Hellaby Resource Services Limited v Body Corporate 197281
[2023] NZHC 341
•28 February 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-869
[2023] NZHC 341
IN THE MATTER of THE MOUNTAIN VIEW APARTMENTS BETWEEN
HELLABY RESOURCE SERVICES LIMITED
First Plaintiff and Fourth Counterclaim Defendant
SRG GLOBAL REMEDIATION SERVICES (NZ) LIMITED
Second Plaintiff and First Counterclaim Defendant
AND
BODY CORPORATE 197281
Defendant and Counterclaim Plaintiff
MAYNARD MARKS LIMITED
Second Counterclaim DefendantHOBANZ PROJECT ASSIST LIMITED
Third Counterclaim Defendant
Hearing: 27 February 2023 Appearances:
N Gilles and A C Eager for SRG Global Remediation Services (NZ) Ltd
JWA Johnson and NG Lawrence for Body Corporate 197281 J Goodall KC and T Clark for Maynard Marks Ltd
R Tosh for Hobanz Project Assist Ltd
MG Ring KC and AJ Thorn for McCormack PlaintiffsJudgment:
28 February 2023
JUDGMENT OF LANG J
[on application for adjournment of trial]
HELLABY RESOURCE SERVICES LTD v BODY CORPORATE 197281 [2023] NZHC 341 [28 February
2023]
[1] These proceedings are currently scheduled to be the subject of a six week trial commencing on 10 July 2023. This judgment determines an application by SRG Global Remediation Services (NZ) Ltd (SRG) for an adjournment of the trial.
Background
[2] The two proceedings arise out of a construction contract for remediation works carried out on an apartment complex that contained 99 residential units. Body Corporate 197281 (the body corporate) is responsible for administering the affairs of the complex and it engaged SRG to undertake the works. The body corporate also engaged Maynard Marks Ltd (Maynard Marks) and Hobanz Project Assist Ltd (HOBANZ) as consultants for the project.
[3] The scope of works increased significantly during the project and the ultimate cost was far greater than anticipated by all parties. A dispute then arose regarding several aspects of the remedial works. In CIV 2020-404-513 (the Maynard Marks proceeding) 54 of the 99 unit owners seek damages from Maynard Marks for failing to advise them that it would be more cost effective to demolish the existing complex and build a new one.
[4] In CIV-2019-404-869 (the SRG proceeding) SRG1 sought summary judgment against the body corporate for the amount owing under a payment claim issued under the Construction Contracts Act 2002 for the sum of approximately $2.8 million. The body corporate responded by filing a counterclaim seeking damages for defective work and overpayments under the contract. SRG then applied for a stay of the body corporate’s counterclaim on the basis that the construction contract required the parties to determine disputes under the contract by arbitration.
[5] Associate Judge Gardiner entered summary judgment in favour of SRG for the amount claimed on the basis that the body corporate had no tenable defence to the claim.2 In doing so she rejected an argument that the counterclaim should be stayed
1 Then called TBS Remcon Ltd (TBS). In December 2018 Hellaby Resource Services Ltd (Hellaby), TBS’s parent company, sold TBS to SRG. Hellaby assigned TSB’s rights under the construction contract to SRG.
2 Hellaby Resource Services Ltd v Body Corporate 197281 [2021] NZHC 554 at [155(a)].
so that the dispute could be determined by arbitration.3 However, the Associate Judge stayed enforcement of the claim on the basis that the body corporate had an arguable cross-claim against SRG for an amount equalling or exceeding the amount of the judgment.4
[6] On 8 February 2022 Associate Judge Gardiner issued a further judgment in which she directed that the two proceedings were to be tried together.5 Her reasoning is summarised in the following paragraphs of her judgment:
Overall interests of justice
[65] Balancing all these considerations, I reach two conclusions. First, it is in the overall interests of justice for the two proceedings to be heard together. The degree of commonality, the time and cost savings to Maynard Marks, the Body Corporate, [HOBANZ] and the Court, and the risk of conflicting findings if there are separate hearings, weighs heavily in favour of a concurrent hearing. I am especially concerned about this final consideration. I do not consider it acceptable to have two almost identical claims (the claims against Maynard Marks), arising out of the same events and involving almost identical legal and factual issues, heard and determined by two different judges. I am also of the view that bringing the proceedings together is necessary to address the potentially overlapping claims to the same relief by the McCormack plaintiffs and the Body Corporate. The potential prejudice to the McCormack plaintiffs and to Hellaby/SRG in the form of additional time and cost is acknowledged but is outweighed by these other considerations.
[66] Second, it is appropriate to set down both proceedings for a concurrent trial now. The first available date for a long hearing is the third quarter of 2023. A trial that far out allows time for the Body Corporate’s counterclaim against Hellaby/SRG to catch up, if the Court of Appeal dismisses SRG’s appeal. If the Court of Appeal upholds the appeal, meaning the claim goes to arbitration, the hearing scope and duration can be reduced accordingly. Setting down a hearing now addresses the main potential prejudice to the McCormack plaintiffs arising from the orders sought, being delay in securing a fixture. Moreover, if it is inevitable that the proceedings will be heard together (as contended by Mr Hunt, Mr Hollyman and Mr Tosh) I consider it preferable that the decision is made now so the parties can begin working towards that outcome.
[67] I note that SRG and the Body Corporate recently resolved SRG’s application for a stay of the Body Corporate’s counterclaim pending appeal, until one month after the Court of Appeal issues its judgment on the appeal and cross-appeal. In their submissions in support of the application for a stay pending the appeal, SRG submitted that SRG could catch up with any steps taken by other parties during the intervening months, well ahead of a 2023 hearing. I made consent orders on that basis. If that agreed stay will
3 At [142].
4 At [155(c)].
5 Hellaby Resource Services Ltd v Body Corporate 197281 [2022] NZHC 330.
jeopardise their readiness to have the counterclaim heard on the allocated trial date, the stay will need to be reviewed. I leave it to counsel to take the appropriate steps to ensure that the counterclaim is ready to be heard.
…
(Emphasis added)
[7] As will be evident from [66] of this passage, both SRG and the body corporate appealed to the Court of Appeal against the Associate Judge’s decision. In a judgment delivered on 2 November 2022 the Court of Appeal dismissed the body corporate’s appeal against the entry of summary judgment and allowed SRG’s cross-appeal against the Associate Judge’s decision staying enforcement of the claim.6 However, the Court of Appeal upheld the Associate Judge’s conclusion that the dispute was not required to be determined by arbitration.7 SRG has now applied for leave to appeal to the Supreme Court against this aspect of the Court of Appeal’s decision.
[8] As noted in the passage at [67], SRG and the body corporate originally agreed that SRG would not be required to take steps to defend the counterclaim in the SRG proceeding until after the Court of Appeal had delivered its decision relating to the entry of summary judgment. The agreement required SRG to provide discovery within a month after the delivery of the decision. This arrangement was varied on 11 October 2022 when Associate Judge Taylor issued a Minute requiring SRG to provide discovery of its documents within eight weeks of that date. SRG has yet to provide discovery of its documents.
[9] It was apparent from an early stage that the body corporate would need to provide a more particularised version of its counterclaim. In a minute issued on 1 June 2022 Associate Judge Taylor directed that an amended counterclaim was to be filed and served by 29 July 2022. On 24 August 2022 the Associate Judge varied this to require the body corporate to file and serve its amended counterclaim no later than 30 September 2022. He also directed that the close of pleadings date was to be 28 October 2022.
6 SRG Global Remediation Services (NZ) Ltd v Body Corporate 197281 [2022] NZCA 518.
7 At [147].
[10] On 7 October 2022 the body corporate filed and served an amended counterclaim. It then, without having obtained leave, purported to file and serve a further amended counterclaim on 22 December 2022. Leave was required because the close of pleadings date had passed. The body corporate also served its briefs of evidence on the same date.
The arguments for and against an adjournment
[11] SRG’s counsel, Mr Gillies, contends that the latest version of the counterclaim is not sufficiently particularised to enable SRG to understand and respond to the claims the body corporate makes against it. He also maintains that the body corporate’s briefs of evidence do not assist it in this task. Furthermore, neither the counterclaim nor the briefs of evidence deal properly with the issue of quantum. SRG therefore recently served a notice on the body corporate requiring it to provide further and better particulars of its claim.
[12] In addition, SRG still has to provide discovery of relevant documents in its possession and this process will take approximately six weeks. Mr Gillies therefore says it will have insufficient time within which to complete this task and then prepare evidence responding to the body corporate’s claims. He says an adjournment of the current fixture is the only way in which it will be able to adequately defend itself.
[13] During the hearing I asked counsel for the other parties to prepare a timeline setting out the steps that would need to be taken to bring the proceedings to a state of readiness for the trial to commence on 10 July 2023. This provided for SRG, HOBANZ and Maynard Marks to serve their evidence in opposition to the body corporate’s claim by 12 June 2023. Mr Gillies contended the timetable is unrealistic and over optimistic. He cast doubt on the ability of any of the parties to meet it.
[14] The other parties to both proceedings oppose the application for an adjournment. They say that SRG’s problems are largely of its own making and that sufficient time remains before the commencement of the trial for it to provide discovery and serve its briefs of evidence. They therefore ask the Court to dismiss the application and maintain the existing fixture.
[15] The plaintiffs in the Maynard Marks proceeding are particularly distressed by the prospect of further delay. They opposed the two proceedings being heard together because of the delay this would necessarily cause. At the time that issue was considered their claim was much more advanced than was the claim by the body corporate. They could foresee issues arising in having their claim effectively stalled whilst the proceeding by the body corporate went through the interlocutory stages. They view the situation that has now arisen as vindicating their argument that the two proceedings should never have been joined.
Relevant principles
[16]Rule 10.2 of the High Court Rules 2016 provides:
10.2 Adjournment of trial
The court may, before or at the trial, if it is in the interests of justice, postpone or adjourn the trial for any time, to any place, and upon any terms it thinks just.
[17]There is no dispute regarding the principles to be applied in the present context.
They were succinctly summarised by Venning J as follows:8
[13] The interests of justice are the overriding consideration. Those interests are not limited to doing justice to the party seeking the adjournment. The Court must also do justice to the parties who wish to retain the benefit of the fixture and must also consider the interests of litigants in other cases before the Court as well as the general interest in maintaining public confidence in the ability of the Court to manage and hear cases within a reasonable timeframe.
Decision
[18] I have reached a clear view that it would not be in the interests of justice to grant an adjournment of the existing fixture. Before setting out the reasons for this I make two points. First, I am not prepared to revisit Associate Judge Gardiner’s decision that both proceedings should be tried together. I raise this because counsel for both SRG and the Maynard Marks plaintiffs suggested it might be appropriate for the Maynard Marks proceeding to proceed to trial and for the SRG proceeding to be
8 NZ Iron Sands Holdings Ltd v Toward Industries Ltd [2019] NZHC 2516 (footnote omitted).
adjourned. The reasons why it is desirable to have both proceedings heard together remain as valid now as they were when the Associate Judge made her decision.
[19] Secondly, counsel for the other parties suggested SRG is solely to blame for the situation that has arisen and must now bear the consequences of this. I do not accept this is the case. Some of the issues that have now arisen flow from the fact that the body corporate was extremely late in providing its particularised counterclaim. The fact that it was not served until 22 December 2022 meant that none of the parties had an opportunity to consider it until early this year. Furthermore, the fact that the body corporate did not apply for leave to file the document has created further difficulties.
[20] One of the primary considerations in the present context is that any further delay would be both prejudicial and unfair to the plaintiffs in the Maynard Marks proceeding. They have provided evidence of the distress they have already suffered and they should not be required to endure the consequences of further delay unless that is absolutely necessary. The Associate Judge considered their interests to be important when setting the current fixture. As the passage set out above confirms, she believed the prejudice to the Maynard Marks plaintiffs could be ameliorated through the allocation of a firm fixture that all parties could work towards. Any adjournment would obviously remove that comfort.
[21] Secondly, part of the present problem has arisen because SRG ultimately persuaded the Court and the other parties that it should not be required to respond to the counterclaim until its appeal against the Associate Judge’s summary judgment decision had been determined. It did so on the basis that the other parties, and in particular the body corporate, would not be prejudiced if that occurred. In submissions filed in support of an application for stay of the counterclaim pending disposition of the appeal counsel then acting for SRG advised the Court and other counsel as follows:
15.The Body Corporate will not suffer any prejudice if this Court grants a stay of the Counterclaim pending determination of the appeal. A decision in respect of the Appeal can be expected well ahead of any likely trial date, enabling SRG to catch up with any progress made by the other parties in the intervening months.
…
17. As addressed above, the stay pending appeal would not affect steps regarding the counterclaims against other parties or any ultimate trial fixture. It is submitted that there would be no or minimal prejudice to the Body Corporate or other defendants, and any such prejudice would be outweighed by the prejudice caused to SRG if a stay was declined.
[22] I regard these submissions as constituting an assurance that SRG would take such steps as were necessary to enable the counterclaim to catch up with the Maynard Marks proceeding if it obtained the stay that it sought. One of the issues that has now arisen is the fact that SRG requires six further weeks to complete discovery. This demonstrates that it did not institute measures to ensure it could comply with its discovery obligations within a month after delivery of the Court of Appeal’s decision as it originally agreed to do. Nor did it take steps to comply with Associate Judge Taylor’s direction that it provide discovery by 30 September 2022. The situation that has arisen in relation to SRG’s discovery is therefore entirely of its own making.
[23] Furthermore, HOBANZ and Maynard Marks issued cross-claims against SRG in July 2022. SRG had no ability to insist that these be determined by arbitration as it contended was the case with the claim by the body corporate. SRG has therefore been on notice since July 2022 that it would be participating in the trial scheduled to commence on 10 July 2023, regardless of the outcome of the appeal. It appears to have been oblivious to this fact.
[24] SRG should have planned to meet this certainty as well as the prospect that it might not succeed with its appeal. At the very least, this would involve the assembly of relevant documents to enable it to comply with the Associate Judge’s direction that it provided discovery by 30 September 2022. It would also have involved the engagement and briefing of experts to assist SRG to defend both the counterclaim by the body corporate and the cross-claims by HOBANZ and Maynard Marks. These steps would have been necessary even if the Court of Appeal had determined that the claim by the body corporate had to be determined by arbitration.
[25] The only point of substance for SRG relates to issues arising out of the late filing of the amended counterclaim, for which SRG bears no responsibility. Mr Gillies submits that the amended counterclaim that was filed and served on 22 December 2022 raises new allegations and abandons existing allegations. SRG is obviously not
prejudiced by the latter but it may be by the former. I consider this issue can best be resolved by the body corporate immediately applying for leave to file the amended counterclaim. If SRG considers it is unfairly prejudiced by any new allegations it can oppose the application and it will be given an urgent fixture.
[26] Mr Gillies also says that many of the allegations in the amended counterclaim are not explained or substantiated in the briefs of evidence the body corporate has served. He contends this is also the case for issues relating to quantum. The body corporate endeavours to explain the latter by saying that its experts cannot calculate quantum for some aspects of its claim until it receives SRG’s discovery. It contends, however, that the briefs of evidence adequately explain the balance of the matters about which Mr Gillies complains. It has also confirmed that it will respond to the notice requiring further and better particulars today.
[27] The short answer to this argument is that it is for the body corporate to establish its claim. Its evidence has now closed other than in relation to issues of quantum that may need to be re-pleaded once SRG provides its discovery. The body corporate will not, however, be permitted to re-formulate its claim or adduce new evidence going beyond issues relating to quantum. This means that the body corporate will be the party to suffer if its evidence is insufficient to establish aspects of its claim. SRG is not prejudiced by this issue.
[28] Furthermore, counsel for HOBANZ and Maynard Marks advised me during the hearing that their clients have also reached the view that the body corporate’s evidence is insufficient to establish aspects of its claim. Rather than alert the body corporate to the issue now they propose to address it at trial when it will be too late for the body corporate to rectify the situation. SRG is obviously free to take the same approach.
[29] Finally, I consider there is still sufficient time remaining until the commencement of the trial for SRG to complete its discovery obligations and serve its evidence. It still has nearly three and a half months, or approximately 15 weeks, to serve its briefs of evidence. This may be tight, but I consider it to be sufficient for
SRG to address those aspects of the body corporate’s claim it considers necessary to respond to.
Result
[30]The application for an adjournment of the trial is declined.
[31] At this stage I make no determination in relation to the body corporate’s application for “unless” orders regarding SRG’s discovery obligations. The body corporate has leave to request that application to be brought on for hearing if SRG does not complete its discovery as directed in a Minute that I issued following the hearing.
Lang J
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