Thompson v DD Construction Limited
[2017] NZHC 516
•21 March 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-1319 [2017] NZHC 516
BETWEEN IAN ALLEN THOMPSON
Plaintiff
BODY CORPORATE 167241
Second PlaintiffAND
DD CONSTRUCTION LIMITED First Defendant
DARRYL RICHARD MONTGOMERY Second Defendant
TURNER HOPKINS Third Defendant
Hearing: 12 December 2016 Appearances:
Mr W McCartney for Plaintiff
Mrs S Grant for DefendantsJudgment:
21 March 2017
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
21.03.17 at 3.30 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
THOMPSON & Anor v DD CONSTRUCTION LIMITED & Ors [2017] NZHC 516 [21 March 2017]
Background
[1] In this proceeding, the defendants have sought summary judgment under r 12.2(2) of the High Court Rules. It arises from repairs carried out to an apartment building in Auckland. The plaintiffs, having paid for the repairs, consider that they were subject to excessive charges and seek to recover the alleged excess. The detailed causes of action which the plaintiffs rely upon are discussed further on in this judgment.
[2] The following statement of the background of the case is taken from the submissions which counsel for the defendants, Mrs Grant, filed. The plaintiffs do not challenge the substantial accuracy of that statement of background which, with some alterations, was to the following effect:
a) The Development is an eight-unit townhouse development in Grey Lynn.
The Development suffered significant damage from water ingress due to defects in the construction of the building.
b)In mid-2013, the owners of the unit titles resolved to address the defects and undertake substantial remedial works on the Development. The works included recladding the exterior and interior of each unit.
c) Mr Montgomery, the second defendant and director of the first defendant company DDC, agreed that DDC would complete the remedial works. Mr Montgomery’s domestic partner, Mr Martin, who is a solicitor, was the chairman of the Body Corporate. They both lived together in a unit in the Development.
d)Mr Thompson, the first plaintiff, was the owner of two units in the Development. He was a member of the management committee. The Body Corporate is the second plaintiff in the proceedings.
e)At the outset, contemporaneous documents establish that a quantity surveyor was asked to prepare “budget” figures for the repair costs for each of the units. For the two units which the first plaintiff owned, units five and six, they were approximately $247,000 and $246,000 respectively.
f) On 27 May 2013, the Body Corporate held its annual general meeting (AGM). Mr Montgomery was physically present, and Mr Thompson was linked in via telephone.1 All of the unitholders in the Development in attendance knew Mr Montgomery worked as the director of DDC.2 In that capacity, Mr Montgomery made statements about the approximate cost and time of carrying out the remedial works, as the works were then understood. The minutes of the meeting record, inter alia:3
Aaron [Martin] and Darryl [Montgomery paid DDC’s quantity surveyor to put together a budget figure for each owner to use to approach their financiers to fund the reclad project. Overall including GST the cost is $2.8 million and owners should use a figure of $350,000 per unit when approaching financiers.
…
Each unit is expected to take 18 weeks from start to end if the project was managed to its most efficient with appropriate labour units applied. To do the whole lot of units would be 42 weeks approximately.
g) The plaintiffs say that these statements constituted misleading and deceptive conduct for reasons that will be explained below, but which have to do with the final cost of repairs to the complex as a whole, including the units owned by the individual unit owners.
h)The first and second defendants say that these statements were honest and good faith estimates, made in the desire to be helpful to the unitholders of the Development in obtaining finance and to give a sense of the scope of the works.4 They also say that, as genuine estimates, they were not intended to be construed as warranties, in the manner of a fixed or ceiling price and
time. They also only covered part of the required works.
1 Exhibit A to the affidavit of Darryl Richard Montgomery, dated 31 May 2016, at 1 (AGM Minutes).
2 Affidavit of Darryl Richard Montgomery, dated 3 August 2016, at [5]. However, I understand that the plaintiffs dispute that all owners in attendance knew that Mr Montgomery was a director of DDC.
3 AGM Minutes, above n 1, at 11–12. I note the mistake in the defendants’ submissions. They should have included a closed square bracket after the word ‘Montgomery’.
4 Affidavit of Darryl Richard Montgomery, dated 31 May 2016, at [6].
i) Following the AGM, DDC submitted a tender for the remedial works on 30
August 2013.5 Tony Scott, a quantity surveyor employed by DDC, drew up the tender on the basis of the documents, drawings and specifications supplied to DDC. The tender was qualified in that it was restricted to the listed items and there were also stated exclusions. This was done because, at the time the tender was made, it was unclear how much work had to be completed to make the Development code compliant.
[3] Some additional background needs to be mentioned. Before doing so, I refer to the plaintiffs’ earlier contention that they do not accept that all of the owners present at the AGM knew of the connection between Mr Montgomery and DDC. However, I do not consider it necessary to resolve this issue in the context of this judgment.
[4] The Body Corporate and Mr Thompson allege that a number of misrepresentations induced them to enter into a contract for repair of the property.
[5] For present purposes, the relevant misrepresentation which the plaintiffs rely upon can be stated as follows. The first and second defendants represented that the maximum or “outside” figure that would be incurred in repairing the weather tightness problems with the units, including units five and six owned by the first plaintiff, was $350,000 for each unit. It is noteworthy that the first and second defendants do not dispute that such a representation was made. In contrast, the actual cost incurred was, in the case of unit five, $463,373, and in the case of unit six, $425,490. In each case, as throughout the rest of this judgment, rounded figures are used.
[6] The “outside figure” of $350,000 was exceeded in the case of unit five by an amount of $113,373, and in the case of unit six, $75,490. The actual price therefore exceeded the “outside” figure by approximately a third in the case of unit five, and by approximately 20% in the case of unit six. In terms of the expected completion time, the first and second defendants represented that the work on each unit would take 18 weeks. However, unit five took 58 weeks and unit six took 34 weeks to
complete.
5 Exhibit B to the affidavit of Darryl Richard Montgomery, dated 31 May 2016 (DDC Tender).
[7] On 22 August 2013, the High Court approved a scheme for the remediation of the building pursuant to s 74 of the Unit Titles Act 2010. The scheme authorised repairs to be undertaken to the common property held by the Body Corporate and to the owners’ units.6 The repairs to the building were to be carried out pursuant to construction contracts managed by the Body Corporate.7 Preamble G is important and is set out in its entirety:
The full extent of the work required to repair damage to the building will not be known until work begins and the exterior cladding has been removed. Any further damage to the building that is identified during the course of the works will be governed by the terms of the scheme.
[8] The Body Corporate was appointed the agent of each owner:
Severally, with authority from time to time, to authorise, undertake, covenant, and agree on behalf of each Owner all matters concerning and incidental to the Repairs, including the costs of Repairs for which each Owner is responsible.”8
As well, the scheme provided as follows:9
4.1The body corporate for itself and on behalf of each owner, is hereby grant[ed]… the general power to ensure that the repairs are identified and the work required is undertaken and completed in a good and workmanlike fashion and that the money required to meet the costs of the repairs is collected from each owner.
[9] References to the Body Corporate acting “for itself and on behalf of each owner” is a reference to the fact that repairs to both the common areas of the property and the individually owned apartments were going to be the subject matter of the building contract, which the Body Corporate was empowered to enter into. The Body Corporate was also given power to levy and charge the owners for the cost
of repairs.10
6 Preamble E.
7 Preamble F.
8 BD 426.
9 Preamble E.
10 Clause 4.2(h).
The contract
[10] Tenders were sought from builders. Two were apparently received, or at least were considered by the Body Corporate, being the tender from the first defendant and another from a company called RCS.
[11] The minutes of the extraordinary general meeting (EGM) held on 16
September 2013 record that the quantity surveyor attended and explained the “comparatives” between the tender which had been put in by RCS and a tender from the first defendant.
[12] The Body Corporate resolved to accept the tender from the first defendant. The minutes also record agreement that, while there would be some fixed cost elements in the proposed construction agreement, “overall any contract entered into would be on a charge out basis except where there were fixed sum components for sub trades”.11 At an earlier meeting of the Body Corporate on 1 July 2013, the second defendant had explained the advantages of such an approach:
[He] gave advice about the pitfalls of using fixed quotes in light of the industry penchant for using variations to re-coop costs and that any such variations are at a margin that is the same as the main contracts stated rate for margins [He] explained the benefit of cost plus to owners and the importance of being able to see each invoice as opposed to fixed price which does not give an owner the ability to see sub contractor invoices or timesheets.
[13] The building contract was entered into between DDC and the Body Corporate on 28 September 2013. In his capacity as a solicitor, Mr Martin eventually drew up the construction contract for the first defendant. He claimed that he acted in good faith throughout. The contract was stated on its face to be a “Cost and Margin Building Contract”. It is a standard form contract issued by the Certified Builders Association of New Zealand. Mr Thompson and Mr Martin signed on behalf of the Body Corporate and warranted that they had the authority to bind all the registered
proprietors of the Development to the contract.12
11 BD 518.
12 Exhibit C to the affidavit of Darryl Richard Montgomery, dated 31 May 2016, at cl 24.1 (Contract).
[14] It may be that the standard form contract was not entirely satisfactory in some respects. In particular, the Body Corporate was described in that document as “the owner”, when in fact it was not the owner of the entirety of the property, but was only the owner of the common areas. Additionally, within a summary of work that was required, there was no reference to opening up the existing structure and investigating its state in order to make decisions about what repairs were going to be necessary.
[15] Under the building contract, the first defendant was entitled to charge labour at basic hourly rates.13 The first defendant was further entitled to an “Agreed Builder’s Margin’, which was described in the following terms:14
Agreed margin for Builder’s administration, overhead and profit, applicable to all labour, materials & other inputs provided in connection with the Project, whether provided by the Builder, or by suppliers of materials or trade services to the Builder. 10%
Relevant terms of the contract
[16] Attention needs to be paid to the terms of the contract which the second plaintiff entered into with the first defendant.15 The terms contained provisions which the first and second defendants say were influential in explaining the basis upon which estimates were provided of how much it was going to cost to remediate the complex. In particular, cls 4.1, 4.8 and 4.9 of the contract are relevant in determining how a reasonable person ought to have understood the representations
which were made. The provisions that particularly bear upon these issues are the following:
4.1This is a building contract in which the total price payable for the Building Work is not fixed, specified, or known at the time of entering into the Contact. Instead, the progress payments and the Final Contract Price are to be calculated by reference to the actual costs incurred by the Building in carrying out the Building Work, plus a margin for the Builder’s administration overhead and profit. The Parties may have chosen to enter into this form of building contract for any number of reasons including that it is too difficult for the Builder and/or the Owner to accurately predict the precise
13 For example, carpenters were to be charged out at $63.25 per hour.
14 BD 384.
15 Contract, above n 12.
scope of the Building Work at the outset, or the Building Work involves innovative systems or materials the cost of which is largely unknown, or to avoid the administrative burden of having to recalculate a fixed contract price each time a component of the work changes simply because it is their preference to do so. While this inevitably involves some uncertainty as to what the Final Contract Price will eventually amount to, it has the advantage that at the conclusion of the Building Work the Owner will have become liable to pay no more and no less than the value of the Building Work and materials the Owner has actually received.
4.8Either prior or subsequent to the Parties entering into this Contract, the Builder may have given or may give to the Owner or the
Owner’s representative(s) an estimate, indication, projection, guess,
intimation, statement, assurance, warranty or representation or
similar communication (together referred to as an “estimate”) as to what the Final Contract Price or any component of it is likely to turn out to be. It is common for building owners to request an estimate and it is common for builders, in good faith and out of a desire to be helpful, to comply with that request, or indeed to offer an estimate unsolicited. The Parties acknowledge that even the most carefully calculated estimate can in hindsight prove to be grossly pessimistic or optimistic, and it is impossible for the Builder to accurately predict what the final outcome of the Project will be, given that so many factors are outside the Builder’s control.
4.9The Parties therefore expressly record that any such estimate that may have been or may be provided by the Builder shall only represent the Builder’s best guess, based on the Builder’s experience and what the Builder knows about the Project itself to date. It shall have no legal significance or effect, and the Builder shall not be held accountable for it, unless the Parties have taken the precaution of expressly agreeing otherwise in writing. This is so even if either of the Parties has, without full knowledge of the legal significance, described the estimate as a “quote” or used some other wording that might suggest a commitment or binding constraint that would otherwise be enforceable in law. The facts that the Parties have chosen to enter into this form of contract rather than a fixed price contract shall be recognised as fundamentally inconsistent with the Builder being legally bound by any such estimate.
Causes of action
[17] As against the first and second defendants, the first cause of action which the first plaintiff pleads is a breach of s 9 and s 43 of the Fair Trading Act 1986 (FTA). It is pleaded that the second defendant’s statements were false and misleading, being misrepresentations concerning the likely cost of remediation and the time it would take to complete the works. The plaintiffs claim they have suffered, amongst other things, loss representing the amount paid to the first defendant in excess of the represented amount of $350,000 per unit.
[18] The second cause of action, by the second plaintiff against the first defendant, asserts that there were contractual misrepresentations, which is again referable to the representations as to the cost of completion and time it would take for construction. Under this cause of action, the second plaintiff seeks to recover an amount representing the excess over $350,000 per unit which was paid. It is alleged that the second plaintiff entered into the building contract under the inducement of misrepresentations as to cost.
[19] The third cause of action, by the second plaintiff against the first defendant, alleges that there was an implied term in the contract that the first defendant’s charges for the building work would be reasonable. The second plaintiff claims that the charges for the work were unreasonably high, and therefore in breach of the implied term. In each case, the breach of the implied term is said to entitle the second plaintiff to recover the excess paid over the amount of $350,000 per unit.
[20] The fourth cause of action, by the second plaintiff against the second defendant, similarly claims a breach of s 9 of the FTA centring on the misrepresentations described above. In regard to this cause of action, I note that, while the first and second defendants initially took the position that the second defendant, as a director of the first defendant, did not make the statements “in trade”, the defendants have now resiled from that position. The issue to be determined is thus the same as with respect to the other FTA claims, namely whether there was deceptive and misleading conduct arising from misrepresentations.
[21] As against the first defendant, the fifth cause of action involves the first plaintiff alleging that the first defendant unlawfully interfered in their title through placing mortgages on the titles of his two units.
[22] The sixth cause of action, by the first plaintiff against the third defendant, asserts that the third defendant breached their statutory duty under s 164A of the Land Transfer Act 1952.
Defendant’s summary judgment application principles
[23] High Court Rule 12.2(2) states that “[t]he court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.”
[24] The leading authority on the principles applicable to a defendant’s application for summary judgment is the Court of Appeal in Westpac Banking Corp v M M Kembla New Zealand Ltd.16 It was accurately summarised in the submissions
for the defendants in the following terms:17
The defendant bears the onus of satisfying the Court that none of the plaintiff’s claims can succeed. It is not enough for the defendant to merely show that there are weaknesses in the plaintiff’s case.
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 the affidavit evidence.
Summary judgment will generally only be entered against a plaintiff where there is a complete defence to the plaintiff’s claim, or a clear answer to the claim, which cannot be contradicted.
It may be inappropriate to award summary judgment where ultimate determination of the case turns on a judgment that is only able to be properly arrived at after a full hearing of the evidence.
It will generally be inappropriate to assess the sufficiency of the proof of the plaintiff’s claim at a summary judgment. Otherwise a defendant, particularly one more in possession of the facts than the plaintiff, could force on the plaintiff’s case prematurely, before discovery and before the plaintiff’s evidence can reasonably be assembled.
Although a legal point may be decided at summary judgment if it is sufficiently clear, novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.
[25] Mrs Grant also submitted (again correctly, in my view) that the principles relating to the resolving of conflicts of evidence in the context of a summary
16 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
17 At [60]–[64], as set out by Katz J in Ferrer-Aza v Nzone Race Management Ltd [2016] NZHC
885 at [10]. Also see generally Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [HR12.2.01]–[HR12.2.11].
judgment application were as stated by the Court of Appeal in Krukziener v Hanover
Finance Ltd, which confirmed:18
[26] The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable.... In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it....
[26] As this summary judgment application is in the context of the FTA, Mr McCartney, for the plaintiffs, referred me to the remarks of Katz J in Ferrer-Aza v Nzone Race Management Ltd (which itself referred to the Court of Appeal decision19 in Luxottica Retail New Zealand Ltd v Specsavers New Zealand Ltd):20
[56] The Court of Appeal has recently suggested that summary judgment may be unusual where breaches of the FTA are alleged. This is because such cases almost inevitably raise questions of fact that are unsuitable for determination at the summary judgment stage:
Although the threshold issue of whether the material in question is capable of breaching the Fair Trading Act is a question of law for the Judge, it will often be difficult to divorce that question from the issue of whether there has been a breach in fact in all the circumstances. It would be relatively unusual to find that a plaintiff ’s claims cannot succeed where issues of judgment are involved and where the evidence is incomplete and has not been tested at trial.
[27] I accept that caution needs to be borne in mind when considering an application by the defendant for summary judgment of the kind which has been made in this case.
The Fair Trading Act 1986: principles
[28] The starting point when considering whether the plaintiffs have a viable s 9 claim is to examine the issue of whether the statements, which are said to have amounted to misleading or deceptive conduct, have such qualities. In that regard, both counsel agreed that the appropriate authority to consider and apply was that of the Supreme Court in Red Eagle Corporation Ltd v Ellis.21 Determining that issue
requires the court to inquire whether a reasonable person in the position of the
18 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
19 Luxottica Retail New Zealand Ltd v Specsavers New Zealand Ltd [2012] NZCA 357 at [51].
20 Ferrer-Aza, above n 17.
21 Red Eagle Corp Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492.
claimant, having the characteristics known to the defendant or of which the defendant ought to have been aware, would likely have been misled or deceived.22
[29] However, the Supreme Court also dispelled any notion that there is an exclusive test for ascertaining a breach of s 9.23
[30] Two different approaches have emerged in relation to statements of opinion and predictions which later turn out to be wrong. The “orthodox” or “narrow” view limits misrepresentations to a misrepresentation of past or current fact.24 If that view is taken, a person can be liable for an expression of opinion, which later proves to be incorrect, only where he or she does not honestly hold that opinion when it is expressed, or, possibly, if there is no reasonable basis for it.25
[31] For the purposes of this judgment, it is sufficient to refer to the decision of the Court of Appeal decision in Premium Real Estate Ltd v Stevens.26 The Court expressed a preference for the “orthodox” view, which has been consistently applied in case law ever since.27 The Court believed that it was difficult to see why an honestly held and reasonably based opinion should be actionable under s 9 simply because it is not borne out by subsequent events.28 The person expressing the opinion may have done all that could sensibly be done to reach an informed view, but would otherwise still be liable, even if the subsequent events or circumstances were unforeseeable.29 As this case involves statements of opinion or prediction, this is the approach that I intend to apply when considering the allegations which the
plaintiffs make against the first and second defendants.
22 At [28].
23 At [26].
24 Premium Real Estate Ltd v Stevens [2008] NZCA 82, [2009] 1 NZLR 148 at [51].
25 At [51].
26 Premium Real Estate Ltd, above n 24.
27 At [54]. Also see David v TFAC Ltd [2009] NZCA 44, [2009] 3 NZLR 239 at [43].
28 At [54].
29 At [54].
Discussion of FTA claims: first and fourth causes of action
[32] The next issue to consider is whether the FTA claims can succeed.
[33] Given the more restrictive approach to statements of opinion and promises is the correct one to adopt, in light of the appellate authorities to which I have made reference, the issue becomes whether the defendants actually held the opinion that the construction work could be completed for $350,000, or whether they had a reasonable basis for holding that opinion. This comes down to an examination of the state of mind of the director, the second defendant, Mr Montgomery. He has deposed that he did hold such a view at the time when the statements were made,
prior to the signing of the contract in September 2013.30
[34] The evidence which the second defendant has given is not inherently implausible. As the parties accept, whichever construction company eventually undertook the construction work had an open remit. It would be required to repair defects to the building which it encountered after the building was opened up and construction work had started. On the other hand, the second defendant does not produce any basis upon which he arrived at the $350,000 figure. It might have been understandable if he had carried out a calculation on the basis of the area of the apartments, or the expected hours of work and materials that would typically be required for this type of work, and then adopted a reasonable assessment of what the most pessimistic outcome would likely be.
[35] Instead of doing that, the defendants justify their position on the basis that it was necessary to produce a figure, which would at least be a starting point for the owners when they approached their financiers to obtain funding for the repair work.
[36] Broadly the same comments can be made about the estimate of time that was going to be required to complete the remediation work. We are not told on what basis the second defendant made the estimate of the 18 weeks completion time.
[37] It is correct that the plaintiffs do not provide any evidence to rebut the assertion on the part of the second defendant that the opinions he gave were honest and reasonably based. They put forward evidence, though, that they attempted to have an independent quantity surveying firm, Kwanto Ltd, review the costs that the first defendant charged.31 That is not evidence, though, that bears upon the question of whether the second defendant was likely to have honestly and reasonably held the opinion concerning the likely completion costs and the duration of the construction period. In any event, the plaintiffs say that the first and second defendants declined
to cooperate with Kwanto Ltd to enable it to carry out its enquiries.
[38] The plaintiffs in this case do not claim that they are likely to find direct evidence showing that the second defendant did not honestly and reasonably hold the opinions in issue.
[39] It is possible that there are documents in the position of the defendants which would throw light on the situation. However, there is no requirement in the High Court Rules that an application for summary judgment by the defendant ought to be deferred until discovery has been attended to. The drafters of the Rules plainly intended that summary judgment could be entered without the plaintiff first having the opportunity to obtain documents on discovery.
[40] Nevertheless, as the Court of Appeal stated in Kembla, it cannot be overlooked that there are dangers inherent in summary judgment applications by defendants. The effect can be to force the case on for hearing before the plaintiff has had an opportunity to assemble its evidence and review any documents that might be available on discovery.
[41] If the plaintiffs are able to demonstrate, based upon the evidence presently in their hands, that the identifiable outlines of a claim exist, and the nature of the case is such that it is likely that there will be documents that are relevant to that claim, then the court might well conclude that it is not safe to proceed with the summary judgment application, without giving the plaintiff the opportunity to build up its case based upon discoverable documents.
[42] In effect, the plaintiff needed to be able to put evidence forward which gives rise to an inference which controverts the defendant’s position that the opinions were honestly held and reasonably based. In the absence of direct evidence on the point, they are driven to seeking to point to circumstances that give rise to an inference that the opposite is the case. This is not an impossible task. Given that they have physical access to the units that were actually repaired and they already have copies of some of the documents on which the first defendant’s charges were based, particularly the invoices, it may have been possible for them to obtain the assistance of an expert who could provide an opinion about the feasibility of the $350,000 completion cost and the 18 weeks construction time.
[43] It might also be feasible for the second defendant to put forward evidence, perhaps from an expert in the area, that the extent by which the estimates exceeded the actual cost is understandable and not unreasonable. No such evidence was put before the court for the hearing of the summary judgment application, though.
[44] My conclusion is that it cannot be inferred from the overall circumstances of the case that the second defendant provided his opinion honestly and that the opinion was one for which there was a reasonable basis. That, on its own, is determinative of the application for summary judgment.
Other causes of action against the first and second defendants
[45] I have concluded that the first and second defendants are not entitled to summary judgment against the plaintiffs on the claim under the FTA.
[46] As r 12.2(2) of the High Court Rules provides that a court may only give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action can succeed, there is now no basis upon which the defendants are able to obtain summary judgment.
[47] There is therefore no need to discuss the other causes of action in this judgment in relation to the first and second defendants.
[48] However, I still must deal with the only cause of action against Turner Hopkins, which is the third defendant firm. This is the sixth cause of action outlined earlier.
Claim for breach of statutory duty against third defendant
[49] The next claim is the sixth cause of action and alleges that the solicitor required to give a correct certificate pursuant to s 164A of the Land Transfer Act
1952 (LTA) failed to do so. The nub of the allegation is that Mr Stirling breached his obligations when he initiated the e-dealing on 24 April 2015 that resulted in mortgages being registered against the titles to the properties which the first plaintiff owned. It is alleged that the third defendant firm, in which Mr Stirling is a partner, is liable for his acts and omissions.
[50] This claim is inadequately particularised. I infer, though, that it involves an assertion that the solicitor was not acting in good faith when he included in the documentation filed a certificate in the following terms:32
I certify that I have the authority to act for the mortgagor and that the party has legal capacity to authorise me to lodge this instrument
[51] The authority which Mr Stirling apparently relied upon was contained in cl
19.5 of the Cost and Margin Building Contract, dated 28 September 2013. The provision stated that the owner irrevocably granted, and agreed to execute, in favour of the builder:
A registrable all obligations mortgage… over all of the Owner’s estate and interest in the Property… to secure payment of the Builder’s invoices and any other sums payable to the Builder pursuant to this contract; and
An unconditional irrevocable power of attorney in favour of the Builder to execute the Mortgage on the Owner’s behalf, whether or not the Builder has made demand on the Owner to do so.
[52] A private law cause of action will arise from the statutory obligation in circumstances which Lord Browne-Wilkinson identified in X (Minors) v
Bedfordshire County Council:33
32 BD 414.
33 X (Minors) v Bedfordshire County Council [1995] 2 AC 633 (HL) at 731.
The principles applicable in determining whether such statutory cause of action exists are now well established, although the application of those principles in any particular case remains difficult. The basic proposition is that in the ordinary case a breach of statutory duty does not, by itself, give rise to any private law cause of action. However a private law cause of action will arise if it can be shown, as a matter of construction of the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of the duty. There is no general rule by reference to which it can be decided whether a statute does create such a right of action but there are a number of indicators. If the statute provides no other remedy for its breach and the Parliamentary intention to protect a limited class is shown, that indicates that there may be a private right of action since otherwise there is no method of securing the protection the statute was intended to confer. If the statute does provide some other means of enforcing the duty that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action: Cutler v. Wandsworth Stadium Ltd. [1949] A.C. 398; Lonrho Ltd. v. Shell Petroleum Co. Ltd. (No. 2) [1982] A.C. 173. However, the mere existence of some other statutory remedy is not necessarily decisive. It is still possible to show that on the true construction of the statute the protected class was intended by Parliament to have a private remedy. Thus the specific duties imposed on employers in relation to factory premises are enforceable by an action for damages, notwithstanding the imposition by the statutes of criminal penalties for any breach: see Groves v. Wimborne (Lord) [1898] 2
Q.B. 402.These remarks throw light upon the function which the solicitor was discharging when he gave the certificate in the present case.
[53] The certificate is provided to the registrar. It is intended to provide assurance to the registrar that there is a proper cause for lodging the instrument which will, on acceptance by the registrar, affect the legal title of which the register is the defining document. The certificate is at least implicitly provided only to the registrar. There is no requirement that any other person, such as the proprietor of the title affected, receive a copy of the certificate. This would indicate in my view that the procedure of giving such certificates is not designed to provide information or reassurance to many other parties, again, such as the proprietor of the title.
[54] For these reasons, I consider that the proposed cause of action is not viable and it is not arguable that the plaintiff could obtain judgment on that cause of action. In light of those conclusions, the order of the court will be that judgment is entered for the defendants on their application with regard to this cause of action.
Conclusion and costs
[55] To summarise, the effect of this judgment is that the applications for summary judgment on each of the plaintiffs’ causes of action against the first and second defendants are dismissed. The summary judgment application brought by the third defendant against the first plaintiff is granted.
[56] The parties should confer on the question of costs and, if they are unable to agree, each side is to file memorandum not exceeding five pages within 15 working
days of the date of this judgment.
J.P. Doogue
Associate Judge
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