Spencer v Bryner

[2019] NZHC 1762

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-623

[2019] NZHC 1762

IN THE MATTER OF

the Unit Titles Act 2010

BETWEEN

BARRY ROBERT SPENCER and COLLEEN JOAN SPENCER

Plaintiffs

AND

VIVIENNE FRANCES BRYNER

First Defendant

TEAM WELLINGTON LIMITED
Second Defendant

AND

FARRY.CO LAW

First Third Party

Hearing:	27 June 2019
Counsel:	C M Stevens and T Mijatov for first defendant O E Jaques for first third party
Judgment:	25 July 2019

JUDGMENT OF DOBSON J

[1]        The context of the issue to be determined in this judgment is described in my minute issued on 2 July 2019, in the following terms:

[1]        This proceeding began as a claim by putative purchasers of a Wellington apartment for the return of a deposit paid on the purchase. It was brought against the vendor and the vendor’s real estate agent under the Declaratory Judgments Act 1908 in reliance on alleged non-performance by the vendor of a pre-settlement disclosure condition imposed under s 147 of the Unit Titles Act 2010.

[2]        The defendants settled the claim by the plaintiff/purchasers. Before that occurred, the first defendant (Ms Bryner) had issued a third party notice

SPENCER v BRYNER [2019] NZHC 1762 [25 July 2019]

against Farry.Co Law (Farrys) in that firm’s capacity as her solicitors acting on the transaction. The basis for the claim against Farrys was that the firm has been negligent in not complying with the time limit for provision of pre- settlement disclosure as required by s 147 of the Unit Titles Act.

[3]Farrys filed a statement of defence denying negligence.

[4]        Subsequent to the settlement achieved between the plaintiffs and defendants, Ms Bryner filed an amended statement of claim against Farrys. It pleaded the terms of the settlement achieved and sought damages for indemnification of that cost, plus damages for loss of the bargain suffered when the apartment had subsequently been re-sold at a lower price. That amended statement of claim was filed on 13 May 2019 and was served by email the same day. No statement of defence to the amended statement of claim issued against Farrys has been filed.

[5]        On the basis that her amended statement of claim introduced a new cause of action, Ms Bryner’s solicitors proceeded on the premise that High Court Rule 7.77(6) required a statement of defence to be filed to the amended statement of  claim within 10 working days after 13 May  2019, that is, by  27 May 2019. When none was served by that time, solicitors for Ms Bryner applied to set down her claim against Farrys for formal proof. On 21 June 2019, I scheduled a formal proof hearing for it on 27 June 2019.

[6]        On 26 June 2019, counsel for Ms Bryner provided solicitors acting for Farrys with the documents she intended to rely on in pursuing the application for formal proof the following day. I accept Mr Stevens’ assurance that those documents would have been provided earlier, but for his unavailability due to a Law Society teaching commitment.

[7]        Solicitors for Farrys instructed Mr Jaques at short notice and he filed a memorandum disputing that Ms Bryner was entitled to move for judgment by way of formal proof, as a fall-back seeking leave to file a statement of defence to the amended statement of claim and raising arguments that the quantum sought was not adequately proven.

[2]        The first defendant’s (Ms Bryner’s) application for judgment by formal proof against Farry.Co Law (Farrys) raised two issues. First, whether her amended statement of claim had introduced a fresh cause of action, thereby triggering an obligation under r 7.77(6) of the High Court Rules 2016 for Farrys to file a statement of defence to it. Secondly, if the amended statement of claim did introduce a new cause of action, whether it is one that had arisen since the filing of the original statement of claim, in which event Farrys would take the point that it could only be added by leave of the Court in terms of r 7.77(4) of the High Court Rules.

[3]        It was not appropriate to require counsel to present full argument on both issues when they appeared on 27 June 2019, and in my 2 July 2019 minute I directed the filing of sequential submissions on these issues. Counsel for Ms Bryner subsequently

filed a memorandum dated 4 July 2019 (supplemented by a further memorandum on 15 July 2019). In response, counsel for Farrys filed a memorandum on 11 July 2019.

A new cause of action?

[4]        If a fresh cause of action has been introduced in an amended statement of claim, an amended statement of defence would be required within 10 working days after the date of service of the amended pleading.1 However, if no fresh cause of action has been introduced, the filing of an amended statement of defence is optional.2

[5]        The principles relevant to whether a cause of action is fresh were summarised in Transpower New Zealand Ltd v Todd Energy Ltd as follows:3

(a)A cause of action is a factual situation the existence of which entitles one person to obtain a legal remedy against another;

(b)Only material facts are taken into account and the selection of those facts “is made at the highest level of abstraction”;

(c)The test of whether an amended pleading is “fresh” is whether it is something “essentially different”. Whether there is such a change is a question of degree. The change in character could be brought about by alterations in matters of law, or of fact, or both; and

(d)A plaintiff will not be permitted, after the period of limitations has run, to set up a new case “varying so substantially” from the previous pleadings that it would involve investigation of factual or legal matters, or both, “different from what have already been raised and of which no fair warning has been given”.

[6]        In Commerce Commission v Visy Board Pty Ltd, the Court of Appeal referred to these principles and added that:4

… in order for an amendment to amount to a new cause of action, there must be a change to the legal basis for the claim. That can, in theory, occur through the addition of new facts, but only if the facts added are so fundamental that they change the essence of the case against the defendant. If the basic legal claims made are the same, and they are simply backed up by the addition or substitution of a new fact, that is unlikely to amount to a new cause of action.

1      High Court Rules, r 7.77(6).

2      Rule 7.77(7).

3      Transpower New Zealand Ltd v Todd Energy Ltd [2007] NZCA 302 at [61], as cited in ISP Consulting Engineers Ltd v Body Corporate 89408 [2017] NZCA 160 at [21] (citations omitted).

4      Commerce Commission v Visy Board Pty Ltd [2012] NZCA 383 at [146].

[7]The judgment continued:5

… the importance of the pleaded fact to the success of the claim is not the test; the question is whether the amendment has changed the essential nature of the claim.

[8]        The Court of Appeal in ISP Consulting Engineers Ltd v Body Corporate 89408 held that the assessment of whether an amended pleading is “essentially different” is objective and relates to the substance of what is pleaded rather than the form.6

[9]        Ms Bryner submits that the original statement of claim had been for contribution up to but not exceeding the extent of her liability to the plaintiffs, whereas the amended statement of claim is for damages for all foreseeable loss caused by Farrys’ negligence. Her loss has now crystallised, and she seeks to derive a materially different legal consequence from the facts. Therefore the amended claim is “essentially different” and accordingly introduces a new cause of action.

[10]      Counsel for Ms Bryner submit there are a number of differences between the original and amended statement of claim, including:

(a)the statutory authority in support of the claim changed;

(b)further facts are alleged;

(c)the original claim primarily related to the return of the plaintiffs’ deposit because of Farrys’ failure;

(d)the amended claim more explicitly pleads the nature of Farrys’ duty of care, breach of duty, and causation of loss; and

(e)the quantum of loss was different between the two claims.

5      Commerce Commission v Visy Board Pty Ltd, above n 4, at [147].

6      ISP Consulting Engineers Ltd v Body Corporate 89408, above n 3, at [22].

[11]      In response, Farrys submit that, rather than introducing a new cause of action, the differences between the original statement of claim and the amended statement of claim are properly categorised as matters of particularisation.

Statutory authority in support of the claim

[12]      The intitulement of the claim has changed from being “in the matter of an application pursuant to the Declaratory Judgments Act 1908” to a claim “in the matter of the Unit Titles Act 2010”. However, the Unit Titles Act remains the source of the obligation to provide pre-settlement disclosure.  As Farrys note, the way in which  Ms Bryner pleads and relies on the Unit Titles Act remains materially the same.

Further facts alleged

[13]      The further facts  alleged  relate  to  the  settlement  of  the  claim  against  Ms Bryner. As Farrys submit, those facts are properly characterised as particulars of the loss claimed in the original statement of claim. It included allegations that subsequent to cancellation of the contract by the plaintiffs, appraisals of the property established that any resale would be at a loss, and alleged that Farrys would be liable for the loss of the bargain. The prayer for relief included loss of bargain as a separate head of damage.

Original claim primarily related to return of plaintiffs’ deposit

[14]      Ms Bryner submitted that she initially sought contribution but she now seeks damages. Therefore liability now depends only on establishing the legal elements of negligence as opposed to having to establish negligence and a right of contribution. This is said to be seeking to derive a different legal consequence from the facts.

[15]      However, loss of the bargain on the sale was pleaded in the original statement of claim, together with a prayer for relief in respect of that loss. There is no substantive difference between that and the amended statement of claim.

More explicit pleadings

[16]      Ms Bryner submitted that “the amended claim more explicitly pleaded the nature of Farrys’ duty of care, breach of duty, and causation of loss”. Again, this is a matter of provision of particulars, and cannot result in the introduction of a new cause of action.

Quantum of loss

[17]      Counsel for Ms Bryner also suggested that the quantum of loss is different. Again, this is no more than further particulars being given. In the original statement of claim, Ms Bryner sought repayment of the deposit and loss of bargain. She essentially claims the same relief in the amended statement of claim, just taking into account the difference in the liability for the deposit due to the settlement she reached with the plaintiffs.

[18]      There are numerous authorities which demonstrate that the analysis of whether a new cause of action has been introduced is not amenable to any bright line test. I am satisfied in the circumstances of this case that no new cause of action has been introduced.

The requirements of r 7.77(4)

[19]      However, if I am wrong in that view, then I uphold Farrys’ alternative proposition that if the amended statement of claim does introduce a new cause of action, then it arises by virtue of the circumstances in which the settlement of the plaintiffs’ claim occurred. In that event, it would be a cause of action that arose since the filing of the original statement of claim and Ms Bryner could only file the amended statement of claim with leave under r 7.77(4).

[20]      There is a symmetry in that requirement in that the application for leave, necessarily served on Farrys, would have put Farrys on notice of Ms Bryner’s assessment that the amended statement of claim did introduce a new cause of action. That would trigger an awareness by Farrys that they would be obliged, in terms of the rules, to file a statement of defence to the amended claim.

[21]      Accordingly, on either issue, Ms Bryner was not entitled to seek judgment by formal proof in the absence of a statement of defence to the amended statement of claim.

[22]      Clearly, Ms Bryner is entitled to have her claim progressed promptly. In formal terms, I grant leave under r 7.77(4) for the filing of the amended statement of claim (on the premise that Ms Bryner characterises it as containing a new cause of action notwithstanding my view to the contrary). I also grant leave for Farrys to file the amended statement of defence that Mr Jaques presented at the hearing before me.

[23]      Counsel are to confer about timetabling for steps in the proceeding down to it being ready for trial. In the event of disagreement, the matter can be referred back to me on the basis of a memorandum or memoranda outlining the differences in proposals for timetabling.

Costs

[24]      At the 27 June 2019 hearing, I somewhat peremptorily indicated to Mr Jaques that Farrys would not be entitled to costs on opposing the application for judgment by way of formal proof. I accept it was premature to express that view. I will not determine costs on the recent initiatives, but reserve the issue of costs to be determined in light of the substantive outcome.

Dobson J

Solicitors:

DLA Piper, Wellington for first defendant Kennedys, Auckland for first third party