The Warehouse Limited v Westgate No 1 Limited (previously known as Milford Centre Limited)
[2013] NZHC 2264
•2 September 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-3476 [2013] NZHC 2264
BETWEEN THE WAREHOUSE LIMITED Plaintiff
ANDWESTGATE NO 1 LIMITED (previously known as Milford Centre Limited)
First Defendant
WESTGATE NO 3 LIMITED (previously known as IMF New Zealand Limited) Second Defendant/First Third Party
TYCO NEW ZEALAND LIMITED Third Defendant/Second Third Party
GIBSON CONSULTANT ENGINEERS LIMITED
Fourth Defendant/Third Third Party
JOHN ANTHONY GIBSON
Fifth Defendant/Fourth Third Party
Hearing: 29 August 2013
Counsel: PJL Hunt and TW Clark for plaintiff
DR Bigio and AM Evans for third defendant
Judgment: 2 September 2013
JUDGMENT OF ASSOCIATE JUDGE FAIRE [on application for summary judgment]
This judgment was delivered by me on 2 September 2013 at 4pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: McElroys, Auckland
LangtonHudsonButcher, Auckland (SC Langton)
THE WAREHOUSE LIMITED v WESTGATE NO 1 LIMITED [2013] NZHC 2264 [2 September 2013]
The application for summary judgment
[1] The third defendant applies for an order for summary judgment against the plaintiff on its claim in negligence against the third defendant.
The issues raised by this proceeding
[2] There are two principal issues that require determination. They are the following:
(a) Did the third defendant owe the plaintiff, a tenant in the Milford Mall Shopping Centre (the Mall), a duty to take reasonable care when testing and surveying the Mall’s fire safety systems so as to ensure that the Mall’s fire safety systems in general, and its fire sprinkler system in particular, complied with the relevant safety standards under the Building Act 2004?
(b)Is the determination of the first issue suitable for determination under the summary judgment procedure?
The cause of action pleading against the third defendant
[3] The plaintiff pleads that the third defendant entered into a contract with the second defendant pursuant to which it agreed to carry out an annual survey and a biennial survey. It is alleged that the third defendant owed the plaintiff, as a tenant of a building occupied by the plaintiff, a duty to take reasonable care when testing and surveying the Mall’s fire systems. It is pleaded that the third defendant failed to detect a blind spot in the Mall’s fire sprinkler system when carrying out its inspection of the Mall’s fire safety systems on or about 8 February 2007 and, further, failed to advise the Mall owner, the first defendant, that from 25 March 2007 onwards the biennial survey was overdue and that, as a consequence, the Mall owner was in breach of the relevant fire safety standards.
[4] It is next pleaded that if due care had been taken, the absence of sprinklers and non-compliance of the sprinkler system would have been identified with the result that a fire that occurred would have been extinguished and contained, and with
the consequence that the damage to the plaintiff ’s leased premises and stock would
have been avoided or reduced.
Background
[5] The background facts have been extracted from the amended statement of claim filed on 22 March 2013 and the affidavits of DB Hipkins and JE Tomlinson filed in respect of this application.
[6] This proceeding concerns a claim by the plaintiff arising from a fire that occurred at the Mall on 23 April 2007.
[7] The plaintiff is a tenant in the Mall. It claims that it suffered damage to its premises and stock as a result of the fire.
[8] The plaintiff entered into a lease with Milford Shopping Centre Ltd (MSC) for a lease of Shop 160 in the Mall in November 1999. The lease was initially for six years. It contained rights of renewal. The rights of renewal were exercised so that the plaintiff’s right to occupy Shop 160 arose by operation of the lease.
[9] The third defendant had, prior to 2004, carried out certain fire protection services for the Mall. In November 2004, it submitted an offer to MSC to commission Fire Protection Services Ltd (FPIS) to carry out the next biennial survey for the Mall. That offer was accepted by MSC. This fact is introduced in DB Hipkins’ affidavit. It is not referred to in the plaintiff’s amended statement of claim.
[10] Before the biennial survey was carried out, the contract was cancelled. The biennial survey was carried out by Central Inspection Services Ltd in November
2004. This fact is also introduced in DB Hipkins’ affidavit and is not referred to in the amended statement of claim.
[11] In November 2005, the third defendant carried out an annual survey to inspect and test the fire alarm system in the Mall. That was undertaken pursuant to a
contract between the third defendant and MSC. This also does not appear in the amended statement of claim.
[12] The Mall was sold to Milford Centre Ltd. That company is now known as
Westgate No 1 Ltd and is the first defendant. The sale took place in November 2006.
[13] The third defendant and the first or second defendant, entered into a fire protection and testing and survey contract. It was for an initial term of 12 months from 1 January 2007. There is some dispute as to whether the contract was with the first or the second defendant. The second defendant was contracted to the first defendant to provide management services at the Mall. Mr Bigio submitted that the identity of the contracting party with the third defendant does not require determination for the purposes of this application. Suffice to say, the contracted party was either the first or the second defendant. There is a conflict between the date pleaded in the amended statement of claim and the position advanced by the third defendant as to the date of this contract. The plaintiff pleads the date as
15 November 2006. The third defendant has produced the contract which shows execution by either the first or second defendant on 16 February 2007.
[14] Mr Bigio, in his submissions, helpfully summarised the terms of that contract as follows:
12.aTyco to provide regular maintenance of MCL’s Building Warrant of Fitness features, including performing an Annual Survey of the manual fire alarms and procuring a price from FPIS to commission a Biennial Survey of the fire sprinkler systems;
b. There was no liability for events beyond the control of Tyco (Testing
Contract Conditions 2);
c.Tyco’s liability to MCL was restricted to $5 million, which amount MCL was required first to apply to any third party claims (Testing Contract Conditions 3);
d.Tyco was not liable for loss or damage arising out of goods or systems failing to perform/perform properly/perform for their purpose as a result of an “item” which was the subject of the Contract being interfered with or worked on without Tyco’s consent or work required to be done by a third party was not performed. MCL was required to indemnify Tyco against all loss, damage and expense arising out of claims in respect of this loss or damage (Testing Contract Conditions 5); and
e.Tyco was not liable for certain costs or expenses, including further investigatory work necessary as a result of its tests and inspections listed in the Contract (Testing Contract Conditions 8).
[15] The circumstances that led to the fire are pleaded in particulars 2.6 to 2.9 of the amended statement of claim dated 22 March 2013. These provisions provide:
2.6At date unknown to the plaintiff, but at some point between November 2004 and November 2006, a partition wall was erected at the rear of a retail shop in the Mall, namely shop M111 (E-Things) to create a storeroom at the rear of E-Things (the storeroom).
2.7The rear wall of the storeroom was a common wall between the tenancies of E-Things and the plaintiff (the inter-tenancy wall).
2.8 There were no fire sprinklers in the storeroom.
2.9 The installation of the partition wall:
(1) Created a “blind spot” unprotected by the Mall’s fire sprinkler system as the partition wall prevented the sprinklers in E-Things from reaching any fire in the storeroom;
(2) Resulted in a change of use of the storeroom, from retail to storage, with a consequential increase in the fire hazard rating of the storeroom.
[16] The amended statement of claim pleads the relevant fire safety standards at paragraphs 2.10 to 2.15 which provide:
2.10Under s100 of the Building Act 2004, the Mall was required to have a compliance schedule. The compliance schedule issued for the Mall specified NZS 4541 as the performance standard applying to the Mall’s fire sprinkler system.
2.11 NZS 4541 sets out the performance standards and inspection, maintenance and reporting standards for the sprinkler system. The standard operative at the relevant time was NZS 4541:2003.
2.12Under NZS 4541 surveys of the Mall’s fire sprinkler system were required to be undertaken at 2 yearly (not exceeding 28 months) intervals (biennial inspections).
2.13 In accordance with NZS 4541 a survey of the Mall’s fire sprinkler
system was undertaken on or about 24 November 2004.
2.14Under NZS 4541, a further fire sprinkler survey was required to be undertaken by 24 November 2006, and in any event no later than
24 March 2007.
2.15In breach of the performance standards set out in NZS 4541 the next survey of the Malls fire sprinkler system did to take place until
9 May 2007.
[17] What caused the fire that is the cause of the loss which occurred in this case is described in paragraphs 2.16 and 2.17 of the amended statement of claim which provide:
2.16 On or about 23 April 2007 a fire occurred in the Mall (the fire).
Particulars
(1) The fire originated in the ceiling space immediately above the storeroom;
(2) The fire spread downwards into the storeroom via the drop- down of flaming debris, which ignited the highly combustible material contained in the storeroom;
(3) As there were no sprinklers in the storeroom, an intense fire rapidly developed;
(4) The fire broke through the inter-tenancy wall between E- Things and The Warehouse tenancies spreading first smoke and then flames into The Warehouse tenancy.
2.17The sprinklers in The Warehouse tenancy, contained the fire damage to the inter-tenancy wall, and prevented the fire from spreading any further into The Warehouse tenancy. The Warehouse tenancy was, however, filled with smoke which caused extensive damage.
[18] The plaintiff pleads at paragraphs 3.1 through to 3.6 breaches of its lease with the first defendant. Paragraphs 3.1 to 3.6 provide:
3.1 Clause 7.5 of the lease provided that:
The Lessee and the Lessor will at all times comply fully with the requirements of the Insurance Council of New Zealand and all competent authorities and with the requirements of any relevant statute, regulation, by-law or notice issued by any similar authority relating to fires.
3.2The relevant statutory obligations at the time of the fire included the compliance schedule and building witness of fact regime provided for by the Building Act 2004.
3.3The relevant standard under the compliance schedule and building witness of fact regime in relation to inspection and maintenance of the Mall’s fire sprinkler systems at the time of the fire was NZS
4541, which required fire sprinkler surveys to be undertaken at
2 yearly (not exceeding 28 months) intervals (biennial inspections).
3.4 In breach of clause 7.5 of the lease:
(1) The first defendant failed to carry out the required biennial inspections of the Mall’s fire sprinkler system within the requisite timeframe.
Particulars
(a) It repeats paragraphs 2.10 to 2.15 above.
(2) The Mall’s sprinkler system did not comply with NZS 4541 as it had a blind spot, namely the storeroom, which was unprotected by sprinklers.
Particulars
(a) It repeats particulars 2.6 to 2.9 above.
3.5Had the first defendant undertaken the biennial fire sprinkler survey within the requisite timeframe:
(1) The absence of the fire sprinklers in the storeroom would have been detected;
(2) The non-compliance of the fire sprinkler system with NZS 4541 would have been identified and corrected before the fire:
(3) The fire would have been extinguished or contained within the storeroom; and
(4) The damage to the plaintiff’s premises and stock would
have been avoided or reduced.
3.6 As a result of the first defendant’s breaches referred to in paragraph
3.4, the fire occurred in the manner described in paragraphs 2.16 and
2.17, and the plaintiff’s premises and stock were damaged by thefire and smoke. As a consequence, the plaintiff has suffered the losses particularised in paragraph 2.19.
[19] For completeness’ sake I set out the insurance requirements as between the plaintiff and first defendant. They were helpfully set out in Mr Bigio’s written submissions, which I adopt:
a.The lessor (MCL) was required to insure the Centre to its full insurable value on either a full replacement basis or on a constructive loss basis at the lessor’s discretion (clause 7.1);
b.The lessee (the Warehouse) was required to take out public risk insurance applicable to the premises and the business carried on by the lessee (not less than $10,000,000) and an insurance policy for the full insurable value on a replacement basis of all additions to the premises owned or carried out by the lessee and its fittings, fixtures and stock (clause 7.2);
c.The lessor and the lessee were both required to comply with all requirements of the Insurance Council of New Zealand, all competent authorities and with any relevant statute, regulation, by- law or notice issued by any similar authority relating to fires (clause
7.5);
d.The lessee indemnified the lessor for any loss or claim arising from certain acts or omissions of the lessee to the extent the lessor was not insured or indemnified under any insurance policy (the proceeds of which are not rendered irrecoverable) and the lessor’s insurer has approved the lessor’s claim and made payment to the lessor (clause
7.7 and clause 7.8);
e.The lessee could recover from the lessor for loss or damage to property in the premises where the lessor was negligent or breached an express term of the Lease (clause 7.9); and
f. The lessee indemnified the lessor against any liability for damage or loss to any other person or property in the premises or the buildings caused by the lessee’s negligence (clause 7.9).
The tortious duty of care
[20] Counsel were not able to locate any direct authority dealing with the facts involved in this case.
[21] Mr Hunt referred to the judgment of the Court of Appeal in Rolls-Royce New
Zealand Ltd v Carter Holt Harvey Ltd, where the Court said:1
[58] Should there be a duty of care in a case such as this? The ultimate question when deciding whether a duty of care should be recognised in New Zealand is whether, in the light of all the circumstances of the case, it is just and reasonable that such a duty be imposed. The focus is on two broad fields of inquiry but these provide only a framework rather than a straitjacket. The first area of inquiry is as to the degree of proximity or relationship between the parties. The second is whether there are other wider policy considerations that tend to negative or restrict or strengthen the existence of a duty in the particular class of case. At this second stage, the Court's inquiry is concerned with the effect of the recognition of a duty on other legal duties and, more generally, on society. See South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282, at pp 293 – 294 (Cooke P), pp 305 – 306 (Richardson J), p 312 (Casey J), pp 316 – 318 (Hardie Boys J) and Attorney-General v Carter at paras [22] and [30].
1 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA) at 340, per
Glazebrook J.
[22] Mr Bigio referred to the restatement of the test for whether a duty of care is
owed in a situation where there is no leading authority either way:2
[24] In Sunset Terraces the Court expressly left open the issue now before us. That issue must be approached the same way as in all new situations where there is no binding authority either way. The ultimate question is whether it is reasonable to recognise the asserted duty. This is looked at from two points of view: the relationship of the parties, and the wider public interest. These two aspects are conventionally discussed under the headings of proximity and policy.
[23] The Court of Appeal discussed the factors relevant to the inquiry into proximity or the relationship of the parties.3 Mr Bigio provided a short summary of those factors, which I adopt:
(a) The degree of analogy with cases in which duties were established;
(b)Balancing the plaintiff’s moral claim to compensation for avoidable harm and the defendant’s moral claim to be protected from undue restriction on its freedom of action and from an undue burden of legal responsibility;
(c) The plaintiff’s vulnerability generally and to the defendant;
(d) Whether the plaintiff had other remedies available; (e) The nature of the loss; and
(f) The statutory and commercial background relevant to defining the
relationship between the parties.
2 Body Corporate No 207624 v North Shore City Council [2012] NZSC 83, [2013] 2 NZLR 297 at
316, Tipping J (Citations omitted).
3 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd, above n 1, at [59]–[65].
[24] Before embarking on an analysis of the proximity factors and the wider policy considerations, it is appropriate to ask the question of whether such analysis is appropriate under the summary judgment procedure.
The Court’s approach to a summary judgment application by a defendant
[25] On a summary judgment application, rule 12.2(2) of the High Court Rules requires that the defendant satisfy the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[26] Westpac Banking Corp v MM Kembla (New Zealand) Ltd noted the following when dealing with r 136(2), the predecessor of r 12.2(2):4
[58] The applications for summary judgment were made under R 136(2) of the High Court Rules which permits the Court to give judgment against the plaintiff “if the defendant satisfies the Court that none of the causes of action in the plaintiff's statement of claim can succeed”.
[59] Since R 136(2) permits summary judgment only where a defendant satisfies the Court that the plaintiff cannot succeed on any of its causes of action, the procedure is not directly equivalent to the plaintiff's summary judgment provided by R 136(1). …
[60] Where a claim is untenable on the pleadings as a matter of law, it will not usually be necessary to have recourse to the summary judgment procedure because a defendant can apply to strike out the claim under R 186. Rather R 136(2) permits a defendant who has a clear answer to the plaintiff which cannot be contradicted to put up the evidence which constitutes the answer so that the proceedings can be summarily dismissed. The difference between an application to strike out the claim and summary judgment is that strike-out is usually determined on the pleadings alone whereas summary judgment requires evidence. Summary judgment is a judgment between the parties on the dispute which operates as issue estoppel, whereas if a pleading is struck out as untenable as a matter of law the plaintiff is not precluded from bringing a further properly constituted claim.
[61] The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff's claim. Examples, cited in McGechan on Procedure at HR 136.09A, are where the wrong party has proceeded or where the claim is clearly met by qualified privilege.
[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and the legal issues. Although a legal point may be as well decided on summary judgment application as at trial if sufficiently clear (Pemberton v Chappell [1987] 1 NZLR 1), novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.
[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff's claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit), to force on the plaintiff's case prematurely before completion of discovery or other interlocutory steps and before the plaintiff's evidence can reasonably be assembled.
[64] The defendant bears the onus of satisfying the Court that none of the claims can succeed. It is not necessary for the plaintiff to put up evidence at all although, if the defendant supplies evidence which would satisfy the Court that the claim cannot succeed, a plaintiff will usually have to respond with credible evidence of its own. Even then it is perhaps unhelpful to describe the effect as one where an onus is transferred. At the end of the day, the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.
[27] These passages were approved by the Privy Council in Jones v Attorney- General.5
[28] Summary judgment applications are appropriate where there is a complete and incontrovertible answer on the facts. By contrast, a strike out application is appropriate when there is a clear legal impediment to liability.
[29] When dealing with novel cases where duties of care are alleged, the Chief
Justice has emphasised the appropriate approach as follows:6
5 Jones v Attorney-General [2004] 1 NZLR 433 (PC) at [5].
6 Body Corporate 207624 v North Shore City Council) [2012] NZSC 83, [2013] 2 NZLR 297 (Citations omitted).
[4] Once again, it is necessary to point out that if the claim were indeed novel, as the Council maintains it is (on the basis that existing authority recognises liability in respect of residential buildings only), then application for strike out or summary judgment is appropriate only in cases where there is clear legal impediment to liability in negligence (in which case strike out is appropriate) or where there is a complete and incontrovertible answer on the facts (in which case summary judgment may be entered for the defendant). It is not clear why the Court of Appeal entered summary judgment in the present case. The case was not one where incontrovertible facts able to be established on summary procedure negated the claim (as for example where the terms of a contract provide a complete answer to a claim). The Court of Appeal’s conclusion that the claim could not succeed because no duty of care was owed by the Council to the owners of the units, if correct, would at most justify strike out of the claim, not summary judgment.
[30] Mr Bigio cited Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd as an example of a commercial case where the existence of a duty of care was analysed in a summary judgment context.7 That is not correct. The Court of Appeal had before it a strike out application.
[31] I canvassed with counsel as to whether this application might be amended to include an alternative order striking out the cause of action against the third defendant. Mr Hunt opposed any such amendment.
[32] That is understandable because, as the current pleadings stand, there is no agreement on the facts. In addition, the third defendant does not accept a number of the allegations made in the amended statement of claim.
[33] I conclude that this is not an appropriate case for the entry of summary judgment. The application is refused.
[34] I canvassed with counsel the questions of costs depending on the outcome. They requested that I reserve costs. Accordingly, I do so. If there is no agreement on the appropriate time to determine costs, then memoranda may be filed and served at fourteen day intervals in support, opposition and reply. For the parties’ benefit I record that the argument before me will have refined the central issue in the subject
cause of action and from that perspective will have been of benefit to both parties.8
That is a significant factor in determining whether a cost order at the time of the conclusion of the application is appropriate.
JA Faire
Associate Judge
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