Smith v Nathan

[2010] NZCA 265

IN THE COURT OF APPEAL OF NEW ZEALAND

CA141/2010
[2010] NZCA 265

BETWEENGEOFFREY STEPHEN SMITH AND CAROLYN SMITH

Applicants

ANDMILES HUNTER NATHAN, JAMES DENNIS TAIT AND MICHAEL GERARD CURTIS

First Respondents

ANDMILES HUNTER NATHAN AND MARY NATHAN

Second Respondents

Hearing:15 June 2010

Court:William Young  P, Ellen France and Randerson JJ

Counsel:S C Price and J K Stewart for Appellants

M J Fisher and K S Muston for Respondents

Judgment:24 June 2010 at 3 pm

JUDGMENT OF THE COURT

A            We dismiss the application for leave to appeal. 

BWe direct that the applicants pay to the first respondents costs for a standard application on a Band A basis and usual disbursements.

REASONS OF THE COURT

(Given by William Young P)

[1]        In issue is an application for special leave to appeal against a judgment delivered by Wylie J delivered on 16 November 2009[1] dismissing an application for review of a decision of an Associate Judge declining to strike out a cause of action. 

[1]      Nathan v Smith HC Auckland CIV 2007-404-253, 16 November 2009.

[2]        The case arises out of a sale of a house developed by Mr and Mrs Smith.  They sold the house under an agreement for sale and purchase dated 28 December 2000.  The purchasers were Mr and Mrs Nathan “and/or nominee”.  The agreement contained warranties and undertakings as to the construction of the house.  When the transaction was settled (on 23 January 2001), the transfer was to the trustees of a trust associated with Mr and Mrs Nathan.  Their identities were disclosed in the memorandum of transfer and notice of change of ownership.  This was sent by Mr and Mrs Nathan’s solicitors to Mr and Mrs Smith’s solicitors before settlement.

[3]        The trustees and Mr and Mrs Nathan allege that the house was not weather tight.  They seek damages to recover repair and reconstruction costs and issued proceedings on 23 January 2007 (ie the last day of the limitation period for contractual claims[2]) against Mr and Mrs Smith and others.  In these proceedings the trustees are the first plaintiffs and Mr and Mrs Nathan are the second plaintiffs.  As against Mr and Mrs Smith, they alleged breach of the warranties in the agreement for sale and purchase, and they also claimed in tort.  The strike out issue is solely in relation to an aspect of the contractual claims.

[2]      Limitation Act 1950, s 4.

[4]        A complicating feature of the case is that there is more than one basis upon which Mr and Mrs Nathan and the trustees might be able to pursue a contractual claim.

(a)In the statement of claim as originally filed, the trustees relied on the Contracts (Privity) Act 1982 but in a later amended statement of claim, they (strangely to our way of thinking) did not persist with that pleading.  They now wish to resuscitate this claim. Although their entitlement to do so may be challenged, it is yet to be established that they cannot do so. 

(b)Mr and Mrs Nathan have also sued on the warranties.  Their position is that they are entitled to process this claim on behalf of the trustees.  The “on behalf” nature of this claim was not specifically pleaded and there is now debate between the parties whether this claim can be pursued. But it is likewise yet to be established that is not available.  Indeed Wylie J plainly thought that it was legally tenable albeit that his opinion on this point did not form part of his formal judgment.

(c)A third basis for a contractual claim rests on the argument that Mr and Mrs Nathan assigned the warranties to the trustees.   On the authority of the judgment of this Court in Mountain Road (No 9) LimitedvMichael Edgley Corporation Pty Ltd[3] this claim is only within time if notice of the assignment was given (as required by s 130 of the Property Law Act 1952) prior to the expiry of the limitation period.  The only documents which the trustees can point to which might constitute notice are the memorandum of transfer and the notice of change of ownership.  The applicants deny that provision of those documents to Mr and Mrs Smith as part of the settlement process could amount to the giving of notice for these purposes.

[3]Mountain Road (No 9) Limited v Michael Edgley Corporation Pty Ltd [1999] 1 NZLR 335.

[5]        The judgment of Wylie J only formally addressed the third of these arguments which, to the extent that he could, he resolved against Mr and Mrs Smith by concluding that those documents did constitute notice of the assignment relied on by the trustees.

[6]        Mr and Mrs Smith are concerned that if this judgment stands, there will be an issue estoppel on this point with the result that if there is no appeal and they later lose the case substantively in the High Court they will be stuck with the conclusion that the notice requirements associated with the alleged assignment have been satisfied.  We accept that all (or at least most) of the evidence relevant to this issue was before Wylie J.  His judgment makes it clear that, in his view, the two documents which we have mentioned did constitute notice of the assignment.  We have considered carefully two decisions of this Court which address the circumstances in which a prior interlocutory judgment may give rise to issue estoppel, res judicata or abuse of process arguments:  Joseph Lynch Land Co Ltd v Lynch[4] (where such arguments failed) and McGaveston v NZ Permanent Trustees Ltd[5] (where corresponding arguments succeeded).  In this case, all that Wylie J was required to do was decide that there was an arguable case on this issue.[6]  We do not accept that his admittedly robustly expressed conclusion that there was an arguable case gives rise to an issue estoppel.  In particular,  the judgment of Wylie J will no doubt be persuasive as far as the trial judge is concerned but will not be binding and it will not be conclusive if there is a later appeal to this Court. 

[4]Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37.

[5]McGaveston v NZ Permanent Trustees Ltd CA23/02 11 December 2002.

[6]See Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33] and Attorney-General v Prince & Gardner [1998] 1 NZLR 262 at 267 (CA).

[7]        With the issue estoppel point now addressed, we consider that the granting of leave to appeal is simply not justified in the present context.

[8]        Section 130 of the Property Law Act 1952 has now been repealed and in that sense the legal issue involved in the case is dead law and is probably of interest only to the parties.

[9]        Mountain Road is a controversial decision which has been distinctly not followed in Australia[7] and is not in accord with current authority in the United Kingdom.[8]  If Mr and Mrs Smith were to obtain leave to appeal, it is quite likely that either this Court or perhaps the Supreme Court, would be invited to review Mountain Road. 

[7]Thomas v NAB Ltd [1999] QCA 525; Alma Hill Constructions Pty Ltd v Onal [2007] VSC 86, 16 VR 190.

[8]      Finlan v Eyton Morris Winfield (A Firm) [2007] EWHC 914 (Ch), [2007] 4 All E.R. 143.

[10]       As well, and importantly, a favourable result from the point of view of Mr and Mrs Smith on the Mountain Road argument would not exclude them from the action and they will continue to face claims in both tort and contract. 

[11]       Trial of the substantive action is set down for March next year.  If we were to grant leave to appeal in relation to the current issue, the resulting appeal to this Court (with the potential for a further appeal to the Supreme Court) could compromise that fixture and, at the very least, would be a serious distraction for the parties ahead of the fixture. 

[12]       In those circumstances, we think it inappropriate to grant leave to appeal and we dismiss the application.  We direct that the applicants pay the first respondents costs for a standard application on a Band A basis and usual disbursements.

Solicitors:

MinterEllisonRuddWatts, Auckland for Appellants

P J Castle, Auckland for Respondents