Lister v 2 Harrogate Street Limited HC Christchurch CIV 2008-409-1071

[2010] NZHC 2168

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2008-409-001071

BETWEEN  ANDREW ROSS LISTER

123 TRUSTEES LIMITED

AS TRUSTEES OF THE LISTER TRUST Plaintiffs

AND2 HARROGATE STREET LIMITED First Defendant

ANDPAUL MAURICE FOLEY Second Defendant

AND  FOLEY DESIGN LIMITED Third Defendant

ANDPAYNTER INVESTMENTS LIMITED Fourth Defendant

Hearing:         2 November 2010

Appearances: D Smith for Plaintiffs

O G Paulsen for First Defendant

Judgment:      2 November 2010

ORAL JUDGMENT OF HON. JUSTICE FRENCH

Introduction

[1]      2 Harrogate Street Limited seeks to strike out the plaintiffs’ claim against it. An Associate Judge declined to strike it out, and on review I upheld the Associate Judge’s decision.

[2]      2 Harrogate now wishes to appeal my decision to the Court of Appeal.

LISTER AND ORS V 2 HARROGATE STREET LIMITED AND ORS HC CHCH CIV-2008-409-001071  2

November 2010

[3]      To do that, it requires leave to appeal under s 26P of the Judicature Act. [4]  The application for leave is opposed.

Factual background

[5]      The proceeding concerns a motel complex owned by the plaintiffs in their capacity as trustees of the Lister Trust.

[6]      The purpose-built complex was originally developed by 2 Harrogate.  After construction, the complex was leased for a time and then in June 2002, 2 Harrogate sold the freehold to a purchaser described in the agreement as “Andrew Ross Lister or nominee”.   Mr Lister nominated the plaintiffs to take title to the property on settlement.

[7]      The plaintiffs allege the motel complex suffers from a number of building defects which have resulted in water ingress and resulting damage.   They seek to recover the cost of repairs and associated losses from several defendants, including the developer 2 Harrogate.

[8]      The statement of claim pleads two causes of action against 2 Harrogate.

[9]      The first cause of action is in contract, for alleged breach of certain express warranties contained in the sale agreement relating to building requirements.

[10]     The second cause of action is in tort.  The plaintiffs allege that 2 Harrogate owed a duty to subsequent purchasers of the motel complex to exercise reasonable care in the construction of the building.  2 Harrogate is alleged to have breached that duty by failing to ensure the building was constructed in a proper workmanlike manner and in accordance with the requirements of the building code, and by failing properly to supervise its contractors and other agents.

[11]     As I understand the statement of claim, it is not alleged that 2 Harrogate itself physically carried out any building work as opposed to engaging the services of others.

[12]     2  Harrogate  seeks  to  strike  out  both  claims  on  the  grounds  that  neither disclose any reasonable cause of action.   It contends the contractual claim is unsustainable, there being no contractual relationship between it and the plaintiffs (only between it and Mr Lister), and that no duty of care was owed in tort.

[13]     The Associate Judge and I both held that the contract argument had already been answered in the plaintiffs’ favour by the Court of Appeal decision, Laidlaw v Parsonage [2010] 1 NZLR 286.

[14]     In Laidlaw, the Court of Appeal held that a purchaser’s nominee under an agreement for sale and purchase does, as a result of s 4 of the Contracts (Privity) Act

1982, obtain the benefit of the contract and the right to sue on it.

[15]     2 Harrogate wishes to argue that Laidlaw was wrongly decided and should be revisited by the Court of Appeal.

[16]     As regards the tort claim, I held that the claim was a novel one and faced some difficulties, but that I could not be certain to the required degree that it was so untenable or so clearly bad it should be precluded from going forward.

The grounds of the application for leave

[17]     The  principles  applicable  to  the  granting  of  leave  to  appeal  are  well established.  As was stated in Snee v Snee [2000] NZFLR 120 at 22, the appeal must raise some question of law or fact capable of bona fide and serious argument in a case involving some interest public or private of sufficient importance to outweigh the cost and delay of the further appeal.  In the end, the guiding principle must be the requirements of justice.

[18]     The questions which 2 Harrogate wishes to pursue in the Court of Appeal are:

i)What  benefit  does  nomination  confer  upon  a  purchaser’s nominee under an agreement for sale and purchase of land?

ii)Does a developer/builder of a non-residential building owe a duty of care in tort to an immediate or subsequent owner to ensure   that   proper   care   and   skill   is   exercised   in   the construction of the building?

[19]     In  support  of  the  application  for  leave,  Mr  Paulsen  made  the  following submissions:

i)The Court of Appeal is not bound by its own decisions, and there are aspects of Laidlaw which make it especially appropriate for reconsideration, including practical consequences and overseas case law not argued or considered by the Court of Appeal.  The practical difficulties are said to include tax implications and doctrinal confusion between the concept of assignment and nomination.

ii)       The  arguments  have  not  yet  been  heard  because  the  High

Court is bound by Laidlaw.

iii)The increasing use of nominees as a device in agreements for sale and purchase means there is a strong public interest.

iv)Since my decision was issued, counsel have become aware of another High Court decision, Auckland Christian Mandarin Church Trust Board v Canam Construction (1995) Ltd & Ors HC Auckland CIV-2008-404-8526, 25 June 2010, in which Priestley J held that a builder does not own a duty of care to the owner of a commercial property or   a non-residential property.

v)While  a  strike  out  is  technically  interlocutory,  substantive rights are at stake and therefore the usual rule against allowing a second appeal in relation to interlocutories does not apply.

vi)      The application may determine the entire case. vii)     The issues are legal issues.

viii)     An appeal to the Court of Appeal will not delay the trial date.

Discussion

[20]     I have carefully considered each of these submissions, which Mr Paulsen has made well.  I am not however persuaded that Laidlaw does require reconsideration.

[21]     I am fortified in that conclusion by the fact that the Supreme Court declined leave to appeal from Laidlaw.

[22]     In any event, in my view it would be wrong for me to grant leave.  It should be  for  the  Court  of  Appeal  itself  to  determine  whether  it  wishes  to  reconsider Laidlaw.

[23]     As regards the tort claim, that does, in my judgment, satisfy the Snee test. However, it is only a fall-back claim, and would only be pursued in the event that the plaintiffs failed in upholding Laidlaw.   The tort claim is not likely, in the circumstances of this case, to add significantly to the length of the hearing and the cost.  In those circumstances, in my view little practical purpose would be served in granting leave.

[24]     For  all  of  those  reasons,  and  standing  back  and  looking at  the  situation overall, I am satisfied that the requirements of justice mean the application should be declined.

Costs

[25]    Costs are to follow the event.   Costs are awarded on a 2B basis, with disbursements including Mr Smith’s airfare.

Solicitors:

BentonLaw, Auckland

(Counsel: Advocacy Chambers, Auckland)

Cavell Leitch Pringle & Boyle, Christchurch

Cuningham Taylor, Christchurch