Wrightson Ltd v Blackmount Forests Ltd
[2010] NZCA 631
•20 December 2010
IN THE COURT OF APPEAL OF NEW ZEALAND
CA311/2009
[2010] NZCA 631BETWEENWRIGHTSON LIMITED
Appellant
ANDBLACKMOUNT FORESTS LIMITED
First RespondentANDBRUNEL PEAK FORESTS LIMITED
Second Respondent
Hearing:2 June 2010
Court:William Young P, Glazebrook and Chambers JJ
Counsel:M G Ring QC and D H McLellan for Appellant
J G Miles QC and S A Grant for Respondents
Judgment:20 December 2010 at 4 pm
JUDGMENT OF THE COURT
A The appeal is dismissed.
B The appellant must pay the respondent costs for a complex appeal on a band A basis and usual disbursements.
REASONS OF THE COURT
(Given by Chambers J)
Table of Contents
Para No
A forestry venture in Southland [1]
Issues on the appeal [9]
What test is applied to limitation matters on a strike-out application? [16]
Is the contract cause of action frivolous, vexatious or an abuse of process?
The contract claim [20]
A duty to disclose the facts [39]
Deciding not to disclose the facts [43]
Is the negligence cause of action frivolous, vexatious or an abuse of process?
The negligence claim [60]
A duty to disclose the facts [74]
Deciding not to disclose the facts [77]
Where to from here? [81]
A forestry venture in Southland
[1] On 19 November 1997, Blackmount Forests Ltd,[1] the first respondent, entered into a conditional agreement with Trinity Foundation (Services No 2) Ltd. This agreement provided that 374 hectares of land owned by Trinity in Southland were to be used by Blackmount to establish and harvest a Douglas fir forest. Blackmount was required to use Wrightson Ltd, the appellant, to plant and manage the forest. There was also a provision for Trinity to procure a certificate from Wrightson identifying and measuring the area that was suitable for Douglas fir trees. The agreement was conditional on Blackmount carrying out due diligence.
[1] Blackmount Forests Ltd is the agent for a joint venture, of which the second respondent, Brunel Peak Forests Ltd, is a member. We shall refer to the respondents collectively as Blackmount.
[2] On 25 November 1997, Wrightson certified that 340 of the 374 hectares were suitable for planting in Douglas fir (the suitability certificate). Wrightson also advised Blackmount that the areas suitable for planting would have a site index of 34 metres, which is said to be a favourable indication of the potential growth of, and so revenue from, the forest (the site index statement).
[3] Blackmount pleads that on 26 November 1997, in reliance on these representations about the forest, it declared the agreement with Trinity unconditional and entered into a forestry management agreement with Wrightson.
[4] The initial planting of the Douglas fir trees was completed in 1998. Under the management agreement, Wrightson was required to provide quarterly reports to Blackmount. Blackmount says that these reports painted a favourable picture of the state of the forest. No major health or growth problems were reported. In particular, there was no suggestion in the reports that the representations earlier made about the total area suitable for planting, or the site index statement, were inaccurate.
[5] Blackmount says it discovered in August 2002 that, contrary to the suitability certificate, only 270 of the 374 hectares were suitable for Douglas fir. Blackmount further says it discovered in August 2006 that the site index statement was also incorrect, and that only 220 hectares of Douglas fir trees could be expected to achieve the represented 34 metre index.
[6] Blackmount issued proceedings in July 2004. It sued Trinity under the Fair Trading Act 1986 and sought relief under the Contractual Mistakes Act 1977. Its claim at that time against Wrightson was only under the Fair Trading Act. In August 2006, however, it filed a third amended statement of claim. Blackmount pleaded for the first time causes of action in contract and negligence against Wrightson.
[7] Wrightson applied to have the proceedings struck out on the basis that all causes of action were time-barred. Associate Judge Faire struck out Blackmount’s Fair Trading Act cause of action but declined to strike out the claims for breach of contract and in negligence.[2] The Judge considered it fairly arguable that Blackmount could rely on s 28(b) of the Limitation Act 1950 to extend the ordinary limitation periods which Blackmount accepts would, but for s 28(b), prevent its suits in contract and negligence. Section 28(b) operates to postpone the start of a limitation period where a defendant has fraudulently concealed the facts which give rise to the relevant cause of action. In such a case time begins to run only from the date the fraud is discovered or is reasonably discoverable. In reaching this conclusion, the Judge rejected Wrightson’s submission that Blackmount, in order to claim the benefit of s 28(b), needed to allege specifically that Wrightson had deliberately concealed the true position.
[2] Blackmount Forests Ltd v Trinity Foundation (Services No 2) Ltd HC Auckland CIV-2004-404-4037, 9 June 2008 [“Faire decision”].
[8] Wrightson did not succeed in its application for review of the Judge’s decision. Chisholm J essentially agreed with the Associate Judge.[3] He did not address Blackmount’s cross-review of the decision to strike out the Fair Trading Act cause of action. Subsequently, Chisholm J granted leave to appeal to this Court.[4]
Issues on the appeal
[3] Blackmount Forests Ltd v Trinity Foundation (Services No 2) Ltd HC Auckland CIV-2004-404-4037, 19 March 2009.
[4] Blackmount Forests Ltd v Trinity Foundation (Services No 2) Ltd HC Auckland CIV-2004-404-4037, 12 May 2009.
[9] The appeal was presented to us very much in the nature of a legal moot on the meaning of s 28(b), with not much attempt to engage with the pleaded facts of the case and the answers Blackmount had given to various requests for particulars. We ploughed through numerous cases with a view to trying to work out what the phrase “concealed by the fraud of [the defendant]” means in s 28(b). In particular, the argument, as framed by Mr Ring QC, for Wrightson, turned on whether Blackmount had to show Wrightson had “deliberately” concealed the true position. If it did, Mr Ring claimed victory because of an answer Blackmount had given to a request for particulars. The crucial question and answer, as Mr Ring saw it, were:[5]
Do the plaintiffs allege that Wrightson’s alleged concealment of the matters referred to was wilful?
Not in the sense that the term “wilful” is used when alleging common law fraud, but in the sense that the concealment was non-disclosure in circumstances where there was a duty to disclose the facts, so as to amount to equitable fraud for the purposes of s 28(b) of the Limitation Act 1950.
[5] We shall refer to this answer as “the crucial particular”. It is “crucial” in the sense that Mr Ring’s entire argument rested on it.
[10] It was the central feature of Mr Ring’s argument that Blackmount did not allege that anyone at Wrightson had wilfully or deliberately concealed the true position. This meant, he said, that Blackmount could not succeed under s 28(b), with the consequence that the causes of action in contract and negligence should be struck out.
[11] The answer to the request for particulars was, it has to be said, lawyerly. Whatever clarity it might originally have had was completely dispelled by the end of oral argument. Although Mr Miles QC, for Blackmount, continued to support the view that s 28(b) did not require a deliberate decision not to disclose, as Associate Judge Faire and Chisholm J had found, he said that, even if he was wrong in that submission, Blackmount would assert that Wrightson’s concealment of relevant matters was deliberate. He referred us to other answers to requests for particulars by way of identification of those with the requisite knowledge and intent.
[12] It is not satisfactory to determine something as important as a strike-out application on the basis of one answer to a request for particulars, an answer which was never very clear in its meaning to start with and which has now been effectively disavowed. We prefer not to deal with this appeal on a legalistic basis, examining simply what s 28(b) means in the abstract. Looked at academically, the paragraph is “an inapt and inelegant expression which [has] caused much difficulty”.[6] Instead, we prefer to approach the issues in a very fact-specific way: what will Blackmount have to prove at trial if the limitation period is to be postponed? The expression, “the right of action is concealed by the fraud of [the defendant]”, should be interpreted in light of the factual circumstances in which it arguably arises. Of course, the facts have yet to be determined, but, as is common on strike-out applications, the Court proceeds on the facts as pleaded in the statement of claim and as supplemented, in this case, by answers to requests for particulars. If approached in a fact-specific way, the answer to the question whether Blackmount’s claim should be struck out at this stage becomes clear. We shall analyse the issues in this appeal under three headings.
[6] Cave v Robinson Jarvis & Rolf (a firm) [2002] UKHL 18, [2003] 1 AC 384 at [19].
[13] First, we shall set out the test to be applied where a defendant is seeking to strike out a claim on the basis that it is time-barred.
[14] Next, we shall investigate whether Wrightson has established that the contract cause of action is so clearly statute-barred that Blackmount’s claim can properly be regarded as frivolous, vexatious or an abuse of process.
[15] Thirdly, we shall investigate the same question with respect to the negligence cause of action.
What test is applied to limitation matters on a strike-out application?
[16] Of the three principal questions we have to answer on this appeal, this is the easy one. That is because the Supreme Court had to deal with the same question in Murray v Morel & Co Ltd.[7] Various landowners had sought to sue, among others, Trustees Executors Ltd. Trustees Executors alleged that any claim against it was time-barred. The landowners disputed that. Even if the claim was potentially time-barred, which they did not accept, they contended time was postponed under s 28 of the Limitation Act. Trustees Executors applied to strike out the claim on the basis that it was time-barred.
[7] Murray v Morel Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721.
[17] Tipping J set out the test to be applied on a strike-out application based on a claim being time-barred:[8]
[33] I consider the proper approach, based essentially on Matai, is that in order to succeed in striking out a cause of action as statute-barred, the defendant must satisfy the Court that the plaintiff’s cause of action is so clearly statute-barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process. If the defendant demonstrates that the plaintiff’s proceeding was commenced after the period allowed for the particular cause of action by the Limitation Act, the defendant will be entitled to an order striking out that cause of action unless the plaintiff shows that there is an arguable case for an extension or postponement which would bring the claim back within time.
[34] In the end the Judge must assess whether, in such a case, the plaintiff has presented enough by way of pleadings and particulars (and evidence, if the plaintiff elects to produce evidence), to persuade the Court that what might have looked like a claim which was clearly subject to a statute bar is not, after all, to be viewed in that way, because of a fairly arguable claim for extension or postponement. If the plaintiff demonstrates that to be so, the Court cannot say that the plaintiff’s claim is frivolous, vexatious or an abuse of process. The plaintiff must, however, produce something by way of pleadings, particulars and, if so advised, evidence, in order to give an air of reality to the contention that the plaintiff is entitled to an extension or postponement which will bring the claim back within time. A plaintiff cannot, as in this case, simply make an unsupported assertion in submissions that s 28 applies. A pleading of fraud should, of course, be made only if it is responsible to do so.
[8] This passage from his judgment appears to have the support of all the other Judges: see at [1] per Blanchard J, [93] per McGrath J, [103] per Gault J and [150] per Henry J.
[18] The ultimate burden, therefore, remains on the defendant: it is the defendant who must satisfy the Court that the plaintiff’s cause of action is so clearly statute‑barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process. But there is a shifting evidential burden. Once a defendant has demonstrated that the plaintiff’s proceeding was commenced after the period allowed for the particular cause of action by the Limitation Act, the persuasive burden shifts to the plaintiff to show that he or she has an arguable case for an extension or postponement which would bring the claim back within time.
[19] One other consideration needs to be borne in mind, although it did not arise on the pleadings or facts in Murray. That is the Court’s traditional reluctance to strike out a claim which might, by suitable repleading, be saved.[9] That principle might be applicable here if the crucial particular could legitimately be answered differently.
Is the contract cause of action frivolous, vexatious or an abuse of process?
The contract claim
[9] Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33] and [123].
[20] Mr Miles accepts that, but for s 28(b), at least part of the cause of action in contract would be time-barred. With respect to that part, therefore, Blackmount must show it has an arguable case for postponement which would bring the claim
back within time. Mr Miles submits he has done that. If the crucial particular is a problem, he has indicated to us how it could responsibly be amended.
[21] Before we look at that further, we need to set out the nature of Blackmount’s contract claim.
[22] The contract relied on is a management agreement between Blackmount and Wrightson, said by Blackmount to have been entered into on 28 November 1997 and by Wrightson to have been entered into on 26 November 1997. Blackmount has pleaded what it says are the relevant terms so far as its claim in contract is concerned. Wrightson accepts that the pleaded terms were terms of the agreement. It also asserts other terms of the written agreement are relevant.
[23] One term of the agreement is in dispute. Blackmount asserts it was an implied term of the management agreement that Wrightson’s quarterly reports “would contain an accurate report on the then current health and productivity of the forest”. Wrightson disputes that such was an implied term of the management agreement.
[24] Blackmount pleads four breaches of the agreement. They need to be looked at separately as the breaches, if established, occurred at different times. The first breach is pleaded as follows:
[Wrightson] failed to ensure that the site was appropriate for the planting of Douglas fir, specifically that the site was not prone to cold air ponding and that the site had adequate drainage.
[25] Although this is pleaded as if it were a single breach, it is clear from Blackmount’s answers to requests for particulars that it asserts Wrightson breached the agreement in this respect on numerous occasions. First, in November 1997, when Schedule 1 to the agreement was calculated, again in early 1998 when site preparation commenced, and again in June 1998 when planting commenced. All those dates are earlier than 11 August 2000, which is the key date so far as limitation is concerned, the amended pleading containing the contract cause of action for the first time having been filed on 11 August 2006. To maintain its claim based on these breaches, therefore, Blackmount will have to rely on s 28(b).
[26] Blackmount also asserts under this head, however, that Wrightson’s failure was a continuing “omission”, running “between November 1997 and 2006”. If that is right, then Blackmount would be able to sue for post-August 2000 omissions without limitation concerns. Of course, the loss suffered would be different, as it would have to be limited to loss suffered since August 2000. We return to the topic of loss shortly.
[27] The next allegation of breach is that Wrightson:
Failed to establish a forest that will produce a final crop of high quality defect free trees.
[28] Again, multiple breaches are relied upon. The dates of the alleged breaches are as for the first breach.
[29] The third breach is that Wrightson:
Failed to inform Blackmount of the health and productivity issues affecting the forest in a timely fashion.
[30] Blackmount alleges Wrightson committed these breaches on two occasions, first in the December 2000 quarterly report and again in the March 2001 quarterly report. These breaches, if they occurred, are clearly not time-barred.
[31] The final breach is that Wrightson:
Failed to prune only trees with no defects or deformities.
[32] Although this breach is pleaded as an omission, it is in truth (presumably) an assertion that Wrightson wrongly pruned trees containing defects or deformities when it should not have. In paragraph 31 of the fifth amended statement of claim, the loss said to have been suffered as a consequence of this breach is described as “payments made for pruning of trees with defects or deformities yet to be quantified”. Blackmount has not pleaded when this wrongful pruning was undertaken. In answer to a request for particulars on the negligence cause of action, Blackmount said it could not specify “the date or dates on which the [wrongful] pruning was carried out”: it said that this information was “in the possession of” Wrightson. At present, therefore, there is nothing to show that this breach is time‑barred.
[33] Blackmount asserts these various breaches caused it loss. Loss is not an element of the cause of action in contract, but obviously loss must be proved if Blackmount is to recover damages.
[34] Blackmount has not attempted to isolate what damages flow from what breaches, save that wrongful pruning has, as we have said, led to a claim for “payments...yet to be quantified”. Only two other losses are pleaded. The first is a claim for $162,000. It is said to be that part of the $459,000 paid “as the Agency Fees Amount for the establishment of the forest in 1997” representing “wasted expenditure for the 118.8 unsuitable hectares”. Presumably this loss must have been incurred in 1997 and must, therefore, represent the loss from the November 1997 breaches. But it is all rather unclear.
[35] The other loss claimed is $69,520 “for the unsuccessful blanking of the forest as set out in Schedule B”. Schedule B contains a number of items, the earliest dated 30 June 1999 and the latest dated 26 April 2002. Some of those sums would seem to be time-barred (if s 28(b) does not apply); others seem to be within time.
[36] Were this matter to go to trial, then, based on the pleadings, some of Blackmount’s contract claim would be in time, some out of time. There is accordingly no way in which Wrightson can hope to have the entire contract claim struck out at this stage.
[37] It is clear, however, that Blackmount will have to engage with s 28(b) if it wishes to save part of its contract claim. The onus would be on Blackmount to establish the s 28(b) elements. In order to save the potentially time-barred part of the claim at this stage, Blackmount has to show it has an arguable case for postponement.
[38] The dispute between the parties in this case turns on what exactly Blackmount needs to prove by way of an arguable s 28(b) case.
A duty to disclose the facts
[39] This is not a case where Blackmount alleges actual fraud. We are not, therefore, concerned with what is required under s 28(b) in that type of case. Rather, Blackmount relies on what is sometimes called “equitable fraud”. It is clear that the word “fraud” in s 28(b) embraces equitable fraud.[10] The first thing Blackmount must establish is an arguable case that Wrightson was under a duty to disclose to it the facts which would have revealed its right of action. A person who has breached a contract is not normally under an obligation to tell the other party about the breach. It is only if the contract-breaker is under a duty to disclose to the other party the facts revealing the right of action and then does not fulfil that duty that the contract-breaker is potentially caught with an extended limitation period under s 28(b).
[10] Inca Ltd v Autoscript (NZ) Ltd [1979] 2 NZLR 700 (HC) at 711; Matai Industries Ltd v Jensen [1989] 1 NZLR 525 (HC) at 534.
[40] It is common ground between the parties that a duty to disclose may arise from a fiduciary relationship between the contracting parties. Alternatively, it may arise from the terms of the contract in issue or another contract. In this case, Blackmount asserts that the duty to disclose is implicit in the terms of the management agreement. If that is right, then obviously Wrightson personnel knew that a duty to disclose relevant facts would arise in certain circumstances.
[41] At this stage of the proceeding, Mr Ring has elected not to challenge the proposition that Wrightson arguably was under a duty to disclose the relevant facts. Blackmount therefore has established an arguable case that Wrightson was under such a duty. Of course, a duty to disclose can arise only if a relevant person knows those facts.
[42] Blackmount, both in answers to various requests for particulars and in an affidavit sworn in opposition to the strike-out application, has stipulated who the people are within Wrightson it says knew the relevant facts. Those people have been named as Dennys Guild, at the relevant times Wrightson’s Forestry Department’s General Manager, John Lockie, at relevant times the Operations Manager, and George Platts, said to be “a forestry consultant with Wrightson”. Whether any of those three did know of the alleged breaches is, of course, yet to be established, but what is significant perhaps is that Wrightson chose not to file any affidavit in response to Peter Wilkinson’s affidavit in opposition to the strike-out application.
Deciding not to disclose the facts
[43] So, to recap where we have got to. There is an arguable case[11] that various people within Wrightson knew the relevant facts and that Wrightson was under a duty to disclose them to Blackmount, thereby alerting Blackmount to Wrightson’s breaches of contract. What in addition does Blackmount have to establish?
[11] “Arguable” in the sense that Wrightson has chosen not to challenge at this stage of the proceeding what Blackmount will ultimately have to prove on this aspect.
[44] This is where the dispute between counsel has arisen. Mr Ring submits that what Blackmount must establish is that someone within Wrightson made a conscious decision to conceal the essential facts giving rise to the right of action. He has termed that “wilfulness” and says it involves either active concealment, which he says is not alleged here, or deliberate (passive) non-disclosure, which he says is disavowed in the crucial particular.
[45] Mr Miles, on the other hand, at least in his written submissions, relies on the following passage from Associate Judge Faire’s decision:
[69] By contrast, where passive non-disclosure is alleged, the following elements are required for the section to apply:
(a)there must be knowledge of all the facts that give rise to the cause of action;
(b)there must be a duty of disclosure created by either the fiduciary status or a special condition, express or implied, in the contract; and
(c)there must be non-disclosure.
[46] Each side claims its position is supported by the two leading New Zealand cases on s 28(b), Mahon J’s decision in Inca Ltd v Autoscript (NZ) Ltd[12] and Tipping J’s in Matai Industries Ltd v Jensen.[13]
[12] Inca Limited v Autoscript (NZ) Ltd [1979] 2 NZLR 700 (SC).
[13] Matai Industries Ltd v Jensen [1989] 1 NZLR 525 (HC).
[47] At first blush, there appears to be a distinction between counsel’s respective positions. But the reality, in our view, is different. If someone within Wrightson knew that Wrightson had breached the contract with Blackmount and knew Wrightson was under a duty to disclose the relevant facts which would have alerted Blackmount to those breaches, then that person’s failure to disclose the facts could only have been deliberate or wilful. The focus of s 28(b) is not on whether or not the non-disclosure is wilful. The focus is on knowledge of relevant facts and on knowledge of a duty to disclose them. If, despite such knowledge, the defendant decides not to disclose the facts, then almost always that decision will be worthy of the epithet “wilful”. But that is a consequence of those other factors, not the driver. The cases to which we shall shortly come say that “the concealment must be wilful” but that is no more than a shorthand way of expressing the factual elements we have been discussing. If they are established, then the concealment will indeed be wilful.
[48] We are not convinced that Associate Judge Faire’s formulation, adopted by Mr Miles, yields a different conclusion. “There must be non-disclosure” is really just another way of saying that someone within Wrightson, who knows of the duty to disclose, has decided not to disclose. It is difficult to see how deciding not to disclose could be other than a wilful or deliberate concealment of the facts giving rise to the cause of action.
[49] In the end, we have concluded Blackmount has done “enough by way of pleadings and particulars and evidence” to persuade us that those parts of the contract claim which seem to be subject to a statute-bar may not after all be statute‑barred “because of a fairly arguable claim for extension or postponement”. Three men have been named as knowing the relevant facts. The duty to disclose was accepted for strike-out purposes. Although Blackmount, in answer to a request for particulars, has said it “is not in a position to [say] who [within Wrightson] failed to disclose information, because Blackmount does not know whom Wrightson charged with that responsibility”, it has squarely said who knew the information given to Blackmount was misleading and deceptive and that people within Wrightson knew that this information should have been corrected. That seems to us sufficient at this stage of the proceeding, where Blackmount has not had the benefit of discovery.
[50] We now turn to the crucial particular. Blackmount’s answer was perhaps ambiguous, but then the question itself could be said to have been loaded. Blackmount asserted that Wrightson’s concealment of relevant matters was “wilful” in the sense that Wrightson was said to be under a duty to disclose the facts and somebody decided not to disclose them. This somebody is not named: it may turn out to be Mr Guild or Mr Lockie or Mr Platts. It seems inconceivable that they were not aware of the terms of the contract or of the duty to disclose (if there was such a duty). Ironically, we suspect that the real difficulty Blackmount might face at trial is in proving these men did know that Wrightson had breached its contract and that Wrightson was under a duty to disclose, two matters which have not been under the spotlight at this stage of the proceeding. If Blackmount can establish those matters, there will be, we suspect, little difficulty in its establishing that someone within Wrightson deliberately decided not to disclose the relevant facts. The battleground at trial is, in other words, likely to have shifted from the battleground at this hearing.
[51] We consider the conclusion we have reached on this topic is entirely consistent with the respective judgments of Mahon J and Tipping J.
[52] We begin with Mahon J’s decision in Inca. Pursuant to various contracts over about 13 years, Inca had agreed to supply stationery to Autoscript. One of the terms in these contracts was that, when calculating the price it would charge, Inca would apply the same discount rates that it gave to other wholesalers. After termination of the last contract, Autoscript discovered that Inca had been providing a discount of one third to other wholesalers; Autoscript had been receiving only a 25 per cent discount.
[53] Autoscript’s action for breach of contract to recover the aggregate amount of its overpayment was met in part by a limitation defence, to which Autoscript pleaded s 28(b). It claimed that Inca had fraudulently concealed from it the prices charged to wholesalers.
[54] The trial Judge, Mahon J, was principally concerned with whether, to invoke s 28(b), a plaintiff needed to show some special relationship between the parties giving rise to a duty of disclosure, or whether it was sufficient for a plaintiff to show that it would be inequitable or unconscionable for the defendant to rely on the Limitation Act. To decide the point Mahon J reviewed the historical origins of the concealed fraud doctrine, and the authorities on the English concealed fraud provision, which was, at the time, in identical form to s 28(b). His Honour summarised his conclusions as follows:[14]
It therefore follows, in my opinion, that s 26 of the Limitation Act 1939 (UK), as with its New Zealand counterpart, in so far as it codified the equitable rules extending time limits, uses the word “fraud” in para (a) as meaning either fraud at common law or equitable fraud, and uses the same word in para (b) in the same sense. Paragraph (b) covers causes of action other than fraud, and the limitation defence will be barred for the appropriate period either where there is dishonest concealment of the cause of action, equivalent to common law fraud, or where there is non-disclosure occurring in such circumstances as to amount to equitable fraud. In either case the concealment must be wilful. The defendant must know all the facts which together constitute the cause of action. For that reason, with great respect, I would have decided Moore v Russell Going Ltd[15] the other way. The defendant was unaware that his negligence had damaged the plaintiffs. He could not, in my view, have wilfully concealed a right of action which he did not know existed. But however that may be, passive non-disclosure as opposed to active dishonest concealment of a known wrong, cannot amount to a “fraudulent concealment” unless there is a duty of disclosure created either by fiduciary status or by a special condition, express or implied, in the relevant contract or relationship.
(Emphasis added)
[14] At 711.
[15] Moore v Russell Going Ltd SC Auckland A951/75, 7 September 1977.
[55] We agree with that passage, which to us is reasonably clear in its meaning. Mr Miles submitted that the four sentences after the italicised sentence represent a qualification of the statement that “the concealment must be wilful” and effectively link wilfulness to knowledge. There is, of course, a link, as we hope we have made
clear. The defendant must know all the facts which together constitute the cause of action; if the defendant does not know them, then of course the defendant cannot be guilty of concealment.
[56] Secondly, Mr Miles submitted that it was significant that Mahon J, when analysing the facts of the case, did not separately consider whether Inca’s concealment of the relevant facts had been wilful. But that is because, as again we have tried to explain, once the plaintiff has proved that the defendant knew the relevant facts and knew it was under a duty of disclosure, a failure to disclose will almost invariably be wilful. As Mr Ring put it, the only inference reasonably available was that Inca’s non-disclosure was wilful. So, we surmise, if at trial Blackmount establishes that some within Wrightson knew all the facts which together constitute the cause of action and knew that Wrightson was under a duty to disclose those facts to Blackmount, an inference that the failure to disclose was wilful will be easy to draw.
[57] We now turn to Matai Industries Ltd v Jensen. In this case the plaintiff had alleged that a receiver had acted in breach of a duty of care owed to creditors by selling assets below their value. The defendant claimed that various causes of action were statute-barred. While not asserting common law fraud, the plaintiff claimed that it had an arguable case that s 28(b) applied. Matai was also a case of alleged non-disclosure in breach of a duty to do so. In relation to the point presently at issue, Tipping J agreed with Mahon J’s analysis:[16]
...the failure to disclose must be wilful. One cannot conceal something of which one is unaware...For the concealment to be wilful the [defendant] must be shown to have known the essential facts constituting the cause of action.
[16] At 536.
[58] We think Tipping J was simply acknowledging what Mahon J had recognised: that one cannot, as a matter of logic, wilfully conceal facts of which one
is unaware. We do not need to traverse this judgment at greater length. Suffice to say we respectfully agree with it and believe our judgment is entirely consistent with it.
[59] It follows that we have accepted Mr Ring’s essential proposition as to the law. But it does not help Wrightson, at least at this stage, as we do not regard the crucial particular as a winning trump. Although we consider Blackmount’s pleading is far from perfect, a topic on which we shall have more to say below, we nonetheless consider that Blackmount has produced enough “to give an air of reality to the contention that [it] is entitled to an extension or postponement which will bring the claim back within time”. For these reasons, we decline to strike out the contract cause of action. It has not been shown to be frivolous, vexatious or an abuse of process.
Is the negligence cause of action frivolous, vexatious or an abuse of process?
The negligence claim
[60] Blackmount’s case in negligence closely mirrors its claim based on breach of the management agreement. It asserts Wrightson owed it a duty of care. The duty is pleaded as a duty “to exercise due care, skill and diligence to ensure that the site to be planted was an appropriate site for Douglas fir to grow and to ensure that the forest would produce a final crop of high quality defect free logs”. Wrightson denies that it was under a duty of care. Clearly that will be an issue at trial.
[61] Wrightson pleads four breaches of the duty of care. Again, they need to be looked at separately as the breaches, if established, occurred at different times. The first breach is pleaded as follows:
[Wrightson] certified that 340 hectares of the land was suitable for planting in Douglas fir when only 220 hectares was suitable for planting in Douglas fir.
[62] That certificate is said to have been given in December 1997.
[63] The next breach pleaded is that Wrightson:
Planted the land with Douglas fir when the land was unsuitable for planting in Douglas fir.
[64] In an answer to a request for particulars, Blackmount has pleaded that the planting commenced “in or about June 1998”.
[65] The next allegation of breach is that Wrightson:
Failed to establish a forest that will provide high quality defect free clearwood.
[66] That seems in essence to be the same allegation, albeit in slightly different words, as the allegation discussed above at [27]. See further our discussion at [25] and [28].
[67] The final breach is that Wrightson:
Pruned trees in a manner not likely to produce defect free clearwood.
[68] As to the timing of this alleged breach, see the discussion at [32] above.
[69] Loss is an element of the cause of action in negligence. As with the claim in contract, Blackmount has not attempted to define what losses have flowed from what breaches. The losses are, with one exception, identical with the losses claimed for breach of the management agreement: see the discussion at [34]-[35] above. Some losses seem to be time‑barred (if s 28(b) does not apply); others seem to be within time.
[70] The exception is that, under this cause of action, Blackmount also claims against Wrightson for what is said to be its losses under “the plantable hectares statement” and “the site index statement”. “The plantable hectares statement” is pleaded as having been made in the December 1997 certificate (referred to at [61] and [62] above) and “in subsequent quarterly reports”, up to the report immediately before the August 2001 report. “The site index statement” is said to have been made in a management plan prepared in December 1997. The losses pleaded start from 1997. To put it mildly, the pleading is very obscure.
[71] It would seem that Associate Judge Faire regarded all of the loss as having occurred in 1997, but for a “small sum...for the blanking and replanting claim and the pruning claim”.[17] Blackmount, after Wrightson applied to review Associate Judge Faire’s decision, cross-applied against the Judge’s finding as to when the loss in negligence occurred. Blackmount contended that the loss in negligence did not occur until April 2002 (within the limitation period), presumably on the grounds that the loss was economic and, until known to Blackmount, had not in fact been sustained.[18]
[17] Faire decision at [54]-[57].
[18] Presumably the intent is to run an argument along the lines that found favour in Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC). See further Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Brookers, Wellington, 2009) at [26.5.05(2) and (3)].
[72] Chisholm J did not deal with this argument, as he interpreted Blackmount’s cross-application for review as requiring answer only if he found in Wrightson’s favour on the application for review – which he did not. This has now led to something of a procedural muddle. In the end, we do not need to resolve this question, as, for the reasons we shall give, we shall be holding that, even if parts of the negligence claim are statute-barred, Blackmount has established an arguable case for an extension or postponement which would bring the negligence claim back within time. We wish to make clear, however, that it will be open to Blackmount at trial to advance its contention that no loss was caused until 2002, with the consequence that the negligence claim is within time, even without recourse to s 28(b). We express no view as to whether such a contention will succeed.
[73] For the present, we proceed on an assumption that some of Blackmount’s negligence claim, if established, seems to be in time, some out of time. We now turn to consider the limitation elements and to assess whether, with respect to this cause of action, Blackmount has made out an arguable case for an extension or postponement.
A duty to disclose the facts
[74] For the purposes of this appeal, Mr Ring did not debate the circumstances in which facts revealing a claim in the tort of negligence must be disclosed. Clearly a tortfeasor is not normally under an obligation to tell his or her victim about the tort. In this case, Blackmount relies on an implied term in the management agreement for Wrightson’s alleged duty to disclose not only the relevant facts which would have alerted Blackmount to its cause of action in contract but also the relevant facts which would have alerted Blackmount to its claim in tort as well. In the absence of argument, we express no view as to whether the management agreement did impose such a duty of disclosure. That will be a matter for trial.
[75] We proceed on the untested assumption that such a duty did arise in this case. But a duty to disclose what? Did Wrightson have to disclose that only 220 hectares was suitable for planting in Douglas fir? If so, when does Blackmount assert such disclosure had to be made – at the time of giving the certificate or when it became obvious to personnel within Wrightson that the certificate was wrong? Did Wrightson have to disclose that it had planted the land with Douglas fir when the land was unsuitable for planting in Douglas fir? If so, when does Blackmount assert such disclosure had to be made? At the time of planting or when the unsuitability of the land became obvious? Similar questions might be asked about the other two alleged breaches. It is impossible to answer these questions in the absence of firmly established facts. Both the questions and the answers might be affected by how the duty of disclosure is said to have arisen, something which has not been explored on this strike-out application.
[76] These are all matters which will have to be resolved at trial.
Deciding not to disclose the facts
[77] On this topic, we have nothing to add to the discussion of the law above.
[78] It is just not possible to be helpful as to what Blackmount will have to establish at trial. Everything about this claim is very uncertain at this stage:
(a)the precise nature of the duty of care and how it is said to have arisen;
(b)the exact nature of the breaches and when they occurred;
(c)the loss said to have flowed from each breach;
(d)when the various heads of loss arose; and
(e)how the duty of disclosure is said to have arisen.
[79] None of those uncertainties has been under the spotlight in this strike-out application. Yet their resolution will have a significant effect on exactly what must be proved under this “concealment” head. This case shows the disadvantage of trying to resolve issues on strike-out applications when the issues of law up for debate are inextricably tangled with matters of fact yet to be determined (or even properly pleaded).
[80] Suffice to say, that as with the contract cause of action, Wrightson has failed to establish that the negligence cause of action is frivolous, vexatious or an abuse of process.
Where to from here?
[81] For these reasons, we dismiss Wrightson’s appeal. The proceeding must proceed to trial.
[82] It is clear, however, that Blackmount must file an amended pleading. There are serious deficiencies with the current pleading, especially with regard to the negligence cause of action.
[83] With respect to the contract cause of action, Blackmount needs to incorporate the answers to particulars it has already provided. When a party has agreed to provide particulars, it is indicating that its existing statement of claim is deficient in failing to provide sufficient particulars, as required by rr 5.26 and 5.27 of the High Court Rules. Any subsequent pleading should remove that deficiency.[19] Blackmount has not been doing that in its amended pleadings.
[19] McGechan on Procedure (looseleaf ed, Brookers) at [HR 5.21.03].
[84] Further, more thought needs to be given to what loss is said to have arisen from each of the breaches. The statement of claim is currently deficient in informing Wrightson and the Court as to specific losses from particular breaches.
[85] Next, with respect to those parts of the claim which are time-barred but for s 28(b), Blackmount needs to plead the facts, properly particularised, on which it relies for the various elements of s 28(b), as discussed above.
[86] A wholesale revision of the negligence cause of action is required. The claim at the moment appears to be a mishmash of negligence and negligent misrepresentation. Each needs to be pleaded separately. Paragraph 33, setting out obligations said to be inherent in the duty of care, do not appear to be duty of care obligations at all, except for paragraph (f).
[87] The breaches are inadequately pleaded. Dates need to be given. In so far as Blackmount alleges it relied on Wrightson’s certificates or reports, that needs to be pleaded.
[88] As for the losses, they will not necessarily be the same as for the contract cause of action. Further, presumably different breaches have given rise to different losses at different times.
[89] Finally, Blackmount will need to plead (and later prove) the facts said to give rise to a duty of disclosure in this case. As for the contract claim, it will be necessary to plead who knew about the relevant facts and who deliberately decided not to disclose them.
[90] The deficient pleading has made this a very difficult case to determine. The pleadings have not, however, been under challenge, because, as we have said, Mr Ring elected to pin his hopes on the crucial particular. He may well have thought that he did not want to alert Blackmount at this stage to the deficiencies of its pleadings. We can well understand that tactical decision from his point of view, but we are looking at this from a different point of view, the need for the trial court to know what is properly in issue.
[91] It will of course be for the High Court to determine the precise nature of the amended pleading required and the timing of it.
Solicitors:
Jones Fee, Auckland, for Appellant
Burton & Co, Auckland, for Respondents
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