Hellaby Resource Services Limited v Body Corporate 197281
[2020] NZHC 2131
•21 August 2020
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-869
[2020] NZHC 2131
IN THE MATTER of the Mountain View Apartments BETWEEN
HELLABY RESOURCE SERVICES LIMITED
First Plaintiff
TBS REMCON LIMITED
Second PlaintiffAND
BODY CORPORATE 197281
Defendant
Hearing: 20 August 2020 Appearances:
J Q Wilson and R D H Massey for Plaintiffs
R J Hollyman QC and W J Revell for Defendant
Judgment:
21 August 2020
JUDGMENT OF LANG J
[on application for leave to apply for summary judgment]
This judgment was delivered by me on 21 August 2020 at 3 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
Solicitors:
Bell Gully, Auckland Farry & Co, Auckland Counsel:
R J Hollyman QC, Auckland
HELLABY RESOURCE SERVICES LTD v BODY CORPORATE 197281 [2020] NZHC 2131 [21 August
2020]
[1] In this proceeding the second plaintiff, TBS Remcon Ltd (TBS), seeks leave to apply for summary judgment against the defendant, Body Corporate 197281.
[2] Leave is required under r 12.4(2AA) of the High Court Rules 2016. This rule applies where a second or subsequent application for summary judgment is filed in a proceeding. Leave is required in the present case because the first plaintiff, Hellaby Resource Services Limited (Hellaby), failed in an earlier application for summary judgment against the body corporate. TBS as second plaintiff now wishes to advance its own application for summary judgment. The body corporate opposes the application.
Background
[3] The proceeding relates to a claim for the cost of services performed under a construction contract under which TBS agreed to carry out work on an apartment complex administered by the body corporate under the Unit Titles Act 2010. TBS issued payment claims for the work it carried out under the contract and these were duly approved in payment schedules issued under the contract. Both parties followed the procedures prescribed in the Construction Contracts Act 2002 (CCA). In this proceeding TBS seeks to recover the sums contained in duly issued payment schedules.
[4] Hellaby was the only plaintiff when the proceeding was originally issued on 8 May 2019. Hellaby sought summary judgment against the body corporate based on the fact that TBS had assigned its right to recover the debt to Hellaby in a deed of assignment dated 12 December 2018.
[5]The construction contract contained the following clause:
2.9 Assignment 2.9.1
Neither party shall assign the whole or any part of the Contract without the prior written consent of the other party. Such consent shall not be unreasonably withheld or delayed.
…
[6] In a judgment delivered on 16 October 2019, Associate Judge Lester dismissed Hellaby’s application for summary judgment.1 The Associate Judge determined that TBS had not obtained the body corporate’s prior written consent to the assignment of its rights under the contract to Hellaby as required by Clause 2.0.1. This meant the purported assignment was ineffective against the body corporate.2
[7] On 4 March 2020 Hellaby applied to join TBS as a second plaintiff and intimated TBS would apply for summary judgment against the body corporate if it was joined. The body corporate initially opposed the application for joinder but ultimately consented to the joinder of TBS as second plaintiff. TBS was then joined as a second plaintiff on 9 July 2020.
[8] TBS filed an amended statement of claim on 3 August 2020 and on the same date filed the present application seeking leave to obtain summary judgment against the body corporate. The application for summary judgment and affidavits in support were filed at the same time.
Relevant principles
[9]Rule 12.4(2AA) provides as follows:
The Court may grant leave in respect of a second or subsequent application for summary judgment in the same proceeding if special circumstances exist.
[10] Rule 12.4(2AA) took effect from 24 July 2020.3 To date it appears no cases have been decided under the new rule. It seems likely, however, that it was introduced to remove a difficulty identified in several earlier cases. In Air New Zealand Ltd v Wellington International Airport Ltd, the applicant advanced a second application for summary judgment in the same proceeding.4 The authorities were to the effect that a plaintiff could not bring a second application for summary judgment in the same proceeding.5 An application for summary judgment was, however, permissible in a proceeding filed after an application for summary judgment had been declined in an
1 Hellaby Resources Services Ltd v Body Corporate 197281 [2019] NZHC 2641.
2 At [31].
3 High Court Amendment Rules 2020, r 11.
4 Air New Zealand Ltd v Wellington International Airport Ltd [2009] NZAR 138 (HC).
5 Braid Motors Ltd v Scott (2001) 15 PRNZ 508 (HC) at [58].
earlier discontinued proceeding dealing with the same subject matter but only if the first application for summary judgment had failed on a technical basis.6 In the Wellington International Airport case the first application for summary judgment had been filed in the same proceeding but had been dismissed on a technicality. Justice Wild held that the rules as they then stood permitted only one application for summary judgment by each party in any proceeding.7 The Judge also observed that this outcome was “perhaps Draconian and certainly less than satisfactory”.8
[11] Where a party does not initially apply for summary judgment it may do so subsequently with leave under r 12.4(2). The principles that apply when a plaintiff applies for leave under r 12.4(2) are well understood. In short, an applicant must satisfactorily explain the delay that has occurred in filing the application for summary judgment, as well as set out the merits of the proposed application and deal with any risk of a miscarriage of justice.9
[12] I see an application under r 12.4(2AA) as involving slightly different considerations because the applicant under that rule must show that special circumstances exist to justify a second application for summary judgment in the same proceeding. Although the issue of delay may still be relevant, it may be less so when the second application is filed by a party other than the party who filed an earlier application for summary judgment. The focus under the new rule is on the reason why the second or subsequent application for summary judgment has been filed. This will generally inform the decision as to whether special circumstances exist to justify the likely cost and delay of permitting a second application for summary judgment to proceed.
[13] Some guidance can be obtained from the manner in which the courts have applied r 7.52, which provides:
7.52 Limitation as to second interlocutory application
6 Post v Ferrall (1999) PRNZ 687 (HC) at 690.
7 Air New Zealand Ltd v Wellington International Airport Ltd, above n 4, at [86]-[88].
8 At [88].
9 Tip Top Ice Cream Company Ltd v Polarland Ltd (2002) 7 NZBLC 103,564 (HC) at [28].
(1)A party who fails on an interlocutory application must not apply again for the same or a similar order without first obtaining the leave of a Judge.
(2)A Judge may grant leave only in special circumstances.
(3)This rule does not apply to a second interlocutory application for summary judgment, in which case rule 12.4(2AA) applies.
(Emphasis added)
[14] The requirement for leave under r 7.52 assists in preventing plaintiffs from making unmeritorious duplicate applications.10 Mr Wilson for TBS referred me in this context to the judgment of Associate Judge Bell in Commissioner of Inland Revenue v Patel.11 In that case the Associate Judge observed that the words “special circumstances” are “wide, comprehensive and flexible words indicating something abnormal, oncoming or out of the ordinary but nevertheless less than extraordinary or unique”.12 The rule is based on a principle similar to that of res judicata, that prevents issues that have been finally determined from being subjected to collateral challenge in the same or other proceedings.
[15] I endorse these sentiments but caution against any attempt to provide prescriptive circumstances in which the new rule is to apply. In short, the courts should not encourage litigants to pursue successive unmeritorious applications for summary judgment. It is well recognised, however, that the summary judgment procedure is designed to enable the speedy resolution of meritorious claims where the plaintiff can satisfy the Court that there is no genuinely arguable defence.13 The need for special circumstances to be present before a second application for summary judgment may be advanced enables the Court to subject such applications to scrutiny before they are permitted to proceed. Where such circumstances exist the courts should not deny a plaintiff with a meritorious claim the opportunity to obtain summary judgment and thereby avoid the delay and expense of the interlocutory process and a full trial.
10 Citing Lawrence Riverside Ltd v C P Holdings Ltd HC Auckland CIV-2006-404-4739, 13 December 2010.
11 Commissioner of Inland Revenue v Patel [2013] NZHC 477.
12 Citing Kidd v Van Heeren (1997) 11 PRNZ 422 (CA) at 424.
13 Doyles Trading Co Ltd v West End Services Ltd [1989] 1 NZLR 38 (CA).
Decision
[16] It is not necessary for present purposes to set out the factual background to the present proceeding. It is sufficient to say that TBS carried out the work for the body corporate in an endeavour to rectify weathertightness issues from which the apartment complex suffered. This has not been a straightforward process and ultimately cost substantially more than was originally envisaged. Not surprisingly, the unit owners are very unhappy with that outcome. Furthermore, they contend TBS has failed to adequately address the issues afflicting the complex. The body corporate intends to file a counterclaim against TBS seeking substantial damages. With that background in mind I now address the discrete arguments the body corporate has advanced in opposition to the application.
Delay
[17] The body corporate points out that the Associate Judge released his decision on 16 October 2019 but Hellaby did not apply to join TBS as a plaintiff until 4 March 2020. The body corporate says Hellaby has offered no adequate explanation for the delay and this counts against the present application.
[18] It is not difficult to see why there was some delay following delivery of the Associate Judge’s decision. First, Hellaby and TBS needed to consider the decision and decide how to respond to it. Having decided TBS should be joined as a plaintiff they needed to reach agreement regarding the terms on which that was to occur. This involved agreement regarding legal representation.
[19] This process was completed by 10 February 2020 because Hellaby sought the body corporate’s consent to TBS’s joinder in a letter bearing that date. The letter was sent to the body corporate by email on 12 February 2020, seeking the body corporate’s response no later than 21 February 2020. When the body corporate did not respond Hellaby filed the application seeking joinder of TBS as a plaintiff on 4 March 2020.
[20] I do not consider a delay of approximately four and a half months to be untoward given the steps the parties needed to take following delivery of the Associate Judge’s his decision and the interruption caused by the Christmas break during this
period. I therefore do not accept delay is a factor counting against the present application.
The knowledge of the plaintiffs
[21] Mr Hollyman for the body corporate contends both Hellaby and TBS have always known the facts underpinning the claim against the body corporate. It submits they should therefore have proceeded from the outset with both Hellaby and TBS as plaintiffs.
[22] I do not accept this submission. In the first application for summary judgment Hellaby advanced its case on the basis that TBS had validly assigned to it the debt that the body corporate owed. It contended this was the assignment of a discrete chose in action and not an assignment of any rights under the construction contract. The Associate Judge did not accept this argument for the reasons he gave in his judgment.14 It is clear, however, that Hellaby initially proceeded under a mistaken view as to both the facts and the law. I do not consider Hellaby deliberately chose to advance one argument in the first application for summary judgment in the knowledge that another argument was open to TBS.
Summary judgment will not end the dispute
[23] The body corporate next argues that resolution of the application for summary judgment will not end the dispute between the parties because the counterclaim will still need to be determined. I accept this may be the case even though the body corporate has not yet filed the counterclaim.
[24] The argument overlooks the fact, however, that the entry of summary judgment would end the dispute relating to TBS’s claim. The Court would then be free to concentrate on the body corporate’s counterclaim. It would also relieve the Court and the parties of the burden of undertaking interlocutory procedures and a full trial on TBS’s claim. To that extent the entry of summary judgment would be advantageous even though it may not resolve all outstanding issues between the parties.
14 Hellaby Resource Services Ltd v Body Corporate 197281, above n 1, at [18]-[31].
An application for summary judgment would not succeed
[25] The body corporate contends it has substantive arguments that will enable it to persuade the Court that summary judgment should not be entered. In the alternative, it says the Court may well exercise its discretion not to enter summary judgment. Finally, if summary judgment is entered, the Court may stay execution of the judgment pending determination of the counterclaim.
[26] The Associate Judge dealt with two of the body corporate’s alternative legal arguments, albeit briefly, and rejected both.15 Mr Hollyman for the body corporate suggests the Associate Judge’s reasoning on these issues is open to question and he has other arguments that he wishes to advance in any event.
[27] The Court is obviously unlikely to grant leave to bring a second application for summary judgment in a case in a case where the application for summary judgment plainly cannot succeed. I cannot say this is the position in the present case. The fact that the claim is for sums payable under a construction contract governed by the CCA suggests an application for summary judgment is likely to have considerable prospects of success. The real issue is likely to relate to whether the Court should stay execution of the judgment pending determination of the body corporate’s counterclaim. That issue can only be determined once the outcome of the application for summary judgment is known.
[28] I also consider s 79 of the CCA provides a considerable obstacle to the body corporate’s argument that the existence of the counterclaim may prevent TBS from obtaining summary judgment. Section 79 provides as follows:
79Proceedings for recovery of debt not affected by counterclaim, set- off, or cross-demand
In any proceedings for the recovery of a debt under section 23 or section 24 or section 59, the court must not give effect to any counterclaim, set-off, or cross-demand raised by any party to those proceedings other than a set-off of a liquidated amount if—
(a)judgment has been entered for that amount; or
15 At [37] and [46].
(b)there is not in fact any dispute between the parties in relation to the claim for that amount.
[29] The body corporate has not yet filed its counterclaim, let alone obtained judgment on it. It therefore seems the Court will be precluded from taking the counterclaim into account when considering TBS’s application for summary judgment.
Conclusion
[30] The path the proceeding has taken to date demonstrates clearly why TBS did not advance its claim against the body corporate from the outset. It did not become involved in the proceeding until this Court determined the assignment of the debt to Hellaby was ineffective. I consider that fact amounts to special circumstances in terms of r 12.4(2AA). It is therefore appropriate, in my view, that TBS should now be permitted to apply for summary judgment as the original party to the construction contract. I see no unfair prejudice to the body corporate in that occurring.
[31] It is also interesting to note that TBS’s application for summary judgment does not offend the principle identified by Wild J in the Wellington International Airport case, namely that each party to a proceeding is entitled to bring one application for summary judgment. As will already be obvious, TBS has not yet brought an application for summary judgment in this proceeding. It is therefore likely that it would have been granted leave to bring a second application even if r 12.4(2AA) had not been promulgated.
Result
[32] I grant TBS leave to bring its application for summary judgment. The application for summary judgment is to be listed for first call on 1 September 2020 at 9 am.
Lang J
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