Nicholson v Maultsaid HC Napier Civ-2011-441-000095

[2011] NZHC 584

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2011-441-000095

IN THE MATTER OF     an appeal against a decision of the District

Court at Hastings

BETWEEN  GRANT NICHOLSON Appellant

ANDRAYMOND MERVYN MAULTSAID AND MARGARET MAULTSAID (R&M MAULTSAID PARTNERSHIP) AND NATIONWIDE MOTOR INN LIMITED Respondents

Hearing:         16 June 2011

Counsel:         A B Darroch for Appellant

J O Upton QC for Respondents

Judgment:      16 June 2011 at 3:30 PM

I direct the Registrar to endorse this judgment with a delivery time of 3.30pm on the

16th day of June 2011.

RESERVED JUDGMENT OF MACKENZIE J

[1]      This an appeal against a judgment  of Judge Rea in the District Court at Hastings delivered on 19 January 2011 dismissing an application by the defendant to strike out the plaintiffs’ claim on the basis that it is statute barred by the Limitation Act 1950.

[2]      The facts are succinctly stated by Judge Rea and I can do no better than repeat his summary:[1]

[1] Maultsaid v Nicholson DC Hastings CIV-2006-020-000699, 19 January 2011 at [2]-[7]

Again for the purposes of this application the facts are straightforward. The Defendant was, and is, in business as a mortgage broker in Hawke’s Bay. From about 1999 onwards he acted on behalf of Mr Maultsaid and his interests in connection with proposed financing and refinancing which was being sought. The Defendant approached a number of funders without success. He also spoke to another broker, Mr Keith Foote, who suggested to him that finance might be available through a company called Euro Consultants International which was being promoted by a Mr Bellamy.

The terms of that proposed funding were set out in a letter to the Defendant. On 25 August 2000 the Defendant then wrote to Mr Maultsaid and copied to him the terms of the approach he had received and suggested it was an innovative idea which could be considered – “an option worth looking into further”.

The  Defendant  and  Mr  Maultsaid  met  with  Mr  Foote  to  discuss  this financing option.

Ultimately Mr Maultsaid accepted the proposed funding arrangement from Euro Consultants International and as a result on 25 September 2000 the Plaintiffs paid a procurement fee of US$10,000.00 by cheque to Euro Consultants International.

Settlement date for the payment of the funding from Euro Consultants International was to be on 14 November 2000. Settlement did not take place on that date and various extensions of time were granted but the finance did not arrive from Euro Consultants International. It subsequently transpired that the whole proposed funding arrangement was a scam run by Bellamy. In September 2004 Mr Foote was declared bankrupt and the company structure he operated under was struck off the register.

The Plaintiffs signalled to the Defendant in June 2001 that they would bring a claim against him and the proceedings were filed on 10 November 2006.

[3]      The  Judge  described  the  respective  submissions  for  the  parties  in  the following terms:[2]

[2]At [10] and [18].

Mr Darroch submits that the claim against the Defendant alleges he was negligent  because  he  failed  to  carry  out  sufficient  due  diligence  and

effectively  failed  to  warn  the  Plaintiffs  about  the  “scam”.  He  says  the

Plaintiff suffered a quantifiable loss or damage on 25 September 2000 when

they paid the procurement fee even though they did not know about the scam at that point.

…

Mr Upton submits that in this case there was no measurable loss at the time the Plaintiffs paid over the cheque for US$10,000.00 on 25 September 2000. He says that at that stage there was a contract pursuant to which the Plaintiffs paid the procuration fee and Euro Consultants International agreed to an advance which was to be made on 14 November 2000.

[4]      The Judge concluded:[3]

I accept Mr Upton’s submissions as accurately reflecting the position in this case. This is not a “reasonable discoverability” case. As Tipping J said in the Murray decision accrual is an occurrence based concept and any loss to the Plaintiffs in terms of the contractual relationships they had entered into with Euro Consultants International could only occur from 14 November 2000 and thereafter when the contract was breached by the failure to provide the funding or to return the procurement fee. The Plaintiffs did not have a cause of action against anybody on 25 September 2000 when they paid the procurement  fee.  It  was  only  on  or  after  14  November  2000  when  the funding was not supplied that the cause of action accrued.

[3] At [22].

[5]      Mr Darroch submits that the Judge’s conclusion as set out in para [22] is based on the proposition that the plaintiffs had received the contractual promise of funding from Euro Consultants in return for the payment, and so had not suffered any loss.  He submits that this reasoning incorrectly focuses on the plaintiffs’ rights and potential claim against Euro Consultants rather than the plaintiffs’ rights and potential claim against Mr Nicholson.  He notes that the plaintiffs’ claim alleges that Mr Nicholson  breached  his  obligations  because  he  did  not  identify  the  scam. Mr Darroch submits that the cause of action was complete as soon as the plaintiffs acted to their detriment, which the plaintiffs did when they paid the procurement fee. He submits that if the funding was a scam (which is to be assumed for the purposes of the strike out) then the procurement fee was lost from the moment it was paid.  In his submission, it does not matter that the scam was not discovered until later,

because, applying Murray v Morrel & Co Ltd,[4]  a “reasonable discoverability” test

does not apply.

[4] Murray v Morrel & Co Ltd [2007] 3 NZLR 721 (SC).

[6]      I consider that the crucial question is when the scam was complete.   The answer to that question may depend upon the evidence at trial.  The word “scam” is defined in the Concise Oxford Dictionary as:  “A dishonest scheme, a fraud”.  I do not consider that that, on the pleadings, it can be said that a dishonest scheme has been completed, or that a fraud on the plaintiffs has been committed, at the point when the procurement fee was paid. The possibility is at least open, on the plaintiffs’ pleadings,  that  the  dishonest  scheme  and  the  fraud  on  the  plaintiffs  were  not

complete, and the plaintiffs did not suffer loss, until the proposed lender failed to

advance the monies in accordance with the loan proposal.  That failure did not occur until at least November 2006, within the limitation period.  I agree with Judge Rea that that is not a question of reasonable discoverability of the scam;  rather it is a question of whether the scam was complete or not.

[7]      In Murray v Morrell, Tipping J said:[5]

… in order to succeed in striking out a cause of action as statute-barred, the defendant must satisfy the Court that the plaintiff’s cause of action is so clearly statute-barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process.  …

[5] At [33].

[8]      Unless those requirements are met, limitation questions are best addressed in the context of all the evidence, at trial.  I consider that to be the situation here.

[9]      For these reasons, I consider that Judge Rea’s decision was correct.   The appeal must be dismissed.

[10]     The respondents are entitled to costs, which I fix on a 2B basis.  Mr Upton advised that the respondents are legally aided.

Solicitors:           Duncan Cotterill, Nelson, for Appellant

J O Upton QC, Barrister, Wellington, for Respondents

“A D MacKenzie J”