Nathan and others v Smith and others HC Ak CIV 2007-404-000253

[2009] NZHC 2445

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV 2007-404-000253

BETWEEN  MILES HUNTER NATHAN, JAMES

DENIS TAIT AND MICHAEL GERARD CURTIS

First Plaintiffs

ANDMILES HUNTER NATHAN AND MARY NATHAN

Second Plaintiffs

ANDGEOFFREY STEPHEN SMITH AND CAROLYN SMITH

First Defendants

ANDSCOTT BERNARD MACBETH Second Defendant

(Continued over page)

Hearing:         5 November 2009

Appearances:  M J Fisher for the First and Second Plaintiffs

S C Price and J K Stewart for the First Defendants
No appearances for the Second, Third, Fourth and Fifth Defendants

Judgment:      16 November 2009 at 5:00pm

JUDGMENT OF WYLIE J

This judgment was delivered by Justice Wylie

on 16 November 2009 at 5:00pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

M H NATHAN AND ORS V G S SMITH AND ORS HC AK CIV 2007-404-000253  16 November 2009

ANDSUMICH ARCHITECTS LIMITED Third Defendant

ANDMATTHEW ROBERT CHAPLAIN Fourth Defendant

ANDRONALD WILLIAM ROBINSON Fifth Defendant

Solicitors/Counsel:

P J Castle, P O Box 7670, Newmarket, Auckland 1001(for the First and Second Plaintiffs) MinterEllisonRuddWatts, P O Box 3798, Auckland 1140 (for the First Defendants)

Morgan Coakle, P O Box 114, Auckland 1140 (for the Second Defendant)

DLA Phillips Fox, P O Box 160, Auckland 1140 (for the Third and Fourth Defendants) Carter Atmore, P O Box 68,656, Newton, Auckland (for the Fifth Defendant)

M Fisher, P O Box 3236, Shortland Street, Auckland 1140 (for the First and Second Plaintiffs)

W A McCartney, P O Box 1052, Shortland Street, Auckland 1140 (for the Fifth Defendant)

[1]      The first defendants – Mr and Mrs Smith – seek to review part of a decision

given by Associate Judge Robinson on 5 May 2009.

[2]      The review raises two issues:

a)        Does this Court have jurisdiction  to  review  the  relevant  part  of  the

Associate Judge’s decision?

b)Is  it  necessary  that  notice  of  an  equitable  assignment  of  a  chose  in action be given to the obligor before the assignor can sue, and if so, does a letter from the assignees’ solicitor  to  the  obligors’ solicitor enclosing a memorandum of transfer and notice of change of ownership, constitute notice of the assignment when the transferee assignors identified in the memorandum of transfer and in the notice

of change of ownership  are not the assignees named in the sale and purchase agreement?

Background

[3]      This is a leaky home case.

[4]      From  late  1998  and  throughout  1999,  Mr  and  Mrs  Smith  undertook  the construction of a dwelling on land they owned in Parnell.  The dwelling was built by the fifth defendant.   It was constructed in accordance with plans and specifications prepared  by  the  fourth  defendant,  an  architect  employed  by  Sumich  Architects Limited,  which  firm  is  the  third  defendant  in  the  proceedings. The  plans  and specifications  prepared  by  Sumich  Architects  Limited  were  submitted  to  the  local authority  –  the  Auckland  City  Council  –  and  a  building  permit  was  issued  on 11 January  1999. The  second  defendant  was  engaged  by  Mr  and  Mrs  Smith  to inspect the building work carried out under the building consent, certify the building consent application to the local authority, and if appropriate, issue a code compliance certificate on completion of the dwelling.

[5]      During  the   course  of   construction,  the  second  defendant  inspected   the dwelling and he issued a number of building certifier’s inspection reports.   A code compliance certificate was issued by him in December 1999 when the dwelling was substantially complete.

[6]      In December 2000, Mr and Mrs Smith entered into an agreement to sell the property to the second plaintiffs – Mr and Mrs Nathan - or their nominee for the sum

of  $2,041,770.   Mr  and  Mrs  Nathan  say  that  they  assigned  their  rights  under  the agreement  for  sale  and  purchase  to  the  trustees  of  their  No.  2  family  trust. The trustees of that trust are the first plaintiffs.  The first plaintiffs settled the purchase on 23  January  2001  and  thereafter  Mr  and  Mrs  Nathan  started  living  in  the  dwelling with their family.

[7]      Mr and Mrs Nathan say that shortly after taking possession of the property they noticed various leaks in the dwelling and cracking to the exterior cladding.   A number of investigations were undertaken, and Mr and Mrs Nathan discovered what they believe  to  be  building  defects.   They assert  that,  as  a  result  of  those  defects, moisture penetrated the structure of the dwelling and caused consequential damage.

[8]      The alleged defects were brought to the attention of Mr and Mrs Smith and ultimately to the attention of the other defendants.

[9]      Temporary remedial  works  were  initially  carried  out. More  permanent remedial works have now been completed.  The total cost of the remedial works was

$1,451,540.05.   The first plaintiffs and/or Mr and Mrs Nathan seek to recover that sum from the defendants.

The application before Association Judge Robinson

[10]     The initial statement of claim was filed on 23 January 2007.  A first amended statement of claim was filed on 29 June 2007.

[11]     The application before the Associate Judge was dated 22 August 2007.   Mr and Mrs Smith sought:

a)        leave to apply for summary judgment;

b)summary judgment  in  their  favour  in  respect  of  all  of  the  causes  of actions asserted against them in the first amended statement of claim;

c)        in the alternative, that the causes of action asserted against them in the first amended statement of claim be struck out either wholly or in part.

An order in relation to discovery was also sought but this aspect of the application is

no longer relevant for present purposes.

[12]     By  the  time  the  matter  came  before  Associate  Judge  Robinson,  a  second amended  statement  of  claim  had  been  filed.   It  was  dated  29  October  2007.   For present  purposes  there  were  no  substantive  differences  between  the  first  and  the second amended statements of claim.   The Associate Judge, with the agreement of the parties, treated the first defendants’ application as relating to the second amended statement of claim.

[13]     The initial statement of claim asserted that Mr and Mrs Nathan nominated the first plaintiffs as the purchasers pursuant to the agreement for sale and purchase.  In the  alternative  it  was  asserted  that  Mr  and  Mrs  Nathan  had  assigned  their  rights under the agreement for sale and purchase to the first plaintiffs.

[14]     The first amended statement of claim did not assert nomination.  Nor did the second amended statement of claim.

[15]     Once  an  amendment  to  a  statement  of  claim  has  been  filed,  the  pleading which  has  been  amended  must  be  disregarded  –  Bilsland  v  Terry  &  Ors  [1972] NZLR 43 at [48] – and the former pleading is disregarded in respect of allegations not repeated in the amended pleading – Walkers Nurseries Ltd v Carlile Dowling HC AK CIV 1994-441-57 8 July 2004, Faire AJ at [15].  It follows that the assertion that the first plaintiffs were nominated by Mr and Mrs Nathan is no longer in issue.

[16]     The second amended statement of claim asserts that:

a)        the first plaintiffs are the trustees of the Miles Nathan (No. 2) Trust and the owners of the property;

b)Mr and Mrs Nathan purchased the property from Mr and Mrs Smith and that they occupy the property;

c)        Mr and Mrs Nathan assigned their rights under the agreement for sale and purchase to the first plaintiffs sometime prior to 30 January 2001; and

d)       the assignment was an equitable assignment.

[17]     There are three causes of action against Mr and Mrs Smith and one against

Mr Smith alone.

[18]     The first cause of action is by the first plaintiffs.   It is based in contract and alleges  breach  of  warranties  and  undertakings  contained  in  the  agreement  for  sale and purchase.   It is brought by the first plaintiffs pursuant to the alleged  equitable assignment  of  Mr  and  Mrs  Nathan’s  rights  under  the  agreement  for  sale  and purchase.

[19]     The second cause of action against  Mr  and  Mrs  Smith  is  by  Mr  and  Mrs

Nathan personally.  It is also based in contract.  The pleading reads as follows:

The second plaintiffs repeat the foregoing and say in the alternative that the second  plaintiffs  as  named  purchasers  in  the  Agreement  for  Sale  and Purchase allege that there has been a breach of the Vendor Warranties as set above, and that they have standing to sue, and that they also have suffered loss by virtue of being occupiers of the Property.

Mr and Mrs Nathan claim the same losses as are claimed by the first plaintiffs.

[20]     The third cause of action is by the first plaintiffs against Mr and Mrs Smith.

It is based in tort and it alleges negligence by Mr and Mrs Smith as developers of the dwelling.

[21]     There  is  also  a  fourth  cause  of  action,  seemingly by the  first  plaintiffs,  but perhaps by Mr and Mrs Nathan as well – the pleading is unclear.  Again it is in tort, and it alleges negligence by Mr Smith as head contractor and/or project manager of the construction works.

Associate Judge’s decision

[22]     The Associate Judge recorded that Mr and Mrs Smith were asserting that the claims  in  contract  were  brought  outside  the  limitation  period. He  noted  their submission  that  notice  of  the  alleged  equitable  assignment  had  not  been  given  by Mr and Mrs Nathan to Mr and Mrs Smith as at the date the proceedings were filed – 23 January 2001 – and that as a result the first plaintiffs were not then entitled to sue on Mr and Mrs Smith’s warranties.   He also noted that it was Mr and Mrs Smith’s submission that if Mr and Mrs Nathan wished to stop time running, they had to sue on  the  warranties  as  assignors  on  the  first  plaintiffs’  behalf,  and  not  on  their  own behalf.  They had not done so.  The Associate Judge recorded that Mr and Mrs Smith were contending that Mr and Mrs Nathan had assigned their rights and interests in the agreement for sale and purchase, and that as a result they could no longer rely on the agreement as providing any right to them to claim against Mr and Mrs Smith.

[23]     His  Honour  then  recorded  the  plaintiffs’  arguments  –  first  that  the  first plaintiffs, as assignees, were the owners of the legal right conferred on the second plaintiffs under the agreement for sale and purchase and were therefore entitled to sue under the contract, and secondly that any defect in the pleading could be cured by an amendment to the effect that Mr and Mrs Nathan are bringing the proceedings as trustees on behalf of the first plaintiffs.

[24]     Associate Judge Robinson concluded that Mr and Mrs Smith had had notice

in writing of Mr and Mrs Nathan’s assignment of their rights and obligations under the agreement to the first plaintiffs.   He referred to a letter dated 12 January 2001

that Mr and Mrs Nathan’s solicitors had sent to the solicitors for Mr and Mrs Smith. The  letter  enclosed  a  memorandum  of  transfer.  The memorandum of transfer provided  for  the  property  to  be  conveyed  to  the  first  plaintiffs, and  the  Associate Judge  found  that  it  constituted  notice  in  writing  to  Mr and  Mrs  Smith  of  the assignment of the agreement to the first plaintiffs.  He considered that Mr and Mrs Smith,  by  executing  the  memorandum  of  transfer,  accepted  the  assignment,  and conveyed the property referred to in the agreement to the first plaintiffs. He held that the  first  plaintiffs,  as  the  transferees  named  in  the  memorandum  of transfer,  were entitled as assignees of the rights under the agreement for sale and purchase to bring the proceedings, and that the proceedings had been commenced within the six year time limit detailed in the Limitation Act 1950.

[25]     The  Associate  Judge  then  went  on  to  deal  with  the  cause  of  action  against Mr and Mrs Smith  for  negligence  as  developers,  and  the  cause  of  action  against Mr Smith  for  negligence  as  the  head  contractor  and/or  the  project  manager. He noted  that  there  were  conflicts  in  the  evidence  in  relation  to  both  of  these  matters which could not be resolved in the context of the application for summary judgment.

He concluded as follows:

...  the  applications  by the  first  defendants  for  summary judgment  or  strike out cannot succeed and must be dismissed.

Review of Associate Judge’s decision – Jurisdiction

[26]     Associate Judge Robinson heard the matter in open Court.

[27]     Mr  and  Mrs  Smith  seek  to  review  Associate  Judge  Robinson’s  decision insofar  as  he  declined  to  strike  out  the  causes  of  action  in  contract  against  them. Their  application  relies  on  s  26P  of  the  Judicature  Act  1908.   They  assert  that  an application  to  strike  out  is  an  interlocutory  application  which  must  be  heard  in chambers  –  r  7.34(1)  –  unless  a  Judge  otherwise  directs. They  observe  that Associate Judge Robinson made no such direction, and submit that the fact that the Judge heard the matter in open Court does not render his decision on the strike out application, an order made in open Court.

[28]     Mr  and  Mrs  Nathan  have  filed  a  notice  of  opposition.        They  submit  that Mr and  Mrs  Smith  do  not  have  the  right  to  seek  review  the  Associate  Judge’s decision.  They say that the decision was not made in chambers.  Rather it was made

in open Court.   They argue that the decision had to be made in open Court because Mr and Mrs Smith had also applied for summary judgment and summary judgment applications have to be dealt with in open Court – r 7.36.   They acknowledge that Associate Judge Robinson did not expressly direct that the strike out application was being heard in open Court, but they invite me to infer that he must have done so.

[29]     Associate Judges are appointed under s 26C of the Judicature Act 1908. They are given jurisdiction and certain powers of the Court by s 26I of the Act.  The powers conferred on them include the Court’s jurisdiction in relation to applications

for summary judgment.  In addition, under s 26J(1), rules may be made under s 51C

to confer on Associate Judges such of the jurisdiction and powers of a Judge sitting

in chambers as may be specified in any rules made.

[30]     The High Court Rules have been promulgated under s 51C. Rule 2.1 gives

Associate Judges the jurisdiction and powers of Judges in chambers.

[31]     Where  an  Associate  Judge  is  exercising  jurisdiction  and  the  powers  of  the Court under s 26I of the Act, he or she must do so in Court, and not in chambers.  An appeal will lie from his or her decision direct to the Court of Appeal under s 26P(2). Where an Associate Judge is exercising the powers of a Judge in chambers pursuant to s 26J, the matter should be dealt with in chambers, and the decision is amendable to review under s 26P(1).   It does not matter that the Associate Judge was sitting in robes  or  in  open  Court. He  or  she  is  still  exercising  the  personal  jurisdiction conferred by s 26J – being the jurisdiction of a Judge sitting in chambers – and is not exercising  a  jurisdiction  or  power  of  the  Court  under  s  26I  –  Talyancich  v  Index Developments Limited [1992] 3 NZLR 28 at 36 to 37.

[32]     Associate Judge Robinson did not distinguish between Mr and Mrs Smith’s application for summary judgment in respect of all the causes of action and their application to strike out some or all of the causes of action. The arguments advanced

by Mr and  Mrs Smith were relevant to both.   It would have been  possible for the

Associate Judge to have dealt with the strike out application and with the summary judgment application separately.  He could have directed under r 7.34 that the strike out application was being heard in open Court.  He did not, however, adopt either of these options.

[33]     The  summary  judgment  application  was  required  to  be  dealt  with  in  open Court – r 7.36.  Nevertheless, I am not persuaded that I can read into Associate Judge Robinson’s  decision  a  direction  that  the  strike  out  application  was  being  heard  in open  Court. Rather the  strike  out  application  was  heard  in  chambers,  and  the summary judgment  application  was  heard  in  open  Court.   There  is  a  right  to  seek review  by  this  Court  of  that  part  of  the  decision  as  relates  to  the  strike  out application, and a right to appeal to the Court of Appeal that part of the decision as relates  to  the  summary  judgment  application. This  situation  is  confusing  and unsatisfactory.  It is not however unique.  Where it has arisen previously, the Courts have distinguished between those parts of an Associate Judge’s decision which can only be appealed to the Court of Appeal, and those parts of a decision which can be reviewed in this Court.  I refer for example to McNamara & Ors v Malcolm J Lusby Limited  HC  AK  CIV  2006-404-2967  4 August  2009  Lang  J  and  to  Kerridge  v Kerridge & Ors [2009] 1 NZLR 264, and on appeal, [2009] 2 NZLR 763.

[34]         Mr  and  Mrs  Smith  do  not  seek  to  appeal  Associate  Judge  Robinson’s decision declining summary judgment.   Mr Price appearing for Mr and Mrs Smith accepts that any such appeal would be doomed to fail.   Summary judgment against the  plaintiffs  could  only  have  been  given  if  Mr  and  Mrs  Smith  had  been  able  to satisfy the Court that none of the causes of  action in the statement of claim could succeed – see r 12.2(2).   Here Mr and Mrs Smith could not do so.   The causes of action based in tort alleging negligence could not be dealt with by way of summary judgment,  for  the  reasons  noted  by  Associate  Judge  Robinson.                 There  was  an evidential dispute

[35]     I was initially concerned that there might be inconsistent decisions, were I to find in favour of Mr and Mrs Smith and strike out one or both of the causes of action based  in  contract.   Having  considered  the  matter,  I  am,  however,  satisfied  that  no inconsistency would arise.

[36]     In principle, an interlocutory judgment can found issue estoppel or cause of action estoppel.  However, considerable caution is necessary before coming to such a conclusion – see Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 at 42; Lyons v Stewart (1998) 12 PRNZ 257.

[37]     Here Associate Judge Robinson did not decline summary judgment in favour

of  Mr  and  Mrs  Smith  on  each  individual  cause  of  action. Rather  he  declined summary judgment in favour of Mr and Mrs Smith on all causes of action.   Given the evidential conflict, this was clearly appropriate – see r 12.2(2).  His decision does not finally conclude issues between the parties.  It is a finding by the Associate Judge that he could not grant summary judgment in favour of Mr and Mrs Smith, because he could not conclude that none of the causes of action in the plaintiffs’ statement of claim could succeed.

[38]     If I conclude that Mr and Mrs Smith are right in this review application and that  the  causes  of  action  based  in  contract  should  be  struck  out,  Associate  Judge Robinson’s  decision  declining  summary judgment  in  favour  of  Mr and  Mrs  Smith could  still  stand.     There is no necessary inconsistency,  and  it  would  be  quite unreasonable to expect Mr and Mrs Smith to appeal the Associate Judge’s decision on  the  summary  judgment  application  given  that  any  appeal  must  fail  –  see Arbuthnot v Chief Executive of Work and Income [2008] 1 NZLR 13 at paragraph [29].

[39]     For these reasons I have concluded  that  I  have  jurisdiction  to  review

Associate Judge Robinson’s decision in relation to the strike out application.

Assignment/Strike out

[40]     The Court has an inherent jurisdiction to strike out all or part of a pleading.  It also has jurisdiction pursuant to r 15.1.  The established criteria for striking out were summarised by the Court of Appeal in Attorney-General v Prince & Gardner [1998] 1 NZLR 262 at 267 and these principles were endorsed by the Supreme Court in Couch v Attorney-General [2008] 3 NZLR 725 at [33]. A strike out application proceeds on the assumption that the facts pleaded in the statement of claim are true.

The causes of action must be so clearly untenable that they cannot possibly succeed. The jurisdiction is to be exercised sparingly and only in a clear case where the Court

is satisfied it has the requisite material before it.   In Couch, the Supreme Court, per

Elias CJ and Anderson J, also noted at [33] as follows:

It  is  inappropriate  to strike out  a  claim summarily unless the  court  can  be certain that it cannot succeed.  The case must be “so certainly or clearly bad” that it should be precluded from going forward. Particular care is required in areas where the law is confused or developing.

[41]     Here  the  argument  for  the  first  defendants  is  essentially  that  the  first  and second causes of action as pleaded are misconceived, that they cannot be saved by amendment, and that any amendment would be time barred.

[42]     The Court can and will strike out a cause of action where it is time barred.  It does so on the grounds that the proceeding is frivolous or vexatious or an abuse of process – Stuart v Australian Guarantee Corporation (NZ) Ltd (2002) 16 PRNZ 139 and Ronex Properties Ltd v John Laing Construction Ltd [1983] QB 398.

[43]         The agreement for sale and purchase between Mr and Mrs Nathan and Mr and Mrs   Smith   was   dated   28   December   2000. The   agreement   contains warranties and undertakings given by Mr and Mrs Smith as vendors that, as at the giving and taking of possession, they had obtained the required permits or consents in respect of the building works, that the works were completed in compliance with the permits or consents, that a code compliance certificate was issued, and that all obligations imposed under the Building Act 1991 were fully complied with.

[44]     Both the first plaintiffs and Mr and Mrs Nathan assert that Mr and Mrs Smith have breached those warranties.

[45]     The  warranties  applied  as  from  the  giving  and  taking  of  possession.   That occurred  on  23  January  2001. It  was  common  ground  that  the  causes  of  action alleging breach of the warranties accrued as from that date, and that they could not be brought after the expiration of six years from that date – s 4(1) of the Limitation Act 1950.

[46]     Here the initial statement of claim was filed on 23 January 2007.  The causes

of  action  it  raises  were  brought  within  the  limitation  period.     Both  the  initial statement of claim and the second amended statement of claim alleged breach of the warranties  contained  in  the  agreement  for  sale  and  purchase.   What  is  in  issue  is whether or not the causes of action alleging breach of the warranties were open to either the first plaintiffs or Mr and Mrs Nathan on the bases pleaded.

[47]     The  arguments  for  both  parties  proceeded  on  the  common  assumption  that time continues to run in favour of Mr and Mrs Smith in respect of the existing causes of action unless and until someone entitled to enforce the cause of action commences proceedings for  that purpose.

[48]     Mr Price for Mr and Mrs Smith submitted as follows:

a)        The  first  plaintiffs  are  suing  as  assignees  pursuant  to  an  equitable assignment.

b)The equitable assignment was not enforceable by the first plaintiffs as assignees  against  Mr  and  Mrs  Smith  as  third  party obligors  prior  to their  being  given  notice  of  it.   If  notice  of  the  assignment  was  not given  to  Mr  and  Mrs  Smith  within  the  limitation  period,  the  first plaintiffs as assignees are not competent to enforce the cause of action which  has  been  assigned  to  them  –  Mountain  Road  (No.  9)  Ltd  v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335 at 345.

c)        Mr and Mrs Nathan as assignors could have sued as trustees for the first plaintiffs.  It they were doing so, they should have revealed their representative  capacity.   They  have  not  done  so.   Rather  they  have sought  to  enforce  the  warranties  as  persons  beneficially  entitled  to recover damages for their breach.

d)Mr and Mrs Nathan are no longer the  owners  or  controllers  of  the legal chose in action created by the agreement for sale and purchase, having assigned their rights under the agreement for sale and purchase

to the first plaintiffs.  As a result they have no right to sue in reliance on that agreement – Three Rivers District Council v Bank of England

[1995] 4 All ER 312.

e)        Any attempt to amend the pleadings to disclose that Mr and Mrs Nathan  sue  as  trustees for the first plaintiffs as their  beneficiaries, would be to add a different cause of action, which is statute barred – Photinia Properties Ltd v Auckland City Council HC AK CP 196/97,

2 November 1998, Patterson J at [21] to [24].

[49]     Mr Fisher did not take any issue with the legal foundation for these various propositions.  Rather he asserted that there was notice of the assignment.

[50]     Mr  Price’s  arguments  relied  to  a  significant  extent  on  the  decision  of  the Court  of  Appeal  in  Mountain  Road. In  that  case  proceedings  had  been  issued seeking  damages  for  breach  of  a  contract  for  the  supply of  fabric  for  a  large  tent. The proceedings were issued within the six year limitation period.  They were in the name of the assignee only.  An assignment had been signed by the assignor, but not the assignee, and notice had not been given within the limitation period to the third party obligors who were being sued for the alleged breach.  Notice was only given to the third party obligors after the limitation period had expired.  The Court of Appeal struck out the proceedings on the basis that they could not succeed.   Relevantly, it held that the equitable assignment was not effective against the third parties prior to their  being  given  notice  of  it,  and  that  no  such  notice  had  been  given  within  the limitation period.

[51]     The decision in Mountai  Road has  been  the  subject  of  some  debate  –  see

R T Fenton, Garrow and Fenton’s Law of Personal Property New Zealand (6ed) at

12.051, pp 749-758.   It is there argued that requiring an equitable assignee to serve notice on the third party obligor prior to expiration of a limitation period is a step not required  by authorities in Australia  and in the United Kingdom,  that the giving of notice is something of a technicality which could work unfairly, and that there is no legal or logical necessity that notice be given before proceedings can be issued by an assignee in his or her own name.

[52]     There  are  conflicting  authorities  overseas.   For  example,  in  Weddell  v  J  A Pearce & Major [1988] Ch 26, Scott J held that proceedings issued without notice having been given were not a nullity, and were issued in time. The Court of Appeal declined to follow this decision.

[53]     As  is  noted  in  The  Laws  of  New  Zealand, Choses in Action,  para  30,  n17, Mountain Road was not followed by the Court of Appeal in Queensland – Thomas v National  Australia  Bank  Ltd  [2000] 2 Qd.R 448. The Court there undertook a comprehensive survey of the case law both in the United Kingdom and in Australia. It suggested that various authorities were overlooked in Mountain Road, and that at least in Australia, the weight of authority supports the proposition that an assignee’s title to a chose of action is complete, so as to enable suit to be brought, before notice of the assignment is given to the person liable.  Similarly, Kaye J  in the Supreme Court in Victoria, declined to follow Mountain Road in Alma Hill Constructions Pty Ltd  v  Onal  (2007) 16 VR 190. Recently in the United Kingdom, Blackburne J, sitting in the Chancery Division of the High Court, noted that it was common ground that an equitable assignment was sufficient to pass the right to sue prior to expiration of the limitation period, even though notice was given four months later, and after the limitation period had expired – see Finlan  & Anor v Eyton Morris Winfield (a firm) & Anor [2007] 4 All ER 143 at [5].

[54]     In this country, the Court of Appeal has endorsed Mountain Road in Brazier

& Ors v Bramwell Scaffolding (Dunedin) Ltd  CA  222/99,  3  May  2000  at  [16]  to

[18]. This decision was affirmed, but without reference to the point, by the Privy Council – PC 7/2001, 18 December 2001. It is however noteworthy that in a more recent decision, Hela  Pharma  AB  v  Hela  Pharma  Australasia  Ltd  CA  165/03  and CA 206/03, 17 February 2005, the Court, per Hammond J noted as follows:

[54]     It  would  be  highly  impractical  to  commercial  life  if  contractual rights (such as were created by the distribution agreement in this case) could not be somehow transferred to a third party.

[55]     In the usual run of cases, such a “transfer” is achieved by one of two transactions:  a  novation  (the  making  of  a  separate  new  agreement);  or assignment. ...

...

[58]     In  an  assignment,  on  the  other  hand,  the  benefit  of  a  contract  is transferred to a third party. This is a transaction between the person entitled to the benefit of the contract (the assignor) and the third party (the assignee) which results in the assignee becoming entitled to sue the person liable under the contract (in many cases called the “debtor”). The “debtor” is not a party to  the  transaction  and  hence  his  or  her  consent  is  not  necessary  for  its validity.

...

[60]     In this instance, counsel were agreed that if there was an assignment

it would have to have been an equitable assignment of a legal chose in action (here, the rights under the agreement). This would not require any particular form. What is critical is an intention to assign, although that may have been established by conduct. Notice is not an essential requirement. An assignment of this character may be  perfectly  valid in equity  without  any notice to the third party - although notice is usually said to be “desirable”, since, as with statutory assignments, until he or she receives it the third party

is entitled to treat the assignor as his or her creditor and to discharge his or her debt by payment to that party. The giving of notice may prevent further equities attaching to a debt. It may also affect priorities.

[55]     While matters have been resolved for assignments which  were  made  on  or after 1 January 2008 by the Property Law Act  2007, ss  48  to  56,  the  law  which applied to equitable assignments prior to that date is, in my view, unsettled. I am mindful of the observations of the Supreme Court in Couch. The Court should be particularly slow to strike out a claim in an area  where  the  law  is  confused  or developing. Even if a strike out were otherwise appropriate, because notice of the assignment has not been given, I would decline to exercise the discretion conferred

on me by r 15.1 in the circumstances here applicable.

[56]     These issues notwithstanding, at the present point of time, the decision of the Court of Appeal in Mountain Road appears to record the law in New Zealand and I am of course bound by the decision. As a result, when proceedings are to be issued

in the name of an assignee, prior notice must be given within the limitation period to the third party obligor to prevent the proceedings from being struck out.

[57]     Accordingly the critical question for present purposes  is  whether  or  not Associate Judge Robinson was correct where he concluded that notice of the alleged equitable assignment had been given by Mr and Mrs Nathan to Mr and Mrs Smith.

[58]     Both Mr Smith and Mr Nathan filed affidavits.  The  Court  was  entitled  to receive affidavit evidence not only on the summary judgment application but also on the strike out application, particularly where, as here, there was no factual dispute as

to what occurred. Normally a Court will not consider evidence inconsistent with the pleading, but it can do so where an essential factual allegation is so  demonstrably contrary  to  indisputable  fact  that  the  matter  ought  not  to  be  allowed  to  proceed further  – see Attorney General v McVeagh [1995] 1 NZLR 558 at 566.

[59]     Both Mr Smith and Mr Nathan depose as follows:

a)        On 4 January 2001, Mr and Mrs Nathan’s solicitors advised Mr and Mrs  Smith’s  solicitors  by  facsimile  that  the  agreement  for  sale  and purchase was unconditional.

b)On 12 January 2001, Mr and Mrs Nathan’s solicitors sent Mr and Mrs Smith’s solicitors a letter enclosing a memorandum of transfer and a notice of change of ownership.

c)        On 15 January 2001, Mr and  Mrs  Smith’s  solicitors  sent  a  letter  to

Mr and Mrs Nathan’s solicitors enclosing the settlement statement.

d)       On 23 January 2001, Mr and Mrs Nathan’s solicitors sent a facsimile

to Mr and Mrs Smith’s solicitors confirming that payment had been made to their trust account.

[60]     In  relation  to  the  assignment  asserted  in  the  statement  of  claim,  Mr  Smith says:

The first time that Carolyn [Mrs  Smith] and I heard of any purported assignment  from  the  second  plaintiffs to the first  plaintiffs  was  on 30

January 2007 when we were served with these proceedings.

[61]     Mr Nathan says:

Assignment in terms of the transfer of the property is a legal term which I have  only  heard  of  since  instructing  solicitors  to  commence  this  claim. However,  it  was  always  the  intention  of  Mary  and  me  that  all  our  rights under the agreement would transfer to the trust.

[62]     Both deponents annexed to their respective affidavits copies of the relevant correspondence.

a)        The facsimile dated 4 January 2001 does not refer to any assignment.

It records the transaction as being “Smith – Nathan”.

b)The letter dated 12 January 2001 does not refer  expressly  to  the alleged  assignment. The memorandum of  transfer,  however,  names the transferees as Miles Hunter Nathan, James Denis Tait,  and Michael Gerard Curtis. The notice of change of ownership, referred

to  Messrs  Nathan,  Tait  and  Curtis,  and  recorded  that  they  were  the trustees of the MH Nathan (No. 2) Trust.

c)        The letter from Mr and Mrs Smith’s solicitors dated 15 January 2001 does not assist, although it is noteworthy that the settlement statement was headed “Mary & Miles Nathan”.

d)       The letter dated 23 January 2001 from Mr and Mrs Nathan’s solicitors

to  Mr  and  Mrs  Smith’s  solicitors  does  not  refer  to  the  alleged assignment.

[63]     The Court of Appeal has held that the notice requirements for both legal and equitable assignments are the same – Mountain Road at [343].

[64]     Under the Property Law  Act 2007, the giving of notice is no longer  a  pre- requisite for the assignment of a chose in action. That Act, however, only applies to assignments made on or after 1 January 2008. Under the old Property  Law Act 1952, written notice was  a pre-requisite for the statutory assignment of  a chose in action – s 130. No particular form was required for a notice. To be valid the notice had  to  make it plain, and inform  the  third party obligor  with reasonable  certainty, that  an  assignment  had  been  made. It had to identify what was assigned  and  the identity of the assignee – see The Laws of New Zealand, Choses in Action, para 24. What was required was that the third party obligor “be given to understand that the

debt has been made over by the creditor to some person” – William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 at 462 per Lord Macnaghten.

[65]     Similarly  there  was  no  particular  form  of  notice  required  for  an  equitable assignment providing the intention to assign was clear – Photinia at [22].

[66]     Notice to a solicitor affecting a transaction in which he or she was engaged

on behalf of a client was notice to that client – Magee v UDC Finance Ltd [1983] NZLR 438 at 441 – 443.

[67]     In my judgment the memorandum of transfer and notice of change ownership sent  by  Mr  and  Mrs  Nathan’s  solicitors  to  Mr  and  Mrs  Smith’s  solicitors  were sufficient to give notice of the alleged equitable assignment.  The documents made it clear  and  informed  Mr  and  Mrs  Smith  that  the  assignment  had  taken  place.   The assignees were identified by name.  In the notice of change of ownership, the named transferees  were  recorded  as  being the  trustees  of  the  M  H  Nathan  (No. 2)  family trust.   What had been assigned  was identified.   The property was identified in the transfer  by  reference  to  its  legal  description. The  consideration  noted  in  the agreement for sale and purchase was recorded.  The accompanying letter referred to the agreement for sale and purchase as did the notice of change of ownership.

[68]     Mr Price submits that all the transfer did was to notify the ultimate transferees of the title.  He submits that that could have been pursuant to any one of a number  of  things  –  e.g. exercise of the common law right of conveyance by direction, an on-sale, or a gift.  In my view, this argument has little force.  First, the transfer and the notice of change ownership refer either expressly or by implication to  the  agreement  for  sale  and  purchase.     Mr  and  Mrs  Smith  were  aware  that  the agreement  for  sale  and  purchase  was  with  Mr  and  Mrs  Nathan  or  their  nominee. Secondly,  and  in  any  event,  Mr  and  Mrs  Smith  as  third  party  obligors  were  not concerned with the underlying nature of the transaction leading to the assignment.

[69]     Viewed in context, in my view, receipt of  the  transfer  and  the  notice  of change of ownership by Mr and Mrs Smith’s solicitors was sufficient notice that Mr and Mrs Nathan had assigned the benefit of the agreement for sale and purchase to

the trustees of the trust.   Moreover the notice came to the attention of Mr and Mrs

Smith because they executed the transfer.

[70]     Accordingly, in my view Associate Judge Robinson did not err when he held that the first plaintiffs, as the persons named as transferees in the memorandum of transfer,  were  entitled  as  assignees  of  the  rights  under  the  agreement  for  sale  and purchase to bring the proceedings, and that the proceedings were commenced within the time limit provided by the Limitation Act 1950.

[71]     If I am right in this conclusion, that part of the cause of action whereby Mr and  Mrs  Nathan  personally  seek  to  rely  on  the  agreement  for  sale  and  purchase cannot stand.   Having assigned the agreement to the first plaintiffs, they no longer have any rights to sue on the same.   However,  Mr and Mrs Nathan are  also suing under  the  same  cause  of  action  as  occupiers  for  damages  they  allege  they  have suffered  in  that  capacity. The  pleading  can  readily  be  amended  to  delete  any reference  to  Mr  and  Mrs  Nathan  being  entitled  to  sue  on  the  warranties  in  their personal capacity.

[72]     There is one additional reason why, in my view, Associate Judge Robinson’s decision should be upheld.

[73]     If I am wrong in my conclusion that the transfer and the notice of change of ownership did not suffice to give notice of the assignment, then it seems clear from the affidavits filed that notice of the assignment was not given until the proceedings were commenced. Notwithstanding any failure to give notice the assignment would have been valid as between Mr and Mrs Nathan as assignors, and the first plaintiffs as assignees. Mr and Mrs Nathan could enforce the agreement for sale and purchase for damages accruing up until the time of notice, and the first plaintiffs as assignors could sue for damages accruing thereafter.  The beneficial interest in the damages as between Mr and Mrs Nathan and the first plaintiffs would be a matter between them. Both the first plaintiffs as assignors, and Mr and Mrs Nathan as assignees are before the Court as plaintiffs and both raise causes of action asserting breach of  the warranties. The Court of  Appeal’s decision in Brazier  v  Bramwell  Scaffolding

(Dunedin) Ltd at [16] to [18], suggests that in such circumstances the cause of action should not be struck out.

[74]     I  am  aware  that  that  other  authorities,  e.g.  Photinia,  suggest  that  in  such circumstances  the  assignor  has  to  make  it  clear  that  he  or  she  is  suing  in  a representative  capacity  on  behalf  of  the  assignor. The  Court  of  Appeal  do  not mention that requirement in Brazier nor in Mountain Road.   I do not take this point any further because it was not argued by the parties and because it is unnecessary for me to do so.  Suffice it to say it reinforces my view that the law in this area is vexed.

[75]     Accordingly, Mr and Mrs Smith’s  application  to  review  the  decision  of

Associate Judge Robinson is dismissed.

Costs

[76]     Both parties have succeeded to an extent. Nevertheless, it is my view that the first plaintiffs and  Mr  and  Mrs  Nathan are  entitled to their costs and to  their reasonable disbursements. This is because I have upheld Associate Judge Robinson’s decision, and declined to strike out the causes of action based in contract contained in the second amended statement of claim.  Costs are fixed on a 2B basis.

I would hope that counsel will be able to agree the same.  If not, I direct as follows:

a)        Mr  and  Mrs  Nathan  are  to  file  and  serve  submissions  in  relation  to costs within 10 working days from the date of this judgment.

b)Mr and Mrs Smith are to have a further 10 working days thereafter to reply.

[77]     I  will  then  deal  with  costs  on  the  papers,  unless  I require  the  assistance  of counsel.

Wylie J