Te Wharua Limited v Buddle Findlay HC Ak CIV 2007-404-006193
[2010] NZHC 108
•16 February 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2007-404-006193
BETWEEN TE WHARUA LIMITED
Plaintiff
AND BUDDLE FINDLAY Defendant
Hearing: 2 February 2010
Appearances: Mr B Keene QC for Plaintiff
Mr S Barker for Defendant
Judgment: 16 February 2010 at 11 a.m.
JUDGMENT OF ASSOCIATE JUDGE DOOGUE
This judgment was delivered by me on
16.02.10 at 11 a.m., pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Counsel:
Mr B Keene QC, 20 Waterloo Quadrant, Auckland: [email protected]
Buddle Findlay, P O Box 2694, Wellington: scott[email protected]
TE WHARUA LIMITED V BUDDLE FINDLAY HC AK CIV-2007-404-006193 16 February 2010
Background
[1] The plaintiff was the owner of land at Taupo. As a result of dissatisfaction it had with the solicitors which acted for it on the transaction selling that land, it brought proceedings against those solicitors, the defendant firm. The proceedings were based on complaints of negligence and breach of fiduciary obligation.
[2] The plaintiff company had owned the Taupo property in its capacity as a trustee of the Wickham Family Trust (“WFT”). The individual behind the company and the trust, Mr Wickham, had also settled another trust, the RBL Wickham Trust (“RBLWT”). The plaintiff was also a trustee of that trust. The proceedings were issued in October 2007. Because of the effluxion of time, it is agreed between the parties that it is now too late to bring fresh claims of negligence, having regard to the provisions of the Limitation Act 1956.
[3] The position was accurately described in the following extract from the submissions that Mr Barker filed:
All of the plaintiff’s causes of action are now barred by the Limitation Act:
(a)All of the breaches of contract and breaches of fiduciary duty alleged by the plaintiff occurred prior to 26 March 2002, so that the limitation period expired, at the latest, on 26 March 2008; and
(b)The cause of action in negligence relating to the allegations of negligence leading to the loss of the $172,000 accrued on the occurrence of that loss, on 14 December 2001, with the limitation period expiring on 14 December 2007; and
(c)The cause of action in negligence relating to the decision to sell the house leading to the alleged loss of $640,000 accrued in late 2002, with the limitation period expiring at the latest on 31 December 2008.
[4] When the proceedings were first issued they contained references to the plaintiff being a trustee of RBLWT rather than WFT. The reference to the former trust was wrong because the trustee did not hold the land qua trustee of that trust. The plaintiff has now taken steps to change its pleading to correct the position. Essentially, the defendant says that making such a change to the statement of claim will substantially change the nature of the claim with the result that the plaintiff by doing so is attempting to file a fresh claim which is now a statute barred.
[5] The defendant seeks leave to apply for summary judgment, or alternatively orders striking out the whole of the fifth amended statement of claim (“the 5SOC”)
on the basis that:
(a) The proceedings were commenced by Te Wharua Limited (“TWL”)
as trustee of the RBLWT, which is the incorrect plaintiff;
(b) The plaintiff’s mistake was a case of misidentification, not misnomer; (c) The plaintiff’s purported substitution of parties as plaintiff by
amending its pleadings is invalid and of no effect;
(d) The correct party, TWL as trustee of the WFT, cannot now be added
as plaintiff, because to do so would be to defeat limitation defences available to the defendant; and
(e)The incorrect party remains plaintiff and has no standing to sue with respect to any of the claims in the 5SOC (or any of the previous statements of claim).
Issues
[6] The defendant’s primary submission was that for the purposes of the rules of procedure a person who is a trustee is considered to be a different party when acting
in his or her different capacities. This means that TWL as trustee of the RBLWT is a different party from TWL as trustee of the WFT, and that TWL acting in its personal capacity is yet another distinct party.
[7] Mr Barker summarised the issues as follows:
(a)Does the defendant have a limitation defence available against the correct plaintiff if the correct plaintiff was added as a party to the proceeding?
(b) Is TWL acting as trustee of the RBL Wickham Trust a different party for the purposes of the rules of procedure to TWL acting as trustee of the Wickham Family Trust?
(c)Could the plaintiff substitute parties as plaintiff by way of mere amendment to the statement of claim? and
(d) Was the plaintiff’s error in commencing proceedings in its capacity
as trustee for the RBL Wickham Trust a case of misnomer or misidentification?
[8] The defendant submitted that:
(a)It has limitation defences to the whole of the claim that would be defeated if TWL as trustee of the Wickham Family Trust was added as plaintiff now;
(b)For the purposes of the rules of procedure a person is a different party when acting in each separate capacity recognised under the rules, so that TWL as trustee of the RBL Wickham Trust is a different party from TWL as trustee of the Wickham Family Trust;
(c)A different party cannot be substituted as plaintiff in a proceeding by way of mere amendment of the pleadings. An application under r4.56 is required;
(d) The plaintiff’s error was a case of misidentification and as such the
Court cannot allow an amendment to the identity of the plaintiff now as to do so would defeat the defendant’s limitation defence.
It follows that the plaintiff remains TWL as the trustee of the RBL Wickham Trust, which has no standing to sue on any of the claims and summary judgment or strike out should be awarded.
[9] At a later point in his submissions, Mr Barker said:
At law a trust is not a legal entity distinct from its trustee (Commissioner of
Inland Revenue v Chester Trustee Services Ltd [2003] 1 NZLR 395 at [37]).
It does not follow, however, that there is therefore no distinction between different trusts with the same trustee, or between the trustee in his or her personal capacity and a trustee in his or her capacity as trustee. The rules of procedure do draw such a distinction and a person acting in his or her personal capacity is considered a different party in litigation from a person acting in the capacity of trustee.
[10] The plaintiff, on the other hand, says in its notice of opposition that the pleading of the representative capacity of the plaintiff as acting as trustee of the WFT is a mere particular that:
(a) Does not have to be pleaded; and
(b)If it does have to be pleaded, can be pleaded merely by way of an amendment to the pleadings under High Court Rule 7.77.
[11] Mr Keene QC put it this way in his written submissions:
The defendant’s submission is that the plaintiff’s position in sub-paragraph (a) is directly contradicted by the relevant High Court Rule (r5.35) and that the plaintiff’s submission in sub-paragraph (b) is also inconsistent with the rules of procedure.
[12] He then referred me to the following rules:
(a) Rule 5.35, which provides that “a party to a proceeding who sues or
is sued in a representative capacity must show in what capacity the party sues or is sued in the statement of claim”;
(b)Rule 4.23, which provides that trustees “may sue and be sued on behalf of, or as representing, the property or estate of which they are trustees…”;
(c)Rule 5.28, which provides that claims by or against a trustee must not be joined with claims against him or her personally, unless the personal claims are alleged to arise with reference to the trust in respect of which he or sues or is sued; and
(d)Rule 4.52(b), which allows for a new party order making an existing party a party in another capacity in a proceeding.
Change of party
[13] In Coastal Tankers Ltd v South Port New Zealand Ltd (1999) 13 PRNZ 638 a claim was brought against the defendant for negligent advice about the navigability
of coastal waters in the vicinity of its harbour. In the first statement of claim which was filed, it was alleged that the vessel was owned by Coastal Tankers Ltd. In the second statement of claim which was filed on time, it was alleged that the vessel was owned by Union Steamship Co Ltd and was operated on bare boat charter for two oil companies. In the final amended statement of claim filed on 9 February 1999 it was pleaded that the plaintiff, Coastal Tankers Ltd, was a representative of and/or acted
as trustee for the oil companies and it brought proceedings on that basis. The plaintiff also applied for orders adding BP Oil New Zealand Ltd, Caltex Oil (NZ) Ltd, Mobil Oil New Zealand Ltd, and Shell Oil New Zealand Ltd (“the oil companies”) as plaintiffs. As Master Venning noted, “that is a very different pleading to the original and first amended statement of claim”. The Master concluded that that pleading was untenable. The management agreement did not vest the management company with the authority that it claimed.
[14] The Coastal Tankers decision involved arrangements that were quite different from those in the present case. At paragraphs [14] – [15], Master Venning summed up the issue in that case as follows:
It is clear from the most recent claim that Coastal Tankers Ltd does not own the Taiko and has no claim in its own right against the defendant. The claim
in the first amended statement of claim that Coastal Tankers Ltd had
somehow suffered a loss by reason of its liability to pay the oil companies has been abandoned.
The real issue raised in the most recent pleading is whether the claim by
Coastal Tankers Ltd as representative of or trustee for the oil companies can
be sustained. The pleadings record, and Mr Skelton conceded, that any such claim can only be founded in the management agreement. I note that Mr
Skelton's firm has only very recently been instructed, and did not draft the
pleadings in issue.
[15] As Master Venning observed at paragraph [32], the test of whether an amended pleading raises a fresh cause of action is well settled and was set out in Smith v Wilkins and Davies Construction Co Ltd [1958] NZLR 958 at 961 per McCarthy J:
The issue is, I think, put as clearly as anywhere in the words of Lord Wright
MR in Marshall v London Passenger Transport Board [1936] 3 All ER 83,
as being whether the new pleading involves ‘a new departure, a new head of claim, or a new cause of action’ (ibid, 87). In other words, is it something essentially different from that which was pleaded earlier? Such a change in character may be brought about, in my view, by alterations in matters in law
or of fact, or both. Alterations of fact could possibly be so vital and important as by themselves to set up a new head of claim. On the other hand, more often alterations of fact do not affect the essence of the case brought against the defendant. … In each case it must, I consider, be a question of degree.
Determination
[16] I would accept that if a different plaintiff was substituted into the proceedings, that that would generally be considered a change of a kind which is so vital and important in itself to lead to the conclusion that the claim being brought by the new plaintiff was a fresh claim: Smith v Wilkins and Davies Construction Co Ltd.
In such circumstances it would be likely that the Court would conclude that a new cause of action was being advanced which would necessitate an enquiry whether the new cause of action was statute- barred.
[17] I accept that rule 5 requires that a plaintiff such as TWL must show in what capacity the party sues – that is to disclose in a statement of claim that it is a trustee only. But it does not follow that because different particulars concerning that matter are expressly mandated by the rules that a change of such particulars necessarily implies that a new cause of action is now being pleaded – any more than the provision of fresh particulars of any other kind necessarily results in the pleading of a fresh cause of action.
[18] Apart from the requirements of rule 5.35, there was no need for Te Wharua to
set out the fact that its interest in the proceedings was as a trustee. The equitable obligations that TWL owed to other parties such as the trust beneficiaries did not form part of the facts that TWL was obliged to prove before it could succeed in obtaining judgment on its claims of negligence or breach of fiduciary obligation. No doubt TWL’s status as a trustee could become relevant at a later stage, for example if the claim failed and the trustee sought indemnity in respect of any costs order that was made against it.
[19] But it does not follow that because different particulars are inserted into an amended statement of claim in purported compliance with rule 5.35, that the plaintiff
is thereby amending its statement of claim in such a way that brings it within the principle stated in Smith v Wilkins and Davies Construction Co Limited.
[20] I do not accept that I am bound by the authority of cases such as Finnegan v Cementation Co Ltd [1953] 1 All ER 1130 to come to a different result. In the Finnegan case there were two separate bases upon which the plaintiff (the widow of
a workman killed in a work accident) could claim. She could either sue as the representative of his legal estate – that is as administratrix – or alternatively she had
a statutory entitlement as the widow of the deceased to sue in her own right. Different combinations of fact had to be pleaded and proved depending upon which cause of action was elected. It is for that reason that the capacity which she sued in was critical. The present case is otherwise.
[21] My conclusion is that a change to the statement of claim which makes it clear that the trustee is suing as plaintiff in right of a different trust than the one initially
stated in the statement of claim does not mean that a different plaintiff has thereby been substituted. Te Wharua continued to assert that duties which the lawyers owed
to it had been breached.
[22] That conclusion in my opinion is preferable to the alternative, which is that the Court is driven to the conclusion that a claim should not be resolved on its merits because of limitation arguments that are technical in nature and seem to have little to
do with the justice of the case.
[23] For those reasons the applications by the defendant for leave to apply for summary judgment and to strike out are dismissed. The parties should be able to resolve costs between themselves. If they cannot I will arrange to hear counsel on that matter at 9:30 a.m. on a convenient date.
J P Doogue
Associate Judge
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