Sardan Trustees Limited v Magson's Hardware Limited

Case

[2014] NZHC 460

13 March 2014

No judgment structure available for this case.

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-4684 [2014] NZHC 460

UNDER The Construction Contracts Act 2002

BETWEEN

SARDAN TRUSTEES LIMITED Plaintiff

AND

MAGSON'S HARDWARE LIMITED Defendant

Hearing: 20 February 2014

Appearances:

Mr J Heard for plaintiff
Mr D Smyth for Defendant

Judgment:

13 March 2014

JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE

This judgment was delivered by me on

13.03.14 at 5 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

SARDAN TRUSTEES LIMITED v MAGSON'S HARDWARE LIMITED [2014] NZHC 460 [13 March 2014]

Introduction

[1]      The present dispute arises out of events that occurred in 2013.  The plaintiff, Sardan Trustee Limited, is the trustee for a trading trust called Dansar Investment Trust (“Dansar”).  Dansar carried on business which included excavation, laying of building slabs and related concrete work.   The defendant is Magsons Hardware Limited  (“Magsons”), trading  as  Mitre 10  Mega in  Botany.    Dansar  wished  to contract with Starplus Homes Developments Limited (“Starplus”), a company that developed residential homes in South Auckland.

[2]      Mr Desmond Sharp, the agent for Dansar, was aware that other contractors had  come  to  an  arrangement  with  Magsons.    Magsons  was  not  only  a  general supplier of materials to Starplus but also acted as a financier of Starplus’ contracts with building and related trade contractors which it employed.  The basic structure of the arrangement was that Magsons would contract to accept responsibility for paying contractors within 30 days of invoice which was a more attractive arrangement from the perspective of contractors than that which was offered by Starplus.   Starplus’ terms of payment provided for contractors not to receive payment before 90 days after invoicing.

[3]      It follows that a builder who contracted under Magsons’ arrangement would perform work for Starplus but invoice Magsons who would then recover the amount it had paid from Starplus.   It is not known what the overall arrangement between Magsons and Starplus involved but so far as the payment of contractors was concerned, Magsons would receive a margin comprised of a deduction from the gross amount that was payable to the contractor.  In addition, Starplus was required to pay an additional margin over and above the invoice value to Magsons.

[4]      Dansar claims that it provided services on 28 different sites which were being developed by Starplus with the total value of the work which it performed being

$267,492.44.   It claims the outstanding amount of $218,123.56 and has issued payment claims under the Construction Contracts Act 2002 (“CCCA”).   It further alleges in the statement of claim that Magsons did not file a payment schedule disputing the amounts claimed.

[5]      The position that Magsons takes is that there is no contract between the plaintiff Sardan and Magsons.   Instead, Magsons entered into certain individual construction  contracts  with  Mr Sharp, trading as  Dansar.    I interpolate that  the significance of this contention is that Magsons is not prepared to recognise that any contract it entered into was with the plaintiff.

[6]      To continue, Magsons asserts in its notice of opposition the following:

3.3The  terms  of  the  individual  construction  contracts  between  the defendant and Desmond Sharp were, inter alia:

3.3.1Magsons  Hardware  Ltd  (Magsons)  has forwarded quotes issued by Mr Sharp for work to be carried out on properties being constructed by Starplus Homes Developments Ltd (Starplus);

3.3.2If Starplus accepted the quote from Mr Sharp, it would do so by issueing a written numbered purchase order to that effect to Magsons;

3.3.3    Magsons  only  accepted  any  particular  quote  given  by

Mr Sharp if it had;

3.3.3.1first received a purchase order from Starplus accepting that quote; and

3.3.3.2           then   issued   its   own   written   numbered

purchase order to Mr Sharp in respect of the same quote;

3.3.4    None of the quotes and invoices on which Sardan sues were;

3.3.4.1           Issued by it to Magsons;

3.3.4.2accepted  by  Starplus  by  a  purchase  order issued to Magsons; and

3.3.4.3accepted  by  Magsons  by  the  issue  of  a written  purchase  order  to  Mr  Sharp  save

those which Magsons has already paid.

4.Magsons has paid Mr Sharp for those quotes issued by him and in respect  of  which  it  received  a  numbered  purchase  order  from Starplus and which Magsons in turn accepted by issuing a written numbered purchase order to Mr Sharp.

Legal principles

[7]      When  a  plaintiff  applies  for  summary  judgment,  the  Court  may  give judgment against a defendant if the plaintiff satisfies the Court that the defendant has

no defence.   The relevant principles to be applied were recently summarised in

Krukziener v Hanover Finance Ltd:1

The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the  application  is  to  be  defeated.  The  Court  will  not  normally  resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it.

The contractual arrangements

[8]      Each  side  filed  voluminous  and  detailed  evidence  about  the  contractual arrangements as the parties viewed them.

The plaintiff ’s position

[9]      In its statement of claim, the plaintiff alleged that in January 2013, Mr Sharp met with two of Magsons’ employees at which meeting he offered to carry out excavation of residential building sites and other construction related work for Starplus.  It is pleaded that Magsons accepted that offer and the employees asked Mr Sharp to issue invoices by the end of the calendar month in which the construction work was undertaken.

[10]     In the usual way, an affidavit was filed in support of the summary judgment application which verified the allegations in the statement of claim.

The defendant’s position

[11]     Magsons’ account of what was agreed to was a rather more complicated

arrangement.    In  essence,  Magsons  said  that  Starplus  introduced  Mr  Sharp  to

Magsons  as  a  person  who  could  carry  out  excavation  and  other  work  for  it.

1  Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26] per Miller J (citations omitted).

Essentially, it was said that Magsons had entered an arrangement with Starplus that involved the following steps:

a)       Starplus would lodge plans and specifications for various residential units in a dropbox set up by Magsons;

b)        Dansar could access the documents and quote for the work;

c)       Magsons  would  produce  documentation  in  the  form  of  a  quote addressed to Starplus with an added margin of 5 per cent over and above the quote that it had received from Dansar;

d)The quote would then be referred to Starplus and if Starplus accepted it,  such  acceptance  would  be  notified  to  Magsons  by  means  of Starplus issuing a purchase order;

e)        If Magsons was satisfied with the purchase order it would then accept

the supplier’s quote by issuing its own purchase order to Dansar;

f)        Dansar would then carry out the work in terms of the purchase order and when  completed, invoice Magsons  who would pay within 30 days.

[12]     In an affidavit in opposition, Mr Gasston deposed that he started work with Magsons as a sales manager in January 2013.  While he does not give a date for it, he said that one of the first matters that he was involved in was a meeting with Mr Raymond, a manager of Starplus.  Mr Gasston then interpolated an account of the contractual arrangements that were in existence with Starplus which essentially involved the steps that I have set out above.

[13]     It would appear that Mr Gasston’s evidence is that subsequently he arranged a meeting with Mr Sharp at which the processes for quoting, acceptance by Starplus, signing  off,  and  the  issuing  of  purchase  orders  for  each  job  by Magsons  were explained carefully to Mr Sharp.

The plaintiff ’s expanded version of the arrangements

[14]     In an affirmation which he filed in reply, Mr Sharp said:

5.At the meeting Mr Gasston did explain the system of invoicing to me.   He explained it and I understood it as he explained it in paragraph [4] of his affidavit.   However, the system was never implemented and it was not the basis on which Dansar contracted with Mitre 10.  It was more like an after-the-fact verification system.

6.The first time I went to Mitre 10 to give Mr Gasston quotes for Dansar’s work I asked him directly when I would receive purchase orders.  He told me that his staff were very behind in processing the quotes  and  purchase  orders  for  Starplus  but  that  it  was  not  a problem.  He told me he would get Graeme Raymond to sign them off later and he was not worried that purchase orders had not been processed yet, I was to get on with the work.

12.I had more than one meeting with Mr Gasston and Mr Raymond concerning the contract between Mitre 10 and Dansar. Mr Raymond was at the meetings initially because it was he and Mr Gasston that were arranging Dansar to be contracted to Mitre 10.

13.Starplus, through Mr Raymond and Dansar had already come to terms  on  agreed  fixed  rates  for  the  supply  of  its  labour  and machinery.  Mr Raymond was happy with the rates as was Starplus. Starplus  came  to  the  arrangements  so  that  it  would  be  able  to calculate house build costs, understand invoices, determine if the invoices were payable.   It was the simplest method of contracting and made a lot of business sense to hammer out the details prior to starting  work.    Dansar  did  not  have  to  provide  quotes  prior  to starting work on specific lots for Starplus, it simply was given work and  began  the  work.    Often  the  work came  and  faster  than  the paperwork could be completed.  It never mattered.  Dansar would do the work and invoice for it.   There was never an issue.   It is my understanding that this is how the contracts for Starplus invariably worked, including the contracts that went through Mitre 10 from other contractors to Mitre 10.

Other evidence of how the parties actually carried on the arrangement

[15]     There is evidence that Dansar actually did order its affairs on the basis of the arrangements which were deposed to by Mr Gasston.  His evidence in that regard was corroborated by a Ms Patel.   She produced internal company documentation which showed the check list that Magsons’ employees were required to follow when processing quotes.  She also produced a quote that Mr Sharp sent to Magsons on 7

February 2013 and then a corresponding quote on 14 February 2013 from Magsons to Starplus for the same amount but with an additional 10 per cent margin.  She also produced another quote dated 14 February 2013 addressed from Magsons to Starplus to supply labour and materials for a slab at a Starplus building site.  In addition, she produced an example of the purchase order dated 18 February 2013 addressed from Magsons to Dansar.  Ms Patel also exhibited to her affidavit a spreadsheet relating to all the 28 invoices that were ultimately addressed by Dansar to Magsons for work and services which Dansar supplied to Starplus.   One of the columns in the spreadsheet was headed “quote accepted by Starplus”.  Most of the entries under that column are noted with the narration “Not Signed off”.   That is to say, if the spreadsheet is accurate, it amounts to a record showing that Magsons had sent quotes to Starplus but in most cases Starplus had not communicated acceptance of the quote.

[16]     There were four exceptional cases noted in the spreadsheet where there had been an acceptance of the quote.  Correspondingly in a further column it was noted under the heading “M 10 purchase order dated”, the dates upon which Magsons had issued four purchase orders to Dansar.  The total value of these purchase orders is nearly $40,000.  Mr Smyth, counsel for the defendant pointed out that this figure was approximately the same as the amount that Magsons had actually paid to Dansar.

[17]     One puzzling aspect of the spreadsheet was that it also contained a column headed “M 10 on-charge invoice number”.  This column was filled for 26 of the 28 cases. But if the system had broken down at an earlier point – at the stage where Starplus neglected to notify acceptance of the quote – it is difficult to know why, as the  spreadsheet  column  appears  to  suggest,  Magsons  generated  an  invoice  to Starplus.

[18]     Finally, the spreadsheet noted that Magsons had received quotes (and in the context this must relate to quotes received from Dansar) covering a period from 7

February 2013 to 26 February 2013.

[19]     Another difficulty with the evidence that Ms Patel has produced is that an

email  from  another  Magsons’  employee  dated  18  February  2013  appears  to

acknowledge that there were a further eight “purchase orders” in existence for construction at a road called Erceg Way.   Four of these purchase orders are not referred to in the spreadsheet that Ms Patel issued.   They were sent to Mr Sharp which suggests that they related to work that had been approved by Starplus.

[20]      There is also a contemporaneous internal email dated 13 February 2013

which was produced as part of Magsons’ evidence in which the author noted:

30 quotes have come in today to convert to our Mitre10 quote.

[Mr Sharp] is wanting [purchase order] numbers but [Mr Gasston] has said we need to stick to the process and only give a [purchase order] once the approved [Magsons] quote has come back from Starplus.  These quotes will take a few days to do.  We already have a backlog (have counted 62) which are  mounting  up  and  really  need  to  take  priority.    We  don’t  have  the resources to get these done immediately - let alone the next few days.

[21]     Mr  Sharp  in  his  affirmation  in  reply  said  that  the  arrangements  which Mr Gasston had deposed to “were never adhered to”.  Mr Sharp stated that he never received  any purchase  order  documents  in  the  form  of  the  ones  in  Ms  Patel’s affidavit but he had received some purchase order numbers from Magsons.   After referring to those eight purchase numbers he went on to say:

They were the only ones I received as far as I recall, but that was never an issue with being told to complete work because we had already organised set rates and that Mitre 10 would invoice Starplus, who had agreed the rates and the work.

[22]     Mr Sharp said that the arrangement was for Dansar to receive plans and specifications for jobs to quote on directly from Starplus.  He said that Mr Gasston told him that it was not necessary for Dansar to receive purchase order numbers prior to starting work:

This was because Mitre 10 were behind in their processing of quotes for Starplus, so I would simply get on with the work and he told me he would get everything signed off later.

Affidavit of Ms Mason

[23]     Dansar also produced an affidavit in reply from a Ms Antoinette Mason who had previously been an employee of Magsons with responsibility for dealing with the Starplus accounts.  The first matter that arose from her affidavit was a comment

that she made about the column in Ms Patel’s spreadsheet headed “M 10 on-charge invoice number”.  I have already remarked upon the puzzling nature of this particular column.  Concerning this aspect of the matter, Ms Mason said:

To my best knowledge and belief these represent the invoices issued by Mitre 10 to Starplus for work completed.   They appear to be for work undertaken by Dansar. The numbers are a reference for Mitre 10 to track its invoices to Starplus.

[24]     The significance of this part of the evidence is that it appears to suggest that Magsons invoiced Starplus for a number of transactions which exceeds the number which it paid out to Dansar.  What the evidence therefore suggests is that there were a  number  of  claims  in  which  Dansar  did  not  comply  with  Magsons'  internal processes but Magsons nonetheless invoiced Starplus in regard to those transactions. That would lead to the conclusion that, contrary to the evidence which Magsons has put forward, there was a greater number of claims in regard to which Dansar did comply with the processes or that alternatively Magsons did not always insist upon its internal processes being followed.

[25]     It would not of course be any answer for Magsons to establish that it did not get paid by Starplus in respect of these additional invoices.  I say that for the reason that essentially Magsons, and not Dansar, was at risk of Starplus defaulting in the case of any invoices that Magsons issued.  That conclusion is not affected by the fact that it was Dansar which carried out the work.  Dansar, in short, was entitled to do the work for Starplus but look to Magsons for payment for that work.

[26]     More  generally,  Ms  Mason  made  comments  on  the  procedure  that  was required to be followed if invoices were to be charged back to Magsons.   She annexed to her affidavit a statement which she said she had prepared for Magsons’ solicitors.  Ms Mason’s affidavit supports Mr Sharp’s statement that Dansar received plans and specifications directly from Starplus.  The other evidence which she gives concerning the procedures to be followed can be summarised as follows:

a)        Dansar would send quotes to Magsons and then invoice Magsons which would on charge to Starplus;

b)Generally the process that was followed was that Magsons would receive via a dropbox a quote from Dansar for work to be done on a specific site.  Dansar would have received the site plans directly from Starplus;

c)       “We would have been advised” by Mr Raymond that as long as the figures were “correct” then the Magsons invoices to Starplus would be accepted;

d)Magsons would then add their markup to the quote, reprinted with a Magsons’ trade logo and then forward it to Starplus for approval.  The appropriate person at Starplus would approve the quote and a copy would be returned to Magson by email;

e)        A  Magson  order  number  was  created  and  sent  on  to  Dansar  and

Dansar would then proceed with the work and then invoice Magson.

[27]     So far as the procedure for authorising the amounts which Dansar would be paid, Ms Mason's affidavit does not seem to refute the Magsons’ account of the process except to the extent that in the case of certain particular invoices where the detailed  processes  had  not  been  followed,  Magsons  had  nonetheless  invoiced Starplus.

[28]     This account is certainly not consistent Mr Sharp’s account that Magsons had agreed fixed rates with Starplus and Dansar would simply invoice Magsons once the work had been completed.

Mr Raymond’s evidence

[29]     Mr Raymond  who had  been  an  employee of  Starplus  confirmed that  on behalf of Starplus he had agreed with Dansar a standard cost per square metre of concrete slab that would be charged to Starplus.  He also said that he agreed on a 12 monthly pricing of Magsons’ products.

[30]     Mr  Raymond  said  that  he  attended  meetings  with  Magsons  and  that  he advised them that Starplus would accept invoices based upon the agreed rate that he had settled with Dansar subject to site measurements confirming the quantity of work undertaken.  In other words, this was a charge up basis.

[31]     It was his view that Magsons was unable to “keep up with the paperwork”. He said that on occasion he received invoices from Magsons for labour costs “that Starplus had yet to receive a quote for”.  He said that:

The solution was simple, as long as the rates were correct and the area worked on correct, Starplus did not have an issue with the invoice.

[32]     This would seem to indicate that Starplus was prepared to accept invoicing without having previously approved a quote for the work included in the invoice. On the other hand,  this  part  of Mr Raymond’s  deposition  confirms  that  it  was Magsons who invoiced Starplus and not Dansar.

Mr Su’s evidence

[33]     Reference also needs to be made to evidence which was filed by a Mr Su.  He was  the  proprietor  of  a  company  called  Lidar  Homes  Limited  which  settled purchases of 10 properties from, I understand, Starplus.  In his affirmation he says:

3.Lidar paid $160,000 and forgave payment of $110,000 owed to it by Mitre 10.   It is therefore paid $270,000 of the invoices issued in respect of these properties.

4.Mitre 10 is submitted to Lidar invoices made out to Starplus Homes for work that Dansar performed on the property is listed above.

[34]     I  understand  that  this  evidence  is  adduced  to  establish  that  Lidar  paid liabilities  which  Starplus  owed  for  work  which  Dansar  performed  on  those properties.  That would mean that Magsons (assuming that that is the relevant Mitre

10 franchise in question) had intercepted $270,000 of funds which Starplus owed to

Dansar.

Discussion

[35]     Mr Smyth pointed out to me that there were risks for Magsons in becoming involved  in  an  arrangement  of  this  kind.    It  could  find  that  it  was  paying  out

contractors only to be told that Starplus had never approved the amount claimed by the contractor.  For that reason, it was necessary to have a rigorous system whereby there had to be express approval of the proposed charges before Magsons could accept liability for the amount invoiced out.

[36]     I accept that, assuming that Magsons was conducting itself rationally and had thought the issues through, that this must be so.  To allow a contractor to come to its own arrangements with Starplus on the basis that Magsons would send on an invoice to Starplus without knowing that it was going to be acceptable or not to Starplus while  at  the  same  time  assuming  an  obligation  to  pay  the  contractor  exposed Magsons to considerable risk.  It could result in Magsons being obliged to pay the contractor and yet have no recourse to Starplus for the amount that it was so obliged to pay.

[37]     The account that Ms Mason provided is consistent with the basic thrust of the case which Magsons makes.  That is to say, before Magsons could be responsible for any particular invoice, first there had to have been an approval communicated to Magsons from Starplus for the amount that was proposed to be charged.

[38]     There is a real issue about how many invoices Starplus actually approved. Ms Patel’s spreadsheet would indicate that Magsons had only received acceptance of quotes from Starplus in four cases out of the total 28.

[39]     In the end though, the question is one of determining whether it is arguable that the contract included the requirements that Magsons says it established right from  the  outset  with  Dansar.    I  am  persuaded  that  it  is  at  least  arguable  that Magsons’ position about what the contract contained is correct.  This view is based upon the review of the evidence that I have set out above, coupled with the consideration that safeguards of the kind that Magsons said were included in the contract make good commercial sense.

[40]     It seems likely that  Magsons did not  always  comply with the procedure which it says was agreed with by Mr Sharp.  There seems to have been confusion amongst the staff at Magsons when it came to dealing with Dansar.  This may have

been a consequence of high workloads.  Certainly, the impression that is given is that

Starplus was managing a high number of projects until its demise.

[41]     There does seem to be supporting evidence for Magsons’ contention that it regarded it as important to have detailed, even elaborate, procedures in place for approving charges for work and materials which Dansar supplied to Starplus.  It does not follow, of course, that because someone in the management structure at Magsons believed  that  there should  be a system  of careful  checks  and  balances  that  the contract that is ultimately arrived at between Magsons and Dansar reflected that concern.   Magsons cannot unilaterally impose its own requirements on Dansar.

[42]     It  seems  clear  that  those  procedures  were  not  uniformly  followed  by Magsons’  own  staff.    The  unearthing  of  the  additional  purchase  orders  which Mr Sharp referred to in his affirmation in reply and which were not included in Ms Patel’s summary of transactions in her affidavit establishes that much.

[43]     The inference that Dansar says should be drawn from the demonstrated non- conformity is that the alleged processing arrangements never existed and that there was  a  much  more  straightforward  arrangement  which  Mr  Sharp  agreed  with Starplus.  Equally though, it was not Mr Sharp’s prerogative to adopt a system which Magsons  had not  agreed to.   Any contractual  arrangement would have to be a tripartite arrangement which all parties agreed to.  Just as there is doubt about the arrangements suggested by Magsons, there are questions about whether Magsons agreed to the arrangements provided in Mr Sharp’s version of events.

[44]     It  is  possible  that  the  established  non-compliance  on  the  part  of  some Magsons’ staff members with the agreed protocols for processing quotes, purchase orders and invoices should be viewed as evidence that an agreement of the kind that Magsons contends for was never reached.   An alternative legal analysis would be that even if agreed, Magsons eventually waived compliance with those requirements.

[45]     The question of whether or not there was ever a contract entered into in the first place which contained the provisions which Magsons puts forward involves

disputed questions of fact that cannot be satisfactorily resolved at summary judgment stage.

[46]     An argument based upon waiver would require evidence that there had been a clear and unequivocal representation on Magsons’ part that the arrangements which Magsons say governed the trading relationship between them and Dansar did not have to be complied with:  Neylon v Dickens.2   It is at least arguable at the behest of Magsons that it never led Dansar to believe that it was no longer going to insist upon full compliance with the quotation approval procedure.  It is also arguable that such a

representation cannot be spelt out from the conduct of Magsons.   This latter conclusion is based upon the fact that on the state of the evidence before the court to this point, it could well be submitted that Magsons did not know that Dansar had adopted a  process  which  “short-circuited”  the  approval  process  so  as  to  permit Dansar  to  invoice  Magsons  without  going  through  the  process  which  I  have described earlier in this judgment.

[47]     There is credible evidence that Magsons did not appreciate that the reason why it had not heard back from Starplus either approving or disapproving quotes that it had sent was because Starplus and Dansar had agreed to a different process which resulted in Dansar generating invoices.   That evidence would also be to the effect that it was only when Dansar delivered a collection of invoices to Magsons at the end of February 2013 or a little thereafter that Magsons appreciated that there had been ongoing work carried out which Dansar was charging for.

[48]     It is part of Dansar's case that it has served Magsons with payment claims under the CCCA to which Magsons have not responded.  The claim is then made that the provisions of the Act apply and that Magsons must pay.   However it is common ground that the procedures provided for in the CCCA depend upon their being an enforceable underlying contract.   For the reasons  I have given in this judgment,  I do  not  consider that  the  evidence  which  Dansar has  provided  take

matters to the point where it can be said that Magsons does not have an arguable

2 Neylon v Dickens [1978] 2 NZLR 35 (PC).

defence to all or part of the claims which it brings as part of its summary judgment application.

[49]     There was considerable discussion about factual disagreements in this case.  I do not intend to review all of the evidence in detail which is said to justify the court resolving disputed matters of credibility in favour of Dansar.  Specifically though, I should  indicate my view about  one submission  which  was  addressed  to  me by Mr Heard in the course of his careful arguments.  Mr Heard submitted that the reply evidence which Dansar had filed ought to be accepted because there had been no attempt by Magsons to seek leave to file a reply to that evidence.  I do not consider that that submission can be upheld.  It may be that in exceptional cases, leave to file such reply evidence would be granted because otherwise an injustice would result. But  I  do  not  believe  that  the  parties  to  summary  judgment  cases  ought  to  be subjected to an adverse inference being drawn in every case where it could be argued that the plaintiff’s evidence in reply has introduced fresh matters that could not have been anticipated.

[50]     This case is an unfortunate one.  Dansar has carried out substantial work for a company which has failed.   As a result it has been deprived of cash to run its business.  It would not appear that there is any possible complaint about the quality of the work which Dansar provided.  On the other hand, one can understand the need for Magsons to provide protection for itself when operating in what may have been a high-risk environment.   By that I mean that substantial amounts of materials were being provided and cash laid out to contractors on the strength of a contract with a property developer.  In the absence of dependable security arrangements, Magsons was at risk.   That there were no, or no sufficient security protections in place for Magsons is suggested by the fact that it ended up being a substantial creditor of Starplus.   The evidence is scant whether Magsons had security in the form of a Romalpa retention of title provision.  The evidence of Ms Patel is lacking in detail but it does say that Starplus owes Magsons “a considerable sum”.

[51]     My conclusion is that Dansar has failed to establish that Magsons does not have an arguable defence to its claim.

[52]     The conclusion that I have set out has been reached without considering the other defences which Magsons has put forward which included questions of whether Mr Sharp possessed the required authority of an agent for the plaintiff.   I do not intend to express a view on that matter other than to note that the question of agency in the context of the trust was explored in the Court of Appeal judgment of Insight

Legal Trustee Co Ltd v Stokes.3

Orders

[53]     The  parties  should  confer  on  steps  that  are  required  to  progress  this proceeding including discovery, whether there is any proposal to join parties and the timetable for taking those steps.  The proceeding can be classified as non-complex. The registrar is to allocate a first case management conference not earlier than 17

April 2014.

[54]     The parties are to confer concerning the question of costs and if they are not able to agree are to file memoranda not exceeding five pages on each side within 10

working days of the date of this judgment.

J.P. Doogue

Associate Judge

3 Insight Legal Trustee Co v Stokes [2013] NZCA 148; [2013] BCL 208.

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