Minister of Education v Opus International Consultants Limited

[2018] NZHC 2949

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2016-485-751

[2018] NZHC 2949

BETWEEN

THE MINISTER OF EDUCATION

First Plaintiff

THE SECRETARY FOR EDUCATION
Second Plaintiff

THE BOARD OF TRUSTEEES OF WANAKA PRIMARY SCHOOL
Third Plaintiff

AND

OPUS INTERNATIONAL CONSULTANTS LIMITED

First Defendant

AMALGAMATED BUILDERS LIMITED
Second Defendant

M R DECORATING LIMITED

Third Defendant

Hearing:

30 October 2018

Counsel:

B J Thompson and J S McTavish Butler for plaintiffs G L Wilkin for second defendant

No appearances for first or third defendants

Judgment:

14 November 2018

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]                   In this proceeding, the plaintiffs, the Minister of Education, the Secretary for Education and the Board of Trustees of Wanaka Primary School, sue the defendants, Opus  International  Consultants  Ltd,  Amalgamated   Builders   Ltd   (ABL)   and M R Decorating Ltd, alleging that buildings built for Wanaka Primary School between

THE MINISTER OF EDUCATION v OPUS INTERNATIONAL CONSULTANTS LTD [2018] NZHC 2949 [14 November 2018]

June 2009 and September 2010 are defective in certain respects and seek damages for the cost of remedial work.

[2]                   The plaintiffs’ pleading includes allegations that ABL was involved in the specification, supply and installation of a proprietary cladding product manufactured by Carter Holt Harvey Limited (CHH) called “Shadowclad” at the site and that problems with the cladding has caused or contributed to these defects and the losses that the plaintiffs say they have suffered.

[3]                   As it happens, the Minister of Education and other parties have commenced proceedings in this Court against CHH and other parties in relation to the same product. This, it is said, is a test case concerning Shadowclad, a product that has apparently been used for cladding purposes on dozens of other schools throughout the country.

[4]                   ABL seeks an order pursuant to r 10.12 of the High Court Rules staying this proceeding pending the outcome of the so-called test case. The other defendants are prepared to abide the Court’s determination and took no part in the hearing. ABL’s application is opposed by the plaintiffs.

[5]Rule 10.12 provides:

The court may order that 2 or more proceedings be consolidated on terms it thinks just, or may order them to be tried at the same time or one immediately after another, or may order any of them to be stayed until after the determination of any other of them, if the court is satisfied—

(a)that some common question of law or fact arises in both or all of them; or

(b)that the rights to relief claimed therein are in respect of or arise out of—

(i)the same event; or

(ii)the same transaction; or

(iii)the same event and the same transaction; or

(iv)the same series of events; or

(v)the same series of transactions; or

(vi)the same series of events and the same series of transactions; or

(c)that for some other reason it is desirable to make an order under this rule.

[6]                   ABL relies in particular on r 10.12 (a) and (c), saying that there are common questions of fact and law raised in the test case and this case and that for that and other reasons it is desirable that the test case proceed first.

[7]                   Mr Wilkin for ABL referred me to Regan v Gill where the Court of Appeal, talking of r 10.12, said that “it is difficult to conceive of a wider procedural discretion”.1 Mr Wilkin went on to submit, in broad terms, that the matters generally taken into account by the courts in applications for a stay under the rule include efficient use of resources (both judicial resources and those of the parties); the risk of inconsistent findings of fact or law; and the avoidance of “Confusion, prejudice or even oppression ...”.

[8]That appears to me fairly to summarise the cases.

[9]                   In a nutshell, ABL says that the degree of commonality between the test case and this case is such that the two cases proceeding simultaneously:

(a)would be wasteful of resources;

(b)would give rise to a risk of inconsistent findings of fact and law;

(c)would cause ABL prejudice because it would be obliged to commit substantial resources to a case in circumstances where the factual and legal issues are being addressed elsewhere.

[10]               In stark contrast, the plaintiffs say that the test case and this case are significantly different, that there are no common questions of fact or law and therefore that none of those risks arise.

[11]               I accept the submission made on ABL’s behalf by Mr Wilkin that there is a sense in which both the test case and this case focus on the product Shadowclad.

1      Regan v Gill [2011] NZCA 607 at [10].

[12]               However, the overlap between the two proceedings is not as all-pervasive as ABL would have it:

(a)For a start, as Mr Wilkin accepts, two of the four causes of action pleaded by the plaintiffs against ABL here (the second and third causes of action) are claims based on guarantees provided by the company. The fundamental issues in those claims will be the proper construction of ABL’s obligations under those guarantees. They will raise issues unique to this case. They are not likely to focus to any great extent on what ABL knew or ought to have known, the scope of any general contractual or tortious duty it may have to the plaintiffs to exercise reasonable skill and care, or the breach of any such duty. Even the measure of damages will need to be approached on different bases from those likely to apply in the test case.

(b)Insofar as the remaining two causes of action (the first and fourth causes of action) are concerned, these are pleaded in the alternative as breaches of a general contractual obligation to exercise reasonable skill and care or of a tortious obligation to take reasonable care. Certainly, the issues in the test case as to the durability of Shadowclad and the issues which arise on these causes of action have more in common. But even here, it needs to be borne in mind that the test case is fundamentally a product liability case which will focus on the obligations of a manufacturer to the wider public whereas this case will raise the obligations of a party responsible – along with others – for the performance of the product in this particular application. It is not difficult to envisage how the issues in the two cases will diverge. One example will serve to illustrate the point. The test case apparently involves instances of the product being applied directly to the skeletal framework of the buildings without a cavity. The present case apparently involves Shadowclad being applied as part of a cavity building system. I think it is fair to say that the preponderance of expert opinion is that the latter is a superior system because it depends less on the integrity of the cladding itself (essentially because the cavity allows for a degree of failure). In any event, this

factual difference necessarily means that the focus in the test case will be on the integrity of Shadowclad as a product whereas in this case, whilst the merits or otherwise of Shadowclad will no doubt be an issue, the focus is likely to be on the performance of the cladding system.

[13]               Overall, my assessment is that whilst there are certainly similarities – or points of intersection – between the test case and this case, and some issues that will arise and need to be disposed of in both, it cannot be said that they raise the same issues.

[14]               The proposition that the two proceedings continuing on at the same time is a waste of judicial and the parties’ resources rather assumes that the outcome of the test case will determine issues in this case which will not then have to be litigated.

[15]I have little confidence that that is how matters will unfold.

[16]               If for example the Crown were to be successful in the test case, demonstrate that Shadowclad is a flawed product and, on that basis, obtain damages of some sort, that would no doubt cause the defendants in this proceeding including ABL to take stock. But it appears to me that they might still have defences open to them. Indeed, in the course of argument, Mr Wilkin forcefully demonstrated as much. The affidavit evidence filed on behalf of ABL for this interlocutory hearing included a report from its expert saying effectively that even if there were questions about the quality of Shadowclad as a product, it was performing adequately at Wanaka Primary School having regard to the level of maintenance which it has received.

[17]               In short, the proposition that a stay of this proceeding has the potential to save resources is a highly speculative one.

[18]               Another factor that arose in the course of argument related to the almost monumental nature of the test case. It was commenced in August 2013. I am told that the statement of claim has gone through many iterations. There are four defendants and no fewer than 50 third parties (all territorial local authorities). I understand that interlocutory skirmishing has been prolific and some of the differences involved have already reached the Supreme Court. The case is set down for a six month trial, as to

liability only, in 2020. If the plaintiffs are successful as to liability, quantum will then have to be resolved. Whatever the outcome, there is a real prospect of at least one substantive appeal, and possibly two. It is entirely conceivable that the test case will not be resolved until 2023.

[19]               In fairness it should be said that the indications from ABL’s expert at least is that the buildings in this case are still performing adequately and certainly there is no question of the school being closed or anything of that sort.

[20]               However, it is not obvious to me why the plaintiffs in this case – particularly the Board of Trustees – should be expected to wait years to resolve their, relatively speaking, modest claim.

[21]               Another point raised in support of ABL’s application is that in the meantime this litigation is proving costly and a significant drain on ABL’s resources. These are difficulties faced by all litigants and I do not think they can affect the outcome except possibly in the most marginal of cases.

[22]               In the end, the judgement I have come to is that there is insufficient commonality between the test case and this case to conclude that the two running at the same time would involve an unnecessary waste of resources or any substantial risk of genuinely inconsistent determinations of fact or law, and that there are no other considerations which favour the order sought by ABL.

[23]               Indeed, my view is that considerations such as the magnitude of the test case and the likely time lapse before it is resolved favour this proceeding continuing on.

[24]ABL’s application is dismissed.

[25]               On the face of things, the plaintiffs are entitled to their costs, having succeeded on this interlocutory judgment. Not having heard from counsel as to costs, I will reserve them. If the plaintiffs seek costs, I expect that counsel will be able to resolve them. If it assists, my preliminary view is that the plaintiffs are entitled to a single order of costs between them on a 2B basis. I would not be inclined to certify for

second counsel in the circumstances. I see no obvious reason for considering increased or decreased costs. Those observations however are made without the benefit of hearing from the parties. If counsel are unable to deal with costs they may file memoranda and I will deal with them on the papers.

[26]               I direct the Registrar to set this matter down for a case management teleconference as soon as possible, at which I would expect to deal with any remaining pre-trial matters and set the case down for trial in the New Year.

Associate Judge Johnston

Solicitors:

Meredith Connell, Auckland for plaintiffs AWS Legal, Invercargill for second defendant