Westwood Group Holdings Ltd v Rilean Construction (South Island) Ltd
[2013] NZHC 1739
•10 July 2013
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
CIV-2010-425-000245 [2013] NZHC 1739
BETWEEN WESTWOOD GROUP HOLDINGS LIMITED
Plaintiff
ANDRILEAN CONSTRUCTION (SOUTH ISLAND) LIMITED
First Defendant
HOLMES STRUCTURES LIMITED Second Defendant/First Third Party
WALKER ARCHITECTS LIMITED Third Defendant/Second Third Party
QUEENSTOWN WATERPROOFING SYSTEMS LIMITED
Third Third Party
Hearing: 8 May 2013
Appearances: M E Parker and O B M Miles for Second Defendant/First Third
Party/Applicant
H R Smith for Third Defendant/Second Third party/Co- Applicant
C S Withnall QC for Plaintiff/Respondent
K R Baxter for First Defendant (abiding the outcome of these applications)
Judgment: 10 July 2013
JUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to joinder of third parties]
WESTWOOD GROUP HOLDINGS LIMITED v RILEAN CONSTRUCTION (SOUTH ISLAND) LIMITED [2013] NZHC 1739 [10 July 2013]
Introduction
[1] This judgment concerns an application to join additional third parties.
[2] In 2012, the defendant, Rilean, joined three third parties (Holmes, Walker, and P A Campbell). The third party claim against Mr Campbell was subsequently discontinued.
[3] Holmes and Walker have applied for leave to join six additional third parties.
[4] The joinder of Queenstown Waterproofing Systems Ltd as third third party was made at the commencement of the hearing of the present applications by consent, and is now reflected in the heading of the proceeding.
[5] In addition, I am required in this application to determine whether the following parties should be additionally joined:
Proposed fourth third party – Bubblehead Ltd, previously known as
Waterproofing Systems Ltd
Proposed fifth third party – McGregor Concrete Ltd
Proposed sixth third party – Rawell Environmental Ltd
Proposed seventh third party – Coffey Projects (New Zealand) Ltd
Proposed eighth third party – Triple Star Management Ltd
(Holmes seeks leave to join all five of the proposed third parties whereas Walker seeks leave to join the first three named).
[6] In relation to Rawell, I am also required to determine whether there should be leave to serve an overseas company.
[7] I set out in Schedule 1 at the conclusion of this judgment a table of the existing and proposed parties, together with a brief description of their role in relation to either the design or construction of “The Mountaineer”.
[8] Schedule 2 to this judgment is a spreadsheet showing the procedural steps taken by the parties in this proceeding (as provided by counsel for Holmes).
[9] Schedule 3 to this judgment is a spreadsheet prepared by counsel for Holmes showing the relationships between the various existing or proposed parties as Holmes intends to address the relationships at trial.
Indexed Party Name Abbreviations
Bubblehead – Proposed fourth third party – Bubblehead Ltd (previously known as
Waterproofing Systems Ltd)
Coffey – Proposed seventh third party – Coffey Projects (New Zealand) Ltd Holmes – Second defendant – First third party – Holmes Structures Ltd McGregor Concrete – Proposed fifth third party – McGregor Concrete Ltd Mr Campbell – Former third third party – Peter Alexander Campbell
Rawell – Proposed sixth third party – Rawell Environmental Ltd
Rilean – First defendant – Rilean Construction (South Island) Ltd
Triple Star – Proposed eighth third party – Triple Star Management Ltd Walker – Third defendant/second third party – Walker Architects Ltd Westwood – Plaintiff – Westwood Group Holdings Ltd
The big picture of this litigation
[10] At a time when this proceeding had a greater simplicity to it, I introduced my judgment dismissing the plaintiff’s summary judgment application with this explanation of the background:1
The plaintiff, Westwood, had a four storey building erected in Queenstown, to be known as “The Mountaineer”. The defendant, Rilean, entered into a contract to construct the building. This proceeding concerns the construction of the basement. The basement was constructed pursuant to the design set out in the contractual plans but upon construction water penetrated the basement. Westwood then arranged to have constructed a secondary system to pump out the water entering the basement.
Westwood’s case is that Rilean was obliged by contract to provide a watertight basement and that it did not do so. Westwood sues Rilean for the costs of the installation and future maintenance of the secondary system, for loss of rental income, and for diminution in value of the completed building. It quantifies its damages as not less than $4,136,000.00.
[11] The existing claims in this litigation arise thus:
First defendant – Westwood sues its project contractor, Rilean, for breach of a contractual commitment to build The Mountaineer as a watertight
construction;
First third party/second defendant – Rilean joins the structural engineer,
Holmes, as a joint tortfeasor for negligent design;
Westwood and Rilean sue Holmes for any negligent design;
Second third party/third defendant – Rilean joins Walker, architect, as joint tortfeasor for negligent design;
Westwood and Rilean sue Walker for any negligent design;
Third third party – Holmes and Walker join Queenstown Waterproofing, the installer of the waterproofing system as a joint tortfeasor for negligent
1 Westwood Group Holdings v Rilean Construction (South Island) Ltd HC Invercargill CIV-2010-
425-000245, 15 September 2011 at [1]-[2].
supply and installation of the waterproofing system (“Rawmat”)
[12] If the present joinder applications were granted, then the following would apply:
Fourth third party – Holmes and Walker join Bubblehead, the local distributor and supplier of the Rawmat waterproof membrane, as a joint tortfeasor for negligent supply and supervision of the installation of the
waterproofing system;
Fifth third party – Holmes and Walker join McGregor Concrete, the supplier and installer of the Shotcrete system, as a joint tortfeasor for
negligent supply and installation of the Shotcrete system;
Sixth third party – Holmes and Walker join Rawell, the provider of the Rawmat waterproof membrane and supplier of drawings and specifications, as a joint tortfeasor for negligent supply of product and
provision of drawings and instructions;
Seventh third party – Holmes joins Coffey, as the plaintiff’s contracted project manager for The Mountaineer development, as a joint tortfeasor through not ensuring the installation of the waterproofing system with
proper standards of workmanship;
Eighth third party – Holmes joins Triple Star, a further project manager contracted by the plaintiff for The Mountaineer development, as a joint tortfeasor for negligence in not ensuring the installation of the
waterproofing system with proper standards of workmanship.
Joinder of a third party: the general principles
[13] Rule 4.4 High Court Rules provides for the joinder of third parties in the following terms –
4.4 Third parties
(1) A defendant may issue a third party notice if the defendant claims any or all of the following:
(a) that the defendant is entitled to a contribution or an indemnity from a person who is not a party to the proceeding (a third party):
(b) that the defendant is entitled to relief or a remedy relating to, or connected with, the subject matter of the proceeding from a third party and the relief or remedy is substantially the same as that claimed by the plaintiff against the defendant:
(c) that a question or issue in the proceeding ought to be determined not only between the plaintiff and the defendant but also between—
(i) the plaintiff, the defendant, and the third party; or
(ii) the defendant and the third party; or
(iii) the plaintiff and the third party:
(d) that there is a question or an issue between the defendant and the third party relating to, or connected with, the subject matter of the proceeding that is substantially the same as a question or an issue arising between the plaintiff and the defendant.
(2) A third party notice must be issued within—
(a) 10 working days after the expiry of the time for filing the defendant's statement of defence; or
(b) a longer time given by leave of the court.
(3) A third party notice may be issued only with the leave of the court if—
(a) an application for judgment is pending under rule 12.2 or
12.3; or
(b) a proceeding is entered on a commercial list established under section 24A of the Act at a registry of the court.
[14] The discretion in r 4.4 is further defined by r 4.8 which provides –
4.8 Court's power and discretion
(1) On an application seeking leave to issue a third, fourth, or subsequent party notice, the court must have regard to all relevant circumstances, including delay to the plaintiff.
(2) On the making of an application of that kind, the court may grant or refuse leave or grant leave on just terms.
[15] The general principles which I adopt are as follows (as I stated them in
Walter Peak Corporate Trustee Ltd v Anderson Lloyd):2
(a) The defendant’s claim against the third party must be covered by one of the four grounds set out in r 4.4(1). A defendant may join the third party as of right within the time limit set down in r 4.4(2)(a). An application outside this time limit requires leave of the Court (r
4.4(2)(b)).
(b)Where leave is sought, the Court must consider firstly whether one of the grounds in r 4.4(1) exists and secondly whether to exercise its discretion to join the third party: ANZ Banking Group (NZ) Ltd v Dairy Containers Ltd.3
(c) In exercising its discretion, the Court must have regard to all relevant circumstances, including delay to the plaintiff (r 4.8).
(d) The interest of justice between all parties, however, is paramount.
While any delay to the plaintiff is regrettable, the attainment of justice by the most efficient means is an overriding consideration: KPMG Peat Marwick v Cory-Wright & Salmon Ltd (in rec and liq).4
(e) Where the defendant has not been guilty of unreasonable delay, a factor in favour of exercising the discretion will be whether the defendant could have joined the third party as of right if it had applied within the time limit: ANZ Banking Group (NZ) Ltd v Dairy
Containers Ltd.5
2 Walter Peak Corporate Trustee Ltd v Anderson Lloyd HC Dunedin CIV-2009-412-389, 9
December 2011 at [8].
3 ANZ Banking Group (NZ) Ltd v Dairy Containers Ltd CA156/92, 17 December 1992.
4 KPMG Peat Marwick v Cory-Wright & Salmon Ltd (in rec and liq) CA77/94, 20 May 1994.
5 ANZ Banking Group (NZ) Ltd v Dairy Containers Ltd, above n 3..
(f) Equally, unexplained or unacceptable delay by the defendant may result in leave being refused: Meroiti v National Australia Finance Ltd.6
(g)In cases of serious delay that risk prejudicing the plaintiff, the court may be prepared to make an order for joinder on conditions designed to preserve the hearing date for the plaintiff ’s claim against the defendant: Total Air Supply Company Ltd v Total Air Supply Company (2007) Ltd.7
(h)Avoiding duplicity of proceedings and preventing the same question being tried with different results militate in favour of allowing the application. The overriding purpose of the third party rules is to enable all the issues to be dealt with in one action: Turpin v Direct Transport Ltd.8
(i)There is, however, a need to strike a balance between all the parties’ interests. The extent to which the plaintiff is necessarily involved in the issues between the defendant and the third party is a consideration. Equally, it can be oppressive and unjust to involve a third party in a proceeding where much of the proceeding will not involve that third party.
(j)The Court may have regard to the relative strengths and weaknesses of the parties’ cases, including the case against the proposed third party and the likelihood of recovery: Dairy Containers Ltd v NZI
Bank Ltd.9
6 Meroiti v National Australia Finance Ltd CA128/90, 6 December 1990.
7 Total Air Supply Company Ltd v Total Air Supply Company (2007) Ltd HC Auckland CIV-2008-
404-7627, 10 January 2011.
8 Turpin v Direct Transport Ltd [1975] 2 NZLR 172 (SC).
9 Dairy Containers Ltd v NZI Bank Ltd [1993] 1 NZLR 160 (HC) at 167.
Contribution from a third party under the Law Reform Act 1936 – the principles
[16] Both Holmes and Walker assert that if they are liable to Westwood or to Rilean, then they are entitled to contribution and/or indemnity from the proposed third parties upon the basis that they are joint tortfeasors.
[17] Section 17(1)(c) Law Reform Act 1936 states:
17Proceedings against, and contribution between, joint and several tortfeasors
(1) Where damage is suffered by any person as a result of a tort
(whether a crime or not)—
...
(c) Any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued in time have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.
[18] I adopt the same principles or approaches to the right of contribution which I
set out in Walter Peak Corporate Trustee Ltd v Anderson Lloyd:10
(a) The essence of the right to a contribution lies in the liability to a common demand (Halsbury’s Laws of England).11
(b)The elements necessary for a defendant to succeed in joining a third party pursuant to s 17(1)(c) of the Law Reform Act 1936 are:12
(i) The plaintiff has suffered damage as a result of a tort;
(ii) The defendant is a tortfeasor liable in respect of that damage;
10 Walter Peak Corporate Trustee Ltd v Anderson Lloyd, above n 2, at [11].
11 Halsbury’s Laws of England (5th ed) 2008 vol 49 at [1166]; vol 9(1) at [1166].
12 Computer Training Services Ltd v Universal Data Systems Ltd HC Auckland CL 44/99 ,1 August
2000 at [5].
(iii)The third party is also a tortfeasor liable in respect of that same damage.
(c) Damage does not mean ‘damages’; it means the harm suffered by another person: Birse Construction Ltd v Haiste Ltd (Watson & Ors third parties).13
(d)The damage must be the same. In other words, the harm caused by the proposed third party must be the same as that caused to the plaintiff by the defendant.14
(e) The phrase ‘joint tortfeasors or otherwise’ in s 17(1)(c) includes concurrent tortfeasors as well as joint tortfeasors.15 While the damage must be the same, the causes of action (the specific torts) may be different.
The factual basis of the third party claims
Queenstown Waterproofing (third third party)
[19] A common feature of the claims against those proposed as third parties from the third third party through to the sixth third party is that they have an association directly with the waterproofing system.
[20] Although Queenstown Waterproofing has now been joined by consent as the third third party, a discussion of its alleged role conveniently sets the scene for the other third parties involved with the waterproofing system.
[21] It appears to be common ground that in the ultimate design and construction of The Mountaineer, a combined system for waterproofing was adopted. The system used Shotcrete as a wall casing method and Rawmat Bentonite Geotextile waterproof membrane. The evidence for Holmes in support of its joinder applications was in the
form of affidavits filed by Holmes’ Project Director, John Trowsdale. Mr Trowsdale
13 Birse Construction Ltd v Haiste Ltd (Watson & Ors third parties) [1996] 2 All ER 1 at 8.
14 Computer Training Services v Universal Data Systems, above n 12, at [11].
15 At [12].
referred to documentary evidence recording that Westwood intended to have Queenstown Waterproofing detail the waterproofing system and to provide that detailing to the architect to be implemented into the design, with the applicator responsible for design as a sub-contractor to Rilean. The waterproofing membrane ultimately selected, Rawmat, manufactured by a United Kingdom company, Rawell (proposed sixth third party) was presented to a group involved in The Mountaineer project by Bubblehead (the proposed fourth third party). Mr Trowsdale also exhibits contemporary documents which suggest that Queenstown Waterproofing was to have provided a written guarantee in relation to waterproofing, with insurance to be in place.
[22] The project progressed with Queenstown Waterproofing involved as applicator of the Rawmat.
[23] With Queenstown Waterproofing now joined as the third third party, the Court will be entitled to determine as between it and other parties whether, in relation to the failure of watertightness at The Mountaineer, Queenstown Waterproofing bears any legal responsibility. If Queenstown Waterproofing shares a legal responsibility with other defendants/third parties, the Court will be able to determine in what proportion the defendants should be held liable.
Bubblehead (proposed fourth third party)
[24] Mr Trowsdale deposed, as I have noted, that it was Bubblehead which presented the Rawmat product to a group associated with The Mountaineer project. He exhibits a letter sent by Bubblehead to the contract engineer attaching “certified partner warrantees” (sic), including in relation to the Rawmat warranty. Mr Trowsdale deposes in relation to Bubblehead that it:
Was the supplier of the Rawmat product who warranted its performance, and it was their representations as to the properties of the product that gave rise to their consideration by [Rilean] and [Westwood] of the appropriateness of this product.
[25] Mr Trowsdale further deposes that as a result of the representations and warranties, Rawmat was chosen to the knowledge of Bubblehead and Rawell (United Kingdom manufacturer) to be used in conjunction with Shotcrete for the purpose of waterproofing The Mountaineer basement.
[26] Mr Trowsdale refers to documentation indicating that after the basement was constructed Bubblehead was involved in proposals to fix the waterproofing problem, during which John Stallard of Bubblehead gave an assurance that Bubblehead would issue a full guarantee for the tanking system to the walls when full confinement was achieved and water ingress stopped.
Rawell (proposed sixth third party)
[27] Mr Trowsdale identifies Rawell as a United Kingdom based manufacturer of roofing products including Rawmat waterproofing membranes.
[28] Mr Parker, appearing for Holmes, conceded that it is not known at this point what contractual relationships may have been in place between Westwood and/or Rilean and Rawell. (Mr Parker signals that identification of the precise relationship may have to be clarified through interrogatories). What Holmes primarily relies upon for the joinder of Rawell is evidence of direct communications between Rawell and either or both Westwood and Rilean and evidence indicating that Rawell supplied at least some waterproofing details for the project. Significantly, Mr Trowsdale produces as examples of Rawell’s drawings 11 pages produced by Rawell specifically in relation to “The Mountaineer redevelopment” between 13 July
2007 and 27 February 2007. It is clear that the detail is provided in relation to a proposal using both Rawmat and Shotcrete. This is evidenced by one drawing which bears the title “waterproofing to pile/shotcrete detail” which sets out the relationship of the Rawmat and Rawseal to the Shotcrete.
[29] Mr Trowsdale produces the report of Paul Davis Rajalingam Consulting Engineers of March 2009 on the basement structure waterproofing of The Mountaineer development. He deposes that that report was obtained by the plaintiff through its project manager. The report identifies a failure in the Rawell drawings to detail specific requirements of construction, leading to a conclusion that the
waterproofing contractor would have to be relied on to understand (in the absence of detail) how that should be constructed.
[30] Mr Trowsdale produces also a report obtained by Rilean from Concrete Consultancy Services Ltd dated 4 June 2009. The report states that the leakage problems have occurred as a direct consequence of a lack of proper confinement to the water seal and Rawell membrane at the base of the Shotcrete wall. The report writer (Larry Gaerty) concludes:
…it is quite clear that the combination of shotcrete walls and a Rawell tanking system does not necessarily provide for a safe solution with respect to the delivery of complete watertightness and that some degree of water ingress is inevitable.
[31] Mr Trowsdale also produces correspondence between Rilean and the British Board of Agrément which indicated that the Board (the major authority offering approval and certification services to manufacturers and installers supplying the construction industry in the United Kingdom) had not considered the suitability of the Rawmat product with Shotcrete in assessments it had carried out.
McGregor Concrete (proposed fifth third party)
[32] McGregor Concrete was the applicator of the Shotcrete.
[33] The case of Holmes and Walker’s claim against McGregor Concrete, as explained in detail in the evidence of Mr Trowsdale, is that the Shotcrete application was critical to the confinement of the Rawmat. The central allegation against McGregor Concrete is that the Shotcrete was not adequately placed or compacted, with the consequences that it did not provide adequate confinement and caused the (Rawmat) Bentonite membrane to fail.
[34] Holmes and Walker claim contribution and/or indemnity.
Opposition to joinder of parties involved with Rawmat and Shotcrete
[35] Mr Withnall QC, for Westwood, grouped his submissions in opposition under six heads:
(a) Basis for joinder;
(b) No reasonable cause of action;
(c) Defective pleadings will cause extra delay to the plaintiff; (d) Delay in making the applications;
(e) Consequential delay in any event; (f) Court’s discretion.
[36] I will examine those in turn.
Basis of joinder
[37] Holmes and Walker rely on each of the four limbs of r 4.4(1)(a), asserting: (a) A right to contribution or indemnity from each third party;
(b)An entitlement to relief or a remedy connected with the waterproofing failure which substantially is that claimed by Westwood and Rilean against Holmes and Walker;
(c) There are questions in issue in the proceeding which ought to be determined not only between Westwood and Rilean but also between the other parties identified in r 4.4(1)(c);
(d)There is an issue between Holmes and Walker and the proposed third parties relating to the waterproofing failure which is substantially the same as an issue between Westwood and Rilean.
[38] Mr Withnall developed submissions in relation to each limb of r 4.4(1) in arguing that none of the limbs is satisfied in this case. Mr Parker and Mrs Smith made submissions to the contrary in relation to each limb. As I am satisfied that the third limb (under r 4.4(1)(c)) is satisfied, I do not intend to examine each of the other limbs.
[39] The third limb requires that there be a question in issue in the proceeding which ought to be determined, not only between the plaintiff and the defendant but
also as between either:
the plaintiff, the defendant and the third party, or the defendant and the third party; orthe plaintiff and the third party.
[40] In Westwood’s opposition, Mr Withnall relies upon the fact that Westwood chose to focus its claim against Rilean solely on Rilean’s contractual obligations in relation to constructing a watertight building. (It was this claim, so pleaded, that was the subject of my findings dismissing the Westwood summary judgment application against Rilean).16 My primary conclusion in that judgment was thus:17
I find that it is at least arguable that either through an exercise of implying terms or interpretation the parties to this contract must have meant that Rilean would not have responsibility for a lack of watertightness if water intrusion was caused by a design flaw.
[41] Following the delivery of that judgment Rilean, in keeping with the indication it had given at the summary judgment hearing, issued its third party claims against Holmes and Walker (and at that time, Mr Campbell). Against each Rilean made allegations as to the negligent provision of plans and specifications,
with a claim for indemnification or contribution from each third party.
16 Westwood Group Holdings v Rilean Construction (South Island) Ltd, above n 1.
17 At [145].
[42] With Holmes and Walker then joined as third parties, Westwood decided to sue them directly as defendants. The current version of the Westwood statement of claim, filed on 22 November 2012, continues the claim against Rilean for breach of contract. But then, as against Holmes and Walker, Westwood pleads (in the event the Court finds contrary to Westwood’s position) that Holmes and/or Walker were contractually responsible for the design and that the design as produced could not result in a watertight basement that Holmes and Walker have breached duties of care owed either under their respective terms of engagement or at common law.
[43] Both Holmes and Walker, by their pleadings, deny negligence or other breach of duty.
[44] The third party claims proposed by Holmes and Walker would call upon the Court to determine whether the waterproofing issues at The Mountaineer were caused by design flaws, construction defects, or a combination of the two.
[45] I accept the submission of Mrs Smith for Walker that in this case the design and construction elements of the waterproofing of The Mountaineer are fundamental to the case as already pleaded. In terms of r 4.4(1)(c), I am satisfied that the cause of the waterproofing problems at The Mountaineer is in issue. If there are no other reasons standing in the way of the exercise of the discretion to join the third parties, it ought to be determined not only between Westwood and Rilean/Holmes/Walker but also between those parties and the third parties. Such accords with the long-
established recognition that:18
… the overriding object of the third party rules is to enable all issues to be dealt with in one action.
No reasonable cause of action?
[46] When Holmes and Walker filed their interlocutory applications, they filed
(consistently with the usual practice) draft statements of claim. The key pleading in terms of duty of care against each third party is to this effect the third party owes a
18 Turpin v Direct Transport Ltd [1975] 2 NZLR 172 (SC) per Cooke J at 175; Approved by ANZ Banking Group (New Zealand) Ltd v Dairy Containers Ltd, above n 3, per Thomas J at 6 (delivering the judgment of the Court).
tortious duty of care to Westwood to supply and install the waterproofing system with proper standards of workmanship, and a similar and concurrent tortious and contractual duty to Holmes/Walker in relation thereto.
[47] The statement of claim then pleads an entitlement to indemnity or contribution as a joint and/or concurrent tortfeasor, pleads a substantial similarity of relief or remedy, and finally pleads that the issues in the proceeding ought to be determined as between the third party and existing parties.
[48] Mr Withnall, for Westwood, criticises the pleading as not disclosing a reasonable cause of action. He submits that the statements of claim do not identify:
(a) The facts giving rise to the alleged duty of care;
(b) The nature, scope and extent of the alleged duty of care;
(c) Any alleged breach or breaches of the alleged duty of care;
(d) Because no breaches are identified, how the proposed third parties
caused or contributed to the plaintiff’s losses or any part thereof.
[49] Mr Withnall submits that it was incumbent upon the applicants to put adequately particularised draft statements of claim before the Court.
[50] Mr Parker and Mrs Smith conceded that aspects of Mr Withnall’s criticism of the draft statements of claim were valid. They accepted that significantly better particularity would be required if leave were granted to issue third party claims.
[51] This was not an application to issue third party notices supported simply by a draft pleading but with a minimum of affidavit evidence as to the substantive issues. Mr Trowsdale’s two affidavits provide the substantial factual background to explain and underpin the basis of the proposed third party claims. In relation to each claim, Mr Trowsdale refers chronologically to the involvement of the third party. He exhibits documents relevant to that party. While volume alone is an unreliable indicator of substance, the 154 pages of documentary exhibits adduced in support of
this application were responsibly selected by Mr Trowsdale as evidencing the statements and conclusions he deposed to in his affidavits. By the nature of much of the documentation Mr Trowsdale refers to, it is documentation which was obtained from other parties, particularly Westwood, in the course of discovery in this proceeding. It is material of the nature upon which counsel for Holmes and Walker will be entitled to seek to develop their case.
[52] Having regard to Mr Withnall’s criticism of the draft statements of claim as they stand, there was therefore in my earlier summary of the third party claims some particular focus on the evidence adduced by Mr Trowsdale rather than simply on the draft statement of claim.
Defective pleadings causing delay to Westwood?
[53] Mr Withnall submitted, as a particular aspect of the Court’s consideration of delay in this case, that the Court should deny the applications on the basis that there will inevitably be applications to strike out the third party claims if the proposed third parties are joined.
[54] By reason of the extensive, supporting material provided in Mr Trowsdale’s affidavits, I do not find that applications for strike out are inevitable in this case let alone that they would, if brought, be inevitably successful. Mr Withnall’s submission has some initial force by reason of the form of draft statements of claim that are before the Court at present. Assuming leave is granted and the claims are filed with more particularity, the usual strike out principles will apply so that the Holmes/Walker pleadings will be taken to be correct unless the contrary can be clearly demonstrated. As matters stand, the detailed evidence of Mr Trowsdale and in particular the supporting documents reinforce the underlying proposition of Holmes and Walker that their third party claims appear tenable.
[55] However, the proposed third parties, if joined, will have rights to apply to have the claims against them struck out. There is a realistic prospect that at least one or more of the proposed third parties will apply for an order striking out the claim against them. Such an eventuality is relevant to the issues of delay which I now come to.
Delay in making applications and consequential delay in any event
[56] Westwood asserts that the delay and prejudice which will be caused through the joinder of additional third parties should lead to a refusal of the application.
[57] Before examining the more contentious elements of that assertion, there are some matters of undisputed background which come into account.
[58] Westwood’s summary judgment application was dismissed on 15 September
2011. Holmes and Walker (and Mr Campbell) became parties to the proceeding when joined as third parties on 22 February 2012. Holmes and Walker were then joined by Westwood also as defendants on 8 March 2012.
[59] The existing parties agreed upon directions for tailored discovery in May
2012. At the same time, they agreed a list of issues of fact and law (which they subsequently confirmed in October 2012).
[60] In October 2012 counsel for the existing parties filed a joint memorandum requesting directions as to the completion of interlocutory matters and the allocation of a trial date (then estimated to require seven days). The Court gave directions as requested with any interlocutory applications to be filed by 30 November 2012 and the Registrar to allocate in consultation with counsel a date for a seven day trial. Counsel, in requesting the allocation of a trial date, identified two specifically outstanding interlocutory matters, namely the provision of further and better particulars by Westwood and Rilean and the completion by Holmes of its task of e- discovery and listing. Both those were expected to be completed in November.
[61] A judicial settlement conference was allocated for 7 March 2013 (an earlier date of 6 December 2012 having been vacated because it was too soon to arrange exchange of expert reports or conference of experts and to digest the extensive lists of documents which had been filed.
[62] At the request of the parties, the 7 March 2013 settlement conference date was also vacated, with the parties left to explore private mediation if they could not agree upon a new settlement conference date.
[63] On 12 March 2013, the Registrar gave notice of the allocation of a hearing date to commence on 16 September 2013 (seven days reserved), with the close of pleadings date identified as 24 June 2013.
[64] In late March, counsel requested a telephone conference to discuss a timetable for the joinder of additional third parties, consequential discovery and inspection orders, exchange of expert evidence, and whether the allocated fixture date of 16 September 2013 remained appropriate given the expected joinder of third parties.
[65] At a telephone conference on 10 April 2013, the requested matters were all discussed. A 10 day fixture was allocated for 25 November 2013 on a backup basis to protect the interests of all parties in the proceeding but I directed that that allocation would not cut across the confirmed trial date of 16 September 2013 which was to remain in place with the existing timetabled pre-trial directions. The Court directed that any application for joinder of additional third parties was to be filed and served by 17 April 2013 and were to be for hearing on 8 May 2013. The applications under consideration were filed on 17 April 2013.
[66] I set out that background in some detail to indicate fairly to all parties how the proceeding had been tracking. The key points I now summarise are these:
By October 2012, the existing parties each recognised the appropriateness of having a seven day trial allocated, with no joinder of additional parties
signalled.
To the extent that the parties then obtained a timetable for interlocutory applications of any kind (to be filed by 30 November 2012), the date
passed without any such filing or any request for extension of time.
The Registrar, in March 2013, upon consultation with counsel, set down the seven day trial to commence on 16 September 2013.
At that point Holmes and/or Walker indicated a need to address the possible joinder of additional parties.
On 10 April 2013, upon hearing from counsel, the Court directed that any application for joinder be filed in mid-April with opposition to be filed in
late April.
[67] Mr Withnall submits that the defendants’ delay in making these applications means that, if granted, the trial dates in both September and November would be imperilled.
[68] Mr Withnall notes correctly that the defendants had the opportunity to join third parties without leave in May 2012. When the Court, at the request of all parties, made a comprehensive direction as to the date for filing interlocutory applications, that date (30 November 2012) passed without the defendants filing any such applications. The defendants did not make these applications for more than four months after that date, and made them only after the Court had allocated a final date for the filing of any joinder application. The September trial date was at that point only five months distant. I accept that at that point, even were joinder to have been granted on the hearing date, the September 2013 trial date would no longer have been workable.
[69] The alternative, backup of November 2013 was at the date of application some seven months distant. Mrs Smith, in her submissions for Walker, provided a “potential timetable” which assumed an immediate judgment on these applications to be followed by a timetable which would see new parties filing any interlocutory applications by mid-July 2013. When one has regard to the steps to be taken before that point was reached (service of proceedings upon parties, filing of defences and any cross-claims, completion of discovery and inspection), Ms Smith’s “potential timetable” was always likely to prove unduly optimistic. The existing parties have taken substantial time to bring themselves to a complete digesting of evidence, briefing of experts, and readiness for trial. The time taken for those matters is cited by Holmes and Walker as a substantial part of the reason for the relatively recent filing of the present applications. In any timetable to be imposed upon newly joined
third parties, the Court could not in justice seek to impose, in the interests of an early trial, some form of strict timetable which would give the newly joined parties a valid grievance that they had been put under unrealistic time constraints.
[70] Mr Parker, for Holmes, also indicated that Holmes may wish to administer interrogatories to the existing parties. While such a step may now require leave, the very indication that interrogatories may be called for on the part of a defendant which has been involved from an early point, reinforces the possibility that newly joined parties, whose role in The Mountaineer redevelopment may have been less central, may well consider it necessary themselves to administer interrogatories. Such a step would normally and logically follow the completion of any residual issues concerning discovery.
[71] In some ways, the prospect of delay identified by Mr Withnall is reinforced by the detail if not the direction of submissions made by Mr Parker for Holmes. Mr Parker submitted that there had been no delay in filing the applications for leave to join the third parties. He emphasised that Holmes had not been an original party but was only joined after the plaintiff’s unsuccessful summary judgment application. As I have recorded, that joinder occurred in February 2012.
[72] Mr Parker then said in his written submission:19
The nature of the proceeding, amply demonstrated in the decision on the summary judgment application, discloses a complex building project in respect of which discovery, as aforesaid, has taken a great deal of time to organise and agree as to process thereof; and the actual execution of undertaking discovery and inspection has been time consuming. Once this was completed by the Second Defendant, applications were issued. Reference to the Court file demonstrates that the process of discovery and inspection has been time consuming because of its extent, before there could be a full assessment of the documentation and reference thereof to experts. There has been [no] objection by the Plaintiff to the process and the time it has taken.
[73] Mrs Smith’s submissions included two aspects of discovery which might be considered additional to the points raised by Mr Parker. First, Mrs Smith observed that discovery and inspection of the proposed third party’s documents is expected to
be limited given that they had discrete involvement in the design or construction of
19 Mr Parker’s submissions at [32].
the basement. That observation may have force in relation to those parties who might be considered to be tradespeople. However, in relation to the discovery by a party such as the manufacturer, Rawell, the possibility of limited discovery seems unlikely. By way of illustration, Holmes has already made reference to correspondence with the British Board of Agrément concerning testing of the Rawmat product in conjunction with Shotcrete. There is a potential for substantial discovery requirements upon Rawell. Further, even should some of the proposed third parties have had a limited involvement those parties, and their legal and expert advisors, would be left with the task of digesting all the discovery provided by other parties.
[74] Mrs Smith made the further point that the parties already involved in the proceeding have completed discovery and inspection electronically, so that it is anticipated that those parties can provide disclosure to the proposed third parties immediately. That observation, correct so far as it goes, does not address the extent of the task that will then face the advisers to the newly joined parties.
[75] The Court must also accept that there is a real prospect of a strike out application by one or more of the third parties if joined. Any such application would inevitably preclude a trial this year, or even very early next year. The application – by its nature with the mix of tortious and contractual issues involved – is likely to involve arguments of some complexity and will not be resolved within weeks of application. If such applications are refused, the third party involved will only then become involved in the discovery process and in any other ensuing interlocutory attendances.
[76] Finally, the Court has no information before it as to whether any of the proposed third parties carries insurance. It seems likely that one or more of them will have insurance. While the Court in relation to any timetable will seek to ensure that the involvement of an insurer does not unduly extend timetables, the Court must take account of the right of any insured party to complete any process associated with a claim upon an insurance policy and the response of that policy to this particular litigation.
[77] Standing back and considering these various attendances, I consider that Mr Withnall was realistic in his submissions in his estimate of the potential delay implications. Mr Withnall concluded in relation to the event that additional parties were joined:
Realistically, a fixture could not be allocated before April or May 2014 if these parties are joined. It could well be very much later.
[78] Mr Withnall’s assessment is correct. If one allows for the possibility of at least one strike out application, followed by other interlocutory steps including discovery, there is a real prospect that the parties will not be in a position to prevent allocation of a trial date before the end of this year which likely will mean a trial to commence in mid-2014 at the earliest.
[79] I have to weigh the implication of that delay against the decision of Holmes and Walker to file their joinder applications as late as mid-April 2013. While I have been given some general information indicating that discovery and inspection extended beyond the end of November, Mr Withnall was correct to observe that there has been no specific explanation for the delay. Mr Trowsdale refers to documentary evidence to explain the intended third party claims. He does not clearly point to any difficulty which would have existed in identifying a potential third party claim on the basis of the documents available before November 2012 and after November 2012. The evidence does not persuade me that the applicants were in possession of all the relevant information before the November timetable date for third party applications. There is force in Mr Withnall’s submission that the reasonable observer could have expected Holmes and Walker (and their advisers) to be informed as to the potential liability of the proposed third parties by November 2012 if not appreciably before. That, to some extent, is reinforced by the willingness of the solicitors acting for Holmes and Walker to agree in October 2012 to file all interlocutory applications by the end of November 2012.
[80] The application for joinder was not made for almost six months after that date and was made after all existing parties had agreed to the allocation of a trial date this year.
[81] I consider the delay by Holmes and Walker in making the present applications a significant factor to be weighed.
Specific delay through joinder of specific parties
[82] Mr Withnall submitted that the potential joinder of Rawell, as a United
Kingdom company, carries with it a specific potential for delay.
[83] There are, as Mrs Smith recognised in her “potential timetable”, at least the additional five days for the filing of an overseas defendant’s defence, but in practice having an overseas litigant is likely to involve some recurring delays if for no other reason than that Rawell may well have two sets of solicitors involved.20
Benefit to applicants and prejudice to plaintiff
[84] In seeking to join Queenstown Waterproofing, Bubblehead, Rawell and McGregor Concrete, Holmes and Walker emphasise that those parties (rather than Holmes and Walker themselves) were entities who held themselves out as specialists in the waterproofing of basements (either on the manufacturing and supply side or the construction side). This may well be a case where, with relevant breaches of duty established at trial, rights of contribution, if not indemnity, will arise. Mr Parker and Mrs Smith, for Holmes and Walker, emphasised the degree of prejudice which will occur for Holmes and Walker, and for the Court in terms of judicial resources, should Holmes and Walker be left to pursue the proposed third parties in an independent proceeding. I note particularly (paraphrased):
(a) The loss of the opportunity to have all issues as between all such parties resolved at one trial.
(b) The consequential possibility that inconsistent decisions will occur.
(c) The reality that parties involved in both proceedings will have a duplication of costs.
20 Rule 6.35 High Court Rules.
(d)The avoidance of confusion, prejudice or oppression for individual parties, with a possibly higher prospect of resolution by alternative dispute resolution should all relevant parties be involved.
[85] These are significant factors to be weighed in favour of granting the application. They are, as Mr Parker submitted, factors which led the Court to direct that two proceedings be heard together in Medlab Hamilton Ltd v Waikato District Health Board.21
[86] On the other hand, Mr Withnall noted the absence of any evidence that the proposed third parties could contribute significantly to the satisfaction of a damages award. While I have earlier noted the likelihood that one or more of the proposed third parties (I have in mind particularly Rawell) might have relevant insurance cover, Mr Withnall notes the absence of any specific evidence relevant to that subject. (The single arguable exception is a reference by Mr Trowsdale to public liability insurance in the case of Queenstown Waterproofing, but such insurance would not usually respond to the damages claimed in this case.)
[87] The single relevant set of evidence put before the Court in relation to several of the proposed third parties was produced by Mr Withnall from the Bar. It was produced however without objection by other counsel and comprises in any event matters of public record, being extracts from the Register of Companies. The information discloses:
(a) Bubblehead – the Registrar of Companies has given notice that he is satisfied that Bubblehead has ceased to carry on business and has initiated action to remove Bubblehead from the Register.
(b)Queenstown Waterproofing – this company has $100 shares. The inability of proposed third parties to engage counsel and to fund a long trial was taken into account by the Court of Appeal in Bank of New Zealand v Equiticorp Industries Group Ltd (In Statutory
Management),22 as indicating that even if the applicant bank obtained joinder orders and judgments for contributions, no substantial amounts would be likely to be forthcoming. I have no evidence in this case of a nature to allow the Court to draw firm conclusions as to probable level of contribution, but in relation to at least Bubblehead and Queenstown Waterproofing there is at least a question mark against ability to contribute meaningfully to settlement.
[88] Finally, in relation to the potential prejudice to Holmes and Walker through inconsistent findings, I view the potential for inconsistent findings as a real risk which must be taken into account. In his submissions for Westwood, Mr Withnall emphasised the very specific nature of the contractual claim against Rilean, namely that Rilean was contractually committed to construct a watertight building and failed to do so. Mr Withnall would portray that as a relatively narrow issue. But there are potentially complex design and construction issues. They will arise through the nature of Rilean’s third party claims against Holmes and Walker. They will also arise through Westwood’s suing Holmes and Walker as defendants in case the Court should find that (as alleged by Rilean) either Holmes or Walker or both had been negligent in their preparation of specifications or plans for the basement of The Mountaineer. The range of issues for determination at trial will be determined by the full ambit of all the pleadings, not just the pleading of the plaintiff’s primary cause of action.
[89] On the other hand, the Court must assess the degree of prejudice to Westwood if there is joinder of the proposed third parties. I am satisfied that there will be distinct prejudice to Westwood. Since its summary judgment application was dismissed in September 2011, Westwood has worked cooperatively with the existing parties (as they became parties) to have the proceeding ready for trial. Westwood was entitled to believe, in late October 2012, when all parties joined in a request for the allocation of a trial, that the trial to be allocated would not be prejudiced by any of the parties then pursuing a right to join other parties. That belief would have been reinforced when the existing parties all agreed shortly afterwards to the allocation of
a settlement conference involving the existing parties. All parties then obtained the relative certainty of a trial to commence on 16 September 2013 when the Registrar gave notice on 12 March 2013 of that hearing date. (The backup fixture date of 25
November 2013 was allocated not to replace the September 2013 date but to serve as a backup should it prove to be a viable date in the event joinder of any further third parties was ordered).
[90] The plaintiff ’s pleaded losses in this case are substantial. It was to have had The Mountaineer redevelopment constructed in 2008 and 2009 at a total contract price of $13,225,144.08. It incurred $500,000 in installing a management system to deal with the waterproofing issues. It claims on a capitalised basis the ongoing costs of maintaining and operating the management system. It claims a loss of rental (by reason of reduced letting space) of $256,000 to November 2012 together with capitalised future loss of rental income. It also claims a diminution in the value of the completed building of $2,480,000. While the extent of the losses has understandably not been the subject of evidence in relation to the present applications, it is clear that The Mountaineer was constructed with waterproofing problems. The party which has been bearing the cost of those since the first half of
2009 is Westwood. It committed, with the other existing parties, to be ready for trial with all interlocutory applications filed by November 2012. The Court was able to accommodate a trial either in September 2013 or in November 2013. A trial at such times would not be viable if the proposed third parties are joined. Westwood would likely face a delay to trial of at least eight months from September or six months from November.
[91] Cases in which joinder applications have been refused principally because of prejudice to the plaintiff will often turn on their facts. The brief judgment of Miller J in Barber v Smith23 is such a case. Barber v Smith shares with this case the feature that, with a significant number of parties already involved (plaintiffs and six defendants) the first defendants sought leave to join a third party. The delay between the scheduled trial (16 August 2010) and a possible replacement fixture would have
been very substantial (in the order of 14 months). A potential delay in this case of
23 Barber v Smith HC Auckland CIV-2008-404-7067, 26 May 2010.
six or eight months does not carry the same degree of prejudice. It is nevertheless a significant prejudice in relation to this litigation.
[92] The late decision of Holmes and Walker to seek joinder aggravates the position in this case, as Miller J found it did in Barber v Smith. His Honour observed in that case:24
The important point seems to me this. It is not for the plaintiffs to identify for the first defendants any party against whom they might make a claim for contribution. Having been notified of a claim which was brought in contract and in tort, it is for the first defendants to see who was responsible. They are primarily responsible for the fact that it has not become apparent to them until late in the piece that Markplan may have contributed to the losses through defective steel design. It may well be as Mr Price says, that this would have been avoided had the plaintiffs made earlier discovery, but that does not excuse the first defendants or justify the loss of the fixture at this stage.
[93] In this case, the very issue raised against Holmes and Walker was the design of specifications and plans for The Mountaineer’s waterproofing. The above observations of Miller J in Barber v Smith resonate in relation to the failure of Holmes and Walker to identify at a much earlier point the additional four parties against whom they might make claims for contribution relating to poor waterproofing or poor waterproofing design.
The Court’s discretion
[94] The Court of Appeal has observed that the attainment of justice by the most efficient means is the overriding consideration in applications of this nature.25
Cooke J (as he then was) in Turpin v Direct Transport Ltd observed, having reviewed the facts in that case, that: 26
Ultimately the determining considerations seems [sic] to be to me the requirements of justice to all parties and a reasonably speedy and convenient resolution of all issues. I think that will best be served by granting the order sought.
24 At [8].
25 KPMG Peat Marwick v Cory-Wright & Salmon Ltd (in rec and in liq), above n 4, at 5.
26 Turpin v Direct Transport Ltd, above n 17, at 176.
[95] On the facts of the case, Cooke J found that the pending trial date would not need to be vacated on account of the joinder. His Honour observed that the application for joinder in that case had been “a somewhat belated one”.27
[96] In this case, the distinguishing prejudice is that there will be significant delay for the plaintiff (of at least six to eight months) and possibly more. There is no evidence to establish which, if any, of the proposed third parties will be able to meaningfully contribute to any award of damages. In the meantime, the plaintiff which began experiencing the consequences of waterproofing failure in November
2008 continues to carry and to have to absorb within its business, the cost of remedy and the consequential damages. All this while it, along with the other existing parties, considered it was ready in October 2012 to have the Court allocate a trial date.
[97] In the circumstances, and notwithstanding the real importance which is accorded to the benefits of a single trial involving all potential parties, I do not consider it just in the circumstances of this case to grant leave to Holmes and Walker to join Queenstown Waterproofing, Bubblehead, McGregor Concrete or Rawell.
Application for joinder of Coffey (sixth third party) and Triple Star (eighth third party)
[98] Holmes alone seeks also the joinder of Coffey and Triple Star. Walker does not join in this aspect of the application.
[99] Mr Parker describes Coffey and Triple Star as companies which successively employed Mr Campbell (the original third third party) and provided project management services to The Mountaineer building project. Mr Parker describes Coffey and Triple Star as companies which, through the agency of their employee, Mr Campbell, were instrumental in coordinating the presentations by potential
waterproofing contractors and directing the selection process.
27 At 176.
[100] Referring to the evidence of Mr Trowsdale, Mr Parker submits that each of Coffey and Triple Star owed contractual and tortious duties to Westwood because they:
(a) were each involved as project manager, and as agent of Westwood, in the selection and recommendation of the specialist waterproofing advisers;
(b)such involvement included the selection of McGregor Concrete, but both Coffey and Triple Star failed to give notice to McGregor Concrete of the sensitivity of the Shotcreting process when used in conjunction with the Bentonite membrane, an omission of significance given the apparent rarity of the process;
(c) both Coffey and Triple Star had responsibility for the registration of the project with Rawell, such registration not having been confirmed by any disclosure so far made in this proceeding;
(d)each company was responsible for ensuring warranties were obtained from the relevant specialist waterproofing contractors, supplier, and manufacturer and for insuring that appropriate insurances were in place from contractors such as Queenstown Waterproofing.
Basis of joinder and cause of action
[101] I would have found that a basis for joinder of Coffey and Triple Star was established under the third limb of r 4.4(1). There are questions in the proceeding which ought to be determined not only between Westwood and Rilean but also between the other parties identified under that limb. I am similarly satisfied, notwithstanding Mr Withnall’s equal criticism of the draft statements of claim in relation to Coffey and Triple Star, that the causes of action which Mr Trowsdale’s affidavit explains in more detail cannot be said to be untenable.
Delay in making the applications
[102] The conclusions which I have reached in relation to Holmes and Walker’s delay in making the applications against the first four proposed third parties apply with more force to the applications relating to Coffey and Triple Star. Their joinder is proposed because of their employment of Mr Campbell. While the gradual nature of the discovery process might explain in some measure the time taken by the applicants to appreciate fully the roles of Queenstown Waterproofing/Bubblehead/McGregor Concrete/Rawell, a similar conclusion could not be reached in relation to Coffey and Triple Star. From the time Mr Campbell himself became a party in early 2012, there was the opportunity for any of the existing parties to obtain leave to join his successive employers. Holmes’s failure to do so in a timely way only counts strongly against granting leave to join such parties when such can occur if a trial fixture is vacated and a significant delay ensues before any new trial date.
[103] The various observations I have made as to prejudice for Westwood on the one hand and Holmes and Walker on the other hand in relation to the joinder of Queenstown Waterproofing/Bubblehead/McGregor Concrete/Rawell, apply with at least equal strength to the applications concerning Coffey and Triple Star.
Discretion
[104] Ultimately, for the same reasons but reinforced by Holmes’s failure to seek leave to join Coffey and Triple Star at a much earlier date, I conclude that justice to the parties requires that leave to join Coffey and Triple Star be declined.
Orders
[105] I order:
(a) The applications of Holmes Structures Ltd to join six third parties are dismissed;
(b)The application of Holmes Structures Ltd for leave to serve an overseas party is dismissed;
(c) The application of Walker Architects Ltd to join four third parties is dismissed;
(d)The applicants in each case are to pay the plaintiff’s costs of each application on a 2B basis together with disbursements to be fixed by the Registrar.
Associate Judge Osborne
Solicitors:
Michael Cowan, Queenstown
Duncan Cotterill, Christchurch
Bannermans, Gore
Anderson Lloyd, Queenstown
SCHEDULE 1
Westwood, Plaintiff - owner/client
Rilean, Defendant 1 - (head) project contractor Holmes, Defendant 2/TP 1 - structural engineer Walker, Defendant 3/TP 2 - architect
[PA Campbell, Original TP 3 - contract engineer]
Queenstown Waterproofing, Proposed TP 3 - installer waterproofing systems
Bubblehead, Proposed TP 4 - local distributor/supplier of
Rawell’s Rawmat)
McGregor Concrete, Proposed TP 5 - applicator of Shotcrete system
Rawell, Proposed TP 6 - producer of Rawmat Coffey, Proposed TP 7 - first project manager Triple Star, Proposed TP 8 - second project manager
SCHEDULE 2
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