Manning Private Limited v Triple Star Management Limited
[2015] NZHC 3047
•3 December 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2014-409-000729 [2015] NZHC 3047
BETWEEN MANNING PRIVATE LIMITED
Plaintiff
AND
J E MANNING AND L K MANNING Second Plaintiff
AND
TRIPLE STAR MANAGEMENT LIMITED
First Defendant
AND
EDGE CONSTRUCTION 2010
LIMITED
Second DefendantAND
WATERPROOF STRUCTURES QUEENSTOWN LIMITED Third Defendant
Hearing: 12 November 2015 Appearances:
D-M Cross & J K Stewart for the Plaintiff
D A Webb & S Goodwin for the Second DefendantJudgment:
3 December 2015
JUDGMENT OF NATION J
Directory
[1] In this judgment, for simplicity, I refer to the following:
Manning Investments – Manning Investments Limited, a company of which the
Mannings are directors. The initial registered proprietor of title to the Hawea property.
MANNING v TRIPLE STAR & EDGE CONSTRUCTION [2015] NZHC 3047 [3 December 2015]
MPL – Manning Private Limited, the subsequent proprietor of title to the Hawea property, the first plaintiff.
The Mannings – James and Louise Manning, the second plaintiffs. Triple Star – Triple Star Management Limited, the first defendant. Edge – Edge Construction 2010 Limited, the second defendant.
Waterproof Structures – Waterproof Structures Queenstown Limited, the third defendant.
The Hawea property – the property which is the subject of these proceedings at 598
Lake Hawea, Albert Town Road, Wanaka.
The construction works – the overall project and construction works, the upgrading of an existing dwelling, the construction of a swimming pool, cabana and surrounding site works and the building of a new house on the Hawea property.
Introduction
[2] In February 2013, Mr James Manning signed a letter by which he agreed Triple Star would manage the construction works on the Hawea property which the Mannings were about to buy. Around the same time, Triple Star arranged for a building company, Edge, with which it was closely associated, to carry out much of the construction work. Edge subsequently engaged Waterproof Structures on a subcontract to do waterproofing work in connection with the pool.
[3] MPL and the Mannings claim that there were significant defects in the way work was carried out in connection with the pool and that MPL, or alternatively the Mannings, are entitled to damages in the sum of $691,568 plus further costs as a result of the costs that will be incurred in rectifying those claimed defects.
[4] On 28 July 2015, Edge applied to the Court for an order striking out MPL’s claim on the basis there was no contractual relationship between MPL and Edge, and no novation or other transaction which gave MPL rights as against Edge.
The relevant pleadings
[5] MPL was the only plaintiff on a first amended statement of claim dated 2
April 2015. MPL claimed:
(a) Manning Investments (and not the Mannings) entered into a contract with Triple Star for Triple Star to provide project management services in respect of the construction works on the Hawea property;
(b) in February 2012, Manning Investments entered into a contract with
Edge to carry out the construction works, including the pool works;
(c) in June 2013, when MPL replaced Manning Investments as the registered proprietor of the Hawea property, MPL replaced Manning Investments under the project management agreement and the construction works contract;
(d)in August 2013, Triple Star and Edge were on notice of this replacement, pursuant to oral and written notice, particularly an email sent on 12 August 2013; and
(e) pool work began at the property in or about 2013. Around December
2013, Waterproof Structures carried out waterproofing work at the
Hawea property.
[6] In a statement of defence dated 18 May 2015, Edge denied it ever had a contractual arrangement with Manning Investments and denied it was negligent or in breach of contract in the ways alleged by Manning Investments. It also asserted that it had been engaged by the Mannings in relation to the construction works.
[7] Edge filed its application to strike out MPL’s claim on 28 July 2015.
[8] MPL and the Mannings then filed a second amended statement of claim dated
3 August 2015. In that amended statement of claim, MPL and the Mannings pleaded, amongst other things:
(a) pursuant to an agreement dated 24 February 2012, Triple Star was engaged to be project manager for the construction works on the Hawea property;
(b) in or about February 2012, the Mannings entered into a contract with
Edge under which Edge was to carry out the construction works;
(c) the contract for project management with Triple Star and the construction work contract with Edge were entered into by the Mannings either in their own capacity or on behalf of Manning Investments;
(d) on or about March 2012, construction works commenced at the Hawea property;
(e) the Mannings were the directors of Manning Investments which was the registered proprietor of the Hawea property from 4 July 2012 until 28
June 2013 when it was transferred to MPL;
(f) on or about 28 June 2013, when MPL became the registered proprietor of the property, MPL replaced the Mannings (either in their own capacity or on behalf of Manning Investment Ltd) under the project management agreement with Triple Star and the construction contract with Edge;
(g) on or about 12 August 2013, Triple Star and Edge “were on notice” that MPL was replacing the Mannings (either in its own capacity or on behalf of Manning Investments Limited) under the project management agreement and the construction contract, pursuant to oral and written notice by email sent on 12 August 2013 at or about 1.46 pm; or
(h) in the alternative, if MPL did not replace the Mannings or if Edge and
Triple Star were not notified of the change (which is denied) then the
construction contract and project management agreement remained with the Mannings (either in their own capacity or on behalf of Manning Investments Limited);
(i) Waterproof Structures was engaged by Edge as a subcontractor pursuant to a subcontract dated 10 December 2013 that identified MPL as “principal” under the “head construction works contract”; and
(j) work on the pool at the Hawea property was carried out in December
2013.
[9] The amended claim referred to material terms of the project management contract between “MPL or, in the alternative, the Mannings (either in their own capacity or on behalf of Manning Investments) and Triple Star”. It also referred to material terms of the construction works contract between MPL or, in the alternative, the Mannings (either in their own capacity or on behalf of Manning Investments) and Edge.
[10] The second amended statement of claim referred to alleged defects in work that had been done in relation to the surface around the pool, defects with the pool pump and filter system and with the pool cover.
[11] As a first cause of action for breach of contract, MPL or, in the alternative, the Mannings claimed Edge was responsible for carrying out certain work at the property pursuant to the contract and was in breach of that contract in various ways.
[12] As a second cause of action against Edge, MPL or, in the alternative, the Mannings claimed that Edge owed a duty of care to MPL or, in the alternative, to the Mannings to ensure that construction works were carried out in a proper and competent manner and with reasonable care and skill. MPL alleged that Edge breached its duty of care in the way it had carried out work associated with the pool, including the waterproofing work.
[13] In a statement of defence to this second amended statement of claim, Edge asserted it was engaged by Triple Star to provide building and associated works to the Mannings. It denied there was any disclosure to Edge that the Mannings were acting as agents for any third party. It also specifically denied the allegation that MPL had become the registered proprietor of the Hawea property and that MPL had replaced the Mannings under the project management agreement and construction contract.
[14] Edge asserted that MPL “has not adequately pleaded the nature of the purported “replacement” of Manning Investments Limited with MPL”. It admitted receiving an email on 12 August 2013 requesting that invoices be sent to MPL but otherwise denied receiving notice on 12 August 2013 that MPL was replacing the Mannings under the project management agreement and the construction contract. It denied the alleged breaches of contract and particulars of negligence as pleaded.
[15] Edge’s application to strike out the plaintiff’s statement of claim as against Edge was still in terms as originally filed. Essentially, the application was made on the basis that MPL was not a party to any contract with Edge and had no privity of contract in relation to any oral construction agreement involving Edge. In particular, the application was made on the basis that there had:
… not been a novation of the construction contract or other transaction to which [Edge] was party or of which [Edge] was notified which creates or transferred rights and obligations under the construction contract which are enforceable at the suit of [MPL].
[16] With the application was a brief affidavit from Mr Peter Campbell. He was a director and shareholder of Edge and also a director and shareholder of Triple Star. With his affidavit, he produced various documents relating to the arrangements entered into by Triple Star and the Mannings, the way in which ownership of the Hawea property was recorded and changed as shown by the title to that property, the way Edge had invoiced Triple Star for construction work done by Edge and the way Triple Star had invoiced the cost for its management work and the subcontractors and other costs which had to be paid.
[17] In submissions for Edge, Mr Webb acknowledged that the strike out application could be made only in relation to the alleged claims for breach of contract which MPL was making against Edge. He did not seek to pursue the application in respect of the claims in negligence. He submitted that, if there was no tenable basis for MPL to succeed against Edge on a claim in contract, that part of the claim should be struck out so that there could be certainty as to the basis on which any entitlement for damages should be assessed. He submitted that the pleadings had put MPL on clear notice that Edge contended there was no contractual relationship between Edge and MPL. He submitted that the second amended statement of claim did not disclose a tenable basis for MPL to claim in contract against Edge because MPL had not asserted there had been a novation or assignment of the contracts between Edge and the Mannings, and there was inadequate particularisation of the facts upon which either could be asserted.
[18] Ms Stewart, for MPL, submitted that matters of law did not have to be pleaded, that the facts sufficient to establish either novation or assignment had been sufficiently pleaded but that, if this was not so, that could be remedied through the provision of further particulars and thus did not justify or necessitate striking out the claim in contract.
Strike out principles
[19] Counsel were agreed as to the principles which I must apply in considering a strike out application.
[20] The application for strike out has to be considered on the basis that “pleaded facts, whether or not admitted, are assumed to be true, although this does not extend to pleaded allegations which are entirely speculative and without foundation”.1
[21] It has been said by Judges in the Supreme Court that “[it] is inappropriate to
strike out a claim summarily unless the Court can be certain that it cannot succeed”.2
1 McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR15.7.02], citing
Attorney-General v Prince [1998] 1 NZLR 262 (CA); Couch v Attorney-General [2008] NZSC
45, [2008] 3 NZLR 725.
2 Couch v Attorney-General, above n 1, at [33] per Elias CJ and Anderson J.
[22] It is also accepted that the jurisdiction to strike out is to be exercised sparingly and only in clear cases.3 This reflects the Court’s reluctance to terminate a claim or defence short of trial.
Possibility of amendment
[23] Ms Stewart referred to comments that had been made by Tipping J to the effect that parties whose pleadings are attacked in a strike out application will normally be given the opportunity of amendment if it will cure the matters complained of.4 She considered the plaintiffs’ pleadings were adequate to give Edge notice of the basis on which MPL was asserting it had a tenable claim in contract against Edge. However, indicated that the Mannings and MPL would be willing to provide particulars of the basis on which they asserted there was, by way of novation or alternatively assignment, a transfer of the Mannings’ personal rights under
contracts with Triple Star and Edge to MPL. I also note Ms Stewart’s observation that Triple Star has not sought either further particulars or strike out insofar as MPL’s contractual claim against Triple Star is concerned.
Adequate factual basis
[24] I consider that, in the second amended statement of claim, MPL has given adequate notice to Edge of the factual basis on which it alleges that Edge had contractual obligations to MPL in relation to the construction work, including waterproofing work to be carried out by Waterproof Structures.
[25] In the pleadings as they stand, MPL and the Mannings’ claims against all defendants relate to alleged defects in the pool work and, to a major extent, the waterproofing work done by Waterproof Structures. Waterproof Structures did its work pursuant to a subcontract it entered into with Edge.
[26] The second amended statement of claim refers particularly to the terms of the subcontract and the fact that the subcontract refers to MPL as the principal. It is
alleged that this subcontract was dated 10 December 2013. It is claimed that
3 At [32]; Attorney-General v Prince, above n 1, at 267.
4 Marshall Futures Ltd v Marshall [1992] 1 NZLR 316 (HC) at 323-324.
Waterproof Structures carried out its work at the Hawea property in or around
December 2013.
[27] Although there is no pleading in the second amended statement of claim that Edge continued with construction work and entered into a subcontract with Waterproof Structures having agreed that all of this was done for MPL as principal, sufficient facts have been pleaded to inform Edge that this is what was being alleged.
[28] Certain evidence has been put before the Court through the affidavits and through Edge’s bundle of documents. On the basis of those documents, it cannot be said that MPL’s pleaded facts are entirely speculative and without foundation.
[29] In summary, the documents show:
· In February 2013, the registered owners of the Hawea property were a non-related party, the Findlays.
· By letter of 24 February 2014 from Triple Star to the Mannings, Triple Star and the Mannings agreed that Triple Star would manage the building project at the Hawea property. The agreement referred to the proposed barn design which was ready for building consent submission “pending settlement of the property and receipt of resource consent”.
· At the same time, in that document signed by Mr Campbell, as director of Triple Star, the parties acknowledged that Mr Campbell owned 50 per cent of Edge and the parties would not foresee any conflict of interest in both Triple Star and Edge having the roles of project manager and contractor respectively. The document also recorded that communications with contractors would be through Triple Star and the contractors “will be required to work under the direction of, and cooperate with, Triple Star”.
· Around the same time, Triple Star arranged for Edge to be the main contractor for the construction works at the Hawea property.
· On 4 July 2012, a transfer to Manning Investments was registered on the title for the Hawea property. Manning Investments was a company in which the Mannings were equal shareholders and of which they were appointed as directors in 2012.
· MPL was incorporated on 17 May 2013.
· On 28 June 2013, a transfer to MPL was registered on the title to the
Hawea property.
· Triple Star drew up an invoice dated 31 July 2013 addressed to the Mannings for a total of $257,211.14 excluding GST and a small credit. That invoice included a claim from Edge for $231,653.22. The invoice was made out to the Mannings. The reference on the invoice was “Manning-claim July”.
· With the invoice was a notice under the Construction Contracts Act 2002 from Edge. That notice, addressed to James Manning as payer, stated “payment has to be made as per the contract signed between the company and you as our client”. There was in fact no written contract between Edge and Mr Manning. To the extent there was a written agreement, it was by way of the letter between Triple Star and the Mannings and related to project management, not the construction work.
· On 12 August 2013 at 8.58 am, Triple Star emailed Mr Manning attaching “monthly report and associated invoices” for that month. It invited Mr Manning to contact them if he had any queries.
· At 1.46 pm, Mr Manning emailed Triple Star and asked it to invoice
MPL, ATF Manning Private Trust at the Hawea property address.
· On 31 August 2013, Triple Star invoiced MPL for a further $274,393.34 excluding GST. The invoice included a claim for $269,319.33 invoiced
by Edge. Edge’s payment claim referred to James Manning as payer as with other costs incurred in relation to the project.
· A written subcontract agreement dated 10 December 2013 was entered into between Waterproofing Structures and Edge for the supply and installation of a waterproof system to the swimming pool at the Hawea property. That contract was signed on behalf of Edge by a Mr Twigg as the authorised representative of Edge. Mr Twigg was also the Triple Star representative who had sent Mr Manning the July claim invoices with an email of 12 August 2013. He had also been sent the email from Mr Manning of 12 August 2013 asking for the invoice to be made out to MPL.
· The subcontract agreement between Edge and Waterproof Structures was signed by Waterproof Structures’ authorised representative. The subcontract agreement, under the heading “background”, recited that Edge had entered into a contract with MPL as “principal”. Pursuant to the subcontract, Edge and Waterproof Structures agreed “they will carry out and fulfil all obligations imposed on them by this subcontract agreement”. The parties agreed that the subcontract included “the contract documents (as defined under the head contract) which relate to
the subcontract works”.5 Clause 2.1 of the subcontract stated “all the
powers and obligations of the principal and engineer, under the Head Contract, extend to this subcontract and must be exercised by the Contractor”.
[30] Although all this will have to be the subject of evidence when these proceedings go to trial, on the basis of the documents which are already available to the Court, there would appear to be a clearly tenable evidential basis for MPL to claim that, after MPL acquired title to the Hawea property, Triple Star and Edge both
agreed that the contracts for management of the project and for the construction
5 There was no written contract with regard to the construction works but it must be at least arguable that through the terms of the subcontract agreement, Edge and Waterproof Structures agreed they would both be bound by the terms of the contract referred to in the background as being between Edge and MPL.
work relating to the pool would be for the benefit of MPL and it would be MPL which had the rights and obligations of principal on the construction work contract. It also appears to be tenable for MPL to claim it agreed to pay for the continuing construction work on that basis and both Triple Star and Edge continued with the work required of them on that same basis. MPL may be able to claim that Edge is estopped from relying on contract law to avoid any liability it might thus have to MPL.
[31] Matters of law do not have to be pleaded. The factual basis on which MPL claims it had a contractual relationship with Edge is adequately before the Court. Although Ms Stewart indicated the plaintiffs’ would be willing to amend their statement of claim if this was necessary, I make no directions in that regard given the detailed information which has been given to Edge as to the factual basis on which MPL claims to have obtained contractual rights against Edge. The precise legal basis for MPL’s claim will nevertheless have to be articulated in the plaintiffs’ submissions at trial if they have not been presented in some other way before then.
Conclusion
[32] I find that this is not an appropriate case to strike out the whole or any part of
MPL’s claim as against Edge. The application is dismissed.
Costs
[33] If agreement cannot be reached over costs and either party wishes to make an application for costs, a memorandum is to be filed on behalf of MPL by 11
December 2015. A memorandum in response is to be filed for Edge by 18 December
2015. Each memorandum is to be no longer than three pages. As discussed with counsel, I will then deal with any issue as to costs on the basis of the memoranda presented.
Solicitors:
Minter Ellison Rudd Watts, Auckland
Lane Neave, Christchurch.
0
0
0