Southwest Contracting (2002) Limited v Power Farming New Zealand Limited
[2024] NZCA 15
•16 February 2024 at 10.00 am
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA526/2022 [2024] NZCA 15 |
| BETWEEN | SOUTHWEST CONTRACTING (2002) LIMITED |
| AND | POWER FARMING NEW ZEALAND LIMITED |
| Hearing: | 29 August 2023 |
Court: | Miller, Ellis and van Bohemen JJ |
Counsel: | P C Gilbert for Appellant |
Judgment: | 16 February 2024 at 10.00 am |
JUDGMENT OF THE COURT
AThe application to adduce further evidence is granted in part.
BThe appeal against the decision to strike out the counterclaim by the appellant is dismissed.
CRespondent entitled to costs on Band A basis with usual disbursements.
____________________________________________________________________
REASONS OF THE COURT
(Given by van Bohemen J)
Southwest Contracting (2002) Ltd (South West) appeals the decision of Associate Judge Lester striking out, for want of prosecution, a counterclaim for damages against Power Farming New Zealand Ltd. The counterclaim, which South West now calculates at $9,334,336, was brought in 2004 in response to claims against South West for unpaid invoices of approximately $24,000 and $22,000 for work performed in 2003 by Ag Southland Ltd and Taieri Tractors Ltd, predecessor companies of Power Farming.[1] South West also applies for leave to adduce further evidence relating to the machinery that gave rise to the dispute and to the quantum of its alleged losses.
Relevant background
[1]Power Farming New Zealand Ltd v South West Contracting (2002) Ltd [2022] NZHC 2275 [decision on appeal].
This appeal concerns a dispute over the set up and servicing of two items of machinery, a Vicon RF 130 Balepack baler / wrapper (the baler) and a Case Magnum 7220 tractor (the tractor), that South West acquired from third parties. According to a report prepared for South West by Heaslip Engineering Ltd dated 4 February 2021, (the Heaslip Report):
(a)the baler was purchased by South West second hand at auction in 2002, apparently on the recommendation of Ag Southland as agent for Vicon; and
(b)the tractor, which was new in 1995, was subsequently purchased, second hand, by a predecessor company to South West and was then transferred to South West.
We adopt the background summary of what happened as set out in the submissions of Mr MacGillivray, counsel for Power Farming, which, in all essential respects, Associate Judge Lester also adopted in his decision,[2] and with which Mr Gilbert, counsel for South West, does not take issue:[3]
7.At the start of the 2002/2003 hay baling season, South West contracted Ag Southland Limited to set up the respondent’s tractor-baler combination. During that season, South West experienced difficulties with operating the baler and Ag Southland was contracted to carry out repairs and maintenance. South West blamed Ag Southland for the issues. Ag Southland’s view was that the difficulties were caused by operator error. South West refused to pay Ag Southland’s invoices.
8.In October/November 2003, South West then contracted Taieri Tractors Limited to carry out work on the baler. South West says that Taieri failed to rectify the incorrect set up of the tractor/baler combination. As with Ag Southland, Taieri put South West’s ongoing issues down to operator error. South West refused to pay Taieri’s invoices.
9.In mid-2004, Ag Southland commenced this proceeding in the District Court claiming around $24,000 in unpaid invoices. South West filed a defence and an unquantified counterclaim.
10.In December 2004, Taieri Tractor’s issued liquidation proceedings against South West, which had failed to satisfy a statutory demand for payment of approximately $22,000 in unpaid invoices. The District Court claim was put on hold pending resolution of the liquidation proceeding.
11.During 2004, Ag Southland changed its name to Power Farming Southland Limited and Taieri Tractors changed its name to Power Farming Otago Limited. In 2005, the two companies were amalgamated to become the respondent, Power Farming New Zealand Limited.
12.Following amalgamation, the liquidation proceeding was withdrawn on the basis that South West’s counterclaim in the District Court proceeding now also affected the Taieri claim.
13.In August 2005, South West filed an amended counterclaim, which quantified its loss for the first time. South West claimed that Ag Southland’s negligence caused it to lose profits totalling $404,004.00 during the 2002/2003 season, and that Taieri’s negligence caused it to lose profits totalling $276,969 during the 2003/2004 season. Given the size of the counterclaim, the proceeding was then transferred to the High Court.
14.In August 2006, Power Farming applied in the High Court for security for costs and further and better discovery. Its application for security was granted. This was on the basis that the whole proceeding was stayed until security was posted. South West was in significant financial difficulties and Power Farming was prepared to accept that a consequence of the stay would be that it would be unable to proceed with its claim until or unless security was paid on the counterclaim.
[2]At [6].
[3]Footnotes omitted.
On 18 September 2006, Associate Judge Christiansen ordered South West to pay $10,000 as security for costs and stayed the proceeding until security was posted.[4] The Associate Judge considered that security in a “modest but meaningful sum ought to be directed.”[5]
[4]Power Farming Southland Ltd v South West Contracting (2002) Ltd HC Christchurch[5]At [12].
Associate Judge Christiansen held that there was insufficient material in support of Mr Forde’s claim that South West’s financial position was due in significant part to the reasons Mr Forde attributed — namely, alleged negligence on the part of Power Farming. The Associate Judge accepted Mr MacGillivray’s position that:[6]
… such is the magnitude of South West’s indebtedness that it cannot credibly be said that South West’s impecuniosity was, as a result of the plaintiff’s alleged negligence, even if the quantum of the claim is taken at face value.
[6]At [10].
In the event, South West did not post the required security until 17 September 2021, when it paid $10,000 into its solicitor’s trust account and indicated that it wished to proceed with its counterclaim.
Power Farming then applied under rr 15.1 and 15.2 of the High Court Rules 2016 for an order dismissing the proceeding for want of prosecution, which South West opposed.
Following a hearing on 22 August 2022, Associate Judge Lester granted Power Farming’s application and ordered that South West’s counterclaim be struck out.[7] With the consent of Power Farming, the Associate Judge also struck out Power Farming’s claims against South West.[8]
[7]Decision on appeal, above n 1, at [37].
[8]At [38].
After the Associate Judge’s decision, South West recalculated its claim for damages which it now says totals $9,334,336, based on its assessment of losses assessed over six seasons, from 2002/03 to 2007/08, plus interest at five per cent per annum.
Decision on appeal
Drawing on the decision of Eichelbaum CJ in Lovie v Medical Assurance Society New Zealand Ltd and the commentary on r 15.2 of the High Court Rules in McGechan on Procedure, Associate Judge Lester observed that an applicant for an order under r 15.2 had to satisfy the Court of three main requirements:[9]
(a)inordinate delay;
(b)that the delay was inexcusable; and
(c)serious prejudice.
[9]Lovie v Medical Assurance Society New Zealand Ltd [1992] 2 NZLR 244 (HC) at 248; Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR15.2.01]; and decision on appeal, above n 1, at [9]–[10]. Although the Associate Judge referred to and set out the terms of r 15.1, it is apparent that his analysis was principally by reference to r 15.2 and the commentary on that rule.
The Associate Judge said it was common ground that there had been inordinate delay by South West in pursuing its counterclaim.[10]
[10]Decision on appeal, above n 1, at [11].
The Associate Judge did not accept the submission of South West that Power Farming’s actions were the reason it did not have funds to provide security, noting that this argument had been specifically rejected by Associate Judge Christiansen when he made the order for security.[11] Associate Judge Lester observed that Power Farming had never acknowledged negligence and, even if it had, that it was not a significant cause of South West’s financial predicament. He agreed with Associate Judge Christiansen that the magnitude of South West’s indebtedness was such that it could not credibly be said that South West’s impecuniosity was a result of Power Farming’s alleged negligence.[12]
[11]At [13].
[12]At [16].
Associate Judge Lester noted that it had been nearly 20 years since the allegedly negligent work by Power Farming.[13] While some delay might have been excusable (such as from actively applying for litigation funding), the Associate Judge considered that taking no steps for want of funds could not be excusable delay. Otherwise, he considered that it would be an excuse in every case of delay where the party with the benefit of security invoked r 15.2 of the High Court Rules.[14]
[13]At [18].
[14]At [19].
Associate Judge Lester said it was clear that prejudice was the most important factor, with the key issue being whether justice could still be done.[15] He noted that Power Farming said that, with one exception, none of the persons involved in the relevant dealings with South West in the 2002–2004 period remained an employee.[16] The Associate Judge noted that, while Mr Maber, the owner of Power Farming, was present at the crucial time and was aware that the baler had not been working correctly, he had not worked on the baler and could not give first-hand evidence on the key issue of workmanship.[17] The Associate Judge considered that the fact that potential witnesses spoken to by Power Farming had only a vague recollection of the dispute and did not remember any details was a “classic [dimming] of memories resulting from delay.”[18]
[15]At [22].
[16]At [23].
[17]At [25].
[18]At [27].
The Associate Judge considered the submission of Mr Gilbert that the issue of liability was one for expert evidence only and related to whether the power cable had been connected correctly from the tractor to the baler in accordance with the Workshop Manual. The Associate Judge said that, even if the Workshop Manual had not been complied with, it did not follow that this was a breach of contract.[19] He also noted that there was a separate area of allegedly poor workmanship in relation to the hydraulic connection between the tractor and the baler, which was “no less complicated than the electrical connection issue as to whether following the Workshop Manual guidelines was significant.”[20]
[19]At [31].
[20]At [32].
The Associate Judge said that determining quantum would be problematic; the profits that South West could have made if the baler had been operating would depend on the contracts available at that time, weather conditions and the like, and it was not clear that South West’s discovery of relevant business records was still available.[21]
[21]At [33].
The Associate Judge noted that the equipment at issue was no longer available because it had been sold by South West in 2006 or 2007. He considered it was far from clear how similar machines that might be available could be compared against the equipment at issue and noted that any replication of set up on similar machines would not answer Power Farming’s primary submission that the machinery problems were due to operator error.[22]
[22]At [34].
The Associate Judge concluded:
[36] Standing back, the case has been in abeyance for too long. The real issue is not how South West wishes to present its case but whether PFNZ’s ability to defend the claim in the way it wishes, has been prejudiced. The prejudice is serious. Key witnesses are unavailable or have no real recollection of what happened. Their evidence on issues not thought about for nearly 20 years will be said by South West to be unreliable. The machinery, both tractor and baler, in question are no longer available for testing or inspection. Those issues are particularly relevant to breach and PFNZ is also prejudiced in respect of causation and quantum through the delay.
Accordingly, the Associate Judge ordered that South West’s counterclaim be struck out for want of prosecution.[23]
Submissions for South West
[23]At [37].
Mr Gilbert submits that Associate Judge Lester erred in two principal respects: he was wrong in holding that the delay was inexcusable, and he was wrong to conclude that delay and witness unavailability meant justice could not be done.
On the first question, Mr Gilbert says that South West was not able to apply for litigation funding because of recovery action being taken by a variety of interests: namely the owners of the grass, the supplier of wrapping material for the bales, Ag Southland, the Inland Revenue Department and the Accident Compensation Corporation (ACC). Mr Gilbert says South West’s delay was not a matter of just taking no steps. South West could not raise funds because of its financial position and the ill health of its director and sole shareholder, Brendon Forde.
Mr Gilbert also says that the alleged negligence by Power Farming was the cause of South West’s impecuniosity and its inability to pay the security. He says that if the baler had worked as claimed by the manufacturer, and by Power Farming as its agent, the repair costs would not exist, and a good profit would have been available to South West.
Second, on the question of prejudice and the overall interests of justice, Mr Gilbert submits that the availability of witnesses regarding alleged operator error by South West may not be relevant. Mr Gilbert submits that, if the baler and tractor were connected in the manner acknowledged by correspondence from Power Farming in 2005, the baler could not possibly have been able to work properly. Further, if South West can show that the baler and tractor would have worked properly if connected as set out in the manufacturers’ manuals, Mr Gilbert says that South West will have gone some way to proving part of its claim and the issue of operator error will also have been overcome. Mr Gilbert also says that, even though the tractor and the baler owned by South West have been sold and their whereabouts are unknown, it would be possible to use equivalent machines to demonstrate how the tractor and baler should have been connected and how the baler would have performed in such circumstances.
Mr Gilbert submits that the fact the tractor and the baler are no longer available for testing or inspection is more prejudicial to South West than to Power Farming because South West must rely on the expert evidence that it has sought leave to adduce: namely, a fuller version of the Heaslip Report than the material that was before Associate Judge Lester and a letter from Mr Chris Heaslip, the Chief Executive Officer of Heaslip Engineering, commenting on the Associate Judge’s decision.
Mr Gilbert says that the fuller version of the report and Mr Heaslip’s letter support South West’s claim that the electrical connection between the tractor and the baler had not been in accordance with the workshop manual for the baler and that, even when that issue was remedied, the baler had not worked properly because the hydraulic connection from the tractor to the baler was not in accordance with the manual for the tractor. Mr Gilbert goes into considerable detail on these issues and other issues canvassed in the Heaslip Report.
Submissions for Power Farming
Mr MacGillivray submits that South West’s 15-year delay in paying the security and in taking any steps to progress the counterclaim was manifestly inordinate. He says the delay was also inexcusable and that Mr Forde’s explanation that the company was unable to post the security over that period does not change that reality. The claim is by a company and Mr Forde’s personal circumstances should be disregarded. Mr MacGillivray submits that impecuniosity cannot be a reason for substantial delay by a company pursuing a civil claim of this nature.
Mr MacGillivray submits that the delay has resulted in general prejudice to Power Farming. With one exception, no one currently employed by Power Farming was involved with or has any knowledge of the dispute with South West. The one person who was involved has no memory of the details. To properly defend the counterclaim, Power Farming would have to identify and locate relevant former employees of Ag Southland and Taieri Tractors and persuade them to give evidence about matters that took place between 19 and 21 years ago.
Mr MacGillivray also says that the case cannot be resolved by expert evidence. The dispute is factual and concerns what the staff of Ag Southland and Taieri Tractors did when setting up the machinery and later repairing it. Power Farming does not accept some of the facts alleged by South West, such as whether the power cord from the baler was attached to the tractor’s fuse box. Mr MacGillivray also says there are significant factual disputes about why South West had difficulties when operating the baler: namely, whether those were due to an incorrect set up, as alleged by South West, or because of operator error, as alleged by Power Farming. Those matters require evidence from the technicians involved in setting up and servicing the machinery.
Mr MacGillivray submits that Power Farming would face further prejudice in defending the counterclaim because it would be difficult now for an expert to make an accurate assessment of aspects of the losses claimed for the period 2002–2004. Mr MacGillivray also says that Power Farming has suffered specific prejudice in that South West failed to respond to its request for further and specific discovery relating to the maintenance of the machinery post-2004 and to other information relevant to the quantum of the losses claimed by South West. In addition, to defend the counterclaim, Power Farming could reasonably expect that the machinery relating to South West’s claims would be available for inspection and testing by an expert. Yet, despite the size of the counterclaim, South West took no steps to preserve the tractor or the baler during the long period of its delay — which has also caused prejudice to Power Farming.
Mr MacGillivray says that Power Farming opposes South West’s application to adduce further evidence. He submits that the fuller version of the Heaslip Report is not fresh; it relates to a technical analysis carried out in 2006 and, with reasonable diligence, a fuller report could have been produced in the High Court. He also says there are no exceptional or compelling circumstances that merit the evidence being adduced. Mr MacGillivray also submits that, in any event, the report and Mr Heaslip’s letter are not relevant to the issues to be determined on appeal.
Application to adduce further evidence
In formal terms, South West has applied for leave to file a fuller version of the Heaslip Report, a letter dated 3 October 2022 from Mr Chris Heaslip, and a revised calculation of its losses. It has also filed in Court a video recording of another Vicon baler in operation.
As Mr MacGillivray says, the Heaslip Report is not fresh. With due diligence, it could have been produced at the hearing of the strike-out application before Associate Judge Lester. Indeed, the report is dated 4 February 2021. If that date is correct, it is clear the report could easily have been put in evidence at the hearing on 22 August 2022. However, we have decided to admit the report in evidence, not because there are compelling circumstances as such but because the report provides a useful description of the baler and tractor and an account of South West’s acquisition of these items.
We admit the letter from Mr Heaslip for the limited purpose of assessing South West’s claim that the proceeding can be fairly tried despite the passage of time. In his letter, Mr Heaslip disagrees with the findings of Associate Judge Lester and offers his opinion that the absence of witnesses should not be an obstacle to hearing South West’s counterclaim. He contends that there is no issue about how the baler was connected to the tractor and it can be shown, by reference to manuals or similar machines which are still operating, that the connection was inappropriate. We see no case, however, for admitting the recording of an operating Vicon baler.
We also see no case for admitting the revised calculation of South West’s losses. The losses relate to the six seasons from 2002/03 to 2007/08 and could and should have been produced before now. In addition, the revised calculations do not alter the assessment of whether the Associate Judge erred in striking out South West’s counterclaim.
Analysis
Based on South West’s amended counterclaim and Power Farming’s defence to that counterclaim, it is apparent that the parties agree that Ag Southland set up and commissioned the baler and tractor combination purchased by South West, and that Ag Southland was the agent for Vicon, the manufacturer of the baler.[24] Whether Ag Southland had any contractual responsibility in relation to the purchase of the baler is not at issue in the proceeding.
[24]Paragraph 5 of South West’s amended statement of defence and counterclaim, which Power Farming has admitted, says that “the defendant” (ie South West) was the agent for Vicon. It is clear from the context, however, that the word “the defendant” should have been “the plaintiff”: because Ag Southland and not South West was the agent for Vicon.
It is also apparent from those pleadings that the parties do not agree on most other factual issues relating to the counterclaim. In particular, Power Farming denies that Ag Southland connected the electrical power supply of the baler to the tractor’s fuse box and denies the specific difficulties alleged by South West, even though it admits that South West experienced difficulties in the operation of the baler. In other words, for South West to succeed, it must prove:
(a)the actual difficulties it says it experienced with the operation of the baler;
(b)that those difficulties were the result of the actions of Ag Southland and Taieri Tractors; and
(c)the consequences that followed from those difficulties.
Relevant legal principles
Rule 15.2 of the High Court Rules provides:
Any opposite party may apply to have all or part of a proceeding or counterclaim dismissed or stayed, and the court may make such order as it thinks just, if—
(a)the plaintiff fails to prosecute all or part of the plaintiff’s proceeding to trial and judgment; or
(b)the defendant fails to prosecute all or part of the defendant’s counterclaim to trial and judgment.
It has been well-settled since the decision of this Court in New Zealand Industrial Gases Ltd v Andersons Ltd that an applicant seeking the strike-out of a claim or counterclaim for want of prosecution, as provided in r 15.2 of the High Court Rules, must show that there has been inordinate delay, the delay is inexcusable and the delay has caused prejudice to the other party.[25] However, the decision to strike out is discretionary and those considerations are not necessarily exclusive. The overriding consideration is whether justice can be done, despite the delay.[26]
[25]New Zealand Industrial Gases Ltd v Andersons Ltd [1970] NZLR 58 (CA) at 61, citing[26]At 61, citing Austin Securities Ltd v Northgate & English Stores Ltd [1969] 1 WLR 529 (CA) at 534 per Edmund Davies LJ.
These principles have been referred to and applied in many subsequent decisions, including Lovie v Medical Assurance Society, as referred to by Associate Judge Lester in the decision under appeal.[27]
[27]Lovie v Medical Assurance Society New Zealand Ltd, above n 9, at 248. See also Bank of New Zealand v Savril Contractors Ltd [2005] 2 NZLR 475 (CA) at [89]; and Scottwood Charitable Trust v Bank of New Zealand (2001) 15 PRNZ 534 (CA) at [33].
However, as this Court also noted in Industrial Gases and stated more fully in May v May, because the decision is discretionary, before this Court can interfere with the decision to strike out the counterclaim, it must be satisfied that the Court below acted on a wrong principle, took into account irrelevant matters, failed to have regard to relevant matters or was plainly wrong.[28]
[28]New Zealand Industrial Gases Ltd v Andersons Ltd, above n 25, at 61; and May v MayMr Gilbert does not take issue with the principles stated by Associate Judge Lester on the basis of Lovie v Medical Assurance Society. Nor does he challenge the Associate Judge’s finding that the delay was inordinate, say that the Associate Judge took into account irrelevant matters or failed to have regard to relevant matters. Mr Gilbert says, in effect, that the Associate Judge was wrong to conclude that the delay was inexcusable and that delay and witness unavailability meant justice could not be done.
Was the Associate Judge wrong to conclude that the delay was inexcusable?
The core of South West’s position on this issue is that the alleged negligence of Power Farming was the substantial cause of South West’s impecuniosity and thus of its inability to pay the security. However, that contention was specifically rejected by Associate Judge Christiansen when he directed payment of the security in September 2006 and by Associate Judge Lester when he struck out the counterclaim in September 2022.
As already noted, Associate Judge Christiansen held that there was insufficient material in support of Mr Forde’s claim that South West’s financial position was due in significant part to the reasons Mr Forde attributed — namely, alleged negligence on the part of Power Farming. Associate Judge Lester reached the same conclusion for essentially the same reason — the magnitude of South West’s indebtedness was such that it could not credibly be said that South West’s impecuniosity was the result of Power Farming’s alleged negligence, even if the quantum of the claim was taken at face value.
It remains the case that there is insufficient material to support the claim that South West’s financial position was caused by the alleged negligence of Power Farming. As Associate Judge Christiansen recorded, on the basis of a statement of financial position filed by Mr Forde, South West’s debts as of September 2006 were over $1 million and its primary creditor was Mr Forde in the amount of $711,000.[29] Other liabilities were to the IRD for $62,500 and to UDC for a debt shortfall of $500,000. The Associate Judge made no reference to the claims of the growers of the grass, the supplier of the plastic wrapping and the outstanding levies to the ACC that were referred to by Mr Gilbert in his written submissions and by Mr Forde in his affidavit of 29 July 2022.
[29]Power Farming Southland Ltd v South West Contracting (2002) Ltd, above n 4, at [7].
South West has filed no further information of its financial position other than its revised calculation of alleged losses, which we have declined to admit in to evidence. Even on the basis of South West’s earlier calculation, the alleged losses were significant — in excess of $680,000 for the 2002/03 and 2003/04 seasons — yet were held by Associate Judge Lester to be insufficient to establish that South West’s impecuniosity was the result of Power Farming’s alleged negligence, given South West’s overall indebtedness. The fact that Mr Forde now alleges that the losses were over $9,000,000 over a longer time period does not alter that assessment, given the level of South West’s overall indebtedness and Mr Forde’s claim that, for a period of 15 years, he was unable to raise sufficient funds to pay the modest security ordered by Associate Judge Christiansen.
We reach that conclusion irrespective of the health and other personal difficulties experienced by Mr Forde. While we accept that those difficulties were real and significant and had an impact on Mr Forde’s ability to find employment, those issues are personal to Mr Forde. They cannot be ascribed to the company through which he chose to operate his business and which is a separate legal entity. As Mr MacGillivray observes, the security for costs regime reflects a policy that litigants who are unable to pay costs should not be able to put other parties to the costs of litigation. That is particularly so in a commercial context, especially one in which very significant damages are now claimed for actions that took place over 20 years ago.
For these reasons, we do not accept that Associate Judge Lester was wrong to hold that the delay in paying the security and prosecuting the counterclaim was inexcusable.
Was the Associate Judge wrong to conclude that justice could not be done because of the delay?
Mr Gilbert does not dispute that Power Farming would face difficulties in locating relevant witnesses who could give evidence about what happened when the tractor / baler combination was commissioned and later repaired. He invites the Court to accept that those difficulties, and the difficulties posed by the fact that South West no longer has access to the actual tractor and baler, can be avoided by expert evidence and by a demonstration that an equivalent tractor and an equivalent baler, connected in accordance with their manuals, will function properly.
The problem with that contention, as Mr Gilbert acknowledged in response to questions from the Court, is that both the baler and the tractor owned by South West were second-hand and their service and maintenance histories are unknown. Even if the proposed demonstration by equivalent machines were successful, it would not prove that the machines owned by South West would have functioned properly if connected in accordance with the manuals. Nor would it establish that the machines, as connected by Ag Southland and Taieri Tractors, would not have functioned properly if operated correctly.
As Mr MacGillivray says, the dispute over the counterclaim is factual. It relates to how the tractor and baler were commissioned by Ag Southland and were repaired by Ag Southland and Taieri Tractors. It also concerns how the machines were operated by South West. The only way those matters can be properly tested is by evidence of the people who commissioned, repaired and operated the tractor and the baler.
On the basis of the affidavits of Mr Campbell, the Chief Executive of the Power Farming Group of companies, and Mr Maber, the sole director of the Power Farming company that is the subject of the counterclaim, we are satisfied that Power Farming would face real difficulties in locating witnesses who were involved in the commissioning and repairing of the tractor / baler combination. Those witnesses are essential to Power Farming’s case that the baler and tractor were connected properly. That Power Farming is not able to locate such witnesses obviously causes it real prejudice. That prejudice is the direct result of the delay by South West in paying the security and prosecuting its counterclaim.
For the reasons given above, the prejudice to Power Farming would not be avoided by a demonstration of how an equivalent tractor and baler would function. Nor would the prejudice be avoided by the Heaslip Report. Despite its technical detail, the Heaslip Report is essentially Mr Heaslip’s opinion of why the tractor and baler did not function properly when operated by South West, based on what he was told by Mr Forde and others about how the tractor and baler were connected, electrically and hydraulically, and how they were operated, and on Mr Heaslip’s interpretation of the manuals for the baler and tractor.
While not doubting Mr Heaslip’s competence as a mechanical engineer, it is noteworthy that the Heaslip Report states as fact matters that relate to the way the machinery actually functioned — which must have been based on what Mr Heaslip was told by Mr Forde or others in South West. For example, the Heaslip Report states that:
(a)the initial electrical connection of the baler and tractor “resulted” in frequent low voltage alarms on the controller screen which often coincided with sensor faults and loss of sequencing on the baler; and
(b)one of the problems “caused by” the low voltage supply to the controller was that the net wrap would initiate prematurely.
These matters are disputed by Power Farming and can only be established after evidence has been given of how the machines were actually connected and operated. Findings on those questions can be informed by expert opinion such as that offered by Mr Heaslip. They cannot be proven, however, simply on the basis of expert opinion.
For completeness, we also note that the fact that Mr Forde has located one person who he says was involved in the commissioning of the tractor / baler combination does not alter the prejudice suffered by Power Farming, particularly when there is no evidence before the Court as to whether that person is willing to give evidence and has sufficient recall of the relevant events.
Lastly, we agree with Mr MacGillivray that, because of South West’s delay, Power Farming has also suffered significant prejudice in its ability to defend South West’s claim for damages because of the difficulties Power Farming would face in obtaining an accurate assessment of the losses claimed for the 2002–2004 period. That prejudice would be significantly exacerbated if South West were to pursue its claim for damages extending to the 2007/08 season.
For all these reasons, we accept that Power Farming has suffered serious prejudice as a result of South West’s failure to pay the security for costs ordered by Associate Judge Christiansen in September 2006 and its failure to prosecute its counterclaim.
Given the extent of the delay and the seriousness of the prejudice, we are satisfied that Associate Judge Lester was not wrong to conclude that justice could not be done because of the delay.
Result
The application to adduce further evidence is granted in part.
We are satisfied there is no reason to interfere with Associate Judge Lester’s decision to strike out South West’s counterclaim.
South West’s appeal is dismissed.
Costs
Power Farming is entitled to the costs of this proceeding for a standard appeal on a Band A basis together with usual disbursements.
Solicitors:
P C Gilbert, Wellington for Appellant
Tompkins Wake, Hamilton for Respondent
CIV-2004-025-000484, 18 September 2006 at [17(a)].
Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 (CA) at 268–269 per Salmon LJ.
(1982) 1 NZFLR 165 (CA) at 169–170.
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