidence:
He was very affected by his wartime experience and determined on his return to New Zealand to do something which could help and relieve the suffering of people. He therefore studied and obtained his qualification as a bacteriologist.
[7] Employment as a bacteriologist took Mr Len Haden to the Whangarei
Hospital in 1942. The Hadens bought a 14-acre block on Hospital Road, across the
3 The concession is made only for the purposes of disposing of the proposed question.
4 Statutory successor to Northland Health Limited, under the New Zealand Public Health and
Disability Act 2000.
road from the hospital. Besides his responsibilities at the hospital, Mr Len Haden also farmed a pedigree dairy herd on the land.
[8] But Mr Len Haden died, at the age of 62, in December 1950. Soon after, the pedigree dairy herd was sold. And, in July 1951, Mrs Haden sold the land to the Northland Hospital Board.
[9] It is not clear exactly how the transaction came about. Mrs Haden died in June 1992. It seems to be common ground that the ―offer back‖ obligations, in s 40 of the Public Works Act 1981 (the Act), apply.
[10] In February 1997, Mr Boris Haden received a letter from LINZ. It is the Government department responsible for administering the disposal of land under the Act. The letter informed him that Northland Health Ltd (which had succeeded to the assets of the Northland Hospital Board) had declared parts of the hospital land surplus to requirements. It had asked LINZ to undertake an ―offer back‖ of the surplus land to former owners, pursuant to s 40 of the Act.
[11] What land was held originally, what land was declared surplus, and what land was then offered under the LINZ letter of February 1997, is all important.
1942-1951: The original land held by the Hadens
[12] The land originally bought by the Hadens was some 14 acres in extent. It is an unusual shape. The land on Hospital Road is flat. It is there that the Hadens lived. Behind, there is an escarpment. Beyond that are the paddocks by the Raumanga Stream on which Mr Len Haden’s dairy herd grazed.
[13] Originally the land was held in two titles: CT 172/111 and CT 162/26. But in October 1983 CT 162/26 was subdivided, and new titles were issued: CT 55B/100 and CT 55B/99.
[14] For ease of understanding I reproduce a copy of the plan shown in the original titles, 172/111 and 162/26, and allocate areas within the land area that
assume importance in these proceedings:
Fig 1
[15] First, there is the original 14-acre block. It comprised the two original titles, and each and all of the areas shown in Fig 1. I should note, while we are on the topic:
(a) Area Ac is the land held in title CT 172/111. It is known as the
―doctor’s residence‖.
(b)The Haden home was in the area called Ab. It forms part of CT 55B/100. After the Hadens left the property, it became a social hall for the hospital staff.
(c) Area B is also part of CT 55B/100. It is known as the ―gymnasium land‖. It is the third part of the flat land (along with Ab + Ac), fronting on to Hospital Road.
(d)Area Aa is the third part of CT 55B/100. It was the only land ultimately transferred to Mr Boris Haden under the 2008 settlement of the offer back dispute. I will revert to this topic shortly.
(e) Area C is the remaining part of original title CT 162/26, subdivided in
1983 to become title CT 55B/99. This was done to facilitate stream realignment. It was then vested in the Whangarei City Council as a recreation reserve. The Council paid $1 for the transfer. It is the subject of the first and second causes of action in the proceedings.
[16] I have used the prefix ―A‖ in the case of three areas of land to distinguish the land LINZ identified in 1997 as being offered back. LINZ referred to an area denoted ―Area A‖ on a plan. It comprised Aa + Ab +Ac.
Summary of ownership and offers
[17] It is useful at this point to tabulate these land areas according to the way in which they subsequently were dealt with:
1. 1951: What Mrs Haden sold to the Board 2. 1993/94: What appears to have been declared surplus
3. 1997: What LINZ
offered Mr Haden4. 1997-2008: What the Board agreed to transfer to Mr Haden
Aa Ab Ac B
C
Aa Ab Ac B
Aa Ab Ac
Aa
Fig 2
[18] The relevant titles and land areas may also be tabulated thus:
Title Areas
172/111
Ac
55B/100
Aa + Ab + B
55B/99
C
Fig 3
1993/94: Declaration of land surplus to requirements
[19] In October 1993 Northland Health Ltd resolved to dispose of all of this land. Its letter to the Crown Health Enterprises Monitoring Unit specifically identified Titles 55B/100 (i.e. Aa + Ab + B) and CT 172/11 (i.e. Ac) as surplus. Area C of course had vested in the Council as a reserve a decade earlier.
[20] On 1 February 1994 the Minister for Crown Health Enterprises, the Hon. Paul East, wrote to Northland Health Ltd giving his consent to disposal of the sites referred to in its letter. So we may take it that around 1 February 1994 the four parts of the Haden land identified above were surplus to requirements.5
1997: The offer back by LINZ
[21] The disposal of these lands was considered by LINZ. In April 1995 it concluded that the surplus land should be offered back to the Haden family in accordance with s 40 of the Act. That conclusion led to the 14 February 1997 letter from LINZ to Mr Haden.
[22] The letter advised that Northland Health Ltd had declared parts of the hospital land surplus to its requirements. It went on:
The attached plan shows the surplus areas at the hospital in Area A is part of Certificate of Title 55B/100 which is in turn part of the land acquired from Emily Renee Haden in 1951.
5 The Board acknowledges as much in its written submissions.
The letter continued:
Therefore in accordance with s 40 Public Works Act 1981 you are jointly entitled to be offered this land back at current market value. I have been supplied with a copy of the valuation for Area ―A‖ ...
[23] It is clear from the letter that Mr Haden (and his brother) were being offered area A in the attached plan. As I have said,6 area A comprised what I have called Aa
+ Ab +Ac. Three points should be made:
(a) LINZ’s area A comprised all of CT 172/111 (area Ac) and part of
CT 55B/100 (areas Aa + Ab). So when the letter described area A as
―part of Certificate of Title 55B/100‖ it was right in relation to area B (the part of CT 55B/100 not included), but wrong as to area Ac (which had always been in CT 172/111).
(b)The ―gymnasium land‖ within CT 55B/100 (my area B) was not included in LINZ’s area A. Yet it was part of the land identified as surplus by Northland Health Ltd in 1993. And it was therefore part of the land the Minister had approved for sale. So plainly someone at Northland Health Ltd or LINZ had changed their mind in relation to the gymnasium land.
(c) To add to the confusion, the valuation attached to the letter of
14 February 1997 (and which was being used to justify the offer back value for LINZ’s area A) related to both area Ac (CT 172/111) and the whole of the land in CT 55B/100 (i.e. including area B).
So the confusion at this point was fairly profound.
1997-2007: Negotiations with the Board
[24] Mr Haden (and his son-in-law Mr Andrew Grant, who also provided an
affidavit) say that when discussions with Northland Health ensued after LINZ’s
letter, Northland Health changed its mind again about including areas Ab and Ac. So
6 At [16].
in the end, none of the ―flat land‖ (i.e. areas Ab + Ac + B) was offered to Mr Haden.
Northland Health now wanted to keep it all.
[25] The offer in the February 1997 LINZ letter was open for 40 days. It was not accepted in that time. Correspondence continued through to the year 2000. But without conclusion. Next there was an argument as to whether the offer had ever lapsed. In June 2007, Mr Haden’s solicitor wrote to LINZ asserting that the offer had remained open, and had in fact been accepted by the plaintiff. The letter indicated that proceedings would be issued. Without prejudice, however, an offer was made to negotiate. Part of that negotiation would require definition of exactly what land was being offered back.
[26] Northland Health Ltd had by now been transformed into the Northland District Health Board. Its solicitor wrote to the plaintiff’s solicitors suggesting mediation. One of the topics which would need to be addressed in mediation was the ―boundaries of the land which the Court would regard as surplus or the subject of an offer made by the Northland District Health Board.‖ The plaintiff agreed to mediation.
2008: Mediation and settlement
[27] The mediation took place on 29 January 2008. A senior commercial lawyer, Ms Carol Durbin, acted as mediator. The Board was represented by staff and a legal adviser. For the plaintiff, Mr Haden and his daughter attended, along with counsel. At the end of the mediation settlement was achieved. A settlement agreement was entered that same day.
[28] Some of the key provisions of the settlement agreement are as follows:
(a) That the land to be sold to Mr Haden under the offer back provisions of the Act would be area Aa.
(b)As that land would otherwise be landlocked, a right-of-way was to be granted along the western boundary of area Ac.
(c) A right of first refusal for a period of 30 years in favour of Mr Haden or his estate was to be granted in relation to the remainder land in CT 172/111 (area Ac) and CT 55B/100 (areas Ab + B). That is, the flat land in Hospital Road.
(d)A net consideration of $100,000 (inclusive of GST) was to be paid by the plaintiff.
All this of course required co-operation from LINZ (and was conditional on that).
But LINZ’s position was expected to be co-operative.
[29] The plaintiff says that the mediation proceeded on the basis that the flat land fronting Hospital Road (i.e. areas Ab + Ac + B) was off the table. He says the position taken by the Board was that that land had never actually been declared surplus and was not eligible for offer back. The plaintiff says that he and his family took that representation at face value.
2008 – 2010: The dispute flares up again
[30] The settlement agreement was entered into in January 2008. By October
2008 the land transfer contemplated by it had not yet occurred. But then a letter from Crown Property Services Ltd (acting on instructions from the Board and LINZ) caused Mr Haden to query what in fact had been declared surplus in the first place. An Official Information Act request was made. That request disclosed the communications between Northland Health and Crown Health Enterprises
Monitoring Unit referred to above.7
[31] Despite these discoveries, the plaintiff nonetheless:
(a) negotiated and entered a formal sale and purchase agreement for area
Aa in January 2009, pursuant to the terms of the settlement agreement; and
7 At [19] – [20].
(b) settled the purchase of area Aa in May 2009.
[32] In 2010 the present proceedings were commenced. The plaintiff pleads in its statement of claim:
Following receipt of the offer back dated 10 October 2008 and pursuant to a request made under the Official Information Act 1982 dated 30 October
2008 and answered on 6 November 2008, the plaintiff then learned and did
discover for the first time that all of the surplus land including the said portions with frontage to Hospital Road which contained:
(a) The residence used by the said medical staff (53 Hospital Road);8
and
(b) The former dwellinghouse of the deceased used to house the said social club;9 and
(c) The gymnasium:-10
was declared surplus in or about February 1994 and was to be offered back and should at all times have been the subject of a clear, certain and unlimited offer back to the deceased or her successors under s 40 of the Public Works Act 1981.
[33] It is important to note that although the plaintiff pleads that it entered the settlement agreement on the basis of misrepresentations as to the status of the land declared surplus, he does not seek to set aside the settlement agreement. Rather, he contends that he was entitled to receive an offer back of all of the flat land. So his argument is that to the extent that the settlement agreement might be seen to preclude that, it does not. To the extent that it does, but no more, it should be set aside.
Separate question application
[34] On 4 July 2011 the Board applied for orders determining three preliminary questions.
[35] By the time the matter was heard by me the Board had abandoned its application in respect of the third question (which related to the effect of the former
8 Area Ac.
9 Area Ab.
10 Area B.
Limitation Act 1950). At the hearing it condensed the first two questions into the issue set out at [2] above.
[36] The essential proposition by the Board, underlying the proposed question, is that even if:
(a) the Board or LINZ had misrepresented the position as to what had been declared surplus in 1994 prior to the settlement agreement (which they both deny); or
(b)(regardless of misrepresentation) the plaintiff was mistaken in entering the agreement:-
his actions once the true position became apparent (in October 2008) in:
(c) executing a sale and purchase agreement on 22 January 2009 (almost a year after the settlement agreement, and some three months after the true position had become apparent in relation to the flat land); and
(d) settling the purchase in May 2009:-
mean he has either waived his rights in relation to the flat land, affirmed the contract despite being aware of the misrepresentation, or is now estopped from pursuing the claims in the third, fourth and fifth causes of action.
[37] Mr Haden’s response to this substantive allegation is reasonably cogent. He
says:
(a) he was ignorant of the true position at the time of entry into the obligation in the settlement agreement;
(b)executing the sale agreement and settling the transaction in 2009 was merely the implementation of a bargain he was bound to complete, and does not seek to upset;
(c) he has not cancelled the settlement agreement. Rather he seeks relief under s 7(3) of the Contractual Mistakes Act 1977 to the effect that the settlement agreement (whereunder area Aa is conveyed to him) not preclude his continuing to assert a right to receive an offer back of areas Ab + Ac + B. If it does preclude that, then he seeks to set aside that part of that agreement only; and
(d)so far as the claim of misrepresentation is concerned, again he does not cancel. Instead he seeks damages if, as a result of the misrepresentation, he has entered an agreement that precludes his obtaining an offer back of the whole of the flat land area declared surplus in 1994.
Submissions
[38] For the Board, Mr David Grindle submitted that pre-trial determination of the proposed separate question would assist in the final determination of the proceedings. It would ―resolve significant issues prior to the substantive hearing‖. It would provide an opportunity for the plaintiff to reconsider its position overall. It would also truncate time and issues for determination. The Board accepts that determination of the proposed question would not end the litigation. At the very least the first and second causes of action in relation to the area C land would continue. Those causes of action fall to be considered in relation to the strike-out application brought by the Council: see [70] below.
[39] Mr Grindle was not able, immediately, to calculate the relative time periods involved for (1) the preliminary hearing and the final hearing on the one hand, and (2) the comparative time associated with proceeding with a combined hearing. His view was a combined hearing would take ―at least a week‖. On the other hand the proposed question, separated out, could be undertaken in ―approximately one day‖. Because of the factual concession with which the proposed question commences, it would require little if any viva voce evidence.
[40] Mr Grindle accepted that a condition of any order for a separate question should be that appeals against the Court’s decision on that question be stayed until the remaining issues had been determined at trial.
[41] Mr James Burns, for the Crown, supported the submissions made by Mr Grindle. It is not necessary for me to traverse his submissions separately. At one point it had appeared that Mr Burns was contending that the third question proposed by the Board (which it had abandoned) should still be entertained as a further separate question. However, no application was brought by the Crown. Mr Burns accepted that if that aspect of the application had been abandoned by the Board (as it had), then it fell away entirely.
[42] For the plaintiff, Mr Richard Laurenson argued, as I have already set out,11 that the Board entirely misconceived the claim. The Board reasoned as if the claim was calculated to confirm that the plaintiff had cancelled, or was entitled to cancel, the settlement agreement. But that is not the plaintiff’s case. It merely seeks to establish it is not debarred from pursuing its third cause of action, i.e. that the plaintiff remains entitled to receive an offer back in respect of the flat land areas Ab
+ Ac + B.
[43] Mr Laurenson submitted that the starting point under Rule 10.15 should be an assumption that all matters in issue should be determined in one trial, and that the burden to displace that assumption ―places a heavy onus on any party seeking split trials‖.12 The separate question application was really a strike-out application by another name. Such a purpose is not contemplated for separate questions.13 The
result of the separate question should not be assumed to be adverse to the plaintiff. If the result was not adverse, there would be potential delay in determination of all matters in the proceeding, and either no saving in time or an increased expenditure of
time.
11 At [37].
12 Relying on the judgment of Fisher J in Clear Communications Ltd v Telecom Corporation of NZ Ltd (1998) 12 PRNZ 333 at 335.
13 Innes v Ewing (1986) 4 PRNZ 10 (HC) at 20.
[44] Mr Laurenson referred also to cautionary statements by Fisher J in the Clear Communications decision already referred to and by Asher J in Young v St Lukes Square (1993) Ltd.14 Some of the difficulties identified in those decisions were: demarcation difficulties between issues for the first trial and those left for the second; resulting difficulties of issue estoppels; inadvertent disqualification of a Judge who had expressed views at the first trial on matters for decision at the second; the need to recall witnesses; the duplication of time and cost in counsel coming up to speed again for the second hearing; and the prospect of multiple appeals.
Analysis
[45] Rule 10.15 provides:
10.15 Orders for decision
The court may, whether or not the decision will dispose of the proceeding, make orders for—
(a) the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding; and
(b) the formulation of the question for decision and, if thought necessary, the statement of a case.
A parallel power exists under Rule 7.9(1)(e), but Rule 10.15 is normally resorted to.
[46] The Court has a general discretion under Rule 10.15. Each case must be considered individually.15 But one must start with at least a moderate presumption against splitting trial.16 That presumption is borne out in practice: applications under Rule 10.15, where contested, fail more frequently than they succeed. The
burden lies on the applicant, and is ―not insignificant‖.17
14 Young v St Lukes Square (1993) Ltd HC Auckland CIV-2003-404-3215, 17 November 2005 at
[6].
15 Clear Communications Ltd v Telecom Corporation of NZ Ltd at 335, Turners & Growers Ltd v
Zespri Group Ltd HC Auckland CIV-2009-404-4392, 5 May 2010 at [13].
16 Turners & Growers Ltd v Zespri Group Ltd at [10].
17 Clear Communications Ltd v Telecom Corporation of NZ Ltd at 335; KPMG New Zealand v
Gemmell HC Auckland CIV-2008-404-4288, 27 March 2009 at [20].
[47] The classic statement of the risks of the Rule 10.15 procedure is that by
Fisher J in Clear Communications Ltd:18
Split trials risk a number of difficulties. It is often difficult to define with sufficient precision the demarcation between those issues to be addressed at the first trial and those left for the second ... It is not always easy to see what matters have become the subject of issues estoppel. It may be necessary to prepare issue estoppel schedules and hear argument as to their scope. A Judge may inadvertently disqualify himself or herself by expressing views on matters yet to be fully addressed at the second hearing ... Findings might be inadvertently made without the benefit of evidence and argument envisaged by a party as appropriate only for the second hearing. The second hearing can require the recalling of the same witnesses with needless extra time and cost to the parties and the public. There is duplication of time spent by counsel and the Court in reacquainting themselves with issues imperfectly remembered from an earlier trial and the time spent retraversing those matters in Court. There can be multiple appeals (in extreme cases taking the matter to the Privy Council as in Ryde v Sorenson) before returning to the Court of first instance to embark upon the second phase of the case. Even without appeals, there can be delay in embarking upon a second round of discovery and other interlocutory matters and amended pleadings following the first trial and then the delay of obtaining a fixture for the second hearing. There can be difficulties in ensuring that the same Judge is available for the second hearing, bearing in mind the usual commitments, sabbaticals, retirements and deaths which are the unhappy lot of the judiciary. If a different Judge has to preside at the second hearing there can be difficulties over earlier views as to credibility and the status of the notes of evidence from the first hearing. In my view these and other difficulties together place a heavy onus on any party seeking split trials.
[48] Complex cases in particular are ones where the Rule 10.15 procedure may be inappropriate. As Lord Scarman once said:
Preliminary points of law are too often treacherous shortcuts. Their price can be, as here, delay, anxiety, and expense.19
[49] A classic instance of Lord Scarman’s warning is the unfortunate Treaty Tribes Coalition v Urban Mäori Authorities20 litigation. A High Court Judge ordered that a preliminary question be determined. It was whether the Mäori Fisheries Commission was required by its statute to allocate certain settlement assets (fisheries quota, shares and cash) solely to iwi (or bodies representing iwi). Posed in that way, the question was apparently one of law. An appeal was brought against the Judge’s
decision to set that question down for hearing. The appellant (an iwi representative
18 Clear Communications Ltd v Telecom Corporation of NZ Ltd at 335.
19 Tilling v Whiteman [1980] AC 1 at 25 per Lord Scarman.
20 Treaty Tribes Coalition v Urban Mäori Authorities [1997] 1 NZLR 513 (PC).
group) argued that the issue should first be considered by the Waitangi Tribunal. In considering the appeal the Court of Appeal enlarged the question before it to consider what was meant by the expression ―iwi‖ in that context. In doing so it referred to a variety of extrinsic sources. It also examined the extent of the Mäori Fisheries Commission’s statutory duties of consultation. The Privy Council
considered the Court of Appeal had enlarged the original question by doing all this.21
There were, as a result, significant concerns: the answer to the original question had never been given; the enlarged questions had not been formulated clearly; to answer them evidence was required, but none had been adduced. So that was enough to justify allowing the appeal. But nor did their Lordships care for the original question formulated in the High Court. They redrafted it. They remitted the case back to the High Court to determine the revised question. They reserved leave to the Judge to amend the question further, or add additional questions. The original question had been ordered on 30 June 1995. The Privy Council decision revising it was delivered on 16 January 1997. As an exercise in saving time, it was not a success.
[50] There are a number of questions that need to be addressed by a Court before granting an application under Rule 10.15. Perhaps the most important questions are these:
(a) Question One: Will there be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second?22
The interaction between issues in split trials is said to be the single most important question for consideration by a Court considering a Rule 10.15 application.23 This question requires the Court to look at: (1) what is pleaded, (2) what issues arise on the separate question, (3) what issues remain for the second hearing, and (4) in each case, what evidence is required to dispose of those issues. Issues in the two
hearings desirably should be discreet. If they are not, or if there is
21 At 519, 521.
22 Clear Communications v Telecom Corporation of NZ Ltd at 335; KPMG New Zealand v
Gemmell at [21] and [28].
23 Clear Communications Ltd v Telecom Corporation of NZ Ltd at 335.
significant evidential overlap, separate determination is far less likely to be appropriate.24 Particular consideration must be given to potential difficulties from issue estoppels. In a multi-party proceeding, inefficiencies associated with parties with limited connection to the initial question being required to attend the first hearing, simply in order to protect their position. The risk of a Judge
dealing with the first trial being inadvertently disqualified from conducting the subsequent hearing must also be considered.25
(b)Question Two: Will the separate question bring the proceedings to an end?
The fact that the separate question, if answered affirmatively, will not bring the proceedings to an end is not determinative. Rule 10.15 makes that clear on its face. But it is a consideration tending against granting the application.26 The Courts also need to guard against granting a separate question which absorbs the bulk of the substantive issues for trial, thus turning an interlocutory application into a
substantive one.27
24 Levi Strauss & Co v Kimbyr Investments Ltd (1992) 5 PRNZ 577 (HC) at 580; Dobson Construction Co Ltd (In Liquidation) v Dobson (1993) 7 PRNZ 64 (HC) at 65; Andrews v Television New Zealand Ltd HC Auckland CIV-2004-404-3536, 15 March 2005 at [17]; Auravale Industries Ltd v Hallenstein Bros Ltd HC Auckland CIV-2004-404-488, 31 October
2005 at [18] – [19]; Fairview Park Ltd v Bell HC Auckland CIV-2006-404-1549, 24 July 2006 at [24]; Todd Pohokura Ltd v Shell Exploration NZ Ltd HC Wellington CIV-2006-485-1600,
31 January 2007 at [32]; O’Connell v Dwerryhouse HC Auckland CIV-2010-404-1329, 24 June
2011 at [48].
25 Clear Communications Ltd v Telecom Corporation of NZ Ltd at 335; Miller v Fonterra Co- Operative Group Ltd [2010] NZEMPC 45 (EC) at [17] and [29].
26 Commerce Commission v Qantas Airways Ltd (No. 1) (1991) 4 TCLR 417 (HC) at 422;
Myers Park Apartments Ltd v Sea Horse Investments Ltd HC Auckland CIV-2004-404-7180,
6 March 2006 at [36]; Jeffries v Privacy Commissioner HC Wellington CIV-2006-485-860,
20 October 2006 at [78] – [84]; Dorchester Finance Ltd v Christchurch Foodcourts Ltd HC Auckland CIV-2005-404-6193, 8 June 2009 at [25]; Miller v Fonterra Co-Operative Group Ltd at [27].
27 Andrews v Television New Zealand Ltd at [19]; Fairview Park Ltd v Bell HC Auckland CIV-
2006-404-1549, 24 July 2006 at [24].
(c) Question Three: What potential time saving does the separate question offer?
There are two aspects to this enquiry. First, the potential hearing time saved. A mathematical approach is called for. The applicant should be able to demonstrate (by reference to reasoned time estimates) the potential time saved if the question is answered affirmatively.28 The applicant also needs to address the counterfactual: what total time will be taken if the question is answered negatively? The absence of
significant potential time savings will be a consideration against granting an application under Rule 10.15.29
Secondly, any potential delay to final resolution of the whole case, and any associated inefficiencies resulting from splitting trial into two parts. An affirmative answer to the separate question cannot of course be assumed. An important consideration will be how long the gap is likely to be between hearing the separate question and the hearing of the remaining issues. Will final resolution now be later than if everything proceeded at once? Associated inefficiencies may include duplication of preparation for counsel (reacquainting themselves with issues from the earlier trial), and time spent retraversing matters at the
second trial.30 Similarly, duplication of evidence.31 An interregnum
delay (and the need to ―restart‖ counsel) is inefficient and costly. It
may result in loss of momentum, increased costs and reduced prospects of settlement.32
28 That is, if the applicant receives the answer it is looking for.
29 Dobson Construction Co (In Liquidation) Ltd v Dobson at 66; Young v St Lukes Square (1993) Ltd at [8]; Kaipara District Council v Ashby HC Auckland CIV-2004-488-795, 25 November
2005 at [39]; Bowport Ltd v Alloy Yachts Ltd HC Auckland CIV-2001-404-1843, 18 July 2006 at
[22] – [24]; Fairview Park Ltd v Bell at [25]; Jeffries v Privacy Commissioner at [77] and[85] – [87]; Dorchester Finance Ltd v Christchurch Foodcourts Ltd at[26].
30 Clear Communications v Telecom Corporation of NZ Ltd at 335; Fairview Park Ltd v Bell at
[24].
31 Young v St Lukes Square (1993) Ltd at [6(b)].
32 Young v St Lukes Square (1993) Ltd at [6(f)].
(d) Question Four: How will appeals be dealt with?
Multiple appeals are likely to be inefficient. They are likely to delay resolution of proceedings, and enlarge the period between the preliminary hearing and trial of the remaining issues.33 It may be desirable to make it a condition of granting a Rule 10.15 application that the hearing of appeals be postponed until determination of all issues in the proceeding.34 Even then, however, parties may still seek to be released from that condition.35
(e) Question Five: Are there any other practical considerations tending one way or the other?
Some proceedings are simply ill-suited to split trial procedure. There are particular difficulties in fragmenting issues in competition36 and negligence cases.37 On the other hand, intellectual property cases may lend themselves to preliminary determination.38 There is also some reluctance evident in the case law for the determination of novel areas of law under Rule 10.15 procedure.39 Such cases are usually better resolved within their full factual setting, rather than in a
separate subset of facts.
33 Strathmore Group Ltd v Fraser [1992] 3 NZLR 385 (PC) at 389; Levi Strauss & Co Kimbyr
Investments Ltd at 580; NGC NZ Ltd v Todd Petroleum Mining Co Ltd HC Wellington CIV-
2004-485-1753, 29 March 2006 at [37] – [38]; KPMG New Zealand v Gemmell at [32] – [34].
34 Such an order had been made in Commerce Commission v Air New Zealand Ltd HC Auckland
CIV-2008-404-8352, 24 August 2011.
35 Commerce Commission v Air New Zealand Ltd HC Auckland CIV-2008-404-8352, 3 November
2011 (where an application to be released was unsuccessful).
36 Commerce Commission v Qantas Airways Ltd (No. 1) at 422; Shell (Petroleum Mining) Co Ltd v Kapuni Gas Contacts Ltd (No. 2) HC Auckland CL5/94, 18 July 1995 at 6 – 7.
37 Body Corporate S91535 v Danegeld Ltd HC Tauranga CIV-2006-470-922, 24 May 2010 at [14].
38 Yves St Laurent Parfums v Louden Cosmetics Ltd (No. 2) (1994) 8 PRNZ 238 (HC) at 240; Young v St Lukes Square (1993) Ltd HC Auckland at [6(c)]; KPMG New Zealand v Gemmell at [22].
39 Andrews v Television New Zealand Ltd HC Auckland at [21]; O’Callaghan v Drummond HC Christchurch CIV-2007-409-1441, 21 October 2008 at [17].
Finally, the availability and rostering of the Judge for the second trial must be considered (bearing in mind the risks of other commitments, sabbaticals, retirement or death intervening).40
Question One: Difficult demarcation issues?
[51] The pleading relevant to the separate question is sparse. At paragraph [44] of
the Board and Crown’s statements of defence, the following is advanced:
It ... says further by way of an affirmative defence that each of the plaintiff’s
causes of action are barred by the settlement agreement dated 29 January
2008 referred to above.
The separate question proposed raises a rather different point from the pleading. The latter is based on the fact of the settlement agreement – i.e. that it was entered at all. Assuming for present purposes the settlement agreement settled the dispute about the remainder land (areas Ab + Ac + B), entry into that agreement ordinarily would bar further claim to that land. But the plaintiff alleges entry was the consequence of misrepresentation and mistake. The defendants’ proposition for summary determination in the proposed separate question is not clearly articulated in the present pleading. It has little to do with entry into the settlement agreement (the validity of which is challenged) and everything to do with implementation of that agreement. That is, negotiating and executing the subsequent sale and purchase agreement, and then settling the purchase, after the true facts became known. It is that implementation the defendants say bars the plaintiff’s third to fifth causes of action.
[52] The separate question proposed was subject to radical revision at the hearing. The result of committee drafting under pressure, it has some of the elegance of a camel. Swiftly bypassing stray references to ―affirmation‖ and ―waiver‖, the nub of the defendants’ argument for the separate question is that the plaintiff’s implementation of the agreement, after the true position became known to him, creates an equitable estoppel. Although the plaintiff has not cancelled the settlement
agreement, the fourth cause of action seeks relief under the Contractual Mistakes Act
40 Clear Communications Ltd v Telecom Corporation of NZ Ltd at 335; KPMG New Zealand v
Gemmell at [22] and [30].
1977. In particular, to ―[set] aside the [settlement] agreement ... insofar as it affects the [Board’s] retained land‖. The defendants say that informed implementation of the agreement has the effect of estopping the plaintiff from advancing this plea. To put it another way, the plaintiff cannot both approbate and reprobate the settlement agreement. Quod approbo, non reprobo. That which I approve, I cannot reject. That is by no means an absolute principle, however.
[53] The fifth cause of action concerns misrepresentation, and is alternative to the fourth. I cannot see any argument that the plaintiff could be estopped in these circumstances from seeking damages for misrepresentation. Implementation of an agreement does not preclude a subsequent suit for damages for misrepresentation, even if apprehended immediately after entry into the contract. So the focus of the separate question must be the Contractual Mistakes Act pleading.
[54] The defendants’ argument is not without legal difficulties. First, it is clear that an innocent contracting party confronted by apprehended misrepresentation or mistake is not bound to cancel. Secondly, not having cancelled, the innocent party is bound to continue to perform. Absent express agreement, it is not entitled to suspend performance against the party in the wrong.41 Thirdly, whether continuing performance in those circumstances then precludes Contractual Mistakes Act relief of the kind sought here is an issue the trial Judge will have to deal with.
[55] I turn now to the evidence required to resolve the proposed separate question. The question is not, contrary to the Crown’s written submission, ―a straightforward matter of law‖. For an estoppel to be made out, evidence will need to be adduced of (1) the context in which the plaintiff’s actions are to be construed, and (2) the Board’s response to those actions: reliance and change of position. The question will be why (assuming for present purposes that misrepresentation and mistake have occurred) it would be unconscionable to permit the plaintiff to pursue his claim to offer back rights for the remaining land. There is in all this an unfortunate theoretical aspect. Whether it is unconscionable or not to permit the plaintiff to do
so may well depend on the alleged misrepresentation or mistake. These are to be
41 Fercometal SARL v Mediterranean Shipping Co SA [1989] AC 788 (HL). See discussion in
Berryman, Kós and Watts Contractual Remedies (New Zealand Law Society, 2005) at 25 – 27.
assumed to have occurred for the purposes of the proposed separate question. Yet as a matter of fact they may not, once examined properly, have occurred at all.
[56] If the separate question is resolved in favour of the defendants, the consequence (presumably) will be that the plaintiff cannot be entitled to receive an offer back of the remaining land. But he will still be left with a right to claim damages for misrepresentation and monetary relief for mistake. The circumstances in which the alleged misrepresentation and mistake occurred will still need to be examined.
[57] On the other hand, if the separate question is resolved in favour of the plaintiff, all that will have occurred is that a partial defence to some42 of the causes of action will no longer be able to be run by the Board and the Crown. The remainder of the case will need to be run.
[58] I did not receive submissions on whether the proposed question might give rise to difficult issue estoppel questions. But at least in the respect identified in [55], there is an unhappy overlap problem. While disproof of misrepresentation or mistake at the second trial may set the matter to rights again, it does suggest that the proposed separation of issues is artificial, and may simply waste everyone’s time the first time round.
[59] In my view the proposed separate question would be an uneasy excision from the case. It makes more sense for all issues in the case to be dealt with at a single trial. The answer to Question One tends against granting the application.
Question Two: Proceedings brought to an end?
[60] The separate question will not bring the proceedings to an end. The separate question only addresses the third to fifth causes of action. It is irrelevant to the first and second. Even if the Board is successful on the separate question, the effect will
be no more than to reduce the remedial scope available if the plaintiff establishes
42 The third and fourth.
misrepresentation or mistake. It will not end those causes of action, even against the
Board. Furthermore, the Board remains a party to the first cause of action. [61] The answer to Question Two tends against granting the application. Question Three: Time saving?
[62] Whether a time saving could result from setting the separate question is (as I have noted previously)43 unclear. If trial is not split, it is said that the combined hearing would take approximately one week. I suspect that is too conservative an estimate. The separate question would appear likely to take one to two days to complete. Therefore:
(a) If the separate question proposed is answered in the affirmative, the Court would still need to explore the factual basis for the alleged misrepresentations or mistake in the third to fifth causes of action in order to deal with surviving claims for damages or monetary relief. I am unable to infer with any confidence a net saving of time, even if the question is answered in the affirmative.
(b)But, as I have already noted44 an affirmative answer cannot be assumed. The plaintiff’s response is (as I have said)45 cogent. If the question is answered in the negative, then (as I have also said)46 a partial defence falls away, but the rest of the case will still require to
be tried.
[63] It is difficult to see the effect of the separate question doing other than bringing forward in time an issue – entitlement to an offer back of the remaining land owned by the Board - that otherwise would need to be dealt with at trial. It does
not seem likely to alter markedly the time required at trial, either way. But it will
43 At [39].
44 At [50(c)].
45 At [37].
46 At [57].
have the deleterious effect of splitting trial, with all the associated inefficiencies that go with that.
[64] The answer to Question Three also tends against granting the application.
Question Four: Appeals?
[65] As noted,47 Mr Grindle accepts that it should be a condition of any order that an appeal from the result of the separate question be stayed until determination of all issues in the proceedings.
[66] To that extent, at least, Question Four favours granting the application.
Question Five: Any other practical considerations?
[67] I have found already that the fragmentation of the case in the way proposed will create difficulties, and overlaps with the subsequent hearing. I did not receive submissions on the practical implications of the proposal, but it is difficult to imagine that this would not result in protraction of the final determination of the proceedings.
Conclusion
[68] Evaluated in this manner, it is clear that the Board and the Crown have not discharged the burden of showing that it is appropriate to direct the proposed separate question.
[69] The application for the direction of a separate question under Rule 10.15 is dismissed.
47 At [40].
Strike-out application
[70] The Council seeks to strike out the first and second causes of action, as against it. These concern land area C.48 It was subdivided in 1983 and vested in the Council as a recreation reserve.
[71] The first cause of action asserts that the transfer to the Council was in breach of s 40, as it was neither required for another essential work49 nor for exchange under s 105.50 The plaintiff seeks declarations that the 1983 transfer was illegal, null and void, and that area C must now be offered back to him. Alternatively, he seeks that the Crown and Council pay him compensation in lieu.
[72] The second cause of action is brought alternatively to the first. It alleges breach of statutory duty against the Board and the Crown. Misleadingly, the headline in the pleading says that it is a cause of action ―against all defendants‖. However it is clear from the body of the pleading that it is not. Mr Laurenson confirmed in argument that the second cause of action is not advanced against the Council. As purchaser of the land, it could not have had any statutory duty under the Act. The Council’s strike-out application focused on this cause of action. But it is not necessary to say anything more about it here.
[73] It may be noted that neither the Crown nor the Board applied to strike out either cause of action.
Submissions
[74] For the Council, Mr Graeme Mathias accepted that a substantial burden lay on a strike-out applicant. Mr Mathias accepts that the transfer to the Council in
1983, for the purposes of establishing a recreation reserve, was not a transfer ―for
any essential work‖ for the purposes of s 40.51 Following clarification of the
48 See [14] and [15(e)].
49 Section 40(1)(b) – as it was in 1983.
50 Section 40(1)(c).
51 Relying on Dunbar v Hurinui District Council HC Christchurch CIV-2004-409-171, 5 August
2004.
plaintiff’s pleading of the second cause of action, Mr Mathias’s remaining submission came down to a simple point: that by virtue of s 62 of the Land Transfer Act 1952 the Council’s interest as registered proprietor was protected, except in the case of fraud. That was not pleaded. As he put it in his written submissions:
The ... Council acquired the property from the ... Board. There is no allegation that the transaction between the two parties in any way falls within any of the exemptions to the protection offered by s 62 so that the interest now held by the Council is protected.
[75] For the plaintiff, Mr Laurenson submitted that the case was analogous to Counties Manukau Health Ltd v Dilworth Trust Ltd.52 As I discuss below (at [78]), that decision indicates that in certain circumstances a purchaser of land may acquire it subject to an overriding equitable interest in favour of a prior s 40 rightholder. A core question in such a case is what knowledge the purchaser had of the actual or potential s 40 right, prior to acquisition. Mr Laurenson submitted that the circumstances in which the land was transferred to the Council in 1982 and 1983
would need to be the subject of close scrutiny. As that will be an intensely factual inquiry, the case was inappropriate for determination on a strike-out application.
Analysis
[76] Legal principles relating to strike-out applications under Rule 15.1 are so familiar that Judges (and many counsel) may well murmur them in their sleep. Pleaded facts are assumed to be true; generally only uncontentious evidence will be admitted.53 The jurisdiction is only exercised ―where the Court is satisfied that it has the requisite material ... to reach a definite and certain conclusion‖.54 The jurisdiction is exercised sparingly, and it ―is inappropriate to strike out a claim summarily unless the Court can be certain that it cannot succeed‖.55 Where a pleading is ―deficient but capable of repair‖ the Court will permit a party to amend
it; amendment would only be refused if a pleading is a ―total right off‖.56
52 Counties Manukau Health Ltd v Dilworth Trust Board [1999] 3 NZLR 537 (CA).
53 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.
54 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [31].
55 Ibid, at [33].
56 Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 (HC) at 324.
[77] A bona fide purchaser for value who has acquired land that should have been offered to a prior owner under s 40(2), will generally gain indefeasible title. Generally, also, such a purchaser will owe no obligation to the disappointed s 40 rightholder. The rightholder’s claim will be against the vendor or the Crown. By way of example, in Rowan v Attorney-General57 the Crown compulsorily acquired part of some land owned by the Rowans. The Rowans subsequently sold the remaining part. Ultimately it was bought by Mr Watson. Some 20 years later the part acquired by the Crown was declared surplus. Erroneously, the Crown offered
the land for sale by public treaty to Mr Watson, rather than to the Rowans. As the surplus land was landlocked, and Mr Watson was a neighbour, the Crown thought he would offer the best price. But the Rowans knew nothing about that transaction. The land was not offered back to them, as it should have been. In due course the Rowans sued the Crown for breach of statutory duty and negligence. No attempt was made to embroil Mr Watson in the proceedings. As the Court of Appeal put it in
Edmonds v Attorney-General,58 ―the land in question had been on-sold and
developed and was no longer available to offer back.‖
[78] But the Court of Appeal decision in Counties Manukau Health Ltd v Dilworth Trust Board59 makes clear that s 62 does not necessarily protect a purchaser who has some measure of knowledge of the rightholder’s entitlement prior to contracting to purchase the land. Even constructive or imputed knowledge. In that case land had been acquired from the Dilworth Trust Board in 1973 for the purpose of a hospital. The land was transferred to the Auckland Area Health Board, and later again to
Counties Manukau Health Ltd. Like Northland Health Ltd in the present case, it was a Crown Health Enterprise. As a matter of fact it was clear, prior to transfer to Counties Manukau Health, that the land was no longer required for hospital purposes. It should have been offered to Dilworth under s 40(2). But it was not. Although Counties Manukau Health had built a clinic on the land, that was not a
hospital. Despite the fact that the land had been transferred to Counties Manukau
57 Rowan v Attorney-General [1997] 2 NZLR 559 (HC).
58 Attorney-General v Edmonds [2006] NZCA 146 at [62].
59 Counties Manukau Health Ltd v Dilworth Trust Board [1999] 3 NZLR 537 (CA).
Health, Dilworth commenced proceedings for orders that the land be transferred to it, pursuant to s 40. Dealing with a strike-out application, the Court of Appeal said:60
It is therefore arguable that Counties Manukau Health took the land subject to Dilworth's statutory right, in the nature of an option, to repurchase the land. Whether or not Counties Manukau Health took the land subject to that right would appear to depend on whether or not it had notice, either actual, constructive, or imputed, of that interest. It may well be that knowledge that the land was originally taken for hospital purposes, and that it was self- evidently not required for those purposes at the time of the transfer, may be sufficient to constitute notice. Such questions are questions of fact or, at least, questions of mixed law and fact, which are best left to a substantive hearing.
The conclusion of the Court of Appeal in that paragraph was not altered by the Privy Council on appeal.61 The result is that, potentially, a purchaser’s title may be impressed by an equitable interest in favour of the s 40 rightholder.
[79] Furthermore, even if the Board has acquired indefeasible title, it remains susceptible to remedies in personam. So much is recognised in the Privy Council’s decision in Counties Manukau Health, just referred to.62 As the Privy Council also noted in Oh Hiam v Tham Kong:63
The Torrens system is designed to provide simplicity and certitude in transfers of land, which is amply achieved without depriving equity of the ability to exercise its jurisdiction in personam on grounds of conscience.
An independent cause of action is required to support an in personam claim in such a case. Unconscionable conduct alone is not sufficient.64
[80] It is clear, that in this case, the statement of claim advances an in personam claim for compensation against the Council. The independent legal basis for that claim against the Council, as purchaser, is not adequately pleaded at present. But against the prospect that the plaintiff can do so, it would not be appropriate to strike the Council out of the proceeding at this stage. I will give the plaintiff 28 days to file
a further amended statement of claim rectifying this omission.
60 At [26].
61 Dilworth Trust Board v Counties Manukau Health Ltd [2002] 1 NZLR 433 at [35].
62 Idem.
63 Oh Hiam v Tham Kong [1982] BPR 9,451 at 9,453 (PC).
64 Duncan v McDonald [1997] 3 NZLR 669 (CA) at 683-684.
[81] Likewise, the statement of claim presently does not establish an adequate footing on which to base a claim for an interest of the land itself, contrary to s 62. It is possible that paragraph 15 of the statement of claim could be so construed, but that is to draw an unduly long bow. If the plaintiff is asserting an equitable interest in the area C land, against the Council, based on knowledge, then it should re-plead accordingly. Again, it would not be appropriate to strike out the present pleading at this point.
Conclusion
[82] The application to strike out is dismissed.
Disposition
[83] Both applications are dismissed.
[84] The plaintiff will have his costs on the first application, calculated on a category 2 band B basis. Absent compelling memoranda to the contrary, which otherwise I strongly discourage, costs are allocated equally as between the Board and the Crown. Costs on the second application will lie where they fall.
[85] The plaintiff will need to file, within 28 days, a further amended statement of claim, amending its pleading of the first cause of action against the Council in the respects noted in [80] and [81]. Leave is reserved to the Council to reapply within a further 14 days thereafter.
[86] I thank counsel for their assistance.
Solicitors:
Thomson O’Neil & Co, Stratford for Plaintiff
Crown Law Office, Wellington for First and Third Defendants
Webb Ross, Whangarei for Second Defendant
Thomson Wilson, Whangarei for Fourth Defendant
Stephen Kós J
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