Siemens (New Zealand) Limited v Broadspectrum (New Zealand) Limited
[2017] NZHC 287
•28 February 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-000894 [2017] NZHC 287
BETWEEN SIEMENS (NEW ZEALAND) LIMITED
Plaintiff
AND
BROADSPECTRUM (NEW ZEALAND) LIMITED
Defendant
Hearing: 26 September 2016 Appearances:
C Langstone and I Allan for the Plaintiff / Respondent
D Campbell and M Broad for the Defendant / ApplicantJudgment:
28 February 2017
JUDGMENT OF ASSOCIATE JUDGE SARGISSON
This judgment was delivered by me on 28 February 2017 at 3.30 p.m. pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date.......................................
Solicitors:
Kensington Swan, Auckland
Fee Langstone, Auckland
SIEMENS (NEW ZEALAND) LTD v BROADSPECTRUM (NEW ZEALAND) LTD [2017] NZHC 287 [28 February 2017]
[1] In these proceedings, Siemens New Zealand Limited is suing Broadspectrum (New Zealand) Ltd, a subsidiary of Transpower New Zealand Limited, in relation to allegedly negligent work performed in installing and assembling a transformer. Broadspectrum denies liability.
[2] Broadspectrum now applies for various orders seeking to limit its potential exposure for damages assuming it is found liable at trial. Two kinds of orders are sought:
(a) Declarations by summary judgment in respect of three causes of action in a counterclaim;
(b)Alternatively, orders striking out parts of Siemens’ claim for judgment and/or damages.
[3] Siemens opposes the application.
[4] My judgment focuses mainly on the summary judgment limb of the application as that comprises the focus of Broadspectrum’s submissions and is where the real arguments rests. If Broadspectrum fails to convince me that summary judgment is appropriate, it is highly unlikely that a strike out will be considered so.
[5] For the reasons I discuss, the application is declined. In summary, Broadspectrum has failed to discharge its onus to demonstrate that Siemens has no defence to Broadspectrum’s counterclaim; and there are also discretionary factors that weigh against Broadspectrum.
Factual Background
[6] The basic facts in this case are not in any real dispute. Siemens “broadly agrees” with the factual summary in Broadspectrum’s synopsis of submissions.
[7] The basis of Siemens’ claim is a Master Supply Agreement (MSA) entered into between the two parties which commenced on 1 November 2009. Pursuant to the terms of the MSA on contract, each new work undertaken by Broadspectrum is subject to a separate Purchase Agreement, but covered by the same standard terms. Clause 3.2 of the MSA stipulates that a Purchase Agreement consists of a Supply Schedule, a request for quotation, the MSA, and a Purchase Order. In case of any inconsistency in the terms, priority follows the order in which they are listed.
[8] Subsequent to entering into the MSA, the parties entered into Supply Schedule No. 2 pursuant to which Broadspectrum performed work for Siemens installing and assembling a transformer. However, the transformer failed eight or nine minutes after it was energised. Subsequently, the parties amended the Supply Schedule to pave the way for Transfield to undertake repair. However, the Transformer was never repaired and was eventually sold for scrap metal.
[9] Siemens says the resulting loss and damage amounted to $1,137,742.57. In April 2015 it filed a statement of claim alleging that the loss and damage resulted from Broadspectrum’s breach of its obligations under tort and contract. Broadspectrum denies liability.
[10] In May 2015 Broadspectrum filed a statement of defence and counterclaim (later amended one day before the present application was filed). The counterclaim relies on three causes of action which contend that Broadspectrum’s liability (which is denied) is limited to either AUD $50,000 or $323,725 in accordance with the MSA, pursuant to cl 19.6(b) and cl 19.5 respectively.
[11] Both the summary judgment and strike-out applications essentially ask the Court to rule on the meaning and effect of certain clauses in the MSA. The summary judgment application seeks a declaration; and the alternative strike out orders are sought on the grounds that it is frivolous for Siemens to claim for damages beyond the allegedly clear contractual limitations provided for in the MSA.
[12] Broadspectrum’s application essentially turns on the interpretation of two
pertinent clauses of the MSA, as set out below.
Clause 19.6
[13] Clause 19.6(b) relevantly provides:
The Vendor shall effect and maintain the following valid enforceable insurance policies in respect of each Purchase Agreement.
(a) …
(b) a contract works insurance policy covering loss of or damage to the Work (if any Work will be performed on Site) but excluding loss of or damage to materials provided to the Vendor by Siemens, where Siemens shall insure the materials provided to the Vendor and the Vendor shall only be liable for the payment of the insurance deductible where the Vendor is liable for any loss or damage to the Siemens supplied material. The Vendor shall be named an additional insured on the policy which includes a cross liability clause in which the insurer agrees to waive all rights of subrogation or action against any of the persons comprising the insured;
[14] It appears that Broadspectrum’s main contention with respect to this clause is that at the time of Broadspectrum’s alleged negligence, Siemens had an insurance policy in accordance with this clause. Specifically, Broadspectrum says Siemens had a ‘Construction Risks – Material Damage Policy’ with QBE Insurance Australia Limited, and that one of the material terms of the policy stipulated that the “excess in relation to the loss to Existing Property was AUD 50,000”.1
[15] Broadspectrum’s first cause of action is that the benefit of the policy extends to itself as a subcontractor of Siemens, and in the case of the Transformer, Siemens was obliged to arrange insurance for its benefit.
[16] Broadspectrum also states that the transformer was “Existing Property”. Therefore if the Court should find it liable for any loss or damage, the liability
should be limited to AUD $50,000 in accordance with the insurance excess and
1 The policy is also said to define Existing Property to mean “existing buildings, structures and
plant of every description”.
clause 19.6(b) of the Master Supply Agreement. On the basis of this clause and the insurance policy, Broadspectrum applies for the following:
(a) Summary judgment declaring that the defendant’s liability for any loss
or damage (which is denied) is limited to AUD $50,000;
(b) Alternatively, an order that Siemens’ claim for damages and/or
judgment in excess of AUD $50,000 be struck out.
[17] Broadspectrum’s second cause of action also relies on cl 19.6(b), but this time on the counterfactual that no insurance policy exists pursuant to the clause. If Siemens has failed to place an insurance policy in accordance with 19.6(b), Broadspectrum claims this represents a breach of Siemens’ obligations under the clause. On this basis, Broadspectrum applies for the following:
(a) Summary judgment declaring that, in the event Broadspectrum is found liable, then:
(i) Siemens’ loss will be limited to AUD $50,000; or
(ii)Broadspectrum will be entitled to set off against that loss the full amount of the loss less AUD $50,000; or
(iii)Broadspectrum is entitled to judgment for the full amount of the loss less AUD $50,000.
(b)Alternatively, an order striking out Siemens’ claim for judgment and/or damages in excess of AUD $50,000.
Clause 19.5
[18] The second pertinent clause is clause 19.5, which relevantly provides:
Except to the extent that liability cannot be legally limited or excluded and whether in contract, tort, negligence, under an indemnity, under statute in equity or otherwise, other than the Vendor’s liability for personal injury or
death, the Vendor’s liability arising out of or in connection with a Purchase Agreement shall be limited to the amount specified in Schedule 1 or the Supply Schedule.
[19] Broadspectrum says that in accordance with Supply Schedule No. 2, the limit of its liability was limited to an amount equal to 100% of the Agreed Price under the Purchase Agreement. Therefore, Broadspectrum’s third cause of action is for contractual limitation of liability to the amount of the Agreed Price of $272,192 plus the variations, totalling $323,725.30.
[20] On this basis, Broadspectrum seeks:
(a) Summary judgment for a final declaration that, if found liable at trial, its liability is limited to $323,725.30;
(b)Alternatively, an order striking out Siemens’ claim for judgment and/or damages in excess of $323,725.30.
Summary judgment
Legal principles
[21] Broadspectrum’s application for summary judgment is made in reliance on rr 12.2(1) and 12.16 of the High Court Rules. Rule 12.2 provides as follows:
Judgment when there is no defence or when no cause of action can succeed
(1) The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
(2) The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[22] Rule 12.6 provides that r 12.2 applies, with all necessary to modifications, to counterclaims as well as claims.
Siemens’ procedural objection
[23] Before addressing the merits of Broadspectrum’s summary judgment application, it is necessary to consider a procedural objection that formed the basis of Siemens’ grounds of opposition.
[24] Counsel for Siemens submits that it is procedurally inappropriate for Broadspectrum to seek summary judgment as a counterclaim plaintiff. According to this argument, Broadspectrum’s alleged counterclaim is not a counterclaim at law; its three causes of action are rather partial affirmative defences as to quantum. Consequently, as a defendant, Broadspectrum is required pursuant to r 12.2(2) to show that Siemens’ claim cannot succeed it its entirety. Siemens concludes that because Broadspectrum brings only a partial defence, the application therefore cannot be granted. In support, Siemens contends that counterclaims have to be independent causes of action which Broadspectrum’s claims cannot be because they are all contingent at the very least on Broadspectrum being found liable at trial.
[25] There is little question that Broadspectrum has brought this unconventional application as a strategy or device for circumventing the rule against partial defences in r 12.2(2). But the real issue does not concern Broadspectrum’s motivations but the Court’s jurisdiction.
[26] Siemens’ argument effectively seeks to circumscribe the Court’s jurisdiction, creating a jurisdictional bar against allowing Broadspectrum to bring its counterclaim and to seek summary judgment upon it. I see no reason why I should limit the Court’s jurisdiction in this way. I accept that a defence and a counterclaim are conceptually distinct.2 A defence is a shield; a counterclaim a sword.3 But I agree with the observation made by counsel for Broadspectrum that if Siemens had not issued this proceeding, but instead simply demanded payment for the alleged loss, there would be no argument that Broadspectrum could not bring a claim
seeking a declaration as to the meaning of the pertinent clauses of the MSA. It is
also clear from r 12.16 that Broadspectrum may seek summary judgment by way of
2 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 5-6.
3 Stooke v Taylor (1880) 5 QBD 569 at 576-577.
counterclaim. I accept that Broadspectrum may bring the application as a counterclaim plaintiff under r 12.2(1) and r 12.16 and I proceed on this basis.
[27] But while Broadspectrum’s unconventional approach does not limit the Court’s jurisdiction, it does give me reason to pause before exercising the Court’s discretion in its favour. Broadspectrum’s counterclaims are inextricably bound up with the grounds of its affirmative defences to Siemens’ claim against Broadspectrum. Indeed, they replicate them. This makes me wary of prematurely addressing issues that are better reserved for trial.
[28] This is where Siemens’ procedural objection is at its strongest. Siemens highlights the danger of giving summary judgment on one aspect of a case in isolation from others. It argues that if the court is to delve into this wider context, it renders redundant the objective of summary judgment in saving the time and expense involved with a full trial. There would therefore be little practical utility in
issuing a declaration by way of summary judgment.4
[29] Broadspectrum, on the other hand, contends that the Court can neatly separate out the issue of Broadspectrum’s liability from the question of its potential exposure. Conceptually, I accept that there are cases where this will be possible, but they are likely few and far between. In most cases there will be “no clear dichotomy between issues affecting liability on the one hand and damages on the other”.5
[30] The principles of contractual interpretation are clear that individual clauses must be read in the context of the rest of the agreement and in conjunction with what the parties understood those clauses to mean.6 It is dangerous for a Court to make judgment on clauses that deal with damages in isolation from others affecting liability. I accept that this provides a discretionary reason weighing against the grant
of the application.
4 Kung v Country Section NZ Indian Association Inc [1996] 1 NZLR 663 at 666 per Hammond J.
5 Ghent v Brinkman HC Wellington CP393/86, 11 September 1987.
6 Firm P1 Limited v Zurich Australian Insurance Limited T/A Zurich New Zealand [2014] NZSC
147 at [60]-[61].
Declaratory relief in the summary judgment context
[31] The Declaratory Judgments Act 1908 empowers the High Court to give declaratory judgments or orders. Section 10 provides that this jurisdiction is wholly discretionary to be made or refused on any ground which the Court deems sufficient.
[32] Case-law has developed numerous principles that guide the exercise of this discretion, and these are comprehensively summarised in NZ Insurance Co Ltd v Prudential Assurance Co Ltd [1976] 1 NZLR 84 (CA). In particular, the Court will not answer purely abstract questions in anticipation of an actual controversy, nor will
it deal with mixed questions of fact and law.7
[33] I also accept Broadspectrum’s own (telling) assertion that “[t]he proper interpretation and application of clauses 19.5 and 19.6 are in issue. There is a genuine dispute”. But as I will discuss shortly, the problem for Broadspectrum is that there is too much, not too little, controversy.
[34] Conceptually, it is quite plausible that in some cases a declaration as to contractual interpretation could be made independent of and prior to a finding for or against liability. But this is not such a case. Here there are mixed issues of fact and law in dispute that cannot be resolved in the summary judgment forum. I turn to these issues now.
Has Broadspectrum discharged its evidentiary onus?
[35] With this all in mind, I turn to the key issue: whether Broadspectrum has discharged its onus of satisfying me that the defendant has no tenable defence to its three causes of actions.
[36] With respect to the first and second causes of action, Broadspectrum contends
that “the natural and ordinary meaning of clause 19.6(b) is clear”.
7 NZ Insurance Co Ltd v Prudential Assurance Co Ltd [1976] 1 NZLR 84 (CA) at 85. See also Carrington v Carrington [2014] NZHC 869, (2014) 22 PRNZ 43 at [40]-[41]; and Mandic v The Cornwall Park Trust Board (Inc) [2011] NZSC 135, [2012] 2 NZLR 194 at [5].
[37] I am not so convinced. Siemens accepts that if the transformer falls within the phrase “Siemens supplied material” then Broadspectrum would have been covered by the insurance policy and the limitation would have applied. Siemens contends, however, that this term should be interpreted in light of Schedule 1 of the MSA which stipulates that “Siemens material” is not applicable unless specified in the Supply Schedule, which in this case it is not. Siemens concludes that the transformer was therefore not “Siemens material” for the purposes of the clause or any insurance policy taken out Siemens.
[38] Broadspectrum replies that the phrase “Siemens material” is not the same as, and does not affect the interpretation of, the phrase “Siemens supplied material”. This may be so, but I cannot discount the possibility that Siemens’ interpretation has merit and that the transformer is therefore not covered by cl 19.6(b).
[39] I also note that in oral submissions Siemens raised further questions as to the meaning of ‘materials’ and ‘supplied’. I agree with Broadspectrum that these late submissions were procedurally inappropriate. To give Broadspectrum adequate time to respond,8 I adjourned proceedings and invited them to file reply submissions, which they subsequently did on 29 September 2016.
[40] Still, Broadspectrum should hardly have been surprised. As counterclaim plaintiff, Broadspectrum has the onus of analysing and explaining the meaning of the pertinent contractual clauses. It did not do so, at least not to my satisfaction, and indeed the interpretational issues have become murkier and more confusing the further the proceedings has progressed.
[41] For instance, in relation to the meaning of ‘materials’, it seems to me that whether or not the transformer falls within this term is hardly obvious as a matter of business common sense. In its reply submissions, Broadspectrum relies simply on a dictionary definition of “materials”. This is an insufficient argument, and indeed it appears somewhat incongruous for Broadspectrum to suggest that the Transformer
was materials because it “was plainly needed for its own installation”.
8 Greenbank NZ Ltd v Haas [2000] 3 NZLR 341 (CA).
[42] The fact that Siemens could raise this objection so late in the piece, and hardly a frivolous one at that, is indicative of the fact that Broadspectrum has not done enough to demonstrate the meaning of the clause.
[43] I turn then to the third cause of action.
[44] Clause 19.5, on which Broadspectrum relies for its third cause of action, is similarly not without any trace of ambiguity. Broadspectrum may have established that the Supply Schedule limits its liability to the amount of the Agreed Price plus variations, but Broadspectrum fails to satisfy me that the exception laid out in cl 19.5 does not apply on the facts. The exception reads:
Except to the extent that liability cannot be legally limited or excluded and whether in contract, tort, negligence, under an indemnity, under statute in equity or otherwise, other than the Vendor’s liability for personal injury or death …
[45] This vaguely worded exception is simply not addressed by Broadspectrum. This is entirely unsatisfactory if Broadspectrum expects the Court to deliver a declaration as to contractual interpretation of any practical utility in the context of this summary judgment application.
Summary
[46] All in all, Broadspectrum has not persuaded me that “there is no real question be tried” in this case.9
[47] I am not required, of course, to accept uncritically contrary positions from Siemens if they are equivocal, imprecise, inconsistent with accepted evidence, or inherently improbable.10 But this is not the situation here. I do not consider that Siemens’ contrary views on contractual interpretational and application are “fanciful or are not bona fide”.11 Rather, they have raised some real disagreements that can
only be worked through in the context of a full trial. It would be inappropriate for
9 Pemberton v Chappell, above n 3, at 185.
10 Attorney-General v Rakiura Holdings Ltd (1986) 1 PRNZ 12 at 14.
11 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Westlaw) at
[HR 12.2.06].
the Court to inhibit Siemens from bringing its complete claim to trial before it has ever had a fair chance to do so.
Strike out
[48] Rule 15.1 of the High Court Rules 2016 provides that the court may strike out all or part of a pleading if it:
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the Court.
[49] The general principles which apply in respect of a strike-out application such as the present are well-established:12
(a) The pleaded facts, whether admitted or not, are assumed to be true. (b) The cause of action or defence must be clearly untenable.
(c) The jurisdiction is to exercised sparingly and only in clear cases.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law, even where extensive argument is required.
[50] Broadspectrum argues that Siemens has not arguable claim beyond AUD $50,000, and it is improper and frivolous for them to have claimed quantum in excess of the limits that were agreed. However, without saying anything determinative about the merits of this case, I am not persuaded that they were so
agreed. Having failed to satisfy me that a summary judgment would be appropriate,
12 See Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267, affirmed in Couch v Attorney- General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
Broadspectrum has little hope convincing me that Siemens’ claim is frivolous, vexatious or an abuse of process. I repeat that Siemens has at least an arguable case for its competing interpretation of the two clauses of the MSA pertinent to this case.
[51] Moreover, while there is nothing objectionable about partial strike-out applications in principle, I accept Siemens’ submission that the Court should be wary of the potential inefficiency of such applications.13 As noted earlier, the Court would be required to drag up complex issues of fact and law that would make the process inappropriately long and expensive.
Result
[52] The application is declined.
[53] Costs are reserved in accordance with the Court of Appeal’s decision in
NZI Bank Ltd v Philpott.14
Associate Judge Sargisson
13 Whitman v Airwaus Corporation of New Zealand Ltd (1994) 8 PRNZ 155 at 158.
14 NZI Bank Ltd v Philpott [1990] 2 NZLR 403.
0
2
0