Kaori Limited v Shrinkforce Shrink Wrap Services Limited

[2012] NZHC 2663

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2011-404-4603 [2012] NZHC 2663

BETWEEN  KAORI LIMITED Plaintiff

ANDSHRINKFORCE SHRINK WRAP SERVICES LIMITED

Defendant

Hearing:         10 October 2012

Counsel:         N F Flanagan & E C Rutherford for Plaintiff

T Joseph for Defendant

Judgment:      11 October 2012

JUDGMENT OF KEANE J

This judgment was delivered by  on  11 October 2012 at 4.45 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Date:

Solicitors:

Crown Solicitor, Auckland for Plaintiff

Gilbert Walker, Auckland for Defendant

KAORI LIMITED V SHRINKFORCE SHRINK WRAP SERVICES LIMITED HC AK CIV 2011-404-4603 [11

October 2012]

[1]      In December 2009 Kaori, a company registered in the Cayman Islands, which owns the 38 metre sailing yacht 'Kaori', entered into a contract with Shrinkforce to have the yacht shrink wrapped while its teak decking was replaced, and other repairs made, at an Auckland ship yard. The contract price was $84,108. The total cost to Kaori was $118,594.

[2]      In June 2010, when the shrink wrapping was removed, Kaori contends, the paint work to the hull was extensively damaged. A pale blue line ran the length of the hull. The paint work was marred by drip lines, glue residue and blotching. Kaori attributed this to the way in which the shrink wrapping had been applied or removed and  considered  the  damage  so  extensive  that  Shrinkforce  was  incapable  of remedying it. Kaori cancelled the contract.

[3]      In August 2011 Kaori brought this claim against Shrinkforce for $441,000, relying  then  on  an  estimate  given  by  Orams  Marine.  Its  claim  lies  under  the Consumer Guarantees Act 1993 and under the contract. Shrinkforce denies liability and contends that under the contract Kaori cannot claim under the Consumer Guarantees Act 1993 and can only claim what it paid out under the contract.

[4]      On 28 March 2012 this case was allocated a four day fixture to begin on 23

October 2012. Then, on 25 September 2012, Kaori applied, under HCR 10.15, to have the quantum of damages severed for separate hearing if it succeeds on liability. Quantum can only be fixed accurately, it contends, once the remedial work has taken place. That has still to happen.

[5]      Shrinkforce opposes this application. Quantum, it contends, can and ought to be resolved at the forthcoming fixture. Kaori's application comes unacceptably late and a split trial will result in duplication, delay and added costs. If it is found liable, Shrinkforce contends, it ought not to be left with an indeterminate liability to be resolved at some indefinite point in the future.

[6]      HCR 10.15 enables an order to be made, as a matter of discretion, splitting the trial as to quantum from that as to liability. It says this:

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.

[7]      The ordinary position is that quantum and liability are to be decided together at a single hearing. The one seeking a split of quantum from liability, therefore, carries an onus, which Fisher J has described as 'heavy'.[1] As he then said, such a split can result in duplication, delay and increased costs and, as he said also, 'The most important single question is usually the interaction between the issues intended to be traversed at the first hearing and those for the second.'

[1] Clear Communications Ltd v Telecom Corporation of NZ Ltd [1998] 12 PRNZ 333, 335; Young v St Lukes Square [1993] Ltd HC Auckland CIV 2003-404-3215, 17 November 2005; KPMG NZ v Gemmell HC Auckland CIV 2008-404-4288, 27 March 2009.

[8]      Whether  quantum  is  able to  be  resolved  as  an  entirely separate issue  is certainly a significant question in this instance but another, no less significant, is whether, should it become relevant, quantum would be able to be resolved at a second hearing without undue delay.

Liability and quantum issues

[9]      The primary issue at the forthcoming hearing is likely to be whether Kaori has any claim under the Consumer Guarantees Act 1993, or is left only with such claim  as  it  has  in  contract.  That  issue  of  law  has  no  bearing  on  this  present application.

[10]     The liability issues that are relevant are those to be resolved on the evidence. They concern the state of the hull's paint work before it was shrink wrapped. Was it

good or was it poor? They concern also the nature and extent of the damage to the paint  work  that  Kaori  alleges.  Can  any  such  damage  be  sheeted  home  to Shrinkforce?  Is  any such  damage  of  such  magnitude  as  to  justify an  award  of damages of the order that Kaori seeks?

[11]     If, at one extreme, Kaori can establish that the paint work was good, that there was no immediate need for the hull to be repainted, and that the damage was so extensive that it can only be remedied by repainting the hull, it will have established its loss. If, conversely, the paint work was already poor and repainting imminent, or any damage cannot be sheeted home to Shrinkforce, or was miniscule, it will fail.

[12]     Traversing these issues is a more immediate one that could prove decisive. Kaori contends that the paint work to the hull was extensively damaged between the waterline and the belt line above it, which lies just below the transom. Shrinkforce contends, relying on the evidence of a painting contractor, who quoted for the remedial work in October 2010, that it is confined to the area above the belt line and along the transom. Indeed that in October 2010 that area had already been repainted but defectively.

[13]     Should Kaori nevertheless succeed on liability, the issue of quantum will call for a distinct inquiry. The extent of Kaori's loss, in a precise sense, will depend on what is called for to repaint the yacht and at what cost.

[14]     Will the yacht have to be taken from the water on to the hard and for how long and how much will that cost? Will the mast have to be unstepped, and the rigging and any related electronic equipment taken down, and how much will that cost? What will it cost to repaint the hull? Also in issue will be whether there are related costs like the re-housing of the crew while this happens.

[15]     Presently, as I said at the outset, Kaori seeks damages relying on an estimate from Orams Marine, assuming that the work would be carried out in New Zealand. But the yacht is now in Thailand, where the work may be carried out. Or it may be carried out elsewhere in the world. The total costs, Kaori says, cannot presently be quantified. Hence this present application. But that leaves the issue of delay.

[16]     In the second half of 2010, after the shrink wrapping was removed, Kaori evidently did obtain quotations in Auckland to have the yacht repainted, from Orams Marine and from the painting contractor on which Shrinkforce relies to contest the scope of damage, and perhaps from others. Kaori did not accept any of those quotations.

[17]     The yacht then also required mechanical repairs and they took priority. In December 2010, I understand, the yacht's true owner, who lives on it for much of the year,  Kaori's  single  shareholder,  Michael  Panter,  elected  to  take  the  yacht  to Brisbane, and envisaged having the yacht repainted there. But there too the yacht had to undergo mechanical repairs and these took priority. The yacht was not repainted in Brisbane either.

[18]     Mr Panter then elected to sail to Thailand and that is where the yacht is presently. Kaori has not, I understand, yet entered into any contract to have the remedial work completed in Thailand or elsewhere. When, if at all, Kaori will do so is presently at large.

Conclusions

[19]     Standing in favour of Kaori's application is that, if liability is found in its favour, quantum ought to be resolved as accurately as it can be and preferably after any remedial work called for is complete and its cost known. Quantum, moreover, could be split off cleanly for a confined separate trial without any great duplication of witnesses or increase in cost.

[20]     Standing against Kaori's application is that it is made very late and carries the potential for indefinite delay. Kaori seeks a separate trial of quantum only because it has  foregone  two  chances  to  have  the  remedial  work  carried  out.  Presently, moreover,  it  is  unable  to  say  when  such  work  will  be  carried  out.  That  is unacceptable. This Court is under a duty to resolve cases promptly as well as justly. Shrinkforce, if found liable, is entitled to know what that liability is.

[21]     I decline Kaori's application. Quantum, as well as liability, must be resolved at the forthcoming fixture. But I add this. I have resolved this application on a broad appraisal of the case before the trial. The trial Judge, after hearing the evidence, may conclude that justice does require quantum to be severed for separate trial.

[22]     The trial Judge would, I imagine however, only countenance a separate trial of quantum if Kaori had committed itself by contract to have the remedial work carried out on a definite date in the very near future. I would imagine also that severance would only be granted on terms that protected Shrinkforce and ensured that any quantum trial took place sooner rather than later.

[23]     Shrinkforce is entitled to an award on this present application at scale 2B. But because severance of quantum may be revisited at the trial, which is very soon to take place, Shrinkforce's precise entitlement is better fixed, or recognised, in the

costs award eventually made.

P.J. Keane J