Routhan v PGG Wrightson Real Estate Limited

[2020] NZHC 702

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000077

[2020] NZHC 702

BETWEEN

PHILIP WILLIAM ROUTHAN and JULIE

VERONICA ROUTHAN (as trustees for the KANIERE FAMILY TRUST
Plaintiffs

AND

PGG WRIGHTSON REAL ESTATE LIMITED

Defendant

AND

NELSON JOHN COOK

First Third Party

AND

COOKS STUD FARMS LIMITED

Second Third Party

AND

ROSS BISHOP

Third Third Party

Hearing:

6 March 2020

Appearances:

J Hodder QC for Plaintiffs E L Keeble for Defendant

No appearance for Third Parties

Judgment:

6 April 2020

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 6 April 2020 at 3.45pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:6 April 2020

ROUTHAN v PGG WRIGHTSON REAL ESTATE LIMITED [2020] NZHC 702 [6 April 2020]

Introduction

[1]    The plaintiffs acquired a dairy farm at Hokitika. The defendant was the vendor’s agent for the sale. The defendant provided the plaintiffs with historical production figures for the farm which the plaintiffs say were over-stated. The plaintiffs seek damages from the defendant pleading causes of action for breach of s 9 of the Fair Trading Act 1986, negligence and deceit.

[2]    The plaintiffs applied for further discovery from the defendant seeking disclosure of documents relating to the defendant’s processes for verification of production levels  before, at  the  time of,  and  after they purchased the  farm.   In    a judgment of 21 November 2019, the application was dismissed on the basis that the documents were not relevant to the issues pleaded in the plaintiffs’ second amended statement of claim.1

[3]The plaintiffs now apply for:

(a)the recall of the judgment; or

(b)leave to appeal the judgment to the Court of Appeal; and

(c)a stay pending the hearing of the appeal.

[4]    The Associate Judge who heard the discovery application was unavailable to hear this application on the day it was set down. Ideally, the application should have been heard by him. This is particularly so in relation to the recall application. The case law often assumes that the first-instance Judge will hear a recall application.2 Unfortunately, neither the Associate Judge nor I identified this as an issue prior to the hearing. I raised this with counsel who shared the view that the jurisdiction to recall a judgment (or grant leave to appeal) rests with the court and not a particular Judge. They did not object to me hearing the application. Counsel had travelled for the hearing and the plaintiffs are in difficult financial circumstances. I agreed to hear

1      Routhan v PGG Wrightson Real Estate Ltd [2019] NZHC 3039.

2      Munro v Gladvale Farms Ltd [2017] NZHC 2692 and Stewart v Engel [2000] 1 WLR 2268 at 2274H, [2000] EWCA Civ 362, [2000] 3 All ER 518, [2001] ECDR 25, [2001] CP Rep 9.

the application on the basis that should anything arise during the hearing that caused me concern as to my ability to deal with the matter I would abandon the hearing and refer it to the first-instance Judge. I am satisfied as to my ability to determine the application on its merits. The situation that arose, however, is plainly undesirable. This judgment is not authority for such applications to be heard by other than the first-instance Judge in later cases.

Background

[5]    The plaintiffs were interested in buying a dairy farm. They turned their attention to the Cook Farm. Mr Routhan approached Mr Daly, who was employed by the defendant. The Cook Farm had previously been listed by another  agency and  Mr Routhan provided Mr Daly with a brochure which had been produced some time before the end of the 2009/2010 dairy season. That brochure recorded that the annual production from the Cook Farm averaged 103,000 kg/ms for the previous three seasons.

[6]    Mr Routhan asked Mr Daly to see if the Cook Farm was still on the market. Mr Daly confirmed that it was. It is alleged Mr Daly also confirmed that the production for the 2009/2010 season remained steady – that is, as stated in the brochure.

[7]    In early September 2010, the defendant produced a document called the Kowhitirangi Proposal which included a document headed “West Coast” with various details about the property.  Under the  heading “production” it stated,  “Average  last 3 years 103,000 kg/ms from 260 cows”.

[8]    The defendant obtained a listing agreement with the vendor on 11 October 2010. At the bottom of the first page of the listing agreement it says, “Rural Information Sheet completed” and there is a box ticked “Yes”. The Rural Information Sheet is referred to in the listing agreement. At cl 17(e), which is the interpretation provision, it states:

“Rural Information Sheet” means the agents Rural Information Sheet prepared by the Agent and signed by the Owner containing further information about

the Property and improvements on the Property and any substitute Rural Information Sheet entered into by the parties in the future.

The document intended to be the Rural Information Sheet is the same document headed “West Coast” which was included in the Kowhitirangi Proposal.

[9]    The Rural Information Sheet was not signed by the vendor despite it being indicated on the front page of the listing agreement that it had.

[10]   Mr Routhan says that Mr Daly has confirmed that when presented with the West Coast document the vendor hesitated about the production figure and said he would check it. Mr Daly never followed up with the vendor to confirm the figure. Unaware of this, the plaintiffs went ahead and signed the agreement for sale and purchase  on  19  October  2010   and  settled  the  purchase   of  Cook   Farm  on   20 December 2010.

The pleadings and the discovery application

[11]   When the plaintiffs filed the discovery application the relevant pleading was their amended statement of claim. Before the discovery application was heard they filed a second amended statement of claim. Both statements of claim plead causes of action under the Fair Trading Act, in negligence and deceit. In respect of the negligence and deceit causes of action the pleadings remained materially identical.

[12]   The paragraphs of relevance in both statements of claim are [15], [23] and [30] which read as follows:

15 PGGWRE (including through Daly) made the average production statement, supplements statement, continuing production statement and the production confirmation statement (“Statements”) because:

(a)PGGWRE at that time operated an incomplete process for verification of vendor’s statements about rural properties for sale;

(b)PGGWRE did not follow its process for verification in relation to the Statements;

(c)PGGWRE generally failed to take reasonable steps to verify the contents of the Statements; and

(d)The contents of the Statements had not been confirmed by the vendor.

…

23     Subsequent to purchasing the Farm, the Trust discovered that:

(a)contrary to usual practice and their understanding, the average production statement had not been confirmed by Daly (for PGGWRE) with Cooks as vendor;

(b)PGGWRE failed to follow its process for verification in relation to the Statements; and

(c)PGGWRE failed to otherwise take reasonable steps to verify the contents of the Statements.

…

30 In the circumstances set out in paragraphs 5 to 17, above, and at all material times, PGGWRE (acting through and responsible for Daly) owed the Trust a duty to take reasonable care in making any statements about the annual past production level of the Farm (Duty), including having in place sound processes for verifying vendor’s information about rural properties for sale, to verify the contents of the Statements following its processes for such verification.

[13]   These pleadings were denied by the defendant in its statement of defence to the amended statement of claim and accordingly have been put in issue in the proceeding.

[14]   The discovery application sought disclosure of the following four categories of document:

i.Documents outlining the Defendant’s earlier process for verification of production levels (i.e. the process in place prior to the process operating at the time we purchased the farm) (manuals, memos, check lists, etc).

ii.Documents outlining the Defendant’s process for verification of production levels at the time we purchased the farm and how the process was to be implemented (manuals, memos, check lists, etc).

iii.Communications in relation to the Defendant’s process for verification of production levels at the time we purchased the farm, generally and in relation to our farm (emails, letters, memos etc).

iv.Documents and communications relating to any changes in the Defendant’s processes for verification of production levels since we purchased our farm (manuals, memos, check lists, emails, letters, etc).

[15]   The discovery application was accompanied by an affidavit of Philip Routhan. His affidavit is substantially concerned with his understanding of the defendant’s processes for verification of production levels before, at the time of, and after the plaintiffs purchased the Cook Farm based on the discussions he had with Mr Daly. He recorded these in file notes that are exhibited to his affidavit and which, it is understood, Mr Daly has accepted as accurate.  Relevantly, at [5]  of his affidavit,  Mr Routhan states:

For present purposes, I note a key aspect of my claim is that the Defendant had inadequate processes in place for the verification of production levels and/or had failed to follow the processes it did have in place. I believe that led to the misrepresentations being made.

[16]   In his submissions, Mr Routhan emphasised the basis of the plaintiffs’ claims when he identified the following as included in the “live issues between the parties”:3

25.1Whether the defendant owed the plaintiff a duty of care which encompassed:

ihaving in place sound processes for verifying vendor’s information about rural properties for sale and/or

ii           verify the contents of the Statements; and/or iii          following its processes for such verification.

25.2Whether the defendant breached that duty by:

ioperating an incomplete process for verification of vendor’s statements about rural properties for sale and/or

iinot follow [sic] its process for verification in relation to the Statements; and/or…

The judgment

[17]    The Associate Judge understood the plaintiffs’ claim was originally about  the misrepresentation of historical production level figures.4 However, arising out of the statements Mr Routhan had obtained from Mr Daly he considered that the plaintiffs were asserting the defendant owed a duty to advise them that the production figures,

3      At [25] of the plaintiffs’ submissions in support of discovery application dated 4 November 2019.

4      Routhan v PGG Wrightson Real Estate Ltd, n 1 above, at [10].

presented in an unqualified way, were not unconditionally accepted by the vendor.5 He noted that repleading of the claim was required.

[18]    The Associate Judge was of the view that to succeed the plaintiffs had to establish a duty on the defendant to speak in order for Mr Daly’s silence to be misleading conduct for the purposes of s 9 of the Fair Trading Act 1986 or for the tort of negligent misstatement.6 In reliance upon Goldsbro v Walker,7 he said that Mr Daly would not be liable for simply passing on information that was given to him by the vendor. He articulated this as follows:8

However, the discovery sought by the plaintiffs is… not relevant to those issues. Nor does a pleading that the defendant owed a duty to verify the milk production figures of itself entitle the plaintiffs to disclosure of the defendant’s internal documents. That agents can rely on the “conduit defence” is of itself confirmation that agents do not have to verify what they are told by their vendors. Agents are not guarantors of the accuracy of the vendors’ instructions. If an agent makes a statement negligently it may attract liability in negligent mis-statement.

[19]   The Associate Judge regarded the basic issues underlying the plaintiffs’ causes of action were:9

(a)Did Mr Daly orally confirm to Mr Routhan that the milk solid production at the Cooks Farm property for the 2009/2010 season remained steady at 103,000 kg/ms?

(b)Are the statements in the proposal document… accurate or not?

[20]   As the documents sought by the plaintiffs were not relevant to these issues he dismissed the discovery application.

The recall application

[21]   The court’s jurisdiction to recall a judgment is found in r 11.9 High Court Rules 2016 which provides:

A Judge may recall a judgment given orally or in writing at any time before a formal record of it is drawn up and sealed.

5 At [24].

6      At [13] and [26]

7      Goldsbro v Walker [1993] 1 NZLR 394, (1993) 4 NZBLC 102,926 (CA).

8      Routhan v PGG Wrightson Real Estate Ltd, above n 1, at [29].

9 At [30].

[22]   In Horowhenua County v Nash (No. 2),10 Wild CJ held that there are three categories of case in which an unperfected judgment may be recalled, namely:11

(a)where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority;

(b)where counsel have failed to direct the court’s attention to a legislative provision or authoritative decision of plain relevance; and

(c)where for some other very special reason justice requires that the judgment be recalled.

[23]   In Brake v Boote, Holland J adopted the principles in Horowhenua County and found that the words “very special reason justice requires that the judgment be recalled” included a failure to apply his mind to a claim for interest when entering judgment.12

[24]   Works Civil Construction Ltd v Does Not Compute Corporation Ltd concerned a summary judgment application claiming damages for breach of contract.13 The Master dismissed the summary judgment application because he conflated two causes of action and made orders as if the statement of claim contained only the second cause of action. He recalled the judgment and entered summary judgment for the plaintiff noting:14

Applying those authorities to this case, the Court reaches the view that its judgment of 22 July 1992 should be recalled, there being very special reasons for doing so. Those reasons are similar to those discussed by the learned Judge in Brake and in Ashe. The wealth of material before the Court, the number of issues to be traversed, the fact that no clear distinction between the two causes of action was maintained throughout the submissions, the uniformity of the relief sought and the exigencies of the Master’s roster all meant that the distinction between the two causes of action became blurred.

10     Horowhenua County v Nash (No. 2) [1968] NZLR 632 (SC).

11     At 633.

12     Brake v Boote [1991] 4 PRNZ 86, at 87.

13     Works Civil Construction Ltd v Does Not Compute Corporation Ltd  HC Wellington CP46/92, 19 November 1992, at 6 – 8.

14     At 8.

[25]   In Munro v Gladvale Farms Ltd, Heath J noted that the Court should be circumspect in exercising its recall jurisdiction which may be used inappropriately by disaffected litigants who are not prepared to accept the consequences of a judgment entered against them.15 Related to this, the requirement that there be very special reasons of justice to recall a judgment must be emphasised. Here, I have been diligent to distinguish those matters advanced by the plaintiffs that might justify recall and those that simply allege errors of law by the Associate Judge that should properly be considered under the application for leave to appeal.

[26]   The exercise of the power to recall a judgment may avoid exposing the parties to the expense and delay of an appeal in circumstances where there has been a plain error which should be remedied. In Munro, Heath J recognised the benefits of the recall jurisdiction  where  a  Judge  has  overlooked  a  material  factor  in  reaching  a particular decision and said:16

In my view, a recall application must raise a material issue on which it would be unjust for the parties to be put to the cost and trouble of appeal, when the issue is one more appropriately addressed by the first-instance Judge.  Such  a situation will arise in cases in which a Judge acknowledges that he or she overlooked a material factor in reaching a particular decision. Recall, in that situation, avoids the risk that an appeal might be allowed and remitted to the trial Judge for reconsideration of the point in issue, at unnecessary further cost to the parties. Such circumstances, in my judgment, constitute a “very special reason” for exercising the recall jurisdiction, to adopt the language employed by Wild CJ in Horowhenua County.

Discussion of recall application

[27]   The kernel of the plaintiffs’ recall application is that the Associate Judge did not address the relevance of the documents sought by the plaintiffs to their negligence cause of action.

[28]   Relevance is to be considered having regard to the pleadings and is broader than the test for admissibility. It can include “something that is directly connected, related or pertinent to ‘the matter in hand’”. 17

15     Munro v Gladvale Farms Ltd [2017] NZHC 2692 at [13].

16 At [14].

17     Dodson Motorsport Ltd v Logiical Performance Ltd [2018] NZAR 1480 at [12].

[29]   At [30] of the amended statement of claim the plaintiffs plead that the defendant owed duties of care to:

(a)take reasonable care in making statements to them about the annual past production levels of the farm;

(b)to have in place sound processes for verifying vendor’s information;

(c)to verify the contents of the statements it made to the plaintiffs; and

(d)to following its internal processes for verification of such information.

[30]   Mr Hodder submits, and I accept, that the negligence cause of action was based on a compound pleading that the defendant is both:

(a)vicariously liable for the provision by the agent, Mr Daly, of the production information; and

(b)directly liable to the plaintiffs because its processes were inadequate to ensure rectification of the vendor’s information on the farm’s production.

[31]   Whilst the defendant’s vicarious liability arises from a negligent misstatement, its direct liability does not. Its direct liability arises from its negligent failure to have in place sound systems. That the negligent systems claim was the focus of the discovery application is apparent from Mr Routhan’s affidavit and his submissions.

[32]   The judgment does not mention the plaintiffs’ negligent systems pleading nor consider the relevance of the documents sought by the plaintiffs to it. As far as the plaintiffs’ cause of action in negligence was concerned, the Associate Judge considered the discovery request as if the claim was only for negligent misstatement. This is reflected in his focus upon the conduit defence. His identification of the basic issues at [30] of the judgment reflect only the Fair Trading Act claim.

[33]   Ms Keeble argues that before the Associate Judge Mr Routhan accepted that the claim was ultimately about the alleged misinformation provided to the plaintiffs. In one sense that is, of course, correct. The plaintiffs allege that the misinformation provided by Mr Daly was ultimately the cause of their loss, but their pleading is that the defendant owed them a duty to have in place sound systems and that it was the breach of that duty which gave rise to the circumstances that brought about their loss.

[34]   There are similarities between this case and Works Civil Construction where the  Judge  conflated  two  causes  of  action.  Here,  the Associate  Judge  conflated a compound pleading dealing with both negligent systems and negligent misstatement into  a  single  pleading  of  negligent  misstatement.  To  adopt  the  words  of  Master Williams,  the  compound  pleading  “became  blurred”.18     For  that  reason, I consider the judgment must be recalled.

[35]   It is therefore unnecessary for me to consider other matters raised in support of the recall application. I mention them for completeness. First, the plaintiffs argue that the Associate Judge was wrong to reject the pleading that the defendant was required to verify the production figures of the vendor in reliance upon the conduit defence, as that is a matter for trial. There was no application to strike out the plaintiffs’ pleading and on a discovery application the pleadings are to be considered tenable. There is very limited scope for a Judge to take a view that discovery should not be ordered because the plaintiff is on a “hiding to nothing” 19 This is certainly not such a case. Such an error, however, is not in my view a very special reason justifying the recall of the judgment but a matter for correction on appeal.

[36]   Related to the Associate Judge’s reliance on the conduit defence, it is argued that he did not refer to Red Eagle Corporation Ltd v Ellis, where the Supreme Court held that to rely on the conduit defence, the conveyor of information must have made it plain to the recipient that he or she was merely passing on information to another.20 Whilst the Associate Judge did not refer to the Red Eagle decision he was plainly aware of the principle contained in it and said at [27]:

18     Works Civil Construction Ltd v Does Not Compute Corporation Ltd, above n 13, at 9.

19     RHH Ltd v Roberts [2018] NZHC 2032 at [12].

20     Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [38].

Even then whether the [conduit defence] can be maintained when Mr Daly knew the vendor had not or would not confirm the production figures may need to be addressed.

[37]   The plaintiffs also argue that new facts have been discovered following the judgment. As a result of the defendant disclosing a Policy Procedure and Practice Manual document the plaintiffs have had confirmed that the defendant’s policy required the Rural Information Sheet to be signed by the vendor  and  that  the  policy document identified the reason was to guard against claims for misrepresentation and misleading conduct. Whilst these matters are supportive of the plaintiffs’ negligent systems claim I do not  see  that  they would  justify recalling  the judgment.

The further discovery that is sought

[38]   The court’s power to order further discovery is contained in r 8.19 High Court Rules 2016. In Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd Asher J set out a four-stage approach in considering applications for further discovery as follows: 21

(a)Are the documents sought relevant, and, if so, how important will they be?

(b)Are there grounds for belief that the documents sought exist?

(c)Is discovery proportionate?

(d)Weighing and balancing these matters, in the court’s discretion, is an order appropriate?

[39]I am satisfied that documents that the plaintiffs seek concerning:

21     Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760 at [14].

(a)systems or processes that the defendant had in place to verify production levels immediately before and at the time the plaintiffs purchased the farm;

(b)systems or processes that the defendant has had in place to verify production levels since that time; and

(c)steps taken by the defendant to verify the historical production levels of the plaintiffs’ farm;

are relevant to the negligent systems claim. The documents are relevant to whether the defendant had a duty to have in place sound systems for verifying production levels, had in place sound systems and, whether the plaintiff followed its own systems.

[40]   In Assa Abloy, Asher J considered that an application for further discovery must show that there is some credible evidence, objectively assessed, that indicates the documents sought exist.22 Mr Routhan has in his affidavit established to that standard the existence of the documents sought by reference to the file notes of conversations with Mr Daly, which the Associate Judge noted the defendant had not objected to.23

[41]   Before the Associate Judge, the defendant submitted that further discovery would be disproportionate, but this was substantially because it regarded the documents as not being relevant and a “red herring” (a position I do not accept). There is no evidence (as opposed to submission) that the defendant will face significant hurdles in identifying and disclosing the documents that are sought or that it will involve an excessive amount of work or expense.

[42]   Ms Keeble argued that ordering further discovery would cause delay prejudicial to the third parties. The third parties took no steps in relation to the discovery application or this application and there is no evidence of any particular prejudice to them.

22 At [12].

23     Routhan v PGG Wrightson Real Estate Ltd, above n 1, at [11].

[43] Balancing these factors, it is my assessment that the court should order further discovery by the defendant in respect of the categories of documents I have identified in [39]. The documents are relevant to the plaintiffs’ negligent systems pleading, there is good reason to believe they exist, and the cost and delays that may be incurred by ordering further discovery are proportionate.

[44]   I am not satisfied that documents the plaintiffs have sought of any communications relevant to steps taken by the defendant to verify production levels generally at around the time they purchased their farm are relevant to the matters in issue. The steps the defendant took, or did not take, in other transactions involving, no doubt, considerably different factual circumstances are not directly relevant, connected or pertinent to the plaintiffs’ causes of action to justify ordering discovery.

The application for leave to appeal and stay

[45]   As I have found that there is a special reason of justice requiring the judgment to be recalled it is not necessary for me to consider these applications.

Result

[46]The judgment of 21 November 2019 is recalled.

[47]   There shall be an order that the defendant shall within 28 days of the date of this judgment file a further affidavit of documents listing all documents in its power, possession or control as follows:

(a)systems or processes that the defendant had in place to verify production levels immediately before and at the time the plaintiffs purchased the farm,

(b)systems or processes that the defendant has had in place to verify production levels since that time, and

(c)steps taken by the defendant to verify the historical production levels of the plaintiffs’ farm.

[48]   I reserve leave to the plaintiffs to apply by memorandum for an extension of time to file its supplementary list of documents if counsel is satisfied that it is not possible to do so due to the effects of the Covid-19 pandemic.

[49]   There shall be a telephone conference to be arranged by the Registrar on or after 15 May 2020 to make timetabling directions to move the case to a hearing. Counsel shall file memoranda at least 3 working days before the conference identifying areas of agreement and difference between them. The agenda for the conference shall be all schedule 5 High Court Rules matters.

[50]   At this stage costs are reserved. I invite counsel to confer on costs but if they cannot agree they may raise that at the next conference and I can then timetable the filing of submissions.

O G Paulsen Associate Judge

Solicitors:

Patient & Williams, Barristers & Solicitors, Christchurch Parker Cowan Lawyers, Queenstown