Martin v Cowan
[2013] NZHC 1274
•31 May 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-6867 [2013] NZHC 1274
BETWEEN JULIA MARTIN AND STEPHEN FARRELL
Plaintiffs
AND
JEFFERY PETER COWAN AND PRUDENCE JANE COWAN Defendants
Hearing: 7 May 2013 Appearances:
J Lethbridge for Plaintiffs
I Auld for DefendantsJudgment:
31 May 2013
RESERVED JUDGMENT OF ASSOCIATE JUDGE SARGISSON (Summary Judgment)
This judgment was delivered by me on 31 May 2013 at 4.30 pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date ..........................
MARTIN AND FARRELL v COWAN AND COWAN [2013] NZHC 1274 [31 May 2013]
[1] The defendants, Jeffrey and Prudence Cowan, claim summary judgment
dismissing the plaintiffs’ claim against them. They rely on High Court Rule
12.12(2). It provides:
The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff's statement of claim can succeed.
[2] The application is opposed.
[3] The essential issue in this application is whether the defendants who are sued in contract solely for breach of warranty have an unassailable defence to the claim in the statement of claim. The defence relied on is that the plaintiffs have no standing to make a valid legal claim for breach of warranty and have in any event suffered no loss. The onus is on the defendants to show they have such a defence.
Background
The claim in the statement of claim
[4] On 27 October 2011 the plaintiffs commenced this proceeding against the Cowans. The basis of the plaintiffs’ claim is that an agreement for sale and purchase entered into on 26 October 2005, between the Cowans as vendors and the plaintiffs as purchasers. The property the Cowans were selling was their house in Reimers Ave, Mt Eden.
[5] On 25 November 2015, as provided for in the agreement, settlement took place and the Cowans parted with possession.
[6] The plaintiffs allege that the Cowans carried out building work on the house and built a garage that did not comply with the Building Act 1991 and thereby breached a standard warranty in the agreement. Relevantly, the warranty states:
6.2The vendor warrants and undertakes that at the giving and taking of possession:
…
(5) Where the vendor has done or caused or permitted to be done on the property any works for which a permit or building consent was required by law
…
(d) All obligations imposed under the Building Act 1991 were fully complied with.
[Emphasis added]
[7] Additionally the plaintiffs allege that they have suffered loss as a result of the breach in that they have expended $15,000 on repairs, suffered loss from diminution of value of $60,000 in relation to the garage and face further expenditure for remedial works estimated at approximately $150,000. They seek judgment as to liability and damages of $225,000.
Statement of defence
[8] In their statement of defence, filed on 14 December 2011, the Cowans admit that the plaintiffs purchased their property but deny they breached the warranty. Additionally, they plead an affirmative defence that the sole cause of action accrued on 26 October 2005, the date of the agreement, and that the plaintiffs’ claim is statute barred.
The Summary Judgment Application
Defendants’ case
[9] On 4 February 2013 on account of documents obtained on discovery, the defendants filed their application for summary judgment.1
[10] The application asserts that the plaintiffs’ claim cannot succeed. No specific grounds for the assertion are set out in the application as required by rule 7.19.2 The application relies, in non-specific terms, on the supporting affidavit of Mr Cowan
sworn on 4 February 2013.
1 Associate Judge Doogue made directions on 3 February 2012 giving the defendants leave to file the application.
2 High Court Rules, r 7.19.
[11] It is apparent from the affidavit that the defendants rely on a factual argument that differs from the limitation defence set out in the statement of defence. In the affidavit Mr Cowan deposes that documents obtained on discovery show that it was not the plaintiffs but the trustees of the plaintiffs’ family trust (known as the Slan Abhaile Family Trust) who purchased the property and that trustees have owned the property since purchase. The plaintiffs were not the owners of the property when the claim was filed and did not became the owners until January 2012 when appointed
substitute trustees.3
[12] Mr Cowan exhibits copies of various documents relating to the Slan Abhaile Family Trust in support of these claims. The documents include a copy of a letter from the plaintiffs’ then solicitors, Kendall Sturm and Foote, dated 22 November
2005, to the Cowan’s solicitors. Relevantly, the letter states:
Please note that our clients have formed a Trust to complete the purchase of
5 Reimers Avenue. We enclose our Transfer and Notice of Sale.
[13] Also included is a copy of a Deed of Retirement and Appointment of Trustees which states that Colleen Ciobo and Malcolm Sturm retired as trustees on 12 January
2012 and that the plaintiffs were appointed as trustees in their stead. Additionally, there is a copy of the certificate of title for the property that shows the plaintiffs were first registered as the proprietors on 25 February 2012 and that in the interim the proprietors were not the plaintiffs, but the prior trustees of the trust.
[14] The proposition arising from this affidavit appears to be that as the trustees took title to the property on settlement on 25 November 2005:
(a) The plaintiffs had no legal rights or duties in relation to the administration of the property as trustees nor did they have any beneficial proprietary interest in the property as they were merely
3 The documents indicate that the Slan Abhaile Family Trust was settled on 25 November 2005. They also indicate that upon settlement pursuant of the sale and purchase on 25 November 2005, the property was transferred to the foundation trustees, Stephanie Martin and Colleen Ciobo. On 1
August 2007, Stephanie Martin resigned as trustee and in her place Malcolm Sturm was appointed. Ownership of the property was transferred to Malcom Sturm and Colleen Ciobo on 30 November
2007.
discretionary beneficiaries under the trust. Hence they had no valid legal claim for breach of warranty or standing to sue. (b)
The plaintiffs could not themselves make a valid claim in contract
unless and until they were appointed trustees and acquired the
trustees’ proprietorship of the property.4 They did not become the
trustees until the limitation period had expired and after a fresh action in contract was barred under s 4 Limitation Act 1950. [15]
The
defendants’ case on summary judgment has evolved however, through
the exchange of evidence and submissions, to include a second proposition that goes beyond the matters expressly mentioned by Mr Cowan in support of the application. The proposition, said to be determinative, is that there is a further reason why the plaintiffs have no standing to bring the claim. It is that the plaintiffs’ own evidence establishes that no harm or loss has been suffered by the plaintiffs; rather it is the trustees who must have suffered loss (if any). The proposition relies on a letter produced by Mr Farrell as an annexure to his affidavit filed in opposition.
[16] The letter was written by the plaintiffs’ solicitors, Grove Darlow, in the context of this litigation in December 2012. It contains the statement that “[i]t is the trust that has suffered the loss.” Counsel for the Cowans argues that the statement amounts to an acknowledgment by the plaintiffs of the absence of loss. He submits such acknowledgment is fatal for reasons that are twofold. First, the plaintiffs’ claim as pleaded must fail in the absence of their suffering any personal loss. Secondly, any valid legal claim could only be for the trust’s loss; and had the plaintiffs wanted to bring such a claim they would have to have amended their claim to demonstrate standing to sue as trustees of the family trust. It is too late to amend for that purpose because they did not become trustees until after the limitation period and an
amended claim would be statute barred.
4 Neither party has attempted to examine or explain how the trustees would have a right to sue on the agreement simply as a result of their nomination to complete the purchase, though each relies on such a right for different ends.
Plaintiffs’ opposition
[17] The plaintiffs’ formal grounds of opposition respond to the ownership issues set out in Mr Cowan’s affidavit. Essentially, they rely on arguments that are threefold:
a) The plaintiffs were appointed as substitute trustees of the trust before they commenced the proceeding. The appointment was an oral appointment made sometime before they commenced their proceeding, and is confirmed by a minute signed by the trustees and the plaintiffs in November 2012. The deed of appointment and release of trustees signed in January 2013 was not necessary because it duplicated the earlier appointment and should be ignored or at least treated with circumspection for the purpose of the summary judgment application.
b) If (a) is wrong then the plaintiffs were appointed as the trustees’
agents for the purpose of commencing the proceeding.
c) In submissions filed shortly before the hearing it was argued that if neither (a) nor (b) is accepted then the claim was a representative claim under rule 4.24. 5
Discussion
[18] I begin by clarifying that to have a valid claim for breach of warranty the plaintiffs must have remained parties to the contract with rights to sue for breach and they must suffered loss caused by the breach. Effectively, the plaintiffs plead both in their claim. The pleading is a conventional pleading covering the essential elements
of a claim for breach of warranty.
5 The plaintiffs raised a further additional ground in these submissions relating to a claim for misnomer that will not be necessary to deal with as it is ancillary to the success of one or the other of the initial grounds.
[19] Turning then to the plaintiff’s arguments as to ownership, though I do not wish to be seen as expressing a definitive view, they seem problematic. Among other things they adopt a reading of the minute that appears strained. They disregard the fact that the deed, which was prepared by legal advisers, would ordinarily be assumed to reflect the true position; and ignore that an agent cannot bring
proceedings for trustees.6 Additionally, though it may that the plaintiffs did have the
same interests as the trustees in respect of a representative claim it is far from clear on the current evidence.7
[20] However these apparent problems are not determinative of the defendants’ claim to have an unassailable defence. In order for the defendants to succeed on one or the other of their propositions, they must show that the plaintiffs do not have standing to sue on the contract for some reason, or that even if retaining rights to sue on the contract the plaintiffs have not suffered loss that would result in anything more than nominal damages. To prove their propositions the defendants rely on Mr Cowan’s evidence and the letter produced by Mr Farrell.
[21] I am not satisfied that it would be appropriate to enter judgment summarily on the basis of this evidence.
Mr Cowan’s evidence
[22] Mr Cowan’s affidavit is subject to r 12.5(4). That rule materially provides that the affidavit given in support of a defendant’s application for summary judgment must:
... show why none of the causes in the plaintiff’s statement of claim can
succeed.
[23] The affidavit deals principally with the issue of the trustees’ ownership of the
property.
6 It is clearly established that a trustee must bring proceedings personally and only in an extreme case will beneficiaries be entitled to bring proceedings in the name of a trust. See Hayim v Citibank [1987] AC 730.
7In accordance with Prudential Assurance Co Ltd v Newman Industries Ltd [1979] 3 All ER 507
representation is not permitted in situations where it would allow a member of the class represented a right that they would not have had standing to claim in a separate proceeding.
[24] It shows that after entering into the agreement to purchase the property the plaintiffs set up the family trust and that their solicitor advised the Cowans’ solicitor that the trustees would complete the purchase the plaintiffs were contractually bound to perform. The Cowans duly transferred the property to the trustees.
[25] Though the affidavit shows proprietorship of the property vested in the trustees, it does not establish that the plaintiffs ceased to be parties to the agreement. It also does not show that they gave up their rights to sue on the agreement for breach of warranty.
[26] On the limited evidence presently available, there is no suggestion that the plaintiffs relinquished all of their rights as contracting parties under the agreement for sale and purchase in that there is no evidence of a novation, absolute assignment or other cancellation of those rights. The facts of the nomination are not dealt with in any detail, nor the effect of such nomination on who holds the rights to enforce the contract or sue for breach. In accordance with Lambly v Silk Pemberton Ltd the
nominee does not automatically become party to the contract;8 rather the named
purchaser remains through any nomination the only party to the contract.9 The possibility that plaintiffs may still be parties to the contract with rights to sue for breach of warranty cannot therefore be discounted.
Grove Darlow letter
[27] Turning to the defendants’ second proposition, and the issue of loss, the defendants submit that as the plaintiffs’ own evidence is that the loss is the trust’s
loss the plaintiffs cannot have suffered a loss. They rely on the general rule of
8 Lambly v Silk Pemberton Ltd [1976] 2 NZLR 427.
9Laidlaw v Parsonage [2009] NZSC 98 affirms that where the contract provides for nomination the
nominee may derive rights to sue pursuant to the Contracts Privity Act 1982. However there is no suggestion of that as the evidence stands or that the parties have amended their contract to so provide. Therefore it seems the trustees, being the nominee, have only been nominated to take the title and are not party to the contract and unless novation, assignment or cancellation occurred the plaintiffs remain the contracting party with the right to sue on the contract. Conversely, the trustees’ relationship with the defendants seems to be as mere nominee and not contractual in nature. Therefore they could not sue on a contractual duty. Nor could the plaintiffs sue on a harm suffered by the trustees.
common law that prevents a claimant recovering substantial damages when a third party, but not the claimant suffers loss as a result of a breach of contract.10
[28] It may well be the plaintiffs have not suffered a personal loss but the submission is conclusory because:
a) The statement made in the Grove Darlow letter was made in the context of the plaintiffs believing they had been appointed trustees. As a consequence the letter is not without ambiguity.
b) Under the High Court Rules, specific grounds are to be given.11
There is good reason for this. In so requiring; an opposing party is entitled know and to have fair opportunity to respond to the case it is required to answer. The current application and affidavit rely expressly and essentially on the basis of ownership of the benefit of the contract and do not put squarely in issue the question of loss.12
The emphasis on ownership appears to have led the plaintiffs to focus
on this issue.13 As a consequence, it is not clear that they actually turned their minds to the essential factual questions regarding loss.
[29] In these circumstances it would be imprudent to treat the Grove Darlow letter as ruling out the possibility that the plaintiffs did suffer at least some of the categories of harm that they claim for, irrespective of the transfer to the trustees. Further evidence on who actually has borne the loss and whether it is the plaintiffs personally or the trust fund will be relevant.
[30] of Appeal said in Westpac Banking Corporation v M M Kembla New Zealand
Ltd :14
10 Dunlop v Selfridge [1915] AC 847.
11 High Court Rules, r 7.19.
12 High Court Rules, r 12.5(4) requires the affidavit to show why the causes of action cannot succeed.
If loss is relied on the affidavit must deal with the loss.
13 This is not dissimilar to the situation in Insight Legal Trustee Company Ltd v Stokes [2013] NZCA
148.
14 Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [62].
Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence.
[31] Having regard to the principle in Kembla it would not be prudent to enter summary judgment.
[32] The need for caution is reinforced by the Privy Council in Jones v Attorney- General. 15 There it is stressed that the threshold for defendant summary judgment is deliberately high to allow plaintiffs to bring their claim in all situations, except where it is clearly hopeless.
Result
[33] The result is that I cannot discount that a theoretical possibility remains that the plaintiff could succeed at trial.16 Therefore I am not satisfied that on the balance of probabilities the defendant has shown that none of the plaintiffs’ claims can succeed.
[34] I decline summary judgment.
[35] Costs are reserved in accordance with NZI v Philpott.17
[36] The Registrar is to list the proceeding for a further telephone conference before the Associate Judge who is case managing the proceeding.
Associate Judge Sargisson
15 Jones v Attorney General [2004] 1 NZLR 433.
16 At [10].
17 NZI Bank Ltd v Philpott [1990] 2 NZLR 403.