York v Westland District Council
[2013] NZHC 2918
•5 November 2013
IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY
CIV-2012-418-000092 [2013] NZHC 2918
BETWEEN PETER CHARLES YORK First Plaintiff
ALPINE GLACIER MOTEL LIMITED Second Plaintiff
ANDWESTLAND DISTRICT COUNCIL Defendant
Hearing: 9 September 2013
Appearances: S P Rennie and J E Bayley for Plaintiffs
D J Neutze for Defendant
Judgment: 5 November 2013
JUDGMENT OF D GENDALL J
Introduction and background
[1] In August 2005 the first plaintiff, Peter Charles York (Mr York), entered into a written agreement (the land agreement) for the purchase of land at 17 Cronz Street, Franz Joseph (the land) on which a motel stands. The purchase price for the land was $2.4 million. The purchase was conditional on Mr York obtaining a satisfactory Land Information Memorandum (the LIM) by 25 August 2005.
[2] At the same time, the land agreement was entered into, Mr York also completed as purchaser a written agreement for the purchase of the motel business which was operating from the land (the motel agreement).
[3] On 18 August 2005 Mr York applied to the defendant (the Council) for a LIM
and on 19 August 2005 the Council issued this LIM.
YORK v WESTLAND DISTRICT COUNCIL [2013] NZHC 2918 [5 November 2013]
[4] On 25 August 2005, in reliance on the LIM, Mr York confirmed both the land agreement and the motel agreement as unconditional and nominated the second plaintiff (Alpine Motel) as purchaser.
[5] Settlement under both the land agreement and the motel agreement was completed on 30 September 2005. Payments of $2.4 million for the land and
$800,000 for the motel business were made to the vendor.
[6] Mr York and Alpine Motel contend that omitted from the LIM was certain critical earthquake risk information held by the Council at the time concerning the land and the motel business. This was to the effect that the Franz Joseph township straddled the Alpine Fault Line, that potentially significant earthquake issues arose with respect to this and other properties in Franz Joseph and the Ministry for the Environment had recommended to local authorities that a Fault Avoidance Zone be established by creating a buffer zone of a minimum of 20m either side of any known trace fault, such as the Alpine Fault Line.
[7] Mr York and Alpine Motel allege that it was only from about late November
2010 that they first discovered the pleaded omissions in the LIM and suffered economic loss. They maintain that the true value of the land and motel business, if the LIM had included all the material information at settlement, was $775,000 rather than the total price paid of $3.2 million. Accordingly, they sue here for damages for what they say is the loss in value of the land and the motel business totalling $2.85 million.
[8] In response, in the present application before me, the Council seeks to strike out this proceeding on the basis that the Council says it is statute-barred and therefore cannot succeed. The Council maintains that any loss to Mr York and Alpine Motel was suffered at the latest when the purchases were settled in 2005, and the present claim is therefore time-barred by the Limitation Act 1950, in that this occurred more than six years prior to the filing of the claim in 2012.
[9] As an alternative, the Council contends that in any event Mr York and Alpine
Motel suffered no loss in reliance upon the LIM, as they accept that they received
what the land and motel business were worth at the time of settlement. In either instance, the Council contends that the present claim should be struck out.
[10] The present strike out application was filed on 27 June 2013. In response to this application, on 2 September 2013 Mr York and Alpine Motel filed their amended statement of claim. In this amended pleading, they now allege that the pleaded omissions from the LIM were not reasonably discoverable until November 2010. Thus, they did not suffer economic loss until that time when the market discovered the pleaded omissions in the LIM and as a result, the value of the land and motel business fell.
Strike out application
[11] The present strike out application is brought by the Council in reliance upon
15.1 High Court Rules which states in part:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
...
(d) is otherwise an abuse of the process of the court
[12] The principles to be applied on a strike out application are set out in
McGechan on Procedure at HR15.1.02 as follows:
HR15.1.02 No reasonably arguable cause of action or defence
(1) Principles
The established criteria for striking out was summarised by the Court of Appeal in A-G v Prince [1998] 1 NZLR 262, (1997)
16 FRNZ 258, [1998] NZFLR 145 (CA) at 267, and endorsed by the
Supreme Court in Couch v A-G [2008] NZSC 45 at [33], per
Elias CJ and Anderson J:
(b) Pleaded facts, whether or not admitted, are assumed to be true. This does not extend to pleaded allegations which are entirely speculative and without foundation.
(c) The cause of action for defence must be clearly untenable.
In Couch Elias CJ and Anderson J, at [33], said: “It is
inappropriate to strike out a claim summarily unless the
court can be certain that it cannot succeed.”
(d) The jurisdiction is to be exercised sparingly, and only in clear cases. This reflects the Court’s reluctance to terminate a claim or defence short of trial.
(e) The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
(f) The Court should be particularly slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation. In Couch, at [33], Elias CJ and Anderson J said: “Particular care is required in areas where the law is confused or developing.” There is considerable authority that developments in negligence need to be based on proved rather than hypothetical facts.
[13] And McGechan goes on at HR15.1.07 to address limitation issues. There, the learned authors state in part:
HR15.1.07 Limitation; contractual discharge
(1) Limitation
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: Murray v Morel & Co Ltd [2007] 3 NZLR 721 (SC) at [33]. The correct procedure where an application is made under s 4(7) of the Limitation Act 1950 is spelt out in W v A-G [1999] 2 NZLR 709 (CA) at 737.
[14] In W v A-G, Tipping J considered the correct procedure for what was albeit an application under s 4(7) Limitation Act 1950 seeking leave to bring an action for bodily injury out of time. In doing so, he stated:1
Correct procedure
[115] Put shortly, applications under s 4(7) of the Limitation Act 1950 should be determined without prejudice to issues of limitation, unless the intended claim is beyond doubt on its face statute barred. In that case leave should be refused. If the date of accrual of the cause of action, or any other aspect of limitation is doubtful, leave should be granted, if otherwise appropriate, and all limitation issues determined at trial. This will avoid the very awkward situation with which Greig J was faced. He was required to
1 W v A-G [1999] 2 NZLR 709 (CA) at [115].
determine difficult issues of fact on affidavit evidence without even the benefit of cross-examination.
...In other words, on an application under s 4(7), save in cases involving an undoubted time-bar, the Court should assume in the intending plaintiff’s favour that the application for leave is within time, but that assumption is made without prejudice to the defendant’s right to plead a statutory or analogous time-bar at trial.
[15] Turning now to limitation questions in the present case, counsel for both parties before me accepted that the Limitation Act 2010 has no relevant application here and it is s 4(1)(a) of the Limitation Act 1950 which applies. This provides:
4Limitation of actions of contract and tort, and certain other actions
(1) ... the following actions shall not be brought after the expiration of 6 years from the date on which the cause of action accrued, that is to say,—
(a) Actions founded on simple contract or on tort:
...
[16] Both parties also appeared to accept that it is clear from the Supreme Court decision in Marlborough District Council v Altimarloch Joint Venture Ltd that the cause of action here is one founded upon a:2
...duty of care on territorial authorities so that if they negligently give erroneous information in a LIM and the recipient relies on that information to its detriment, they will be liable for the loss their negligence has caused...
[17] And, because the claims by Mr York and Alpine Motel in the present case are based in negligence:3
damage is an essential part of the cause of action, and until the damage has occurred the cause of action is not complete.
[18] Put another way, a cause of action in negligence, such as the present situation, arises not on breach but when a plaintiff first sustains loss attributable to
the breach of duty by a defendant.4
2 Marlborough District Council v Altimarloch Joint Venture Ltd [2012] 2 NZLR 726 (SC) at [98]
per Tipping J.
3 Invercargill City Council v Hamlin [1994] 3 NZLR 513 (CA) at 536 per Mackay J.
4 Nykredit Mortgage Bank PLC v Edward Erdman Group Ltd (No 2) [1998] 1 All ER 305 (HL) at
308.
[19] The crucial question on the present strike out application therefore is to determine the date damage or loss may have been caused to Mr York and Alpine Motel by the Council’s alleged breach of its duty. The present proceeding was commenced on 23 July 2012. In line with s 4(1)(a) Limitation Act 1950, to escape any challenge on the basis that the cause of action is statute-barred, it must have accrued after 23 July 2006.
[20] Turning to the Council’s limitation arguments, these are to the effect that the cause of action advanced by Mr York and Alpine Motel here accrued if at all when they first suffered loss caused by the Council’s alleged negligence. This must have occurred in August/September 2005 when, as a result of relying on allegedly negligent advice from the Council in its LIM report, Mr York and Alpine Motel paid a total of $3.2 million for the land and motel business. As this proceeding was not commenced until 23 July 2012, it is thus out of time being more than six years after the date that cause of action accrued.
[21] The Council contends also that this limitation period is not extended by the “reasonable discoverability” doctrine, as the case advanced by Mr York and Alpine Motel here does not concern latent defects in buildings or bodily injury or sexual abuse. Also, as noted above, the Council suggests that, if the plaintiff suffered no loss in 2005 when they committed to buy the land and motel business, then they can have no claim here against the Council, as they did not suffer any loss in reliance on the Council’s alleged negligence in providing the LIM.
[22] In bringing this application the Council relies in particular on the decisions of Murray v Morel & Co Ltd,5 Davys Burton v Thom6 and the recent Supreme Court decision in Marlborough District Council v Altimarloch Joint Venture Ltd.7
[23] In Altimarloch, the Supreme Court dealt with a situation rather similar to that which prevails in the present case. There, the Marlborough District Council was found to be negligent for erroneously overstating in a LIM the quantity of water
rights held on a rural property which had, in turn, induced its purchase. The sale and
5 Murray v Morel & Co Limited [2007] 3 NZLR 721.
6 Davys Burton v Thom [2009] 1 NZLR 437 (SC).
purchase agreement was conditional on a LIM. The LIM was provided in March
2004.
[24] The error in the LIM was that the vendors held and were able to transfer rights to take up to 1500 cubic metres of water daily from a stream located on the property, when the true position was actually that the vendors only held rights to take up to 750 cubic metres a day. The purchaser (Altimarloch Joint Venture Ltd), which was to plant vines on and to operate a horticultural venture from the property
utilising substantial irrigation, did not discover the error until after settlement in
October 2004.
[25] In considering the date when the purchaser’s cause of action against the council accrued, the Supreme Court determined that the damage was suffered by Altimarloch when it became committed to pay more for the property than it was worth, in reliance on the Council’s negligent representation. The cause of action arose at the latest on settlement. In particular, in the Supreme Court, Elias CJ stated:8
...I accept that Altimarloch suffered loss and obtained a cause of action in negligence against the Council which accrued when it confirmed the contract as unconditional in reliance on the Council’s negligent representation and paid the contract price, receiving in exchange land which was worth less than the price paid.
...
And:9
Here, actual damage was suffered by Altimarloch when, in reliance on the Council’s negligent misinformation, it paid more for the land than it was worth. This is the “simple case”, giving rise to no difficulty, given by Lord Nicholls in Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No 2) as an illustration of the principle. A similar illustration is provided by the entry into the flawed matrimonial property agreement in Davys Burton v Thom. Actual damage was suffered immediately the transaction was entered into.
Although there may be cases where it is difficult to determine when loss has been suffered, this is not such a case. As Lord Nicholls made clear in Nykredit, for the purposes of identifying when a cause of action in tort or contract arises loss includes “any detriment, liability or loss capable of
8 At [9].
assessment in money terms and it includes liabilities which may arise on a contingency”. The only limit is that the loss must be “relevant loss”: “loss falling within the measure of damage applicable to the wrong in question”. Here, the loss was suffered and the cause of action arose when the purchaser became committed to payment of the purchase price. The question in this case is not when loss was suffered and the cause of action arose. There was undoubted immediate detriment for the purpose of the cause of action. The question, rather, is the measurement of the loss ultimately suffered by Altimarloch as purchaser for which it is entitled to damages. (Footnotes omitted)
[26] And Tipping J noted:10
When the purchaser entered into the contract with the vendors it immediately acquired, at least prima facie, something worth less than the contract entitled it to receive. This is because the vendors were unable to supply all the water rights they had contracted to supply. At that point the contract which had been induced by the Council’s negligence was worth less to the purchaser than its price...
This means that in the present case the purchaser acquired causes of action against both the vendors and the Council when it became committed to the contract.
[27] The next case cited by Mr Neutze for the Council was Murray v Morel & Co Ltd,11 another decision of the Supreme Court. There, the Court had to consider a cause of action pleaded in negligent misstatement in relation to information put in a prospectus in 1994. Investors in a forestry scheme sought to bring proceedings against the promoters of a forestry venture on the grounds that the prospectus contained untrue statements. The proceedings were not issued until 2003.
[28] Again, the action was subject to a six year limitation under the Limitation Act
1950, and therefore the proceedings were statute barred unless the investors were able to contend that the cause of action did not arise in 1994 but at some later time. They argued that their cause of action arose in 1999, which was the year when they discovered that the prospectus contained allegedly false statements. The claim was
struck out by the High Court, and this was upheld by the Supreme Court.
10 At [121] – [122].
[29] The Supreme Court held that there was no general doctrine of reasonable discoverability before a cause of action accrued. In particular, Tipping J in the Supreme Court made the following observations:12
Mr O’Callahan sought to build his argument for such a general doctrine on the proposition that the approach of the Courts in New Zealand to cases involving latent damage to buildings, sexual abuse, and bodily injury should logically lead to reasonable discoverability being applied across the board in the limitation field. I am satisfied for the reasons I will give that there should be no general adoption of reasonable discoverability for limitation purposes.
And also:13
In my view the numerous references in the Limitation Act to accrual of a cause of action can only be construed as references to the point of time at which everything has happened entitling the plaintiff to the judgment of the court on the cause of action asserted. Save when the Limitation Act itself makes knowledge or reasonable discoverability relevant, the plaintiff’s state of knowledge has no bearing on limitation issues. Accrual is an occurrence- based not knowledge-based concept. The Limitation Act as a whole is structured around that fundamental starting point. The periods of time selected for various purposes must have been chosen on that understanding. The circumstances of postponement and extension have themselves been similarly framed.
[30] Finally, the Council relies on another decision of the Supreme Court, Davys Burton v Thom.14 In that case, Mr Thom had arranged for the appellant law firm to draw up a pre-nuptial agreement. It was intended that the agreement would contain a provision that would exclude from relationship property, a house he owned at the time. The appellant solicitors arranged for the execution of the agreement. However, the legal formalities under the Matrimonial Property Act 1976 were not complied with and, as a result, the agreement was ineffective.
[31] As to the question of when Mr Thom suffered actionable loss as a result of the solicitors’ negligence, the Supreme Court held that the cause of action for the purposes of the Limitation Act 1950 ran from the date that the defective agreement had been executed. The court noted that Mr Thom did not obtain the benefit he
should have secured if the law firm had not been negligent. Accordingly, he suffered
12 At [38].
13 At [69].
immediate loss because he did not obtain the protection he should have received, namely a valid contracting out agreement.
[32] In outlining the legal principles involved at [38] of his judgment, Wilson J said that a cause of action in negligence does not exist until there is, first, an act or omission of the defendant which breaches a duty of care owed to the plaintiff, and, secondly, loss or injury caused by that act or omission suffered by the plaintiff. The existence of loss or injury is an element without which it is said the cause of action does not exist, and accordingly until it occurs time does not run against the plaintiff for limitation purposes.
[33] Wilson J also provides what I see as a good summary of the law in this area:15
In summary, a cause of action in tort for negligence does not exist and hence time does not start running for the purposes of the Limitation Act unless and until the plaintiff has suffered some actual and quantifiable loss, harm or damage as a result of the breach of duty involved. Damage will be contingent, and hence not actual for limitation purposes, if the plaintiff will suffer no damage at all unless and until a contingency is fulfilled. That will be so if the damage results from the plaintiff being exposed to a liability which is contingent on the occurrence of a future uncertain event. A good example is where the liability is that of a guarantor and is contingent on a default by the principal debtor, in contrast to the undertaking (as in Gilbert) of a direct and present liability which falls due in the future. The distinction may well be thought to be a fine one, but in any regime of limitation apparently similar cases may fall on opposite sides of the line which divides those which are barred from those which are not. A reduction in the value of an asset, whether tangible or intangible, constitutes actual damage and exists as soon as the asset becomes less valuable.
[34] Wilson J then went on to consider that Davys Burton v Thom was a damaged asset case and not one of exposure to a contingent liability. The limitation period started to run when the pre-nuptial agreement was signed on 29 March 1990, and therefore the claim was statute-barred when proceedings were brought on 25 July
2002.
[35] Returning to the case before me, it is the Council’s contention therefore that, as in the Supreme Court decisions in Altimarloch and Davys Burton, if Mr York and Alpine Motel do have a claim here, it must be that they suffered loss as a result of
relying upon the Council’s alleged negligent misstatement in the LIM in purchasing what they say were defective assets. Such loss it is said can only have occurred when Mr York and Alpine Motel entered into the land and motel agreements in reliance on the LIM. That is the time when they became committed to pay more for the land and motel than they say they were worth.
[36] Alternatively as noted above, if the land and motel at the time of purchase in September 2005 were worth precisely what Mr York and Alpine Motel had paid for them, as they now seem to contend, then the Council says they have suffered no loss in reliance on the negligently prepared LIM, and can have no claim against the Council.
[37] Finally, the Council maintains that this is clearly not a case where there was a “latent” defect relating to the land or motel, unlike the situation which prevailed in Invercargill City Council v Hamlin.16 Nor is it said that Mr York and Alpine Motel can assert here that economic loss has occurred consequential upon physical damage to the property, such that the Hamlin line of authorities would apply in this case.
[38] I turn now to the plaintiffs’ opposition to the present application and the specific grounds of opposition advanced, which are articulated in their Notice of Opposition as:
(a) The loss claimed is the diminution in market value of the land and motel business;
(b)The market value of the land and motel business first decreased only around November 2010;
(c) The plaintiffs’ cause of action therefore accrued on or about November 2010 and the claim was made within the six year limitation period on 23 July 2012; and
(d)The plaintiffs’ claim is consequently not statute-barred under s 4(1)(a) Limitation Act 1950.
[39] In essence, the position advanced for Mr York and Alpine Motel here is that this is a case similar to both Hamlin and in particular a decision in this Court, Bayliss v Central Hawkes Bay District Council,17 which is a decision entirely on point and one on which they rely.
[40] In Invercargill City Council v Hamlin18 a council building inspector negligently approved defective house foundations but the latent defect only became apparent when cracking in the house materialised. In its decision in the Privy Council, Lord Lloyd of Berwick noted:19
...the cause of action accrues when the cracks became so bad, or the defects so obvious, that any reasonable home owner would call in an expert. Since the defects would then be so obvious to a potential buyer, or his expert, that marks the moment when the market value of the building is depreciated, and therefore the moment when the economic loss occurs...a cause of action accrues when, but not before, all the elements necessary to support the plaintiffs’ are in existence. For in the case of a latent defect in a building the element of loss or damage which is necessary to support a claim for economic loss in tort does not exist so long as the market value of the house is unaffected. Whether or not it is right to describe an undiscoverable crack as damage, it clearly cannot affect the value of the building on the market... Their Lordships repeat that their advice on the limitation point is confined to the problem created by latent defects in buildings. They abstain, as did Cooke P, from considering whether the “reasonable discoverability” test should be of more general application in the law of tort.
[41] In submissions advanced for Mr York and Alpine Motel, Mr Rennie contended that the Hamlin decision and the present case share a common feature, in that in both cases economic loss for subsequent diminution in market value is claimed.
[42] And, in opposing what he says were the defendant’s attempts to distance the present case from Hamlin by suggesting that there is no latent physical defect here, Mr Rennie contended that in any event this is an immaterial distinction. He
maintained that this would not detract from the principle the plaintiffs rely upon.
17 Bayliss v Central Hawkes Bay District Council [2011] 11 NZCPR 843 (HC).
18 Invercargill City Council v Hamlin, above n 16.
19 At 526.
This principle he says is that, whether the “defect” caused to a property is either a latent physical defect in the building or alternatively, a latent earthquake risk, does not matter. This is because in neither instance does any economic loss occur until the market value decreases once it becomes aware of the existence of the defect. Thus, Mr Rennie maintains that the factor in Hamlin that is applicable here must be the kind and timing of the loss, rather than the particular reason for the market value of the property declining.
[43] Mr Rennie went on to submit that, applying this principle in the present case does not require an unacceptable application of the “reasonable discoverability” test, nor does it represent any departure from the conventional approach identified in Murray v Morel, to the effect that accrual is “an occurrence-based” not a “knowledge-based” concept.
[44] Mr York and Alpine Motels’ position as I understand it, is simply that the “occurrence” of loss in this case coincides with the market acquiring knowledge of, and then responding to, those earthquake matters which were said to be negligently omitted from the LIM. Thus the cause of action did not begin to accrue until the diminution in market value occurred as noted above, regardless of whether or not the plaintiffs were aware of that diminution.
[45] The plaintiffs then go on to rely upon the reasoning in Bayliss, a decision of this Court given in February 2010. In that case, the appellants purchased a property in 1999 in reliance upon a LIM supplied by the respondent Council which was alleged, in breach of statutory duty, to omit actual or potential subsidence information. Cracks developed in the house and expert reports were obtained. Finally, a claim was filed in 2007. The respondent Council claimed that the proceeding was time-barred but Andrews J (on appeal from a successful District
Court defendant’s summary judgment application) held:20
I accept that it is arguable (and certainly not able to be rejected on a summary judgment application ) that the plaintiffs did not suffer any loss immediately on receiving the LIM report and relying on it to settle the purchase...
20 Bayliss v Central Hawkes Bay District Council, above n 17, at [68], [71] and [73].
Application of the Hamlin (PC) reasoning by analogy is not precluded by the Supreme Court’s judgment in [Murray]. While the Supreme Court clearly rejected a general application of reasonable discoverability, it did not overrule Hamlin (PC), nor confine it to its precise facts. Rather, the majority affirmed the reasoning of the Privy Council, finding that discoverability was an essential component of loss.
I have, therefore, concluded that the District Court Judge erred in granting the respondent’s application for summary judgment on the basis that the appellant’s cause of action accrued either on the date of the LIM report, or on the date the appellants settled the purchase, and that their claim is therefore time-barred under the Limitation Act. For the reasons set out above, I am not able to conclude that the District Court Judge was correct in concluding that the appellant’s cannot succeed in their argument that the cause of action accrued at a later date.
[46] In response, the Council in the present case seeks to distinguish Bayliss. This is on the basis that it was concerned with economic loss consequent upon subsequent discovery of physical defects and damage which differs from the present case. It does appear however that counsel in Bayliss accepted that the “claim was not of a latent defect in the property” and the Court held that the case was “different from that of Hamlin and the ‘latent defect’ cases.” It might be argued therefore that the situation in Bayliss and that in the present case cannot really be distinguished on any rational basis. Both involve a claim for breach of duty in the provision of a LIM, and subsequent economic loss occasioned by a diminution in market value of the property that only became apparent later.
[47] As a final resort, before me Mr Neutze for the Council contended that in any event Bayliss was wrongly decided. He suggested that in reality the loss in Bayliss was actually suffered immediately the property was purchased, as occurred in Altimarloch. Further, he suggested that the notion of “reasonable discoverability” also could not apply in Bayliss because it cannot be extended past Hamlin-type cases of “negligence simpliciter”. These are all matters for the future however.
[48] The essential position adopted by Mr York and Alpine Motel in their recent amended statement of claim is that this is a claim for economic loss based upon diminution in the market value of the land and motel business. In contrast, the Council’s position is that this is simply a classic transaction case with the cause of action arising here as soon as Mr York and Alpine Motel were financially worse off when they settled the purchase of the land and motel whether they knew it or not.
[49] In my view and despite the submissions from Mr Rennie for the plaintiffs to the contrary, none of the cases cited are directly on point with what I understand to be the facts of the present case.
[50] In Altimarloch, the cause of action accrued at the time of settlement of the purchase when the purchasers received something worth less than what they had paid. The decision in Thom effectively was to the effect that the damage in that case occurred at the time the pre-nuptial agreement was entered into, even though the error was not discovered until later. In Murray v Morel, as I have noted above, Tipping J confirmed that the test to be applied is an occurrence-based test and not a knowledge-based test.
[51] In Hamlin, the Privy Council considered the claim as one of economic loss and it appeared to apply a “reasonable discoverability” test. The Court of Appeal in Hamlin also applied that “reasonable discoverability” test and noted that economic loss was sustained when the damage to the building became manifest. And in Bayliss Andrews J said that no loss necessarily occurred in the circumstances prevailing there until the market value of the property fell.
[52] In considering these matters I remind myself that the application before me is one for strike out which is a jurisdiction to be exercised sparingly and only where the Council is able to satisfy the Court that the plaintiffs’ cause of action is so clearly statute-barred that the claim can properly be regarded as frivolous, vexatious or an abuse of process.
[53] Elias CJ states in the Altimarloch decision at [49] (which I have referred to at [25]) that there may be cases where it is difficult to determine when loss has been suffered, as the decision in Nykredit recognised. In my view the matter before me is just such a case.
[54] And in the earlier Supreme Court decision in Davys Burton v Thom Wilson J acknowledged this at [46] (which I have noted at [33] above) where he noted that in a particular case damage may well be contingent and not actual for limitation
purposes if a plaintiff will suffer no damage at all unless and until a contingency is fulfilled. In noting this, Wilson J went on to state, and I repeat:21
The distinction may well be thought to be a fine one, but in any regime of limitation apparently similar cases may fall on opposite sides of the line which divides those which are barred from those which are not.
[55] In my view, the present case is one where this distinction is a fine one. To determine here which side of the limitation line this case falls is not appropriately determined at this strike out stage.
[56] Finally, I return to the relatively recent Supreme Court decision in Altimarloch (which superseded and does not seem to refer to Bayliss). This might be seen here as the major authority supporting the Council’s contention that the claim against it is statute-barred. To reiterate, in Altimarloch, the cause of action against the Council for the incorrect information in the LIM report arose at the time the purchase contract was entered into as it was said the purchasers suffered loss immediately when they could not use the quantity of water they thought they had access to. A question arises in the present case as to whether that situation is precisely the same as the circumstances that occurred here where the plaintiff purchasers relied on a defective LIM report to their detriment, the LIM omitting what was said to be critical information. And in the present case the plaintiffs’ amended pleading specifically suggests that no detriment or loss was suffered by them until the market value of the property decreased in or around November 2010.
[57] As I see it, the position on all these matters at present is somewhat unclear. I consider it may well be arguable that, on the one hand, the cause of action in this case simply accrued at the time the purchase was made. Similarly, it might be argued on the other hand that the cause of action accrued later as the plaintiffs contend, at a time when the market became aware of the omitted earthquake information and loss was suffered. It might also be concluded when all the evidence is carefully weighed that the claim by Mr York and Alpine Motel could be a
contingent liability claim; that is, a claim contingent on the general public or market
21 Davys Burton v Thom, above n 6, at [46].
learning of the Council’s omissions from its LIM and their importance here. It follows in my view that the Council’s present application must fail.
Conclusion
[58] For all the reasons outlined above I conclude that this is not a case where the plaintiffs’ cause of action is so clearly statute-barred that their claim should be struck out.
[59] The Council’s application before me accordingly fails.
Costs
[60] As to costs, I see no reason why costs should not follow the event in the usual way.
[61] Costs are therefore awarded to Mr York and Alpine Motel on this application on a category 2B basis together with disbursements as fixed by the registrar.
...................................................
D Gendall J
Solicitors:
Rhodes & Co, Christchurch
Brookfields, Auckland
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