Mu v Body Corporate 312431
[2012] NZHC 571
•30 March 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CRI-2011-404-4768 [2012] NZHC 571
BETWEEN DANNI MU Plaintiff
AND BODY CORPORATE 312431
First Defendant
ANDABOUT BODY CORPORATES LIMITED Second Defendant
ANDSHARRON WYNNE O'SULLIVAN Third Defendant
ANDGRAHAM BELL Fourth Defendant
Hearing: 9 February 2012
Appearances: G M Illingworth QC and M J Morris for plaintiff
T J Herbert for first defendant
No appearances for second and third defendants
Judgment: 30 March 2012
JUDGMENT OF ALLAN J
In accordance with r 11.5 I direct that the Registrar endorse this judgment with the delivery time of pm on Friday30 March 2012
Solicitors/Counsel :
Steindle Williams Legal Ltd, Auckland [email protected]
G M Illingworth QC Auckland [email protected]
Adina Thorn Lawyers, Auckland [email protected]T J Herbert, Auckland [email protected]
MU V BODY CORPORATE 312431 HC AK CRI-2011-404-4768 [30 March 2012]
[1] The plaintiff is the owner of a residential unit in a complex known as Normanby Mews, situated in Normanby Road, Mt Eden, Auckland. The complex comprises 48 residential units.
[2] The first defendant was originally incorporated under the Unit Titles Act
1972 and, as from June 2011, is incorporated under the Unit Titles Act 2010 (the
Act).
[3] The first defendant is the Body Corporate for the complex. The second defendant is the secretary of the first defendant, and the third defendant is the director of the second defendant. The fourth defendant, a member of the management committee of the first defendant, abides the decision of the Court in the substantive proceeding.
[4] The building has suffered weathertightness problems. The exterior cladding of the complex is not weathertight and requires replacement. In this proceeding, the plaintiff seeks declaratory relief in respect of the activities of the first defendant. She is concerned in particular about the validity of a meeting of the proprietors, or unit holders, held on 26 October 2010, the proper interpretation of r 4 of the Body Corporate Rules, and the inter-relationship between that rule and s 138 of the Act.
[5] In her amended statement of claim dated 23 November 2011, the plaintiff seeks declarations that:
(a) A resolution passed by members of the Body Corporate on 26 October
2010 purporting to agree to proceed with a panel system known as
“Rockcote”, is invalid:
(b)The defendants are not authorised to enter into a contract or contracts by or on behalf of the Body Corporate for the recladding of the complex, unless the expenditure is approved by special resolution of
75% of the eligible voters.
[6] The proceeding was set down for hearing on 9 February 2012. Counsel filed synopses of argument prior to that date. Mr Herbert, counsel for the first defendant, filed a synopsis which ran to just one and a half pages, but did not address the merits at all. Rather, he claimed that by reason of the plaintiff’s failure to file a reply to positive allegations and affirmative defences pleaded in the statements of defence of the defendants, the plaintiff was deemed to have admitted those allegations, with the result that the defendants were entitled to judgment.
[7] Against that background, counsel agreed that the hearing on 9 February should be devoted to the pleading issue, rather than to the substance of the dispute. If I determined the issue in the plaintiff’s favour, the case was to be set down for a fresh fixture. If on the other hand, the pleading was determined in favour of the defendants, it was agreed that I should grant leave to the plaintiff to make an application for leave to file a reply to the statements of defence out of time. Mr Herbert advised that any such application would be opposed and would need to be set down for hearing at a convenient date.
[8] The second and third defendants abide the decision of the Court on the present application. They each filed statements of defence containing certain affirmative defences and positive allegations. Mr Herbert argues that he is entitled, on behalf of the first defendant, to rely on the plaintiff’s failure to file a reply to the statements of defence of the second and third defendants. I disagree. If those parties wished to take the point that the plaintiff had failed to file a reply to the statements of defence filed by them, it was open to them to appear at the hearing and to seek judgment accordingly. Mr Herbert did not appear for the second and third defendants. In those circumstances, I do not consider it appropriate that he be entitled to rely on the contents of the pleadings filed by other defendants.
The first defendant’s pleading
[9] In its statement of defence, the first defendant pleads to each of the allegations in the plaintiff’s statement of claim, and then at paragraph 22, pleads the following under the heading “Affirmative defences”:
Affirmative defences
22. It refers to the declarations sought at subparagraphs 3.6A and B and says:
(a) There is no justiciable/genuine dispute between the parties;
Particulars
(i) It does not and has not ever suggested that the purported decision has been made or that it was, prior to 25 October 2011, authorised, without special resolution passed at general meeting of its members, to expend money of over $48,000 (if required) on the installation of the Rockcote System.
(ii) No levy has ever been raised by it to pay for the installation of the Rockcote System and may not need to be raised.
(iii) On 25 October 2011, it passed a unanimous resolution that:
… section 138 of the Unit Titles Act 2010 in respect of the Body Corporate’s duties of repair and maintenance shall apply from 25 October
2011.
By s 138 of the Unit Titles Act 2010, it is legally obliged to maintain, repair or renew all cladding systems.
It is now obliged to incur the expenditure of repairing and renewing the cladding systems such that the rule is inapplicable and any dispute between the parties as to the rule is moot. There is no live issue in existence between the parties.
(b) No useful purpose will be served by the declaration;
Particulars
It repeats the particulars at sub-paragraph 22(a) above.
(c) There are facts in dispute and/or the issue is a mixed one of law and fact.
Particulars
The disputes of fact are outlined above.
(d) The Court should not exercise its discretion in light of the wrongful conduct of the plaintiff.
Particulars
The plaintiff has indulged in a concerted campaign of defamation, vilification and threatening behaviour towards the defendants (and other third parties) such that the Court should not exercise its discretion to grant declarations in her favour.
[10] It is common ground that the plaintiff did not, within the time stipulated by the High Court Rules or at any time prior to the hearing, file a reply to the contents of paragraph 22 of the first defendant’s statement of defence.
High Court Rules
[11] High Court Rule 5.62 provides:
Duty to file and serve reply
If a statement of defence asserts an affirmative defence or contains any positive allegation affecting any other party, the plaintiff or that other party must, within 10 working days after the day on which that statement of defence is served, file a reply and serve it on the party serving the statement of defence.
[12] Rule 5.63 sets out both the requirements for a reply and the consequences of failing to file one. It provides:
Contents of reply
(1) A reply must be limited to answering the affirmative defence or positive allegation and otherwise must comply with the rules governing statements of defence so far as they are applicable.
(2) An affirmative defence or positive allegation in a statement of defence that is not denied is treated as being admitted.
[13] The obligation of a defendant to plead an affirmative defence is to be found in r 5.48 which provides:
Requirements of statement of defence
(1) The statement of defence must either admit or deny the allegations of fact in the statement of claim, but a defendant does not have to plead to an allegation that does not affect that defendant.
(2) A denial of an allegation of fact in the statement of claim must not be evasive. Points must be answered in substance. If for example, it is alleged that the defendant received a sum of money, it is not sufficient to deny receipt of the particular amount. Rather, the defendant must deny
receipt of that sum or any part of it, or set out how much was received. When a matter is alleged with circumstances it is not sufficient to deny it as alleged with those circumstances. In all cases a fair and substantial answer must be given.
(3) An allegation not denied is treated as being admitted. (4) An affirmative defence must be pleaded.
(5) The statement of defence must give particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances sufficient to inform the court, the plaintiff, and any other parties of the defendant's defence.
Counsels’ submissions
[14] Mr Herbert submits that:
(a) The plaintiff has failed to file a reply in respect of the affirmative defences pleaded in paragraph 22 of the first defendant’s statement of claim;
(b) The plaintiff was obliged to file and serve any such reply by
21 December 2011;
(c) By virtue of r 5.63(2), the affirmative defences pleaded in paragraph 22 of the first defendant’s statement of defence are to be treated as admitted;
(d)Accordingly the plaintiff has admitted the positive allegations and affirmative defences of the first defendant, as set out in paragraph 22 of the first defendant’s statement of defence;
(e) The affirmative defences so set out are either complete defences to the
plaintiff’s claim and/or render the plaintiff ’s claim nugatory;
(f) The first defendant is accordingly entitled to judgment on the basis of
the plaintiff’s admissions.
[15] Mr Illingworth was given little notice of the first defendant’s pleading-based argument. Nevertheless, he was able to advance a detailed argument on behalf of the plaintiff. In summary, he submits that:
(a) There is a fundamental pleading principle that parties be required to assert relevant facts and not propositions of law;1
(b)An affirmative defence is thus a fact or set of facts which provide a defence to a cause of action relied upon in the statement of claim;
(c) A positive allegation is an allegation of fact that is material to the matters in issue between the parties;
(d)Nothing in paragraph 22 of the first defendant’s amended statement of defence comprises either an affirmative defence or an allegation of fact that is material to the matters in issue between the parties.
[16] By way of amplification of these propositions, Mr Illingworth submits:
(a) The contention that there is no justiciable or genuine dispute between the parties is not an allegation of fact; it is simply a submission as to the legal approach that the first defendant will urge upon the Court;
(b)Likewise, the argument that the declarations sought would serve no useful purpose is simply a legal argument;
(c) The claim that the proceeding involves disputed issues of mixed fact and law (and presumably is therefore inappropriate for the grant of declaratory relief) is an assertion of a legal argument;
(d)The contention that the Court should exercise its discretion against the plaintiff by reason of her alleged behaviour towards the defendants is
not an affirmative defence or a positive allegation of fact either; it is
1 Letang v Cooper [1964] 3 WLR 573; Ophthalmological Society of NZ Inc v Commerce Commission
[2001] NZCA 296 at [22] and Transpower NZ Ltd v Todd Energy Ltd [2007] NZCA 302 at [61].
simply a contention that the Court ought to exercise its discretion
against the plaintiff.
Discussion
[17] Under the former Code of Civil Procedure, an affirmative defence or positive allegation in a statement of defence was treated as denied unless admitted.2 The provisions of r 5.63(2) reverse that presumption. The expressions “affirmative defence” and “positive allegation” are not defined in the Rules, but it is widely understood that an affirmative defence raises material going beyond that alleged by the plaintiff in the statement of claim, as answered by the statement of defence.3
Numerous examples of affirmative defences may be identified. Among them are the following:
(a) Time limitations;4
(b) Estoppel by record, and estoppel by conduct;5
(c) Misrepresentation;6
(d) Accord and satisfaction;7
(e) A waiver of the liability of former lawyers, so precluding a claim against them;8
(f) Honest opinion and qualified privilege in a defamation case;9
2 Code of Civil Procedure, Schedule 2 to the Judicature Act 1908, rr.170 and 171
3 Andrew Beck & Ors McGechan on Procedure (online looseleaf, Brookers) at [HR5.48.15(i)].
4 Main Farm Ltd (in rec) v Otago Regional Council HC Dunedin CIV-2010-412-385, 21 November 2011
at [42]; Glen Eden Holdings Ltd v Galuvao HC Auckland CIV-2010-404-2974 9 February 2011 at [43];
Commerce Commission v Air New Zealand HC Auckland CIV-2008-404-8352, CIV 2009-404-1554, 10
December 2009 at [27].
5 Hughes v Guardian Royal Assurance Co of New Zealand (1988) 5 ANZ Insurance Cases 75,532;
Sargison v VinPro Ltd HC Dunedin CIV-2011-412-453, 28 October 2011 at [11].
6 Hughes.
7 Sargison v VinPro Ltd HC Dunedin CIV-2011-412-453, 28 October 2011 at [11]; Corbett v Western
[2010] NZCA 270.
8 Commercial Factors Ltd v Darlow HC Auckland CIV-2010-404-4555, 11 November 2011.
9 Hubbard v Forth Estate Holdings Ltd HC Auckland CIV-2004-404-5152, 13 June 2005.
(g) Breach of fiduciary duties and undue influence;10
(h) Change of position;11
(i)Allegations amounting to denials of a remuneration package as pleaded by the plaintiff and pleading particulars of an alternative package;12
(j)Breach of contract where the plaintiff was claiming sums owing under a contract relating to workplace injury;13
(k) Discharge by payment;14
(i) Repudiation.15
[18] The separate concepts of “positive allegation” and “affirmative defence” have, on occasion, been treated as virtually synonymous.16 But a positive allegation will not always amount to an affirmative defence. For example, in Main Farm Ltd (in rec) v Otago Regional Council, where the plaintiff claimed it was entitled to charge a reasonable amount whether the heads of agreement were binding or not, a complaint that the plaintiff charged a sum in excess of that amount was treated as a positive allegation.17
[19] A review of the cases suggests that, for pleading purposes, affirmative defences will usually fall into two principal categories. The first is where the
defendant carries the onus of proof. An obvious example is the requirement to plead
10 Kilbirnie Plymouth Investments Ltd v White HC Wellington CIV-2009-485-797, 15 February 2011.
11 ASB Bank v AB [2010] 3 NZLR 427 (HC).
12 Bridgecorp Management Services v Roest HC Auckland CIV-2008-404-3013, 14 September 2009.
13 Accident Compensation Corporation v Affco Holdings Ltd HC Wellington CIV-2007-485-508, 26
September 2008.
14 Castlerock Property Holdings Ltd v Rixon Contracting Ltd HC Auckland CIV-2005-404-6986, 21
August 2007.
15 Prime Property Group Ltd v Amtrust Pacific Properties Ltd HC Wellington CIV-2003-485-208, 21
March 2005.
16 Sargison at [16] and Schubert v Boyle HC Auckland CIV-2008-404-428, 20 August 2010 at [17].
17 Main Farm Ltd (in record) v Otago Regional Council HC Dunedin CIV-2010-412-385, 21
November 2011.
any defence arising under any statute of limitations,18 although it appears that delay in the form of laches is not an affirmative defence.19
[20] Second, any pleading in a statement of defence which raises factual material in addition to that contained in the statement of claim, must set out the detail of those facts in order to enable a plaintiff to prepare evidence in rebuttal in advance of trial. Affirmative defences in this category are, as noted above, sometimes indistinguishable from positive allegations.
[21] The obvious purpose of r 5.48(4), is to ensure that a plaintiff is not taken by surprise. Likewise, a plaintiff faced with an affirmative defence or a positive allegation must file a reply in order to place the defendant on notice of the stance to be adopted by the plaintiff at trial in respect of the defendants’ allegations. The current r 5.63(2) introduces an element of certainty for a defendant, not necessarily guaranteed under the earlier rule. Formerly, a failure to plead to an affirmative defence or a positive allegation was deemed to constitute a denial, but the defendant had no particulars of the basis upon which the allegation was denied.
[22] Against that background, I return to paragraph 22 of the first defendant’s statement of defence. The paragraph is separated into four sub-paragraphs, each headed by a proposition of law, which is then supported by references to certain factual material under the heading “Particulars”. The use of that word must be taken to be deliberate, having regard to its pleading consequences. It is not necessary to provide answers in a statement of defence (and by necessary analogy in a reply) to
particulars in a statement of claim.20 By virtue of long standing practice, a defendant
is entitled to assume that if a factual statement or allegation is classed as a particular, the plaintiff pleads it not as a material fact, but simply in order to provide information to the defendant of the details of the claim, which does not require an
answer in the pleadings.
18 Humphrey v Fairweather [1993] 3 NZLR 91.
19 Dillon v MacDonald (1902) 21 NZLR 45 (SCNZ) at 462 and Wharawhara v Casey [1922] NZLR
445 (CA).
20 McGechan at [HR 5.48.08].
[23] That practice is reflected in Walker v Bennett, where Miller J engaged in an extensive and helpful review of the rules and their predecessors, citing a number of authorities.21 He concluded that:22
…the defendant might assume that if a factual statement or allegation was classed as a particular, the plaintiff had tendered it not as a material fact but to inform the defendant of the details of the claim, and did not require an answer.
[24] If the first defendant required a reply to the factual allegations appearing in paragraph 22, the facts to which a reply was sought ought to have been pleaded as material facts, supported if desired by a conclusory allegation of the legal consequences if those facts were established. But by adopting the technique of pleading all of the factual allegations in paragraph 22 as particulars, the first defendant has, in my view, effectively waived its right to a reply in respect of those factual allegations.
[25] The only portions of paragraph 22 that are not pleaded as particulars are substantially questions of law which, shorn of any allegations of material facts, do not call for an answer from the plaintiff.
[26] I should make special mention of paragraph 22(d) where the first defendant alleges that the Court should not exercise its discretion in light of the wrongful conduct of the plaintiff. Mr Herbert says that, had a reply been filed denying the allegation in paragraph 22(d), he would have filed further affidavit evidence as to the detail of the plaintiff ’s disqualifying conduct. But that seems to me to place the cart before the horse. The plaintiff’s behaviour ought to have been pleaded in detail by way of allegations of primary fact. That would have imposed upon the plaintiff an obligation to file a reply, because the primary facts so alleged would have constituted a positive allegation for pleading purposes. Once the pleadings were settled then the first defendant would have been in a position to determine what affidavit evidence was required in order to meet the contents of the reply. But as matters stand, there
was in my view no obligation on the plaintiff to file a reply.
21 Walker v Bennett (2009) 19 PRNZ 350 at [17]-[28].
22 At [26].
Result
[27] I have reached the conclusion that the plaintiff is not obliged to file a reply to paragraph 22 of the statement of defence of the first defendant because the whole of that paragraph consists either of propositions of law or of factual material pleaded as particulars instead of primary facts.
[28] This proceeding, which affects a great many unit owners, has lost momentum somewhat. There are important issues to be determined as speedily as possible. It does not seem to me to be a particularly valuable use of the available time to take narrow pleading points such as were raised here.
[29] It may be that Mr Herbert wishes to replead so as to formulate paragraph 22 in a manner which does call for a reply.
[30] Counsel are agreed that once this judgment is delivered, arrangements ought to be made for a case management conference. It seems appropriate that the file be referred to Associate Judge Bell, who has had the carriage of it hitherto.
[31] The plaintiff is entitled to costs in respect of the first defendant’s application for judgment. Counsel may file memoranda if they are unable to agree as to quantum.
C J Allan J
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