Nowak v Institution of Professional Engineers New Zealand Incorporated t/a Engineering New Zealand
[2023] NZHC 2612
•19 September 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2022-485-477
[2023] NZHC 2612
UNDER the Chartered Professional Engineers of New Zealand Act 2002 and the New Zealand Bill of Rights Act 1990 IN THE MATTER OF
claims in negligence, breach of statutory duty, breach of statutory obligation and breach of right to justice
BETWEEN
PIOTR BOHDAN NOWAK
Plaintiff
AND
THE INSTITUTION OF PROFESSIONAL ENGINEERS NEW ZEALAND INCORPORATED t/a ENGINEERING NEW ZEALAND
Defendant
Hearing: 22 August 2023 Appearances:
G Davis for the Plaintiff
H Wilson and K Rouch for the Defendant
Judgment:
19 September 2023
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 19 September 2023 at 3.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
Cashmere Law, Christchurch
Dentons Kensington Swan, Wellington
Counsel:
Canterbury Chambers, Christchurch
NOWAK v THE INSTITUTION OF PROFESSIONAL ENGINEERS NEW ZEALAND INC t/a ENGINEERING NEW ZEALAND [2023] NZHC 2612 [19 September 2023]
Introduction
[1] The plaintiff, Piotr Nowak, is an engineer. In 2012, he was registered as a chartered professional engineer (CPEng) under the Chartered Professional Engineers of New Zealand Act 2002 (the Act) and the Chartered Professional Engineers of New Zealand Rules (No 2) 2002 (the Rules).
[2] The defendant, the Institution of Professional Engineers New Zealand Incorporated (IPENZ), is the Registration Authority under the Act.
[3] In 2014, Mr Nowak applied under the Act and the Rules for continued CPEng registration. His application was initially unsuccessful, but ultimately granted by the Chartered Professional Engineers Council (CPEC), a statutory body established under the Act.
[4] Mr Nowak has issued this proceeding against IPENZ, seeking damages alleged to arise from IPENZ’s handling of his application for continued registration.
[5] IPENZ applies under r 10.15 of the High Court Rules 2016 (HCR) for orders for a split trial, with the first trial to determine five preliminary questions. Mr Nowak opposes the application.
Background
[6] Mr Nowak’s application for continued registration was assessed by an assessment panel of IPENZ. A dispute developed between the assessment panel and Mr Nowak regarding the procedure adopted by the panel. The assessment panel recommended that Mr Nowak’s registration be suspended.
[7] In July 2015, the Competency Assessment Board (CAB), a board appointed under the Rules, confirmed that Mr Nowak’s registration would be suspended.
[8] Mr Nowak appealed to CPEC in December 2015. The appeal was declined, but CPEC instructed IPENZ to offer Mr Nowak the opportunity of a further interview with the assessment panel, which Mr Nowak accepted.
[9] Following that interview, the panel verbally informed Mr Nowak that it would recommend that his registration be continued, and the panel prepared a draft decision to that effect. The assessment panel subsequently reversed its draft decision and issued a final decision recommending that Mr Nowak’s registration be suspended, which was confirmed by CAB on 9 December 2016.
[10] Mr Nowak appealed that decision to CPEC in November 2017. On 23 March 2020, CPEC upheld Mr Nowak’s appeal on the grounds of significant factual errors by IPENZ in its assessment of the application, bias by the assessors and procedural failings.
[11] As a result of the appeal being upheld, Mr Nowak’s CPEng registration was reinstated. IPENZ appealed CPEC’s decision to the District Court. On 29 June 2021, the District Court upheld CPEC’s decision and dismissed the appeal. Mr Nowak’s registration continues, with a current expiry date of 31 December 2027.
The causes of action and the proposed separate questions
[12] In his first cause of action, Mr Nowak alleges that IPENZ owed him a duty of care in negligence to perform its statutory functions as the Registration Authority with reasonable care, skill and diligence, including duties to:
(a)assess Mr Nowak’s application fairly, accurately and competently to the standard of a reasonably competent CPEng assessment panel;
(b)process Mr Nowak’s application without undue or unreasonable delay; and
(c)observe the principles of natural justice.
[13]Mr Nowak alleges that IPENZ breached those duties, causing him loss.
[14] Mr Nowak’s second cause of action is for the tort of breach of statutory duty. Mr Nowak alleges that IPENZ owed him a statutory duty to perform its statutory
functions with reasonable care, skill and diligence. The scope of the duties alleged to arise is identical to the scope of the duties alleged to arise in negligence.
[15] In his third cause of action, Mr Nowak alleges breach of a further statutory duty arising under s 25(b) of the Act, which provides:
25 Specified procedure for making decisions
In the performance and exercise of its decision-making functions and powers under this Part, a decision authority must—
…
(b) observe the rules of natural justice; and
…
[16] In his fourth cause of action, Mr Nowak alleges that IPENZ breached s 27(1) of the New Zealand Bill of Rights Act 1990, which provides:
27 Right to justice
(1)Every person has the right to the observance of the principles of natural justice by any tribunal or other public authority which has the power to make a determination in respect of that person’s rights, obligations, or interests protected or recognised by law.
…
[17] IPENZ is proposing one general preliminary question (a), and a particular question in respect of each cause of action. The proposed questions are:
a Whether the Chartered Professional Engineers Act of New Zealand 2002 (the Act) and/or the Chartered Professional Engineers of New Zealand Rules (No 2) (the Rules) are capable of supporting the duties as formulated by Mr Nowak, the plaintiff.
b In respect of the first cause of action, whether under [Subpart 3 of Part 2 of the Rules, r 71 of the Rules and s 43 the Act], the applicant owed the respondent a duty of care to perform its statutory functions with reasonable care, skill and diligence, including:
ito assess the respondent’s application fairly, accurately and competently, to the standard of a reasonably competent CPEng assessment panel;
iito process the respondent’s application without undue or unreasonable delay; and/or
iiito observe principles of natural justice.
c In respect of the second cause of action, whether under [Subpart 3 of Part 2 of the Rules, r 71 of the Rules and s 43 the Act], the applicant owed a duty to the respondent to perform its statutory functions with reasonable care, skill and diligence, including:
ito assess the respondent’s application fairly, accurately and competently, to the standard of a reasonably competent CPEng assessment panel;
iito process the respondent’s application without undue or unreasonable delay; and/or
iiito observe the principles of natural justice.
d In respect of the third cause of action, whether under section 25(b) of the Act, the applicant owed a statutory duty to the respondent to observe the rules of natural justice.
e In respect of the fourth cause of action, whether under section 27(1) of the New Zealand Bill of Rights Act 1990 (NZBORA) the applicant owed a statutory duty to the respondent to observe the rules of natural justice.
[18] IPENZ seeks to establish at a preliminary trial that all four of Mr Nowak’s causes of action are not available to him as a matter of law.
Legal principles
[19]Rule 10.15 of the HCR provides:
10.15 Orders for decision
The court may, whether or not the decision will dispose of the proceeding, make orders for—
(a)the decision of any question separately from any other question, before, at, or after any trial or further trial in the proceeding; and
(b)the formulation of the question for decision and, if thought necessary, the statement of a case.
[20] Split trials are not undertaken lightly. There is at least a moderate presumption against splitting trials.1 Case law contains numerous references to the pitfalls of a split trial.2
[21]In Haden v Attorney-General, Kós J set out five questions to be considered: 3
1 Haden v Attorney-General (2011) 22 PRNZ 1 (HC) at [46].
2 See Clear Communications Ltd v Telecom Corporation of NZ Ltd (1998) 12 PRNZ 333 (HC) at 335; and Body Corporate 126001 v Hannam [2022] NZHC 2746 at [37].
3 Haden v Attorney-General, above n 1, at [50] (footnotes omitted).
(a)Question One: Will there be difficult demarcation questions between those issues to be addressed at the first trial and those left for the second?
“The interaction between issues in split trials is said to be the single most important question for consideration by a Court considering a Rule 10.15 application. This question requires the Court to look at: (1) what is pleaded, (2) what issues arise on the separate question, (3) what issues remain for the second hearing, and (4) in each case, what evidence is required to dispose of those issues. Issues in the two hearings desirably should be discreet. If they are not, or if there is significant evidential overlap, separate determination is far less likely to be appropriate. Particular consideration must be given to potential difficulties from issue estoppels. In a multi-party proceeding, inefficiencies associated with parties with limited connection to the initial question being required to attend the first hearing, simply in order to protect their position. The risk of a Judge dealing with the first trial being inadvertently disqualified from conducting the subsequent hearing must also be considered.”
(b)Question Two: Will the separate question bring the proceedings to an end?
“The fact that the separate question, if answered affirmatively, will not bring the proceedings to an end is not determinative. Rule 10.15 makes that clear on its face. But it is a consideration tending against granting the application. The Courts also need to guard against granting a separate question which absorbs the bulk of the substantive issues for trial, thus turning an interlocutory application into a substantive one.”
(c)Question Three: What potential time saving does the separate question offer?
“There are two aspects to this enquiry. First, the potential hearing time saved. A mathematical approach is called for. The applicant should be able to demonstrate (by reference to reasoned time estimates) the potential time saved if the question is answered affirmatively. The applicant also needs to address the counterfactual: what total time will be taken if the question is answered negatively? The absence of significant potential time savings will be a consideration against granting an application under Rule 10.15.
Secondly, any potential delay to final resolution of the whole case, and any associated inefficiencies resulting from splitting trial into two parts. An affirmative answer to the separate question cannot of course be assumed. An important consideration will be how long the gap is likely to be between hearing the separate question and the hearing of the remaining issues. Will final resolution now be later than if everything proceeded at once? Associated inefficiencies may include duplication of preparation for counsel (reacquainting themselves with issues from the earlier trial), and time spent retraversing matters at the second trial. Similarly, duplication of evidence. An interregnum delay (and the need to ‘restart’ counsel) is inefficient and costly. It may
result in loss of momentum, increased costs and reduced prospects of settlement.”
(d)Question Four: How will appeals be dealt with?
“Multiple appeals are likely to be inefficient. They are likely to delay resolution of proceedings, and enlarge the period between the preliminary hearing and trial of the remaining issues. It may be desirable to make it a condition of granting a Rule 10.15 application that the hearing of appeals be postponed until determination of all issues in the proceeding. Even then, however, parties may still seek to be released from that condition.”
(e)Question Five: Are there any other practical considerations tending one way or the other?
“Some proceedings are simply ill-suited to split trial procedure. There are particular difficulties in fragmenting issues in competition and negligence cases. On the other hand, intellectual property cases may lend themselves to preliminary determination. There is also some reluctance evident in the case law for the determination of novel areas of law under Rule 10.15 procedure. Such cases are usually better resolved within their full factual setting, rather than in a separate subset of facts.
Finally, the availability and rostering of the Judge for the second trial must be considered (bearing in mind the risks of other commitments, sabbaticals, retirement or death intervening).”
[22] The burden lies on the applicant seeking a split trial and has been described as “not insignificant”4 and “heavy”.5 However, the possibility of a split trial should not be dismissed out of hand, and the most important consideration is the interaction between the issues intended to be traversed at the first hearing and those that remain to be traversed at the second hearing.6
Discussion
The parties’ arguments on demarcation issues and practical considerations
[23] IPENZ seeks a preliminary trial to determine whether any of the legal duties alleged by Mr Nowak exist. IPENZ argues that this involves legal issues only, and no disputed questions of fact.
4 KPMG New Zealand v Gemmell HC Auckland CIV-2008-404-4288, 27 March 2009 at [20].
5 Clear Communications Ltd v Telecom Corporation of NZ, above n 2, at 335; and Turners & Growers Ltd v Zespri Group Ltd HC Auckland CIV-2009-404-4392, 5 May 2010 at [20].
6 Clear Communications Ltd v Telecom Corporation of NZ, above n 2, at 335.
[24] Counsel for IPENZ, Mr Wilson, submitted that the issues that arise in respect of the pleaded duties, which IPENZ has sought to encapsulate in its proposed preliminary questions, can be easily demarcated from the issues that arise in respect of breach and consequential loss, which will include causation, reasonable foreseeability of harm and quantum.
[25] Mr Wilson argued that the first trial can proceed with little or no viva voce evidence and largely based on an agreed statement of facts.
[26] Mr Wilson submitted that the issues of breach of duty and consequential loss will require a significant amount of detailed factual evidence that can be left for the second trial, if needed. IPENZ would expect to call six witnesses of narrative facts and at least four expert witnesses at the second trial.
[27] IPENZ’s application for a split trial rests on the premise that the existence of the alleged duties depends solely on an analysis of the Act and the Rules.
[28] For Mr Nowak, Mr Davis submitted that the case is unsuitable for a split trial because the primary claim in negligence is based on a novel duty of care. He argued that the elements of the claim should not be considered separately.
[29] Mr Davis submitted that the existence of the pleaded duty requires consideration of the factual matrix in which the duty is said to arise, in addition to a consideration of the statutory framework. Consideration of the factual matrix at a first trial would result in significant overlap with a second trial dealing with causation, reasonable foreseeability of harm and quantum.
The approach required for a novel duty of care in negligence
[30] The first cause of action in negligence and the second cause of action for breach of statutory duty are closely related. The parties agree that if I determine that the duty of care issues that arise from those two causes of action are unsuitable for determination as preliminary questions, then there is no efficacy in a preliminary determination of the duty questions that arise from the third and fourth causes of action.
[31] In New Zealand, the orthodox approach to determining whether a novel duty of care in negligence exists is to consider factors relating to proximity and policy.
[32] The factors bearing on the existence of a duty of care, breach of that duty and consequential harm overlap.7 That is particularly so for factors that bear on proximity, rather than matters of policy.
[33] IPENZ’s application to separate out the duty questions for preliminary determination, and to have those questions determined on what it submits are undisputed facts, is akin to IPENZ making an application for defendant’s summary judgment or strike out. The approach to determining duty of care issues on an application for summary judgment or strike out is informative.
[34]In Couch v Attorney-General, an application for strike out, Elias CJ said:8
… care needs to be taken in strike-out determinations to ensure that the facts are sufficiently known to enable it to be confidently said that no duty of care can be owed. In difficult cases, duty of care is no more suitable for peremptory assessment on assumed facts than questions of breach or damage. The sequence in which the elements of negligence are considered should not matter. Since considerations relevant to determination of duty of care are also relevant to breach of duty or causation and remoteness of damage, only high level and generalised legal policies may be suitable for consideration in relation to duty of care on strike-out. Consideration of the particular circumstances of the case may more properly be treated as bearing on the remoteness of damage or breach, by which ultimate responsibility under a duty of care owed by the defendant to the plaintiff is determined.
[35] Elias CJ expanded on her comment that high level and generalised legal polices may be suitable for discreet consideration:
[53] Except in cases of clear impediment (such as where tortious liability is inconsistent with statute), the judgment whether as a matter of proximity and policy it is right to recognise a duty of care in novel circumstances will usually be intensely fact-specific. Lord Steyn in Gorringe v Calderdale Metropolitan Borough Council emphasised the especial need to focus closely on the facts and background social context when negligence arises in the exercise of statutory duties and powers, a subject he regarded as one of “great complexity and very much an evolving area of the law”. Kirby J in Pyrenees Shire Council v Day thought it best to accept that liability in negligence in such hard cases is fixed by reference to a “spectrum” of factors of the kind examined in Stovin v Wise by Lord Nicholls and by the “candid evaluation of
7 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [41].
8 Couch v Attorney-General, above n 7, at [43].
policy considerations” by Lord Hoffmann in the same case. We agree with that view. It is effectively the approach taken in South Pacific Manufacturing.
(footnotes omitted)
[36] Attorney-General v Carter is a rare example of a case in which the Court of Appeal was prepared to strike out a novel cause of action in negligence on the ground that it was inconsistent with the applicable statutory framework.9 The Court considered the statutory framework as part of its enquiry into proximity and matters of policy.
[37] The authorities confirm that the Court should be cautious before determining whether a novel duty of care exists on a preliminary basis without the advantage of a full hearing of the facts to provide context.10
The proposed separate questions
[38] Question (a) is subsumed in questions (b) to (e). I will first consider question (b), which is intended to dispose of the cause of action in negligence.
[39]In his statement of claim, Mr Nowak pleads:
105.The Registration Authority owed Mr Nowak a duty of care to perform its statutory functions as the Registration Authority (as pleaded above), with reasonable care, skill and diligence, including:
105.1.to assess Mr Nowak’s application fairly, accurately and competently for continued registration to the standard of a reasonably competent CPEng assessment panel;
105.2.to process Mr Nowak’s application without undue or unreasonable delay; and
105.3.to observe the principles of natural justice.
106.The duties were owed because the Registration Authority:
106.1.is a statutorily appointed body of chartered professional engineers, and was aware or ought to have been aware of the requirements under the Act in determining applications for continued registration;
9 Attorney-General v Carter [2003] 2 NZLR 160 (CA).
10 See Body Corporate S91535 v Danegeld Ltd (in liq) HC Tauranga CIV-2006-470-922, 24 May 2010.
106.2.consisted of engineering professionals, including chartered professional engineers, working within their usual field of practice; and
106.3.knew or ought to have known that a failure to carry out its statutory functions with reasonable care, skill and diligence would cause loss to Mr Nowak.
[40] The nub of the pleading is that IPENZ owed Mr Nowak a duty to exercise reasonable care and skill while performing statutory functions. The pleading includes the facts said to give rise to the alleged duty and its scope.
[41] In question (b), IPENZ has restated the duty pleaded in para [105] of the statement of claim, prefaced with the question of whether the duty arises “under” the relevant provisions of the applicable legislation. In doing so, IPENZ eschewes an inquiry into the factual matrix. The question is limited to the relationship between the duty and the statutory framework.
[42] That approach may be consistent with IPENZ’s argument that the pleaded duty is inconsistent with the statutory framework. However, given IPENZ’s position it would be more appropriate to phrase the question more directly, for example:
Is the duty of care pleaded in para [105] of the statement of claim dated 11 August 2022 inconsistent with the statutory framework of the Act and the Rules, militating against the imposition of the pleaded duty of care on the defendant?
The problems with demarcation
[43] Whether question (b) is considered in its present form, or in a varied form similar to my suggestion above, the issue remains whether the question can be decided in isolation and without full consideration of the factual background, including determination of any disputed facts.
[44] IPENZ seeks determination of its legal argument based on the statutory framework without the need for what it describes as “extensive and time-consuming evidence”, including:
(a)evidence of the way in which IPENZ appoints members of its panels and its processes to ensure their competence and the management of potential conflicts of interest;
(b)expert evidence of competence assurance processes;
(c)expert evidence of conflicts of interest management; and
(d)all evidence relating to Mr Nowak’s particular application for continued registration and the processes that were followed.
[45] Mr Davis submitted that the alleged duty of care arises by virtue of the facts pleaded in para [106] of the statement of claim, the statutory framework and the factual circumstances of Mr Nowak’s application. He says that the existence of the duty cannot be divorced from the factual matrix. Full evidence is required.
[46] If the Court is required to answer question (b) in its present form, then the Court will be required to consider all proximity and policy factors to determine whether a duty of care exists. That determination will require a careful consideration of the factual matrix. The first of the split trials would require most, if not all, of the evidence identified in para [44] above.
[47]A split trial on that basis is unsuitable for several reasons:
(a)there is a risk that there would be a lack of demarcation of the issues, such that the first trial would absorb the bulk of the substantive issues;
(b)there would be significant evidential overlap between determination of the existence and scope of a duty of care in the first trial, and if a duty exists, consideration of breach in the second trial;
(c)some of the witnesses would need to give evidence in both trials, and some evidence given in the first trial would likely be relevant to the issues left for the second trial, and demarcating the issues and
determining the relevance of evidence at the first trial would be difficult; and
(d)there would be potential for issue estoppel at the second trial.
[48] Refining question (b), so that the Court is limited to considering the effect of the statutory framework, does not improve the position. The parties have not agreed a formal statement of facts. The starting point is that Mr Nowak would be free to adduce viva voce evidence at the first trial, provided that the evidence is relevant and otherwise admissible to the refined preliminary question. There would remain potential for arguments regarding the scope of the evidence that would be relevant to a determination of the refined preliminary question, highlighting the difficulty with demarcation of the issues.
[49] In my view, this is one of those cases where it is undesirable to fragment the issues. The novel duty of care question is best resolved within a full factual setting.
Potential efficiencies
[50] This proceeding is ready to be set down for trial. If all issues are dealt with at one trial, then counsel estimate that ten days would be required.
[51] For a split trial, the duration of the first trial would depend on how the preliminary questions are phrased and the extent of the evidence that is then determined by the Court to be relevant. Evidence will be called, and demarcation of what is relevant and what is not will be difficult.
[52] Mr Wilson estimates that one to one-and-a-half days would be required. Mr Davis estimates that three days would be required. Counsel agree that it is difficult to predict how many days would be required for the second trial if one was required, which would depend on how the first trial unfolded. Total hearing time for the two trials might exceed ten days.
[53] When considering possible time savings, the Court should not presume that IPENZ will succeed at the first trial. Regarding the number of hearing days that will
be required for a split trial in this case, by comparison to a single trial, the possible outcome is either a saving of perhaps seven or eight days if IPENZ is successful at the first trial and a second trial is avoided or, overall, a requirement of a few extra days if Mr Nowak is successful at the first trial and the second trial proceeds.
[54] If Mr Nowak is successful at the first trial, then the split trial will cause a delay in final determination of the proceeding, likely to be at least twelve months, ignoring appeals.
[55] That delay may be compounded by the exercise of rights of appeal. This case involves a novel duty of care, which is amenable to appeal.
[56] If IPENZ was successful at the first trial and Mr Nowak appealed, then Mr Nowak would face significant delay while his appeal is dealt with.
[57] IPENZ will consent to a condition on a split trial that any appeal of the first trial by IPENZ await the outcome of the second trial. However, that would add little to the overall efficiencies for resolving this proceeding. If Mr Nowak is successful at the first trial and IPENZ appeals, then IPENZ would still need to deal with the second trial before its appeal in respect of the first trial was heard — there would be no saving.
[58]Finally, a split trial raises a real possibility of multiple appeals.
Conclusion
[59] The problems with demarcation of the issues that arise with a split trial, discussed in paras [43] to [49], outweigh any potential efficiencies which are dependent on which party is successful.
[60] This proceeding can be most efficiently determined by a single trial of ten days duration allocated on the next available date.
The other proposed preliminary questions
[61] The above analysis applies equally to question (b) and the closely related second cause of action for breach of statutory duty.
[62] As noted, counsel agree that it is inappropriate for questions (c) and (d) to be determined separately from questions (a) and (b). Therefore, IPENZ’s application for a split trial fails in its entirety.
Result
[63] The defendant’s application for an order that questions be determined separately before the trial of all other issues arising in the proceeding is dismissed.
[64] The defendant shall pay the plaintiff’s costs in respect of the application on a 2B basis.
Associate Judge Brittain
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