Harbour City Construction 2012 Limited v Link Technology 2000 Limited

[2018] NZHC 686

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE

CIV-2016-485-000782

[2018] NZHC 686

BETWEEN

HARBOUR CITY CONSTRUCTION 2012 LIMITED
Plaintiff

AND

LINK TECHNOLOGY 2000 LIMITED

First Defendant

HARRY MEMELINK AND TREVOR
NEILL HAMILTON as trustees of LINK TRUST NO. 1

Second Defendants

Hearing:

12 April 2018

Counsel:

M Freeman for Plaintiff

Q S Haines for First and Second Defendants

Judgment:

17 April 2018

JUDGMENT OF COLLINS J

Introduction

[1]    This judgment explains why I am dismissing a counterclaim brought by Link Technology 2000 Ltd (Link Technology) and the  trustees  of  Link  Trust  No.  1 (the Trust), referred to jointly as “the defendants”. In their counterclaim, the defendants sought to have Harbour City Construction 2012 Ltd (Harbour City) held liable for converting various items that the defendants claim belong to them.

[2]    The counterclaim is dismissed because the defendants have failed to demonstrate on the balance of probabilities that:

HARBOUR CITY CONSTRUCTION 2012 LIMITED v LINK TECHNOLOGY 2000 LIMITED [2018] NZHC 686 [17 April 2018]

(1)the items in question were ever in the possession of Harbour City; or

(2)had the value attributed to them by the defendants; or

(3)that Harbour City converted any items that belonged to the defendants.

Background

[3]    On 23 July 2015, Harbour City acquired an undeveloped piece of commercial land in Lower Hutt (the property). The property was purchased by Harbour City following a mortgagee sale conducted by the Bank of New Zealand Ltd (the Bank).

[4]    The former registered owners  of  the  property  were  Mr  Memelink  and  Mr Hamilton, in their capacities as trustees of the Trust. The property had been leased by the Trust to Link Technology. Mr Memelink was the sole shareholder and director of Link Technology.

[5]    In 2011, the trustees set out to develop the property. To do so, they acquired a mortgage from the Bank, which exercised its powers of sale when the development project stalled and the trustees defaulted on their mortgage obligations.

[6]    In one of his affidavits, Mr Callis, a director of Harbour City, explained that when he inspected the property prior to purchase he noticed a number of “low value” items that appeared to have been abandoned at the property. He said the property was “completely overgrown with vegetation” and appeared to have been unused for some time.1

[7]    The items left on the property included building materials and a building kit that belonged to the trustees. Link Technology had also left items on the property, including motor vehicles, steel beams and other items.

[8]    On the day Harbour City took possession of the property, it gave notice to  Mr Memelink that all “vehicles, items and other associated rubbish material” had to

1 Affidavit of Mr Callis, dated 3 October 2016, at [10].

be removed from the property by 12.00 pm on 3 August 2015, otherwise they would be treated as abandoned. Mr Memelink responded on 27 and 30 July 2015 asserting that none of the items on the property had been abandoned and they were not to be removed. Thereafter, Harbour City and Mr Memelink became engaged in protracted correspondence and litigation. It is not necessary to traverse all the steps taken by each side. The essence of what transpired is encapsulated in [9] to [17].

[9]    On 23 August 2015, Link Technology issued a trespass notice to Harbour City alleging that Link Technology occupied the property pursuant to a lease between it and the Trust dated 21 April 2011 (the lease).

[10]   Link Technology then proceeded to issue invoices to Harbour City for “monthly rental” and penalties pursuant to the “special conditions of the lease”. The amount claimed was in the vicinity of $4,600 per month.

[11]   On 3 October 2016, Harbour City commenced proceedings in this Court, in which it sought by way of summary judgment a declaration that it was not bound by the lease and damages to be determined at the substantive hearing.

[12]   On 2 November 2016, the defendants filed a statement of defence and counterclaim. In their counterclaim, the defendants sought judgment in the sum of

$4,600 per month, pursuant to the terms of the lease and an undisclosed sum of “damages … for the loss caused … by the loss of the items” that had been left at the property.

[13]   On 16 March 2017, Associate Judge Smith issued summary judgment in favour of Harbour City, in which he held that Harbour City was not bound by the terms of the lease and that the defendants were liable as trespassers for the items remaining on the property.2 An appeal was filed in the Court of Appeal by the defendants. That appeal was, in due course, abandoned.

[14]   In an affidavit dated 28 April 2017, Mr Callis set out the events that occurred after Associate Judge Smith delivered his judgment. In summary, on 17 March 2017,

2      Harbour City Construction Ltd 2012 Ltd v Link Technology 2000 Ltd [2017] NZHC 451.

Harbour City required the defendants to remove their property. A further request was issued on 28 March 2017. On 30 March 2017, lawyers for Mr Memelink sought more time to remove the items. Harbour City accommodated this request. There were further exchanges and correspondence. When nothing was achieved through negotiation, Harbour City engaged a transport company to deliver the items on the property to another site owned by Mr Memelink. This was done on 20 April 2017. The items removed were carefully itemised and photographs were taken by Mr Callis showing the items that were removed. The pieces of timber on the property were carefully stacked before they were removed. Some scrap pieces of timber were removed by the transport contractor for firewood. Harbour City paid the costs of transporting the items to Mr Memelink’s other property.

[15]   On 19 June 2017, Thomas J directed Harbour City’s claims for damages for trespass proceed to a determination, despite the objections of the defendants that they had a counterclaim that also needed to be resolved. On 10 October 2017, Venning J entered judgment in favour of Harbour City in relation to its claim for damages for trespass. He held the defendants were liable for $59,686.98, together with the costs of transporting the items to Mr Memelink’s other property. Venning J declined to deal with the counterclaim and instead directed the defendants to file an amended counterclaim, itemising in more detail the basis of their counterclaim.3

[16]   In an amended counterclaim, dated 24 October 2017, the defendants sought damages for the following chattels they claim were left on the property at the date of settlement and subsequently converted by Harbour City:

(1)25 m3 of Kauri timber valued at $126,500;

(2)a building kit;

(3)a flat pack powder coating booth; and

3      Harbour City Construction 2012 Ltd v Link Technology 2000 Ltd [2017] NZHC 2480 at [23] and [51].

(4)motors and associated components relating to the powder coating booth.

[17]In its statement of defence to the counterclaim, Harbour City:

(1)Accepts that there was timber left on the property, but denies that there was 25 m3 of Kauri. It claims most of the timber had deteriorated and that all timber,  except  for  scraps  and  offcuts,  was  delivered  to  Mr Memelink.

(2)Denies there was a building kit left on the property.

(3)Denies there was a flat pack powder coating booth or associated motors and equipment left at the property.

(4)Pleads all other specified chattels were either not left at the property or were delivered to Mr Memelink.

[18]   In his affidavit of 29 September 2017 in support of the defendants’ counterclaim, Mr Memelink referred to his earlier affidavit of 23 June 2017 and explained he had obtained aerial photographs of the property from the Hutt City Council. Mr Memelink says the photographs show:

(1)the Kauri timber left on the property, comprising many sizes and length of timber. Mr Memelink says that no Kauri was delivered to him by Harbour City. He suggests that items of scrap timber taken by the transport contractor as firewood “might explain where the Kauri timber went”;

(2)Mr Memelink says most of the building kit was in fact returned to him but in a damaged condition and that there were “many parts missing” worth approximately $10,000; and

(3)powder coating extracting components, motors and a number of other items were also removed or not returned to Mr Memelink. He says these items were worth about $10,000.

(4)Mr Memelink said that there was a flat pack powder coating booth on the property. He described it as being very heavy, and requiring specialist equipment to move. Mr Memelink said that this item was about six metres long and worth about $35,000. This item was not amongst the items delivered to Mr Memelink by Harbour City.

[19]   The defendants relied on a brief quotation from “Kauri Warehouse”  dated   23 June 2017 to support their claim that 25 m3 of Kauri was worth $126,500.

[20]   The defendants also relied on an affidavit from Mr Barker, dated 22 December 2017. Mr Barker was employed in various capacities by Mr Memelink. For reasons that have not been adequately explained, Mr Barker’s affidavit was not served on the lawyers for Harbour City until a few days before the hearing. Mr Barker claims he saw a powder coating booth, associated motor components and a “shipping container” quantity of Kauri timber at the property. He says he was at the property when these items were taken by a transport contractor and that he told the driver that the timber was Kauri, not firewood, but that the driver “ignored” him.

Analysis

Factual dispute

[21]   No deponent was cross-examined before me. I am therefore required to determine whether or not the defendants have demonstrated the factual basis of their counterclaim by assessing the cogency and plausibility of the affidavits of Mr Callis, Mr Memelink and Mr Barker.

[22]   In my assessment, the defendants have failed by a considerable margin to demonstrate the factual basis of their counterclaim. My reasons for this conclusion can be reduced to the following four points.

[23]   First, the aerial photographs produced by Mr Memelink are blurry and do not demonstrate exactly what was on the property. Two of the photographs were taken on 29 January 2013 and are therefore of little assistance in trying to determine what items were left on the property when it was acquired by Harbour City. A third aerial photograph, dated 5 March 2017, was taken after Mr Callis says Harbour City had tidied up the property. The aerial photographs do not corroborate Mr Memelink’s evidence in any way and are of no evidential value.

[24]   Second, it is inconceivable the defendants would have left Kauri valued at approximately $126,500 outside to “weather” strewn across an overgrown site amongst rubbish and other items.

[25]   Third, if the items were left on the property and were as valuable as the defendants now claim, then it is also inconceivable they would not have taken advantage of the multiple opportunities afforded to them by Harbour City to secure and remove the items from the property. It is highly improbable that the defendants would not have taken steps to secure and protect a flat pack powder coating booth if it was on the property, particularly as it has been described as being a very large and valuable item of equipment.

[26]   Fourth, it is also implausible that Harbour City would have carefully photographed and documented particular items of property that appeared to have some value and delivered them to Mr Memelink, yet converted or otherwise disposed of the balance of the property.

[27]   The evidence from the defendants concerning quantum is equally unconvincing. The quotation from Kauri Warehouse is a generic quotation for the supply of 25 m3 of Kauri. It does not purport to be a valuation of the Kauri that the defendants say was left at the property. Mr Memelink has not provided any evidence to support his general assertions about the value of the other items he says were left at the property.

Legal liability

[28]   My findings that the defendants have failed to discharge the onus of proving the presence on the property of the items that are the subject of their counterclaim (and their value) renders it unnecessary to dwell on the possible legal liability of Harbour City. Suffice to say that the evidence from Mr Callis demonstrates that Harbour City acted cautiously and responsibly by affording the defendants every opportunity to remove their items from the property. Harbour City acted very reasonably in preserving the items that were left on the property, recording what items were there and delivering the items to Mr Memelink. At all relevant times Harbour City was an involuntary bailee in possession of the items left on the property. All it had to do in those circumstances was act reasonably when removing the items from the property. It did so by a wide margin.4

Costs

[29]   Mr Freeman, counsel for Harbour City, sought indemnity costs on the basis that scale costs would be inadequate in the circumstances of this case. It is easy to sympathise with Mr Freeman’s position. The defendants have not been particularly diligent in prosecuting their counterclaim. No submissions were filed in support of their case and an affidavit that should have been served on Mr Freeman’s office was not served.

[30]   After carefully weighing the conduct of the defendant and the adequacy of scale costs, I am satisfied that justice is served in this case by awarding Harbour City costs on a scale 2B basis. The hearing before me took approximately 35 minutes. The issues were not complicated and Mr Freeman’s helpful submissions were able to be confined to 17 paragraphs. While Harbour City has been patient and diligent in its approach to this litigation, I do not think the defendants’ conduct is so egregious as to justify an award of indemnity costs.

Result

[31]The counterclaim is dismissed for the reasons summarised in [2].

4      Compare Campbell v Redstone Mortgages Ltd [2014] EWHC 3081 (Ch) at [122]-[126].

[32]Harbour City is entitled to costs on a scale 2B basis.

D B Collins J

Solicitors:

Thomas Dewar Sziranyi Letts, Lower Hutt for Plaintiff QH Law, Levin for First and Second Defendants