Smith v Noble Investments Ltd
[2020] NZHC 1236
•5 June 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2014-409-549
[2020] NZHC 1236
BETWEEN GREGORY ROBERT SMITH and COLIN PETER STOKES
PlaintiffsAND
NOBLE INVESTMENTS LIMITED
Removed First Defendant
AND
APPLE FIELDS LIMITED
Removed Second Defendant
AND
JUSTIN WILLIAM PRAIN
Third Defendant
AND
CARDNO (NZ) LIMITED
Fourth Defendant
Hearing: 19 May 2020 Appearances:
G D Stringer for Plaintiffs (via VMR, audio only) P B McMenamin for Third Defendant (in person)
H J Dempsey and M R C Wolff for Fourth Defendant (via VMR)
Judgment:
5 June 2020
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 5 June 2020 at 12.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
5 June 2020
SMITH & STOKES v PRAIN [2020] NZHC 1236 [5 June 2020]
[1] In broad terms there are three applications before the Court. Each of the defendants seeks that this proceeding be struck out or permanently stayed while the plaintiffs seek that a stay entered by Associate Judge Matthews on 22 March 2019 be lifted. The exact nature of the stay ordered on 22 March 2019 is one of the issues between the parties.
[2] The proceeding, which commenced in 2014, has its origins in a contract entered in 2002 (the 2002 contract). I will start with only a bare summary of the matters in issue and deal with the facts in more detail when dealing with the different applications.
Context
[3] The plaintiffs in this litigation, Gregory Robert Smith (Mr Smith) and Colin Peter Stokes (Mr Stokes), claimed against Noble Investments Limited (Noble) (now struck off the Companies Register), for breach of the 2002 contract relating to the purchase by Mr Smith and Mr Stokes of land in a subdivision to be completed by Noble.
[4] The original proceeding was against Noble and Apple Fields Limited (Apple Fields) (now also struck off the Companies Register), which was the company used by Noble to manage the development of this particular subdivision. That claim was for breach of contract and misrepresentation. Further, Mr Smith and Mr Stokes claim that they are the victims of deceit perpetuated by a director of Apple Fields, the third defendant, Justin William Prain (Mr Prain), and the fourth defendant, Cardno (NZ) Limited (Cardno), which was a company engaged by Noble to acquire the requisite consents and assist in the planning of the subdivision in question.1
[5] The plaintiffs, in the 2002 contract, purchased from Noble what is referred to in the 2002 contract and the statement of claim as “Lot 9”. The plaintiffs also purchased Lot 19 and also a one-tenth share of Lot 22. Lot 22 is a strip of land that served as a right of way.
1 Summary paraphrased from judgment of Gendall J in Smith v Noble Investments Ltd [2015] NZHC 3006.
[6] The 2002 contract contained the following Further Terms (FT) of sale which are central to the plaintiffs’ claim:
[FT] 14. Following completion of the initial subdivision the vendor will use it’s [sic] best endeavours at it’s [sic] costs to obtain L1A zoning for Lot 9 and further undertakes not to do anything or negotiate with the Council to use Lot 9 to effect a more advantageous zoning that it might have achieved on the balance of it’s [sic] land, i.e, it shall not agree to a lesser zoning for Lot 9 than for any other lot where it is seeking L1A zoning or it’s [sic] equivalent (unless previously agreed in writing with the Purchaser).
[FT] 15. In the event a further subdivision is approved and work undertaken for residential subdivision by the Vendor on the adjoining development then the Vendor undertakes to provide full width roading to L1A zoning standard at it’s [sic] cost, together with sewer, power, telephone, water and stormwater connection for this zone’s standard to Lot 9. This work is to be completed within TWO YEARS of residential zoning being granted or when development of the Vendors adjoining land is undertaken, whichever comes first.
[7] The plaintiffs also granted Noble an option to purchase Lot 19 under which Noble could purchase it for $10. The plaintiffs plead the option was subject to compliance with FT 14 and F T 15.
[8] As will be expanded on below, the relationship between Noble and the plaintiffs became strained. The plaintiffs caveated Noble’s titles resulting in proceedings commenced in 2010 in which the plaintiffs sought to protect their caveat. Noble’s land became subject to its mortgagee’s power of sale in 2014, albeit a sale did not occur until some time later. In practical terms, the Noble’s mortgagee stepping in ended any chance of Noble complying with FT 15.
[9] From the commencement of this litigation on 7 August 2014 until 22 August 2016, the plaintiffs were represented by experienced counsel. From 22 August 2016 the plaintiffs were self-represented. In February 2020 when they again engaged experienced counsel.
[10] There are numerous references in minutes from the Court in the interim that, given the complexity of the plaintiffs’ proceeding, they would be well served to re-engage counsel.
The present applications
[11] The applications of Mr Prain and Cardno are essentially in the same terms. Both bring the following applications:
(i)an application to strike out for non-compliance with orders of the Court; that application being made in reliance on r 7.48 of the High Court Rules 2016;
(ii)an application for a permanent stay under r 15.1 of the High Court Rules; and
(iii)an application that the plaintiffs’ proceeding be dismissed or stayed for want of prosecution in reliance on r 15.2 of the High Court Rules.
[12] The application under r 15.1 is to make permanent the stay ordered by Associate Judge Matthews on 22 March 2019.
[13] The applications are opposed and countered with an application from Mr Smith and Mr Stokes that the 22 March 2019 stay be lifted.
[14] The defendants’ applications were brought in December 2019. As I have said, the plaintiffs engaged counsel in February 2020. On 24 April 2020, the Court received a proposed sixth amended statement of claim prepared by Mr Stringer, counsel for the plaintiffs. Because the plaintiffs’ claim was stayed, the sixth amended statement of claim was not formally accepted for filing but treated as indicating the pleading the plaintiffs’ intended to file if the stay was lifted. Accordingly, the defendants focused their challenge on the proposed sixth amended statement of claim, which I will refer to simply as the sixth amended statement of claim.
[15] The sixth amended statement of claim was necessary because of the circumstances leading to the stay ordered on 22 March 2019.
[16] The fourth amended statement of claim was dated 29 July 2016 and at a time when the plaintiffs had counsel. That was followed by an amended statement of claim
called the “fifth amended statement of claim” dated 4 May 2018 which was prepared by the plaintiffs. That claim came under criticism from Associate Judge Osborne (as he then was) in a judgment of 31 August 2018.2
[17] On 19 November 2018, Associate Judge Matthews issued a minute in which he referred to the unsatisfactory state of the plaintiffs’ pleadings and referred to earlier comments by the Court on 8 February 2017 and on 17 May 2018 in a similar vein. He again urged the plaintiffs to take legal advice and then said:3
[7] … I have decided that there will be one final opportunity for the plaintiffs, Mr Stokes and Mr Smith, to put their house in order. Because the Court Christmas closure is just five weeks hence, I will allow more time than would ordinarily be the case for this to occur. I impose a deadline of 31 January 2019 for the filing and service of the required amended statement of claim on all parties. I further direct that if this has not occurred by 5.00pm on that day, the claim is stayed without further order of the Court.
[8] For it to be allowed to proceed after that date, an application will be needed supported by evidence on why this order has not been complied with. Mr Stokes and Mr Smith must be under no illusion that an order lifting the stay will readily be made.
[18] On 31 January 2019, a further amended statement of claim (also called a “fifth amended statement of claim” {presumably in error}) was filed and was the subject of detailed memoranda from counsel for the defendants.
[19] At the time, counsel for Cardno submitted that the fifth amended statement of claim did not comply with the directions that had been made by the Court previously, nor the High Court Rules. The defendants requested that the proceeding be stayed.
[20] Associate Judge Matthews’ minute recorded that the plaintiffs, while maintaining the adequacy of their proceedings, accepted that a stay might be appropriate to allow them to carry out further factual investigations. The plaintiffs envisaged that the case would resume once it was known whether they would be able to proceed with the subdivision originally envisaged in the 2002 contract.
2 Smith v Noble Investments Ltd (in liq) [2018] NZHC 2294.
3 Smith v Prain HC Christchurch CIV-2014-409-549, 19 November 2018 at [7]-[8].
[21]The Court made orders in the following terms:4
(a)The case by the plaintiffs against the third and fourth defendants is stayed until further order of the Court.
(b)No later than 5.00pm on Friday, 28 June 2019 the plaintiffs may apply by interlocutory application on notice for an order that the stay be lifted.
(c)On or after 17 June 2019 either the third defendant or the fourth defendant or both may apply by interlocutory application on notice for such orders that they consider appropriate, which on the basis of information presently provided to the Court appears to encompass orders for a permanent stay, strike out, or for further amended pleadings.
[22] I have previously observed in this proceeding that the 17 June 2019 date contained in sub-paragraph (c) above, appears to be a typographical error. I took it as meaning 17 July 2019, given the steps contemplated by sub-paragraph (c) would logically follow from the steps in sub-paragraph (b).
[23] As noted above, there is a dispute between the parties as to the effect of these orders. The defendants characterise the order at [21] as an unless order, that is, unless an application to lift the stay was made by 28 June 2019, the plaintiffs lost the opportunity to bring such an application. There would be a permanent stay by default as the plaintiffs would lose the opportunity to apply to have the stay lifted.
[24] I do not accept that interpretation. The Judge in sub-paragraph (c) expressly contemplated an application to make the stay permanent could be made. Further, in explaining the reason for the orders, the Judge recorded that the stay was to give the plaintiffs a final opportunity to undertake such further investigations as they wished around the factual basis for their claim and to protect the plaintiffs’ position in relation to the claim while that was done. The Judge also recorded that the stay was to preserve the right of the third and fourth defendants to seek after a reasonable period, such orders as they considered necessary in relation to the plaintiffs’ pleading.
[25] While there is some force in the point made by Mr McMenamin, counsel for Mr Prain, that the deadline given by the Judge for the making of an application to lift
4 Smith v Noble Investments Ltd HC Christchurch CIV-2014-409-549, 22 March 2019 at [7].
the stay must have been intended to have some effect, I do not view it as having the automatic “drop dead” consequence contended for by the defendants.
[26] In my opinion, the significance of the November 2018 and March 2019 minutes of Associate Judge Matthews is they show the Court giving the plaintiffs on two occasions, a final opportunity to get their claim in order and make investigations in that regard. In the minute of 19 November 2018, the plaintiffs were warned that they could not assume that the lifting of the foreshadowed stay would be a given. Ultimately, the minutes and what they provide for, are part of the context in which the applications fall to be considered.
Chronology
1.On 7 August 2014 the plaintiffs commenced these proceedings by way of a statement of claim in the Christchurch High Court. The plaintiffs pleaded a claim against Cardno for allegedly breaching a contract.
2.Between August and October 2014, the first, second and third defendants filed a statement of defence and counterclaim to the first statement of claim.
3.On 9 October 2014 the plaintiffs filed and served an amended statement of claim called the first amended statement of claim. This claim added an alleged negligence cause of action against Cardno.
4.Subsequently, Cardno filed and served a statement of defence to the first amended statement of claim.
5.On 11 March 2015 the plaintiffs were served with a notice requiring further particulars of their claim by AFL and Mr Prain.
6.On 13 April 2015, because no response was received from the plaintiffs to AFL and Mr Prain's request for further particulars, AFL and Mr Prain filed and served an interlocutory application for an order requiring further particulars of the plaintiffs' claim.
7.On 8 June 2015, the plaintiffs filed and served a further amended statement of claim called the third amended statement of claim. This pleading added an alleged deceit cause of action against Cardno.
8.On 29 July 2015, Mr Prain served the plaintiffs with a second notice requiring further particulars of their claim.
9.On 29 July 2016, the plaintiffs filed and served a further amended statement of claim called the fourth amended statement of claim.
10.From 22 August 2016, the plaintiffs became self-represented.
11.On 1 September 2016, Gendall J observed he already considered this proceeding a "longstanding and complex proceeding."
12.On 26 October 2016, Associate Judge Osborne directed the pleadings did not adequately particularise the alleged damages and ordered counsel file a memorandum addressing a timetable for the proper particularisation of damages.
13.On 1 February 2017, counsel filed and served a joint memorandum suggesting a staged timetable "for the plaintiffs and first and second defendants to provide particulars of damages and make any necessary initial disclosure relevant to that aspect."
14.On 8 February 2017, Associate Judge Osborne found the plaintiffs still had not adequately particularised damages. He directed special damages such as wasted costs be tabulated and pleaded and general damages be given proper quantification. He directed the plaintiffs file and serve an amended statement of claim with these particulars within 25 working days.
15.The plaintiffs did not file an amended statement of claim within the timeframe directed by Associate Judge Osborne, as their next statement of claim was not filed until 4 May 2018, almost 15 months after the deadline set by Associate Judge Osborne.
16.On 16 March 2017, Associate Judge Osborne ruled the joinder of Gold Band Finance Limited ("Gold Band") and Delta Utility Services Limited ("Delta") to be effective.
17.On 4 May 2017, Associate Judge Osborne considered numerous interlocutory applications (including strike-out applications from Gold Band and Delta), observing as "no opposition appears to have been filed to date, the Court is uncertain as to the extent of opposition". His Honour directed the parties file oppositions to the interlocutory applications within 5 working days, being 11 May 2017.
18.On 11 May 2017, the plaintiffs by joint memorandum notified the Court they opposed Gold Band's and Delta's strike out applications. However, they did not file the necessary opposition and requested an additional 5 working days to compile "full evidence" to serve their notice of opposition.
19.On 26 May 2017, counsel filed a joint memorandum recounting an email conversation between the parties discussing, amongst other things, a timeframe extension for the plaintiffs' notice of opposition.
20.On 6 June 2017, Associate Judge Osborne directed the plaintiffs prepare their notice of opposition within 20 working days from their date of request on 26 May 2017, being 23 June 2017.
21.At this time, in opposition to the interlocutory applications the plaintiffs wished to call and/or subpoena witnesses. However, the Court considered they had not applied under High Court Rule 7.28, which sets out the special circumstances for cross-examination in interlocutory applications. In doing so, the Court granted the plaintiffs an indulgence, and directed them to make that application by 20 June 2017.
22.On 20 June 2017, the plaintiffs filed and served an application to call and/or subpoena witnesses.
23.On 26 June 2017, Associate Judge Matthews held the plaintiffs' application was "inadequate in its present form". He directed the plaintiffs had a further 10 working days to redraft the application, and 20 working days to prepare the necessary affidavits. His Honour recognised these proceedings had "become procedurally complicated" and noted the plaintiffs were self-represented.
24.On 11 July 2017 the plaintiffs by way of joint memorandum withdrew their application for leave to call witnesses.
25.On 23 November 2017, the fifth defendant, Gold Band, and sixth defendant, Delta, were successful in their application for summary judgment dismissing the claim against them.
26.On 22 March 2018, Associate Judge Matthews issued a minute directing the plaintiffs file an amended statement of claim by 4 May 2018.
27.On 4 May 2018, the plaintiffs filed and served a further amended statement of claim called the fifth statement of claim. This pleading added a cause of action in fraud against Cardno and attempted to join more defendants to the proceeding.
28.On 17 May 2018, the Court described the fifth amended statement of claim as "manifestly unsatisfactory" as it did not comply with previous directions as to the particularisation of damages. The Court directed the plaintiffs had "one further opportunity to plead their case in accordance with the High Court Rules.
29.On 27 June 2018, Associate Judge Matthews once again recommended the plaintiffs take legal advice as to this proceeding, particularly regarding whether a legal duty was owed, whether such a duty had been breached, the consequences of such a breach, and whether such claims were sustainable considering limitation periods.
30.On 31 August 2018, Associate Judge Osborne directed, amongst other things, the plaintiffs serve amended pleadings on all existing defendants incorporating the additional or amended causes of action against the defendants the plaintiffs wished to join at the time within 20 working days.
31.On 25 October 2018, counsel for Cardno filed a memorandum recording the plaintiffs had not complied with the direction to file and serve an amended statement of claim within 20 working days and seeking a revised timetable for the plaintiffs to comply with this direction.
32.On 29 October 2018, the Court emailed the plaintiffs enquiring whether they consented to Cardno's timetabling proposal.
33.On 9 November 2018, the plaintiffs filed a memorandum rejecting Cardno's proposed timeframe.
34.On 14 November 2018, counsel for Mr Prain replied to the first plaintiff's memorandum summarising the plaintiffs' delays and failures to comply with Court directions to that date, and sought an order from the Court disallowing any extension "without a formal application and evidence as to why the plaintiffs have been unable to comply with the order of the Court and why an extension would be justified."
35.On 19 November 2018, Associate Judge Matthews issued a minute directing the plaintiffs file a final amended statement of claim by 31 January 2019, or the claim would be stayed without further order.
36.On 31 January 2019, the plaintiffs filed a further amended statement of claim called the fifth amended statement of claim, adding causes of action against Cardno for alleged misleading and deceptive conduct under the Fair Trading Act 1986 and land transfer fraud.
37.On 12 March 2019, counsel for Cardno filed a memorandum seeking directions in relation to the fifth amended statement of claim, recording Cardno's views the pleadings remained defective.
38.On 22 March 2019, Associate Judge Matthews issued a minute staying these proceedings until further order of the Court,
subject to the plaintiffs making an interlocutory application on notice for an order the stay be lifted on or before 5:00pm on Friday 28 June 2019. His Honour directed the defendants could apply to the Court on or after 17 July 2019 for an order to permanently stay or strike-out these proceedings.
39.On 28 June 2019, the plaintiffs filed a memorandum advising they would not apply to lift the stay, as they wished to focus on their "ongoing" factual investigations.
40.On 5 July 2019, Associate Judge Lester issued a minute confirming the stay was to remain in place.
41.On 4 December 2019, in accordance with Associate Judge Matthews' direction, counsel for Cardno filed and served an interlocutory application on notice for orders the plaintiffs' fifth amended statement of claim is permanently stayed and/or struck out.
42.On or about 18 December 2019, counsel for Mr Prain filed and served an interlocutory application for orders that the plaintiffs' fifth amended statement of claim be permanently stayed or struck out.
43.On 18 February 2020, counsel for Cardno filed and served a memorandum of counsel proposing a timetable for progressing this proceeding. At this stage, the plaintiffs had not filed a notice of opposition to Cardno's strike out application, which was due on 24 December 2019.
44.On 18 February 2020, the plaintiffs filed a notice of opposition to Cardno and Mr Prain's applications for orders that the plaintiffs' fifth amended statement of claim be permanently stayed or struck out.
45.On 4 March 2020, the plaintiffs filed and served an affidavit in support of their notice of opposition to Cardno and Mr Prain's strike out applications and the plaintiffs' interlocutory application to lift the stay of proceedings.
[27] The pleadings in this case have been subject to criticism by the Court on a number of occasions. The chronology set out at [26] above, which is adopted from the chronology presented by Mr Wolff, counsel for Cardno, details the history of the pleadings and criticisms by the Court of the pleadings in respect of particulars and quantum. The accuracy of Mr Wolff’s chronology was not challenged by counsel for the plaintiffs, albeit he submitted that responsibility for delay could not be laid entirely at the feet of the plaintiffs, and I will return to that when discussing delay.
Strike out for non-compliance with Court orders
[28] This application is brought in reliance on r 7.48 of the High Court Rules which provides if a party fails to comply with an interlocutory order a Judge may make any order that the Judge thinks fit, including striking out a party’s pleading in whole or in part.
[29] The strike out claim is brought under r 15.1 of the High Court Rules. Rule 15.1 provides:
(1)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 process of the court.
[30] Mr Stringer emphasised the direction in Couch v Attorney-General, where Elias CJ and Anderson J observed “[i] it is inappropriate to strike out a claim summarily unless the court can be certain that it cannot succeed.”5
[31] Mr Stringer also emphasised if a claim can be saved by amendment then it should not be struck out. He relied on Wylie J’s statement of the principles in Smith v Fonterra Co-operative Group Ltd, which I adopt as an accurate summary of the principles:6
[23] The established criteria for striking out were summarised by the Court of Appeal in Attorney General v Prince. They are as follows:
(a)pleaded facts, whether or not admitted, are assumed to be true. This does not however extend to pleaded allegations which are entirely speculative and without foundation;
(b)the cause(s) of action must be clearly untenable. The Court must be certain that it (they) cannot succeed;
(c)the jurisdiction is to be exercised sparingly and only in clear cases;
5 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
6 Smith v Fonterra Group Co-operative Group Ltd [2020] NZHC 419 at [23]-[26].
(d)the jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument; and
(e)the Courts should be slow to strike out a claim in any developing area of the law, particularly where a duty of care is alleged in a new situation.
[24] The threshold for a strike out is high, and the Court should consider not only the basis on which the claim is pleaded but also any other basis on which the claim might be pleaded.
[25] The Court is entitled to receive affidavit evidence on strike out applications, and will do so in proper cases. It will not however attempt to resolve [genuinely undisputed] issues of fact, and it will generally limit evidence to that which is undisputed. Normally it will not consider evidence inconsistent with the pleadings, because, as noted, a strike out application is dealt with on the footing that the pleaded facts can be proved.
[32] In respect of dismissal for want of prosecution under r 15.2, again counsel were in agreement as to the applicable legal principles. McGechan on Procedure records that the principles are well settled7 and refers to Lovie v Medical Assurance Society New Zealand Limited, where Eichelbaum CJ said:8
[T]he applicant must show that the plaintiff has been guilty of inordinate delay, that such delay is inexcusable, and that it had seriously prejudiced the defendant. Although these considerations are not necessarily exclusive, and at the end of the day one must always stand back and have regard to the interests of justice, in this country, ever since New Zealand Industrial Gases v Andersons Ltd [1970] NZLR 58 it has been accepted that if the application is to be successful, the applicant must commence by proving the three factors listed.
[33] McGechan also records that the need to “stand back” involves considering whether the overall interests of justice would allow the case to proceed.9
The applications to strike out the deceit causes of action
[34] Counsel were agreed as to the principles that apply to a cause of action in deceit.
[35] To establish the causes of action against the defendants in deceit, the plaintiffs must show that the defendants made representations that were false and that they made
7 Andrew Beck (ed) McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HC15.2.01].
8 Lovie v Medical Assurance Soc NZ Ltd [1992] 2 NZLR 244 (HC) at 248.
9 McGechan on Procedure, above n 7, at [HR15.2.01(1)].
those representations fraudulently. The plaintiffs must show that the defendants knew that the representation was untrue, or had no belief that it was true, or was reckless as to its truth.10
[36] In addition, the defendants must have intended that the plaintiffs should rely on the representation.
[37]Allegations of fraud must be distinctly alleged and as distinctly proved.11
It is well established that fraud or dishonesty (and the same must go for the present tort) must be distinctly alleged and as distinctly proved; that it must be sufficiently particularised; and that it not sufficiently particularised if the facts pleaded are consistent with innocence … This means that a plaintiff who alleges dishonesty must plead the facts, matters and circumstances relied on to show that the defendant was dishonest and not merely negligent, and that facts, matters and circumstances which are consistent with negligence do not do so.
(citations omitted)
[38] It follows the plaintiffs must allege that the defendants knew the representations were untrue, or had no belief in the representations truth, or were reckless in that regard and that the defendants intended the plaintiffs should rely on the representations. That means that under r 5.17(2) of the High Court Rules, as the plaintiffs are alleging the defendants’ state of mind, they must give particulars of the facts relied on in alleging that state of mind. That requirement reconciles with the passage above from Three Rivers District Council that a plaintiff must plead the facts, matters and circumstances relied on to show that the defendant was dishonest.
[39] In respect of Mr Prain’s state of mind the pleading is “Mr Prain knew his representations were false or were reckless as to whether they were true.”
[40] The generality of this pleading is compounded by the extreme generality of some of the pleadings against Mr Prain. For example, paragraph 46 of the sixth statement of claim pleads:
10 Amaltal Corporation Ltd v Maruha Corporation [2007] 1 NZLR 608 (CA).
11 Three Rivers District Council v Bank of England (No 3) [2001] UKHL 16, [2003] 2 AC 1 at [184]. Cited in NG v Harkness Law Ltd [2014] NZHC 850 at [43].
46.From on or around 2007 until 2016 Mr Prain represented to the Plaintiffs that the infrastructure that Delta was installing included the capacity and provision for their Lot 9 subdivision and Lot 22 roading.
[41] Delta was the contractor carrying out the roading and stormwater works. It is hard to think of a less particularised pleading. Again, these are representations (it is not clear how many instances of representation are claimed) that the plaintiffs say are fraudulent.
[42] I accept Mr McMenamin’s submission on behalf of Mr Prain that the pleading that “Mr Prain knew his representations were false or was reckless as to whether they were true” is no more than a bare assertion of dishonesty. There is no pleading of fact, matter, or circumstances that shows Mr Prain knew that the representations relied on were untrue. “Fraud cannot be left to be inferred from the facts.”12 General allegations, however strong, are insufficient to amount to a proper allegation of fraud.
[43] I put this issue directly to Mr Stringer. He submitted that fraud could not be ruled out at the moment. He emphasised he had only been involved in the proceeding for a short time and had not had an opportunity to come to grips fully with discovery and that something might come out of a full review discovery. He said it could not be assumed by the Court that nothing would be found and therefore the plaintiffs should be allowed to carry on. He submitted there was more to the present circumstances than met the eye. He also submitted ultimately the question of fraud would be a matter for cross-examination. In substance, he requested that the plaintiffs be allowed a further unspecified time to prepare another amended statement of claim where these issues would be addressed but was unable to give any basis for saying Mr Prain had been dishonest. He emphasised that where a pleading can be saved by amendment, it should not be struck out.
[44] I do not consider this a case of saving a pleading by amendment. Essential elements of the deceit cause of action are not pleaded at all, namely the details of fraud and the intention that the representations be relied on in each case with the necessary particulars. While I appreciate Mr Stringer has only been involved recently in the
12 See McGechan on Procedure, above n 7, at [HR5.26.08(1)], referring to, inter alia,
Schmidt v Pepper New Zealand (Custodians) Ltd [2012] NZCA 565 at [15].
proceeding, I note that the first four statements of claim were pleaded by experienced counsel between commencement on 7 August 2014 and the fourth amended statement of claim on 29 July 2016. Had a fact, matter or circumstance which showed that the defendants were acting dishonestly been available, it would have been discovered by now.
[45] This issue was to the fore of Cardno’s submissions challenging the deceit cause of action. After Cardno’s submissions were filed on 5 May 2020, the plaintiffs filed further affidavits from experts addressing stormwater and resource management issues but did not explain the basis of why they said the defendants were dishonest.
[46] I suspect that is in part because of the way in which the representations set out in the statement of claim are framed. The pleadings are so broad and lacking in particulars that there are no instances of conduct identified to which facts, matters or circumstances can be linked to support a claim of dishonesty. This relates to a separate area of criticism by the defendants of the plaintiffs’ pleading. For example, paragraph 41.1 of the sixth amended statement of claim pleads:
44.1 From 25 May 2009 onwards, Cardno and Mr Prain continued to represent that option A would also accommodate lot 9, when the Plaintiffs interests were not being accommodated.
[47] “Option A” is reference to the stormwater requirements for the plaintiffs’ land being accommodated in stormwater basins on the Noble subdivision. The breadth of the pleading is self-evident and as noted by Mr McMenamin, this pleading is of what the plaintiffs understood the defendants to say, rather than what the defendants actually said.
[48]A further example is para 41.7:
41.7 There were numerous meetings between Cardno, Mr Prain and the plaintiffs, where the plaintiffs were assured option A was proceeding, and would include Lot 9.
What the above is intended to add to 41.1 is not clear. The pleading at [46] above, is of a similar character.
[49] Mr Stringer, to support the submissions that there was evidence of dishonesty, referred to an email from Cardno to Mr Stokes of 2 July 2008. That email was accompanied by a coloured plan showing the Noble subdivision and a stormwater basin/run-off pond. It did not show a subdivision on the adjacent Lot 9. The covering email said:
Attached is a revised copy of the scheme plan for the Noble Village development showing the two right of ways giving access to Lot 9 as you discussed with Tom Kain. Can you please confirm that this is satisfactory so I can submit the plan to Council. Do you require any assistance with amending your current application to allow for a higher density?
[50] There is no reference to stormwater or the provision of other services in the email. From Mr Stringer’s submissions it seemed that the plaintiffs assumed that because the stormwater basin was shown on the plan that Cardno was impliedly assuring the plaintiffs would have access to it.
[51] Given the wording of FT 15 of the 2002 contract between the plaintiffs and Noble, set out at [6] above, then subject to putting a document in its full context, it is possible the plaintiffs may have been reasonable in making that assumption, but that does not mean that the email was a representation by the defendants that the plaintiffs would have access to the stormwater system when it was built (the diagram being an indication of what would happen in the future). It is a further leap again to say that the email was in effect sent with the dishonest intent of lulling the plaintiffs into a false sense of security so that they would not take issue with what they say were Noble’s change of plans.
[52] The plaintiffs suspect the defendants of what amounts to conniving with Noble to trick them into believing everything was in hand in respect of the plaintiffs’ subdivision. However, starting from suspicion is not an adequate basis for meeting the stringent requirements for the pleading of fraud. The plaintiffs’ case amounts to them saying that the defendants told them over an extended period that their subdivision could connect to services on the Noble subdivision. It eventuated that it was not possible for that to occur. Therefore, the plaintiffs’ case assumes the defendants must have been lying or reckless to the truth when they made the representations. This without much more is well short of deceit.
[53] In summary, the plaintiffs’ assertion is that they were assured all the infrastructure and services were in place, or under way, to allow the plaintiffs to complete their subdivision. They say that assurance was given dishonestly. However, their inability to give specifics in relation to the alleged representations is the other side of the coin from their inability to plead facts, matter or circumstances as to why the representations were made dishonestly.
[54] Mr McMenamin pointed out that the allegations against Mr Prain in the sixth amended statement of claim are effectively a repeat of allegations made against Mr Prain in the third amended statement of claim.
[55] Mr McMenamin, by a notice dated 28 July 2015, sought particulars of the representations alleged. Those particulars were not given. A fourth amended statement of claim was filed on 29 July 2016 by counsel then instructed for the plaintiffs.
[56] There is force in Mr McMenamin’s submission that some five years after his notice for particulars went unanswered, Mr Prain is now facing in substance the same pleading he did in 2015. This is an issue I will pick up when discussing delay.
[57] I find the proposed sixth amended statement of claim does not plead a reasonably arguable cause of action against Mr Prain and the statement of claim against him is struck out under r 15.1(a). For reasons I have given, I do not consider the cause of action against Mr Prain capable of being saved by amendment. That was the function of the proposed sixth amended statement of claim. No further proposed pleading was put up after the plaintiffs received the defendants’ submissions. Mr Stringer was not able to point to any material or otherwise explain how the pleading gaps could be rectified in an amended pleading. At the risk of labouring the point, the plaintiffs have had a number of indulgences from the Court to get their pleading in order. If that could not be done at the outset of these proceedings when the plaintiffs had experienced counsel, as they do now, I see no prospect of the situation changing.
[58] In respect of the deceit claim against Cardno, the same position applies and accordingly, the deceit claim against Cardno is struck out.
Application to strike out the negligence cause of action against Cardno
[59] The pleading in the sixth amended statement of claim against Cardno is as follows:
67.Cardno owed the Plaintiffs a duty of care it would act to benefit the Plaintiffs by ensuring that Lot 9’s Further Subdivision, services and roading were provided for in its subdivision design, RMA Applications to the Council, and in the engineering design.
[60]There is a further pleading in the sixth amended statement of claim as follows:
68.Cardno assumed responsibility to provide information and advice to the plaintiffs, and that it had the overall carriage of obtaining the consents to enable the plaintiffs subdivision of Lot 9 to proceed.
[61] I accept Mr Wolff’s submission, on behalf of Cardno, that the first duty pleaded does not plead a recognised duty of care. There is also a failure to provide particulars to demonstrate how Cardno was allegedly negligent in carrying out its work. It is struck out as not disclosing a reasonably arguable cause of action.
[62] In essence, the pleading at [59] is a claim that Cardno was negligent in failing to discharge its contractual duty to Noble is to ensure that Noble met its obligation to the plaintiffs. That duty is akin to placing Cardno in the position of guarantor of Noble’s contractual obligations.
[63] I accept Mr Wolff’s submission that this cause of action relies on Noble’s obligations to the plaintiffs under the 2002 contract. Cardno was not a party to that contract. I agree the duty the plaintiffs seek to impose is inherently contractual in nature – it is a duty to ensure something occurred.
[64] The Court of Appeal in Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd, held a duty to take reasonable care to perform a contract does not exist
in tort as that duty would essentially be contractual in nature and therefore could not be owed by someone who is not a party to that contract.13
[65] There was further merit in Mr Wolff’s submission that even if a duty of care was owed, the plaintiffs have failed to identify the standard of care to which Cardno ought to have performed, nor how Cardno’s actions had fallen below the alleged standard of care.
[66] Paragraph 72 of the sixth amended statement of claim sets out what the plaintiffs say Cardno negligently failed to do:
72.Cardo negligently failed to:
72.1Provide accurate advice and information to the Plaintiffs about the RMA applications and engineering design applications it was submitting to the Council, and that it was project managing the construction of; and
72.2Ensure that the Further Subdivision Application and Engineering applications to the Council met the obligations pleaded above.
72.3Use reasonable skill and care to ensure the correctness of the information and advice provided to the plaintiffs.
72.4Try to ensure the consent was obtained so the plaintiffs could complete the subdivision of Lot 9 as had been promised.
[67] Paragraph 72.1 is a pleading Cardno failed to provide accurate advice and information to the plaintiffs about the RMA applications and engineering design applications submitted to the Council. No other details are provided.
[68] The pleading does not attempt to differentiate between the provision of information that was misleading versus an omission to supply information. As I will touch on below, I agree this has the flavour of a negligent misstatement pleading.
[69] Paragraph 72.2 is an allegation Cardno negligently failed to ensure that the applications to the Council met Noble’s obligations to the plaintiffs. That is simply
13 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA).
a recasting of what amounts to a contractual duty and I do not consider it takes the plaintiffs’ claim further.
[70] Paragraph 72.3 is a pleading Cardno negligently failed to use reasonable skill and care to ensure the correctness of the information and advice provided to the plaintiffs. I do not see this as adding materially to para 72.1 and, again, it has no further particulars.
[71] Paragraph 72.4 of the claim is a pleading Cardno negligently failed to “[t]ry to ensure the consent was obtained so the plaintiffs could complete the subdivision of Lot 9 as had been promised.” Again, I do not see this general assertion of negligence as altering the view I have already expressed in respect of this cause of action.
[72] As to the duty of care, Mr Wolff in reply submissions said the plaintiffs’ case as presented had the flavour of allegations of negligent misstatement. Such is suggested by the second duty, but such has never been pleaded before and would now be statute barred. In respect of Cardno, the damage said to have been suffered in respect of the negligence cause of action is the transfer of Lot 19 to Noble – that occurred in December 2008 and so in respect of that damage, time began to run then.
[73] The plaintiffs plead, but for the claimed assurances that everything was in order, they held off taking enforcement action against Noble until October 2013.
[74] The effect of any negligence misstatement by Cardno would have come to an end at that point. Again, Mr Smith says it was 2012 that the plaintiffs learnt Noble was not providing the promised services. Any negligent misstatement claim would not be statute bound.
[75] I conclude that the second duty at paragraph 68 of the sixth statement of claim is statute barred and is also struck out. It cannot be saved by amendment. It has not been raised before and any variation of a negligent misstatement claim will be barred by limitation.
Application to strike out for non-compliance with Court orders
[76] To the extent this application relies on the plaintiffs not applying to lift the stay until well after the date set by Associate Judge Matthews, just as I considered the failure to do so was not intended to have a “drop dead” effect, I do not consider the delay in making the application to lift the stay should, without more, be fatal – such would be to convert it to an unless order.
[77] In the minutes set out in the Chronology at [26] above at items 12, 14, 28, 29, 30, 35 and 38, there is reference to the need for the plaintiffs to properly plead their loss or otherwise meet the requirements of the High Court Rules. Directions were made in that regard on the following dates; 8 February 2017 (item 14), 17 May 2018 (item 28), 31 August 2018 (item 30) and in the minutes of Associate Judge Matthews already referred to (items 35 and 38). The defendants say the plaintiffs have over an extended period failed to properly plead loss as required by the Court’s direction.
[78] As discussed, in relation to the deceit cause of action, at its most basic the plaintiffs allege the defendants’ dishonestly led them to believe that the subdivision plans the defendants were preparing on behalf of Noble would permit the plaintiffs to subdivide their land by joining onto roading, stormwater and other services in the Noble subdivision.
[79] The Court of Appeal, in Amaltal Corporation Limited v Maruhu Corporation, held in respect of deceit the correct measure of loss is the tort measure:14
The correct measure of damages in tort is an award which serves to put the claimant in the position he or she would have been in if the representation had not been made. That is subject to the usual rules of remoteness, mitigation and the like.
[80] It is clear that damages are not to be calculated on a contract basis. Damages in respect of prospective gains to which the person contracting was entitled by virtue of his contract to expect to come in, are not recoverable.15
14 Amaltal Corporation Limited v Maruhu Corporation, above n 10, at [56].
15 At [57].
[81] However, the sixth amended statement of claim pleads that the plaintiffs have suffered loss on a contractual basis. Paragraph 42 of the sixth amended statement of claim pleads:
42. The loss is the difference between the property ($1,600,000) and the subdivided property value of ($5,100,000), being a loss of circa
$3,500,000, plus or minus further development costs and profits.
[82] The sixth amended statement of claim also goes on to claim legal and expert costs and interests.
[83] The plaintiffs’ approach to loss starts with the prospective gains they expected to receive if their contract was completed by Noble. Such is not the correct approach.
[84] In respect of the pleading against Mr Prain, the pleading of damage is as follows:
49.Because of the representations the Plaintiffs did not enforce their rights under the [Agreement for Sale and Purchase] ASAP or Further Agreement until after October 2013.
50.The Plaintiffs have suffered a loss because of Mr Prain’s deceit.
[85] The prayer for relief then refers to damages as pleaded in paragraph 42 of the pleading, and an enquiry into further damages.
[86] I will return to what appears to be a loss of opportunity pleading below. However, the manner in which loss has been pleaded in relation to the cause of action in deceit is incorrect. I am driven to the conclusion that the plaintiffs have failed to comply with the directions made that they properly particularise their loss. The direction that they do so is not met by pleading loss founded on a wholly incorrect basis.
[87] As to the pleading of a loss of opportunity to take enforcement action against Noble, there are difficulties with that claim. Mr Smith, in his affidavit filed in relation to the present applications, said:
8. The plaintiffs have sought to resolve the issues of our subdivision for many years. It has become apparent to us since 2012 that the stormwater solution we have been promised by the developer,
supported by representations made to the plaintiffs by Mr Prain & Cardno, was not being implemented as promised and as continuing to be assured.
(Emphasis added)
[88] On this evidence, it was some time in 2012 that the plaintiffs say they learnt that they were not getting the stormwater solution they allege they were promised.
[89] It is clear the relationship between Noble and the plaintiffs became at least strained in 2010. The plaintiffs had lodged caveats over Noble’s land to protect their rights under the 2002 contract and following opposed hearings, those caveats were maintained. Those caveats were registered in December 2008 and October 2009. Concerns about Noble’s compliance with its obligations to provide services to the plaintiffs’ subdivision appear to have been present from around 2010.16
[90] Ultimately the land Noble was subdividing and which the plaintiffs believed they had a right to access for services and critically, stormwater, was sold by a mortgagee.
[91] In a later judgment of Associate Judge Osborne involving a caveat by the mortgagee, his Honour recorded that the mortgagee’s power of sale of Noble’s property became exercisable in July 2014 following the service of notices under the Property Law Act 2007.17 Quantifying a loss of opportunity to bring enforcement action against Noble, where there are indicators that Noble was financially strained, would not have been straightforward in 2012 (the date given by Mr Smith for when it became apparent that the plaintiffs were not getting the services promised), let alone after the passage of eight years.
[92] Had the defendants’ applications been based on this ground alone, I would have been hesitant to strike out the plaintiffs’ claim, but the inability of the plaintiffs, over an extended period of time, to comply with the directions of the Court to properly
16 Philpott v Noble Investments Ltd [2012] NZHC 1431.
17 Gold Band Finance Ltd v Philpott [2016] NZHC 1674.
plead their claim made in respect of their pleadings, reinforces the view I have reached in striking out the plaintiffs’ claim under r 15.1.
Quantum – Cardno
[93]A different approach to loss is taken in relation to Cardno. The plaintiffs plead:
59. In reliance on Cardno’s deceit the Plaintiffs entered into the Further Agreement with AFL/NIL and transferred Lot 19 to NIL in August 2018.
[94] The plaintiffs plead they have suffered loss because of the alleged deceit in transferring Lot 19 and in refraining from trying to enforce the ASAP against Noble until after 22 October 2013. The prayer for relief again refers to the damages as pleaded in paragraph 42 and, so, the same criticisms apply.
[95] The issue with Lot 19 is not straightforward. Had the subdivision proceeded as originally envisaged, then the plaintiffs would not have retained Lot 19 as Noble would have exercised its rights under the option agreement to acquire it for $10. The circumstances in which the further agreement was entered into would have to be considered. If that agreement was entered into because the plaintiffs reluctantly saw the need to assist Noble to advance the subdivision, then that of itself might suggest that Noble’s financial difficulties existed earlier than I have indicated. I appreciate this is entering the realm of speculation and is probably more relevant to the effect of delay.
[96] However, as it stands, the pleading of loss to the extent it is linked back to the contractual measure is incorrect and the pleading of an enquiry into damages does not meet the orders to properly particularise loss.
Inordinate delay
[97] On behalf of Mr Prain, Mr McMenamin submitted, in effect, that inordinate delay was self-evident given the proceedings were commenced on 7 August 2014 and as at April 2020 the plaintiffs have still not settled their pleadings.
[98] Mr McMenamin identified the following instances of unexplained and he says, inordinate and inexcusable delay.
25.Within this period there are discrete instances where the plaintiffs have culpably failed to take the necessary steps to advance their claim. For example;
23.1the period of 10 months between the initial filing of proceedings in August 2014 and the filing third amended statement of claim on 8 June 2015 which first raised the cause of action in deceit which is the current claim against the third defendant,
23.2the period of 14 months following the order of Associate Judge Osborne on 8 February 2017, to file and serve an amended statement of claim within 25 working days,
23.3the period of 5 months following the order of Associate Judge Osborne on 31 August 2018 to file and serve an amended statement of claim within 20 working days,
23.4the period of 11 months following the order of Associate Judge Matthews on 22 March 2019 permitting the plaintiffs to file, no later than 28 June 2020, an interlocutory application to lift the stay order which he imposed at that time.
[99] Mr McMenamin submits each one of these instances of delay in itself would constitute inordinate delay and that the cumulative effect is decisive. I accept his submission.
[100] Mr Stringer’s submissions, on behalf of the plaintiffs, did not directly engage with the delay identified by Mr McMenamin. Mr Stringer submitted that the delays after March 2018 were explicable and cannot be laid solely at the feet of the plaintiffs.
[101] I do not accept Mr Stringer’s submission. Earlier in this judgment I discussed the circumstances leading to the stay and the final opportunities given by Associate Judge Matthews to the plaintiffs to get their claim in order. There is force in the defendants’ point that it was only with them bringing their applications in December 2019 that the proposed sixth amended statement of claim was provided in April 2020.
[102] As recorded in the minute of Associate Judge Matthews of 22 March 2019, the plaintiffs wanted to use the time to investigate whether they could achieve the
subdivision. This suggests to me they put their energies into assessing loss and by starting with the value of the subdivided land and trying to mitigate their loss by completing the subdivision if possible.
[103] While commercially understandable, starting with the value of their land upon it being sub-divisible, is not the basis upon which loss is assessed. At the risk of repetition, the test is the position the plaintiffs would have been in, in the absence of the alleged deceit. The plaintiffs have themselves identified that on their case they would have taken enforcement action earlier against Noble. The value of that loss of opportunity does not equate to the value of the subdivision, assuming it could be completed.
[104] I make this point, as it appears to me, that the plaintiffs have delayed their claim on an incorrect basis, that is, they have gone down a false path when it comes to quantifying their loss.
[105] It also seems to me there was some delay prior to the issue of these proceedings. In the passage from Mr Smith’s affidavit referred to at [87] above, he refers to discovering that Noble was not following through on its contractual obligation in 2012. These proceedings were not issued until August 2014, so at least 18 months later. While delay prior to the issue of proceedings cannot constitute inordinate and excusable delay, if such delay has occurred, further delay after issue of the proceedings will be looked at more critically.18
[106] Accordingly, I consider there has been inordinate delay. The plaintiffs’ submissions did not seek to justify the delay to any real extent.
[107]I also consider the delay to be inexcusable.
[108] Mr Stringer referred to the fact there was an interlocutory hearing in November 2017 which included strike out applications between counterclaim defendants and defendants. Mr Stringer submitted this meant the defendants bore
18 Lovie v Medical Assurance Society New Zealand Limited, above n 8, at 248.
some responsibility for the delay caused by that interlocutory. However, that submission does not take the plaintiffs very far because in the same application, two additional defendants sought, and were granted, orders for strike out/summary judgment in respect of the plaintiffs’ claim against them.
[109] In short, there would have been an interlocutory hearing as a result of the plaintiffs’ joinder of the two defendants who successfully applied to be removed from the proceeding without the applications between defendants.
[110] Mr Stringer submitted that it was disingenuous of the defendants to suggest there had been delay when in the minute of Associate Judge Matthews of 22 March 2018, there was reference to a trial date being allocated after 1 February 2019.
[111] However, as Mr McMenamin recorded in his reply submissions, as at 22 March 2018, the plaintiffs had not complied with the direction of the Court made more than 13 months earlier on 8 February 2017 to file and serve an amended statement of claim within 25 working days. The reason why the proceeding was not ready to be set down earlier rests with the plaintiffs’ delay. The direction of setting down was vacated in the minute of 19 November 2018 because of the plaintiffs’ failure to comply with the order of Associate Judge Osborne of 31 August 2018. At that time, the plaintiffs applied for an order adding four additional parties as defendants. Directions were made for the filing of an amended statement of claim to include the newly joined parties. Ultimately, having received leave to join additional defendants, the plaintiffs took no steps to file the necessary statement of claim against those parties and so the process of seeking that leave simply added to the delay.
Serious injustice
[112] McGechan on Procedure notes serious prejudice as perhaps the most important consideration.19
19 McGechan on Procedure, above n 7, at [HR15.2.04(1)(a)].
[113] The extent of the prejudice faced by both defendants is related to the deficiencies in the pleadings. Had the statement of claim set out full and specific details of exactly what each of the defendants were alleged to have said, and when, with proper particulars, then the defendants could, from the outset, have been better placed to recall what happened. However, as I have noted, the actual wording of any particular alleged representation is not pleaded. There are practically no particulars of dates, times and place of the alleged representations.
[114] For example, the pleading referred to at [40] covering the period 2007 to 2016 is frankly, hopeless, and gave Mr Prain no starting point to try and reconstruct what he is alleged to have done.
[115] I accept that because of the failure to provide details, the defendants have never been in a position where they could direct their minds to any specific allegations while their recollections were still fresh.
[116]The commentary in McGechan on Procedure notes that:20
In most, if not all, cases some prejudice results from the mere passage of time, dimming of memories, physical changes etc. Situations can exist which are so badly affected by such factors that an order can be made on that basis alone, but “in most cases” Courts look for some “special prejudice”: NZ Industrial Gases Ltd v Andersons Ltd, at 63. But note Eichelbaum CJ’s comments in Lovie at 254,672 that: “[O]ne needs to guard oneself against the danger of discounting the arguments based on the dimming of memories simply because they cannot be adequately demonstrated.”
[117] In respect of Mr Prain, I consider this to be a case where the prejudice to him through delay and the impact of the passage of time on him being able to sensibly recall, as yet, unspecified oral representations that go back more than a dozen years, is sufficient prejudice.
[118] Had the statement of claim been more particularised from the start then I consider this point would not have been decisive. However, I agree with Mr McMenamin that there is simply nowhere for Mr Prain to start in assembling evidence to deal with the broadest of allegations against him.
20 At [HR15.2.04(1)(b)].
[119] In respect to Cardno, additional factors are relied on to support serious prejudice. Cardno says several of its employees have since left and it is now difficult for Cardno to contact those former employees who had knowledge of the issue in the proceeding. For those Cardno employees, the passage of time also impacts on their ability to recall events and Cardno also relies on the fact that some of its records were lost in the Christchurch earthquakes. While the plaintiffs are of course not responsible for the loss of those documents, that is part of the context in which the issue of the effect of the delay is to be considered.
[120] It is telling that the sixth amended statement of claim in respect of Mr Prain and Cardno largely reproduces elements of the third and/or fourth statements of claim, which, as I have said, has been the subject of criticism on by the Court. Nothing said by Mr Stringer gives me confidence that the plaintiffs will be able to rectify the situation. The plaintiffs have had numerous indulgences in respect of their pleadings, yet in substance have gone back to earlier versions of their claim.
Prejudice
[121] The rigour required of a party pleading fraud, the fact that by the sixth amended statement of claim the plaintiffs cannot properly plead the elements of deceit, and the absence of any indication that the plaintiffs will be able to plead deceit, means the defendants have been, and will, continue to be prejudiced through the proceeding remaining on foot. The effect of delay is compounded by the inadequacy of the pleadings.
[122] The plaintiffs have had more than enough indulgences from the Court. As long ago as 30 November 2015, Justice Gendall said the issues in the proceeding needed to be brought to a head.21 Now, nearly five years later, the plaintiffs are nowhere near achieving that end.
[123] Accordingly, I would have concluded that the plaintiffs case against each defendant should dismissed under r 15.2 of the High Court Rules had I not made orders under r 15.1(a).
21 Smith v Noble Investments Limited HC Christchurch CIV-2014-409-549, 1 September 2016.
Costs
[124] Counsel are to file memoranda on costs of not more than five pages, if costs are sought, within 10 working days and any reply within 10 working days thereafter (also to be no more than five pages).
Cross application to lift stay
[125]It follows that the plaintiffs’ cross application to lift the stay, is dismissed.
Associate Judge Lester
Solicitors:
Inder Lynch, Papakura (for the Plaintiffs)
K J McMenamin & Son, Christchurch (for Third Defendant) Morrison Kent, Wellington (for Fourth Defendant)
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