Perpetual Trust Ltd v Mainzeal Property and Construction Ltd

[2012] NZHC 223

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2010-404-7597 [2012] NZHC 223

BETWEEN  PERPETUAL TRUST LIMITED First Plaintiff

ANDAMP CAPITAL PROPERTY PORTFOLIO LIMITED

Second Plaintiff

ANDMAINZEAL PROPERTY AND CONSTRUCTION LIMITED First Defendant

ANDNUPLEX INDUSTRIES LIMITED Second Defendant

ANDPROJECT ROOFING LIMITED Third Defendant

CONTINUED OVERLEAF Hearing:  23 November 2011

Appearances: Mr Price, Ms Stewart and Mr Lockhead for plaintiffs

Ms Knight for first defendant

Fourth defendant (excused from attendance) Fifth Defendant (excused from attendance)

J A Thompson for fifth defendant
P J K Spring for sixth defendant

Mr D K Wilson appears for eighth defendant (but is excused attendance)

Mr A Barker for tenth defendant Mr O'Neill for eleventh defendant Mr P Hunt for twelfth defendant

Mr Smith and Ms Beight for fourteenth and seventeenth defendants

Ms Webster for fifteenth defendant

Judgment:      23 February 2012

JUDGMENT OF ASSOCIATE JUDGE DOOGUE

This judgment was delivered by me on

23.02.12 at 10 a.m., pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

PERPETUAL TRUST LIMITED & Anor V MAINZEAL PROPERTY AND CONSTRUCTION LIMITED & Ors HC AK CIV-2010-404-7597 [23 February 2012]

ANDMPM WATERPROOFING SERVICES LIMITED

Fourth Defendant

ANDDOMINION CONSTRUCTORS (1973) LIMITED

Fifth Defendant

ANDVILLAGE FARMS LIMITED Sixth Defendant

ANDMCALPINE HUSSMANN LIMITED Seventh Defendant

ANDY NOT PLASTERERS LIMITED Eighth Defendant

ANDROBERT GORE LIMITED Ninth Defendant

ANDDOWNER WORKS EDI LIMITED Tenth Defendant

ANDDEAN STEEL LIMITED Eleventh Defendant

ANDCONTRACT COATINGS LIMITED Twelfth Defendant

ANDD. L. GOOD PLUMBERS LIMITED Thirteenth Defendant

ANDSTUDORP LIMITED Fourteenth Defendant

ANDPEDDLE THORP AITKEN LIMITED Fifteenth Defendant

ANDCONTRADO LIMITED Sixteenth Defendant

ANDJAMES HARDIE NEW ZEALAND LIMITED

Seventeenth Defendant

Solicitors:

MinterEllisonRuddWatts, P O Box 3798, Auckland –

[email protected]/  [email protected] for plaintiff

Simpson Grierson, Private Bag 92518, Wellesley Street, Auckland – jo- [email protected] [email protected] for first defendant

Glaister Ennor, P O Box 63, Auckland  - [email protected] for second defendant

Brookfields, P O Box 240, Auckland – [email protected] /

[email protected] for third defendant

Short & Partners, Auckland – [email protected] for fourth defendant

Robertsons, P O Box 2068, Auckland –[email protected]  for fifth defendant

Keegan Alexander, Auckland – [email protected] for sixth defendant

Schnauer & Co, Attn: Mr D Schnauer  - [email protected] for seventh defendant

Mr D Wilson, P O Box 5133,Auckland – [email protected] for eighth defendant

Wilson Harle, Auckland – [email protected] /

[email protected]
(Counsel: A Barker, Auckland -  [email protected] for tenth defendant)

Lee Salmon Long, P O Box 2026, Shortland Street, Auckland –paul.o’[email protected]
/ [email protected] for eleventh defendant

McElroys, P O Box 835, Auckland  – by email:  [email protected] / [email protected] for twelfth defendant

Morgan Coakle, P O Box 114, Auckland – [email protected] for fifteenth defendant

Lowndes Jordan, P O 5966 Auckland – [email protected] for fourteenth and seventeenth defendants

(Counsel:  W Smith – [email protected]) Kennedys, Auckland – [email protected]

[1]      The plaintiffs seek leave to discontinue against the sixth, eighth to thirteenth, and fifteenth defendants.  In the course of the hearing, Mr Warwick Smith, for the fourteenth and seventeenth defendants (James Hardie New Zealand Ltd and its subsidiary, Studorp Ltd) (“James Hardie”), said that his clients had no objection to the   plaintiffs   discontinuing   against   the   eleventh   and   fifteenth   defendants. Accordingly, the plaintiffs have consent to discontinue against those two parties.

[2]      By way of background, I also note that the second defendant has brought a cross-claim against the first defendant.

[3]      James Hardie has brought cross-claims against the sixth, tenth and twelfth defendants.  No cross-claim has been brought against the eleventh defendant.

[4]      There  is  no  unconditional  right  to  discontinue  where  the  circumstances referred to in r 15.20 of the High Court Rules 2008 apply.  Those circumstances, in summary, include where an injunction has been obtained by the discontinuing party.1

Such leave is required because a party may have obtained an injunction that was intended to hold the position until the substantive proceedings can be determined by the Court. If that is not to occur, the Court needs to review the question of whether the injunction should not be discharged before the proceeding is finally brought to an end.  There may also be issues about whether an undertaking as to damages needs to be  enforced  to  make  good  any  loss  incurred  by  the  enjoined  party  during  the currency of the injunction.

[5]      The case of an interim payment order made under r 7.70 contemplates the type of case illustrated in Castanho v Brown & Root (UK) Ltd.2    The plaintiff in a personal injuries action, having received an interim payment, sought to discontinue that claim so that he could take proceedings in the United States of America, a jurisdiction in which a greater damages award was possible.   This authority and others  were  referred  to  by  Wylie  J  in  Telstra  New  Zealand  Holdings  Ltd  v

Commissioner of Inland Revenue,3 a case that dealt with an application to set aside a

1 High Court Rules 2008, r 15.20(1)(a)(i).

2 Castanho v Brown & Root (UK) Ltd [1980] AC 557 (HL).

3 Telstra New Zealand Holdings Ltd v Commissioner of Inland Revenue (2011) 25 NZTC 20-010

discontinuance.    However,  a  review  of  Castanho  v  Brown  &  Root  (UK)  Ltd illustrates the circumstances in which a discontinuance will not be permitted, or will only be conditionally permitted.  In that case, Lord Scarman in his judgment in the House of Lords stated:4

It is inconceivable that the court would have allowed a plaintiff, who had secured interim payments and an admission of liability by proceeding in the English court, to discontinue his action in order to improve his chances in a foreign suit without being put on terms, which could well include not only repayment of the moneys received but an undertaking not to issue a second writ in England.

[6]     In my view, the cases such as Telstra concerning the setting aside of discontinuance are illustrative of some of the matters the Court should take into account when deciding whether a discontinuance should be allowed.  Avoidance of abuse of process is one of the grounds on which the Court should decline consent to a discontinuance or attach conditions to it.5

[7]      A consideration relevant to the decision of whether or not to grant leave is that a plaintiff ought not to be forced to continue against a defendant whom it does not wish to bring to trial.6   To require such an outcome would seem contrary to the objective  of  the  High  Court  Rules,  which  is  to  secure  the  just,  speedy  and inexpensive determination of any proceeding.7   The starting point is that a party has a right to discontinue.   The party will only be constrained in exercising that right where it is necessary to address some injustice that would otherwise occur due to the way in which the discontinuing party has conducted the proceedings to that point — for example, by obtaining an order for an interim injunction.  In such circumstances, the discontinuance may not be permitted at all, or only be permitted on certain conditions.

[8]      In the same way, the right to add defendants is a matter for the plaintiff to determine.   Leave will generally be granted or withheld after having regard to the

(HC).

4 Castanho v Brown & Root (UK) Ltd, above n 2, at 148.
5 High Court Rules 2008, r 15.21(2).
6 O’Brien v New Zealand Social Credit Political League Inc (No 2) [1984] 1 NZLR 68 at 73 (CA).

7 High Court Rules 2008, r 1.2.

effect that bringing an additional party will have on other parties to the proceedings, for example, by causing delay and expense to those other parties.

Alleged prejudice to James Hardie resulting from discontinuance

[9]      James  Hardie  contend  that  if  the  plaintiff  discontinued  against  those defendants who are also cross-claim defendants, James Hardie would be prejudiced because its cross-claims would not be able to proceed.  Therefore, if for example, James Hardie and any of the proposed discontinuance defendants were joint tortfeasors, it would not be possible for James Hardie to obtain a contribution to any judgment from those discontinued defendants under s 17(1)(c) of the Law Reform Act 1936, which provides as follows:

17Proceedings  against,  and  contribution  between,  joint  and  several tortfeasors

(1)      Where damage is suffered by any person as a result of a tort

(whether a crime or not)—

…

(c)      Any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued [in time] have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.

[10] Extensive arguments were addressed to me as to whether James Hardie’s cross-claims were themselves time-barred because they were caught by the 10 year long stop limitation provision in s 393(2) of the Building Act 2004. Reference was made to cases such as Dustin v Weathertight Homes Resolution Service.8

[11]     In that case, Courtney J noted that the general legal position is that the period of limitation governing a right to contribution does not start to run until the point where the right to contribution arises, including the right of a joint tortfeasor to seek

relief.9    I note that this was the position in s 14 of the Limitation Act 1950 (since

8 Dustin v Weathertight Homes Resolution Service HC Auckland CIV-2006-404-276, 25 May 2006.

9 Ibid, at [19].

repealed). But for reasons related to the definition of cases covered by the Building Act 2004, Her Honour concluded that the Building Act extended to claims for contribution arising out of the claimant's own liability for building work,10 and therefore the limitation period that governs the right to claim for contribution in the case of building construction does not arise from the date when the statutory right of contribution under the Law Reform Act 1936 accrues, but from the point where the construction work giving rise to the liability took place.

[12]     James Hardie’s position is that so long as the discontinuance defendants remain in the proceedings, any problems that they might have as defendants under the 10 year limitation period are avoided.   Conversely, if the discontinuance defendants are released from the proceeding, there will be limitation problems for James Hardie in bringing its cross-claims.

[13]     Mr Price invited me to decide the issue of whether or not the plaintiffs should be entitled to discontinue without regard to these matters.   That is to say, even if James Hardie would experience limitation problems, that is not a matter that the Court should be influenced by in deciding whether leave should be granted to the plaintiffs to discontinue.

A duty to avoid prejudicing James Hardie?

[14]     It seems to me that a plaintiff is not required to be guided by considerations of what would be in the interests of a defendant in the proceedings.  Even if it is the case that discontinuance of the proceedings against the nominated defendants would cause prejudice to the fourteenth and seventeenth defendants in prosecuting their cross-claims against the nominated defendants,  that would not seem to me to be a sufficient reason to refuse to allow the plaintiff to discontinue against those defendants.

[15]     If the limitation period of 10 years applies to a claim for contribution under s

17 of the Law Reform Act 1936, that should not result in the plaintiff being required to continue to proceed against those defendants solely for the reason that to adopt

any other course would be disadvantageous to James Hardie.

10 Ibid, at [31].

[16]     Mr Warwick Smith submitted that would be unjust if  James Hardie was limitation-barred from bringing a claim for contribution.   He pointed out that the position of defendants seeking a contribution is a very difficult one where, as here, the defendant’s main claim has been brought very close to the limitation period;  it will be very difficult for such a defendant to issue proceedings (whether by way of cross-claim or otherwise) before the limitation period runs out, too.

[17] I have carefully considered the further submission concerning the injustice that Mr Warwick Smith said would be caused to a joint tortfeasor, where the limitation period in the Building Act 2004 applies not just to rights of action based on the original tort, but also to a right of contribution by a joint tortfeasor responsible for the damage caused by the original tort. However, I agree with Mr Price that if that is the position, then it is as a consequence of a statute enacted by Parliament. It would be wrong for the Court to assume that such an outcome is unjust and seek to avoid such a consequence by adopting a particular interpretation of the rules of procedure.

[18]     I do not consider that the discretion to control the circumstances in which a party may discontinue is designed to ensure that the processes of the Court are not of themselves permitted to generate an injustice.

[19]     I do not consider that James Hardie can complain about the effect that the discontinuance might have on its substantive rights, any more than a party who has been joined as the defendant just before the limitation period expires can complain that an injustice will occur because its interests will be prejudiced by that step, and therefore decline to join.

Discussion

[20]     There are two reasons why I do not consider that the arguments for James Hardie can prevail.  First, the underlying premise is that because they are included as defendants in existing litigation, they may avoid limitation issues if they have to seek a contribution from other defendants.  The argument, as I understand it, is that even though a claim against another defendant for a contribution under the Law Reform

Act 1936 might now be statute-barred, a different outcome results in a case where, as here, the defendants are seeking contribution as a sub-proceeding to a proceeding in which they have already been joined as defendants.

[21]     The logic of this argument must be doubtful.   Limitation periods measure time up to the point where a claim is brought.  For example s 4 of the now repealed Limitation Act 1950 directed that:

The following actions [in tort contract and other actions] shall not be brought after the expiration of six years from the date on which the cause of action accrued.

[22] Similarly, s 393 of the Building Act 2004 says that in the cases specified in that section:

(2)       However, no relief may be granted in respect of civil proceedings relating to building work if those proceedings are brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.

[23] While it is correct that James Hardie issued proceedings in the form of a cross-claim against other defendants in this proceeding recently, s 393 of the Building Act mandates that time begins to run from the date of the building work that gave rise to the status of the party being a joint tortfeasor. The proceedings had not been commenced at the conclusion of 10 years from that date. Those proceedings, because they relate to “building work” as that term is used in s 393 of the Building Act 2004, will be time-barred. A different conclusion is not warranted simply because the cause of action is a sub-proceeding within a proceeding in which the defendants against which the contribution claim is made are already joined.

[24]     A limitation defence will be available to those other defendants.   This is because the proceedings were relevantly commenced more than 10 years after the date when the actions giving rise to the status of joint tortfeasor were committed.

[25]     For  these  reasons,  the  argument  that  retaining  the  defendants  in  the proceedings will enable James Hardie to avoid limitation problems is incorrect.

[26]     I go on to consider whether, in any event, the Court should in its discretion withhold approval for discontinuance where the ground advanced for so doing is to enable James Hardie to avoid a limitation issue that they would encounter if they had to issue fresh proceedings to claim a contribution.

Would James Hardie be prejudiced by a discontinuance?

[27]     In summary, James Hardie is contending that because it happened to be sued with other joint or several tortfeasors, there will be no limitation obstacle in its way if it now decided to seek a contribution from one or more of those defendants. The proposition assumes that it is of significance when considering limitation issues relating  to  cross-claims  between  defendants  that  they have  in  common  that  the plaintiffs started proceedings against all of them within the limitation period.

[28]     I do not agree that the fact that the defendants have been included in one set of proceedings as co-defendants can materially change how the limitation legislation impacts upon any claims that they might wish to bring between each other. The addition of multiple parties to the one set of proceedings is justified by the convenience of having all aspects of a dispute involving several parties determined at the same time.

[29]     The same objectives underlie the ability of defendants, having been joined in the same proceeding, to cross-claim against each other for relief incidental to the main proceeding.

[30]     Joinder is a procedural mechanism.   It does not logically entail that any limitation defence that a party might otherwise have available to it should be affected by the circumstance that the parties have been joined into the same proceeding.  The purposes of limitation legislation are several.   They include the need to protect a party who might otherwise be prejudiced by having to locate evidence a long time after an event has occurred.   A party is freed from the necessity to retain a burdensome quantity of documents against the possibility that at a distant future time a claim might be brought against them.  It provides assurance that a party can order

his or her affairs secure in the knowledge that no old claims could arise against them for an indefinite period into the future.11

[31]     Claims between defendants would not seem, logically, to lie outside the ambit of the policy underlying the limitation statutes. Defendants who have been served with a notice under r 4.18 would seem to have the same need for protection from stale claims as any other defendant.  The problem of assembling evidence following notification of a claim received many years after the event may not be so acute where the defendant is already a party to the litigation.  They may already have taken steps to assemble information in their capacity as defendant.   That is because generally, the right to contribution contained in a r 4.18 notice will concern the same subject matter as the head claim.   But that consideration on its own would not provide  a  sufficiently  clear  or  compelling  reason  to  deprive  the  cross-claim defendant of the advantage of limitation defences.

[32]     Rule 4.18 provides:

If a defendant claims against another defendant in circumstances in which (had that other defendant not been a defendant) it would be permissible to issue and serve a third party notice on that other defendant, the claiming defendant may, at any time before the setting down date for the proceeding, file and serve that other defendant and the plaintiff with a notice to that effect. (Emphasis added.)

[33]     Therefore procedurally, a defendant subject to a cross-notice is, in substance, added as a third party.   That conclusion is based upon the wording of r 4.18.  As noted in McGechan on Procedure:12

This means that the claiming defendant will have to satisfy one or more of the grounds for issuing a third party notice identified in r 4.4(1) High Court Rules 2008.

[34]     If Courtney J’s reasoning in Dustin as to relationship between s 393 of the Building Act 2004 and s 17 of the Law Reform Act 1936 was correct, and I respectfully consider it was, the same reasoning that prevented a third party (by that

name) from seeking a contribution outside the limitation period in s 393 of the

11 See Dustin v Weathertight Homes Resolution Service, above n 8, at [22].

12 Andrew Beck and others McGechan on Procedure (looseleaf ed, Brookers) at [4.18].

Building Act 2004 would apply to a claim brought by one defendant against another under the notice procedure contained in r 4.18.

[35]     On the basis of the foregoing, I do not consider that the supposed limitation advantages lost to James Hardie if the proceedings were discontinued, to have any foundation.

[36]     A further reason for my decision is that, again as noted in McGechan on

Procedure:13

Settlement between the plaintiff and one co-defendant does not prevent the other co-defendant from pursuing a r 4.18 notice, provided it was served before the plaintiff discontinued the proceeding: Harper v Gray & Walker [1985] 2 All ER 507; R A Lister & Co Ltd v E G Thomson (Shipping) Ltd [1987] 3 All ER 1032; BodyCorporate No 207024 v FDS Group Ltd HC Auckland CIV-2004-404-962, 16 March 2007.

[37] Even if the arguments that James Hardie occupied an advantageous position under the limitation provision of the Building Act 2004 because they had commenced a cross-claim against the other defendant, a discontinuance against that other defendant will not prevent that cross-claim continuing.

The asserted analogy to the ability to compel co-contractors as defendants

[38]     Counsel for James Hardie referred to two cases (Pilley v Robinson, Wilson & Sons v Balcarres Brook Steamship),14  for the proposition that a defendant who was one of two co-contractors is entitled to compel a plaintiff to add the second co- contractor  as  a  second  defendant.    From  that  starting  point,  counsel  argued  by analogy, that James Hardie, being a joint tortfeasor, should be able to do the same.

[39]     In Pilley, the debtor was a solicitor, and the creditor’s claims arose out of monies put into the retainer of the firm in which the debtor had been a partner in. The Court felt bound by the House of Lords in Kendall v Hamilton to allow the

defendant to compel joinder of his co-contractors as defendants in this action, though

13 Ibid, at [4.18.02].

14 Pilley v Robinson (1887) QB 155, Wilson, Sons & Co Ltd v Balcarres Brook Steamship Company

Ltd (1893) QB 422.

Stephens J would have preferred to hold that the defendant could only serve third party notices on his co-contractors.

[40]     In  Wilson,  the  defendants  attempted  to  rely  on  Pilley  to  compel  a  co- contractor in another jurisdiction to be joined as a defendant to the proceeding.  The Court interpreted the rule in Pilley as a matter of discretion, and unless it was satisfied that it would be just to compel the plaintiff to sue the out-of-jurisdiction contractor, and the attendant difficulties and costs that it might impose, it would not do so.  In that case, the existing defendants were not prejudiced because they had a right of contribution from the co-contractor.

[41]     Both Wilson and Pilley, and Thomas J in LC Fowler v Stephens College Board  of  Govenors15   referred  to  the  House  of  Lords’  decision  in  Kendall  v Hamilton.16    My consideration of the Kendall case and the remarks in LC Fowler persuades me that it has nothing to do with the case of the present kind.  Kendall did not concern the issue of one defendant seeking to join a co-contractor as another

defendant.  Rather, it concerned a creditor who advanced the money to two debtors who were in partnership.  The debtors defaulted and became bankrupt.  The creditor later learnt that there was a third partner in the business whom he could sue, and sought to sue.   The third participant successfully defended the proceeding on the basis that the plaintiff, having obtained judgment against the other two participants (who did not plead, as they could have, "an abatement" — that not all of those who were jointly liable had been joined to the proceedings), it was now too late for the plaintiff to seek judgment against him.

[42]     Pilley, Wilson and Kendall are cases where parties have entered into a joint obligation.   The line of authority descended from the rule that required that those sued on a joint obligation (for example, a debt that they all jointly engaged for), had all to be sued as defendants in the same litigation.   It does not provide any useful guidance for cases arising from the circumstance that disparate parties who happen to contract on the same construction job later wish to claim that they have a statutory

right of contribution from those other parties as joint tortfeasors.

15 LC Fowler & Sons Ltd v Stephens College Board of Govenors [1991] 3 NZLR 304.

16 Kendall v Hamilton (1897) 4 App Case 504.

Conclusion

[43]     The essential issue is whether the plaintiff is entitled to drop its proceedings against the defendant, and not be compelled to proceed against a defendant that it is no longer willing to sue.   My conclusion in the end is that this is not the type of unusual case such as Mainzeal Corp Ltd v Contractors Bonding Ltd,17  where one defendant had the right to seek the joinder of another defendant, and compel that defendant to remain in the proceedings (notwithstanding the wish of the plaintiff to

discontinue against the newly joined defendant), on the basis that the former defendant’s case depended on the latter defendant’s presence.18   I further agree with Mr Price’s submission that the fact that the plaintiff might have elected to drop what would otherwise be a viable claim for economic reasons is not a matter that should be influential in the Court’s decision whether or not to grant leave to discontinue. Nor is this a case where a possible abuse of process would be caused if consent to

discontinue was granted or granted without certain conditions.

[44]     For these reasons it is my view that the plaintiff’s application ought to be allowed and I rule accordingly.

J.P. Doogue

Associate Judge

17 Mainzeal Corporation Ltd v Contractors Bonding Ltd (1989) 2 PRNZ 47 (HC).

18 Ibid, at 51.