Sharp v Pillay

[2017] NZHC 647

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-2924 [2017] NZHC 647

BETWEEN

NICOLA JUNE SHARP

Plaintiff

AND

PAVITHRA PILLAY First Defendant

CR MARKETING NORTH SHORE LTD T/A CENTRAL REALTY

Second Defendant

LESLEY WHEATLEY Third Defendant

BC HOLDINGS LTD PREVIOUSLY KNOWN AS BODY CORPORATE SPECIALISTS LTD

Fourth Defendant

DAVID IRVING LLEWELLIN Fifth Defendant (discontinued)

ARMSTRONG MURRAY Sixth Defendant

DAVID IRVING LLEWELLIN First Third Party

Hearing:	28 March 2017
Counsel:	H L Quinlan for Plaintiff R Scott for Sixth Defendant
Judgment:	5 April 2017

JUDGMENT OF BREWER J

This judgment was delivered by me on 5 April 2017 at 3:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

SHARP v ARMSTRONG MURRAY [2017] NZHC 647 [5 April 2017]

Introduction

[1]      Armstrong  Murray  is  being  sued  by  Ms Sharp  for  the  consequences  of alleged negligence. Armstrong Murray seeks security for costs.

[2]      Ms Sharp,  in  2012,  bought  an  apartment  in  a  14  apartment  block.   The apartments leak.  Armstrong Murray acted for Ms Sharp as her solicitors when she bought her apartment.  Armstrong Murray did the conveyancing.  Ms Sharp’s cause of action against Armstrong Murray is particularised as follows:1

69.1By 2012, a prudent and competent solicitor would be aware of the statutory requirement  for Bodies Corporate to  have  an  LTMP in place, and the risks and consequences of not having an (or an adequate) LTMP in place.

69.2     Ms Sharp was an inexperienced, first time home buyer.

69.3Armstrong Murray failed to advise Ms Sharp to inquire as to the existence and adequacy of an LTMP in place for the Complex.

70In  reliance  on  the  Advice  Ms  Sharp  did  not  inquire  as  to  the existence or adequacy of an LTMP for the Complex.

71Had Ms Sharp known about the lack of an LTMP for the Complex, she would have had the opportunity to make further inquiries which should have highlighted the obvious weathertightness risks, and she would have avoided the Agreement.

Discussion

[3]      Rule 5.45 of the High Court Rules provides that if there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful then a Judge may, if the Judge thinks that it is just in all the circumstances, order the giving of security for costs.

[4]      The  position  of  the  plaintiff  if  she  is  ultimately  unsuccessful  is  not particularly clear.  In her affidavit of 3 February 2017, Ms Sharp deposes:

20My focus this year financially is to fund the remediation levies and ensure the repair work is completed so that my property retains its value.  The  current  remediation  project  cost  estimate  is  around

$3.7 million,   which   would   mean   my   repair   levies   will   be approximately $300,000 (plus the additional cost of overhead items).

21If I was required to put aside funds as security for costs, I would find it very difficult to fund the repair levies. Like most ordinary homeowners, I do not have unlimited funds so that I can “lock up” tens of thousands of dollars, when I need the funds elsewhere.

[5]      However, given that the apartment cost $300,000 in 2012 of which, I am advised, $276,000 was borrowed, and given that in April of this year Ms Sharp must pay $221,000 in one sum as her remedial levy, I am satisfied that there is reason to believe that Ms Sharp will be unable to pay costs.

[6]      That is not the end of the matter, of course.  The discretion I have goes to what  is  just  in  all  the  circumstances  and  that  means  balancing  the  interests  of Ms Sharp and Armstrong Murray. As the Court of Appeal said in A S McLachlan Ltd v MEL Network Ltd:2

[15]      The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as contemplating  also  that  an  order  for  substantial  security  may,  in  effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in which the claim has little chance of success. Access to the courts for a genuine plaintiff is not lightly to be denied.

[16]     Of course, the interests of defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.

[7]      Having regard to the submissions of counsel, and the written materials, I do not consider that Ms Sharp has much chance of success against Armstrong Murray. It is not for me to analyse the facts in the sort of detail that would be necessary for a strike  out  or  summary  judgment  application,  but  rather  I  should  rely  on  the impression formed by a study of the materials advanced in support of and against the application for security for costs.

[8]      In brief, Ms Sharp signed an agreement to purchase her apartment having received documents from the real estate agent, which included the pre-contract disclosure statement required by s 146(1) of the Unit Titles Act 2010 and a draft Long  Term  Maintenance  Plan  (LTMP).    The  latter  had  become  a  mandatory

requirement for Body Corporates some five weeks before the date of sale and purchase.3

[9]      The agreement for sale and purchase was conditional on Ms Sharp obtaining both finance and a satisfactory building report.

[10]     Shortly after signing the agreement, Ms Sharp engaged Armstrong Murray to act for her on her purchase of the apartment.  Ms Sharp provided Armstrong Murray with the agreement for sale and purchase and a copy of a building report prepared for a  previous  prospective  purchaser  of  the  property.    The  latter  was  provided  to Ms Sharp by the real estate agent.  Ms Sharp instructed Armstrong Murray that she would rely upon the building report, which did not identify any problems with the apartment.

[11]     One week after being instructed by Ms Sharp, Armstrong Murray, on her behalf, declared the agreement unconditional.   Settlement of the transaction took place some three weeks later on 7 December 2012.

[12]     As to whether Armstrong Murray breached a duty of care to Ms Sharp in failing to advise her of the desirability of a LTMP being in existence, each party has an expert witness expressing a different opinion.  Having looked at the affidavits of the competing experts, my impression is that it is unlikely that in the circumstances known to me a breach of a duty of care will be found.  The fact is that in this case there was no LTMP and the draft LTMP, which Ms Sharp had before she signed the agreement, did not identify the need for remedial work to be done.  It simply allowed for routine maintenance for the next 10 years.   However, the law had changed to require Body Corporates to have an LTMP and it might be that a failure to advise Ms Sharp about this law change, in the circumstances of this case, could be held to

be a breach of a duty of care.

3      Unit Titles Act 2010, s 221. The Act came into force by Order in Council on 20 June 2011.

Section 116(1) states that a body corporate must establish and regularly maintain a long-term maintenance plan. However, s 221 provides that nothing in s 116 applies to an existing unit title development until 15 months from 1 July 2011, unless the body corporate agrees, by special resolution, that s 116 should apply before that date.

[13]     The next issue is causation.  That seems to me to be an even higher hurdle for Ms Sharp to clear.  The agreement had already been signed by the time Ms Sharp took it to Armstrong Murray.  Ms Sharp already had the draft LTMP and the building report.   In her pleadings, Ms Sharp alleges she made specific inquiry of the real estate agent and was assured that there were no water ingress problems.   It would seem that Ms Sharp did not take the advice of Armstrong Murray to obtain a Land Information Memorandum (LIM) report from the local authority (I infer that this would not have disclosed water ingress difficulties, but her neglect in this regard does go to attitude).  Accordingly, on the face of the situation, I am not sure how Ms Sharp will satisfy the Court on the balance of probabilities that, had she received advice as to the desirability of a LTMP, she would have taken steps to avoid the agreement.

[14]     To summarise the situation to this point, I am satisfied that there is reason to believe  that  Ms Sharp  will  be  unable  to  pay the  costs  of Armstrong  Murray if Ms Sharp is ultimately unsuccessful in the proceedings.  My impression of her case against Armstrong Murray is that it is weak. As Ms Quinlan conceded, Ms Sharp has an uphill battle.

[15]     However, I must still weigh the interests of the parties in the context of what is  just  in  all  the  circumstances.    I  do  not  characterise  Ms Sharp’s  case  against Armstrong Murray as hopeless or without merit.  Ms Sharp’s evidence has not been heard and evaluated and neither have the opinions of the experts been scrutinised in cross-examination.  I am accordingly going to make an order for security for costs, but  not  in  the  sum  of  $51,959  as  sought  by Armstrong  Murray.    That  sum  is Armstrong Murray’s assessment of likely costs for a three day trial on a 2B basis.

[16]     I will order security for costs on a staged basis.  The first stage will be costs on a 2B basis for the majority of the steps required between now and the trial date. At  that  point,  a  further  order  for  security  for  costs  may  be  applied  for  and determined.   That is when the full extent of Ms Sharp’s case against Armstrong Murray will be known.

[17]     In deciding which steps I will include in the order for security of costs which I  make  at  this  stage,  I  have  taken  into  account  that  Ms Sharp’s  case  against Armstrong Murray is quite narrow and the issues are already clear.  I am exercising a discretion rather than being mathematical.

[18]     The application for security for costs is granted in part.  I order that security be given for $18,286 as follows:

Item	Description	Daily Rate	Number of Days	Total
30	Defendant’s preparation of briefs or affidavits	$2,230.00	2.5	$5,575.00
32	Defendant’s preparation of list of issues, authorities, and common bundle	$2,230.00	2	$4,460.00
33	Preparation for hearing	$2,230.00	3	$6,690.00
11	Filing memorandum for subsequent case management conference	$2,230.00	0.4	$892.00
13	Appearance at subsequent case management conference	$2,230.00	0.3	$669.00
Total	$18,286.00

[19]     I direct that Ms Sharp give security for costs in this sum by 11 May 2017 (which I understand to be the date of the next case management conference).

[20]     I award costs on this interlocutory application to Armstrong Murray on a 2B

basis. These may be calculated by the Registrar in the event of dispute.

Brewer J

Solicitors:

Anthony Harper (Auckland) for Plaintiff

DAC Beachcroft New Zealand (Auckland) for Sixth Defendant