|
|
Home
| Databases
| WorldLII
| Search
| Feedback
High Court of New Zealand Decisions |
Last Updated: 28 December 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-1994-441-000057 (EX NAPIER CP 13/94)
BETWEEN WALKERS NURSERIES LIMITED Plaintiff
AND CARLILE DOWLING Defendant
Hearing: 15 and 16 November 2005
Supplementary Submissions Received 24 February,
13 and 17 March 2006; 8 May and 18 June 2007
Appearances: K J Crossland for the Plaintiff
A C Challis for the Defendant
Judgment: 28 June 2007 at 11.00 am
JUDGMENT OF FRATER J
This judgment was delivered by Justice Frater on 28 June 2007 at 11.00 am, pursuant to
r 540(4) of the High Court Rules
Registrar/Deputy Registrar
Date:
Solicitors: Stace Hammond P O Box 19101 Hamilton for the Plaintiff
McElroys P O Box 835 Auckland for the Defendant
WALKERS NURSERIES LTD V CARLILE DOWLING HC AK CIV-1994-441-000057 28 June 2007
Introduction
[1] Walkers Nurseries Limited has sued its former solicitors, Carlile Dowling, for breach of contract and negligence. Carlile Dowling denies liability under either head. It has also pleaded, by way of affirmative defence, that the claims are statute barred under s 4(1) of the Limitation Act 1950 and has applied to strike out the third amended statement of claim on that ground. In a judgment dated 8 July 2004
Associate Judge Faire granted the strike out application. This is an application for review of his decision.
[2] A significant issue on both the strike out and review applications was whether the doctrine of reasonable discoverability applied to the circumstances of this case. At the time of the hearing before me the judgment of the Court of Appeal in Murray v Morel & Co Ltd [2006] 2 NZLR 366, in which this issue was argued, was awaited. I therefore adjourned the hearing, part heard, for counsel to file further submissions once it was to hand, which they did. The delivery of this judgment was further deferred after the Supreme Court granted leave to appeal Murray v Morel on the reasonable discoverability issue. The Court’s judgment holding that the doctrine is not generally applicable was released on 1 May 2007: see Trustees Executors Ltd v Murray [2007] NZSC 27. As a result, Walkers Nurseries has abandoned its argument on that ground.
[3] Then, on 30 May 2007, the Court of Appeal released its judgment in Davys Burton v Thom [2007] NZCA 215. This appeal dealt with the basic issue in this case, namely, when a cause of action in negligence accrues. Counsel have had the opportunity of making further submissions on this issue also.
[4] Before addressing the facts and remaining issues in this case, it is appropriate to reiterate the nature and scope of the Court’s powers, first, in relation to strike-out applications and secondly, on applications for judicial review of Associate Judges’ decisions.
Strike-out applications
[5] Rule 186 of the High Court Rules empowers the Court to strike out the whole or part of a pleading.
[6] The approach which the Court should take to such applications was enunciated by the Court of Appeal in Attorney-General v Prince & Gardner [1998] 1
NZLR 262, 267 as follows:
A striking-out application proceeds on the assumption that the facts pleaded in the statement of claim are true. That is so even although they are not or may not be admitted. It is well settled that before the Court may strike out proceedings the causes of action must be so clearly untenable that they cannot possibly succeed (R Lucas & Son (Nelson Mail) Ltd v O’Brien [1978]
2 NZLR 289 at pp 294 – 295; Takaro Properties Ltd (in receivership) v
Rowling [1978] 2 NZLR 314 at pp 316 – 317); the jurisdiction is one to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material (Gartside v Sheffield, Young & Ellis [1983] NZLR
37 at p 45; Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2
NZLR 641); but the fact that applications to strike out raise difficult questions of law, and require extensive argument does not exclude
jurisdiction (Gartside v Sheffield, Young & Ellis).
[7] In Matai Industries Ltd v Jensen [1989] 1 NZLR 525, 531, Tipping J identified the following principles, summarised by Associate Judge Faire at [6] of the judgment under review, applicable to cases where the strike-out application involves a Limitation Act defence:
a) That a defendant could never apply to strike out a claim against him as disclosing no reasonable cause of action merely because he might have a good limitation defence;
b) A defendant who believes he has a good limitation defence may, however, either plead the defence and seek trial of the defence as a preliminary issue, or, in a clear case, apply to strike out the plaintiff’s claim on the grounds that it is frivolous, vexatious and an abuse of process;
c) The onus is on the defendant to show that the plaintiff’s claim is statute-barred;
d) Evidence can be tendered by affidavit;
e) The Court should be slow to strike out a claim, or cause of action altogether in limine but against that, if the position is quite clear,
then the defendant should not be vexed by having to go to full trial when the answer is obvious and inevitable.
Judicial review of decisions of Associate Judges
[8] The principles concerning judicial review of decisions of Associate Judges are now well settled. Essentially, they are to be conducted upon appellate lines: see Wilson v Neva Holdings Ltd [1994] 1 NZLR 481 per Fisher J. That means that:
i) It is a review, not a "retrial" or "hearing de novo".
Furthermore, it is a review of the "order or decision", not a review of the original application.
ii) The review is to be conducted "by way of rehearing".
Accordingly, the onus is on the appellant to show that the original decision is wrong.
iii) The Court will not substitute its own discretion for that of the
Associate Judge; it will only interfere if:
• There has been an error of principle;
• The Associate Judge has been influenced by irrelevant considerations or failed to take into account relevant considerations;
• Significant fresh material has been introduced on review;
or
• The decision was plainly wrong.
[9] The plaintiff accepts that it has the burden of showing that the decision was wrong and rested on unsupportable factual findings or wrong principles of law. Against that, it urges the Court to bear in mind that this particular interlocutory
decision had the effect of a final judgment and that, as a result, it has been denied its day in Court.
[10] In response, the defendant emphasises the discretionary nature of the decision to review and that:
• The Associate Judge’s decision was fully reasoned;
Background facts
[11] The circumstances giving rise to the substantive claim and the history of the pleadings are encapsulated in the following passage from Judge Faire’s judgment of
8 July 2004. It bears repetition:
[9] ... In the judgment I delivered on 29 May 2003 I summarised the general background which I adopt and now include in this judgment:
14. The plaintiff company was incorporated under the Companies Act 1955. In a judgment of Ellis J ... in related proceedings, the plaintiff was described as a third generation nursery business in the Hawkes Bay. In 1986 a nurseryman’s conference was held in Taupo. The conference was addressed by a Mr Sewell, the manager of the National Bank at Hastings and one of the bank’s customers, a Mr Bush. Mr Bush addressed the conference about his new broking business for selling nursery stock. The business was called Horticultural Contact.
15. The plaintiff’s director, Mr BJW Walker, agreed to sell stock through Horticultural Contact. He was concerned that the proceeds of sale of the plaintiff’s stock be secured as they passed through Horticultural Contact’s hands. The precise arrangements are analysed by Ellis J in a judgment in a proceeding between the plaintiff and the National Bank in CP 45/95 (Napier Registry) ... given in the plaintiff’s favour on 2 August 2001. An appeal was settled pursuant to the terms of a confidential agreement on or about
23 December 2002. The judgment describes the unfortunate events so far as the plaintiff is concerned. The plaintiff was not paid for
product ordered by Horticultural Contact. That put the plaintiff in
serious financial difficulties. The plaintiff was placed in receivership. Notice appointing the receivers is dated 13 May 1988. The receivers were appointed by the plaintiff’s bank, the BNZ.
16. The statement of claim issued in April 1994 alleges breach of contract and negligence in respect of advice given by one of the defendant’s partners [Mr Thornton] in 1988. The advice related to proceedings and enforcement steps taken against Mr Bush arising from the debt by Horticultural Contact to the plaintiff on the sale of fruit trees. The statement of claim sought an inquiry into damages, interest and costs.
17. An amended statement of claim against the defendants was filed on 23 January 1995. That added an allegation that the defendant failed to adequately advise or take steps to protect the interests of the plaintiff in respect of a claim made by the National Bank over land owned jointly by Mr Bush and another. Again, it sought an inquiry into damages ...
18. The next significant development occurred with the filing of a second amended statement of claim on 18 December 1995. In substance that abandoned the particulars of the alleged breach of contract and negligence contained in the earlier statements of claim. It now alleged that the defendant had breached its duties to the plaintiff by failing to advise the plaintiff that it had legal rights and remedies against the National Bank in receiving funds from Mr Bush and his partner for its own benefit and had failed to take steps to challenge the actions of Mr Bush and his partner and the National Bank. Two days before the filing of that second amended statement of claim, the plaintiff’s solicitors wrote to the solicitors acting for the defendant. In that letter they wrote:
On further investigation of the role of the NB in this matter we believe that the NB knowingly received proceeds of sale of stock by WNL to Messrs Bush and Radburnd with the result that a constructive trust is imposed on such funds in favour of WNL. Alternatively, the NB acted in breach of trust in relation to those funds. As a result WNL is issuing proceedings against the NB. A copy of the statement of claim is enclosed.
Our client’s instructions are that Carlile Dowling, through Mr Thornton, were aware of the breaches of contract by Bush and Radburnd and breaches of trust by the NB. We have amended the claim against Carlile Dowling. A copy of the second amended statement of claim is enclosed for service.
In our view the most appropriate course of action is for the claim against Carlile Dowling to be put on hold pending the outcome of the claim by WNL against the National Bank.
19. The defendant’s solicitors replied by letter dated 20
December:
Carlile Dowling does not object if you want to pursue the
National Bank.
20. ... the second amended statement of claim of 18 December
1995 quantified damages as being:
not less than $254,828.96. It was particularised as:
being the balance of the debt owed by the plaintiff by Bush and Radburnd for the supply of fruit trees.
To that general summary it is necessary to add that the contract with Horticultural Contact required the proceeds of sale of the plaintiff’s stock to be paid into what was, in essence, a trust account with the National Bank. Apart from payment of Horticultural Contact’s commission, the proceeds of that trust account were to be paid to the plaintiff.
[10] A further amended statement of claim was filed on 5 August 2003. The defendant’s contention is that the second and third amended statements of claim, which were filed respectively on 18 December 1995 and 5 August
2003, contain new allegations which the defendant says constitute new causes of action and are time-barred by s4 of the Limitation Act 1950.
Section 4(1) Limitation Act 1950
[12] The material part of that section states that:
(1) Except as otherwise provided in this Act, the following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued, that is to say,—
(a) Actions founded on simple contract or on tort:
The judgment under review
[13] The principal issue which Judge Faire had to determine was whether the third amended statement of claim contained causes of action which were first pleaded after the limitation period in respect of them had expired.
[14] In determining that issue he had regard, inter alia at [15], to the following principles:
...
(c) A cause of action accrues for Limitation Act purposes when all the facts necessary to establish the cause of action are in existence: Stratford v Phillips Shayle George [2001] NZCA 299; (2001) 15 PRNZ 573 (CA);
(d) A cause of action in contract arises from the date of the breach regardless of whether there is any damage at that time: Rabadan v Gail [1996] 3 NZLR 220, 222;
...
(f) The facts necessary to establish the cause of action in negligence require proof of duty, breach and loss consequent on that breach of duty; Stratford v Phillips Shayle George;
(g) A cause of action in negligence accrues at the time the plaintiff suffers loss (which requires more than minimal loss) as a result of the breach, which loss is capable of quantification in terms of money: Forster v Outred and Co [1982] 2 All ER 753, 765;
...
(i) Loss or damage does not have to be quantified at the point of accrual of a cause of action for time to commence to run: Stratford v Phillips Shayle George, 578.
[15] Significantly for present purposes, the Judge rejected Mr Crossland’s submission that time does not start to run until the material facts on which the cause of action was based are discovered or ought reasonably to have been discovered by the plaintiff.
[16] On the facts as disclosed in the pleadings and affidavits, Judge Faire determined that as the last date when Mr Thornton of Carlile Dowling acted for Walkers Nurseries was 15 February 1989, time expired for the contractual claim on
15 February 1995.
[17] He adopted the same cut-off point for the cause of action in negligence. He held that all the plaintiff’s losses arising from the defendant’s failure to advise it about and to pursue the National Bank trust account, including those associated with the receivership which it was unable to avoid, were sustained by the end of August 1988 at the latest, and could have been sued upon by then. If Mr Thornton was negligent, damage occurred almost immediately he failed to act. That was when the cause of action arose; not when Ellis J gave his judgment in the proceedings against the National Bank.
[18] Judge Faire also dismissed Mr Crossland’s alternative argument that Carlile Dowling could not benefit from the consequences of its own negligence in failing to follow the plaintiff’s repeated instructions to investigate the Horticultural Contact trust account issue. He held that even if this had given rise to a basis for claim, that stopped when Mr Thornton’s brief was concluded on
15 February 1989. Thereafter there was no further concealment of the position by
Mr Thornton. Walkers Nurseries was free to pursue its case with new lawyers.
[19] But in case his earlier conclusion that time did not run from the date on which material facts were reasonably discoverable was wrong, the Judge reviewed the evidence in that regard. Having done so, however, he reached the same conclusion as to when the limitation period expired.
[20] He then analysed the nature of the claims made in each of the statements of claim and concluded that as the second amended statement of claim, filed after
15 February 1995, introduced new causes of action, repeated and added to in the third, they were each caught by the provisions of s 4 of the Limitation Act. He said:
[59] a) The allegations relating to the advice on bankruptcy, the writ of sale and prior security were all abandoned with the filing of a second amended statement of claim. The fact that they are raised in the third statement of claim, beyond the limitation period, means they are out of time.
b) The allegations as to the trust account were first made in the second amended statement of claim. When the second amended statement of claim is compared with the amended statement of claim it is apparent that there is a completely new allegation of breach. The comparison is between an allegation based on advice relating to recovering the debt by writ of sale or execution against the debtor’s property, and the new allegation which is to pursue trust monies in the hands of a third party. In my view that was a new case and fits within the definition of a fresh cause of action for the purposes of the Limitation Act. There is, in fact, nothing in the amended statement of claim that would give a hint of an allegation of breach in the form of a failure to pursue the third party trustee for the monies held on trust.
[21] Finally Judge Faire considered the arguments that the defendant had either waived the right to raise the limitation defence (by agreeing to the deferment of this proceeding pending the resolution of the claim against the National Bank) or was
estopped from doing so. Mr Crossland abandoned the second argument and the Judge dismissed the first, and, given his clear view of the strength of the Limitation Act defence, granted the strike out application.
Issues for determination on review
[22] With the abandonment of the reasonable discoverability argument, two issues remain for determination by this Court:
i) The date on which the cause of action accrued;
[23] Although he did not specifically concede the point, Mr Crossland did not challenge the Judge’s findings on the commencement of the limitation period for contractual purposes; his focus was on the negligence claim.
The accrual date
[24] Of these two issues, the critical one is whether Judge Faire erred in his findings as to the date on which the cause of action accrued.
[25] As Arnold J said, in delivering the judgment of the Court of Appeal in Davys
Burton v Thom at [64]:
In this area of the law, as in others, “context is everything”.
[26] Accordingly, it is appropriate that I start by setting out just what it is that the plaintiff claims.
Pleadings
[27] For that I refer to the third amended statement of claim. In it the plaintiff alleges that:
• Between 9 July 1987 and 21 March 1988, in breach of its agreement with Walkers Nurseries and its equitable obligations in respect of the sale proceeds of Walker Nurseries’ stock, Horticultural Contact variously deposited those proceeds into and withdrew them from Horticultural Contact’s first trust account with the National Bank, deposited them into other accounts, or paid debts with them, but failed to transfer or deposit them into Walkers Nurseries’ trust account with the bank, or account for the balance to Walkers Nurseries, with the result that the National Bank was unjustly enriched at its expense.
• On 3 May 1988 and on various dates through to 22 July 1988 the plaintiff instructed the defendant to recover the balance of Walkers Nurseries’ sale proceeds. In doing so it asked the defendant to investigate the trust accounts with a view to ensuring that all Walkers Nurseries’ sale proceeds received by Horticultural Contact were being and had been dealt with in accordance with the agreement between Horticultural Contact and Walkers Nurseries, and to ascertain whether any Walkers Nurseries’ sale proceeds had been received by Horticultural Contact but not paid to Walkers Nurseries or dealt with otherwise than in accordance with the agreement. It also asked whether the National Bank had a legal right to divert Walkers Nurseries’ sale proceeds from the second trust account.
• Mr Thornton advised it against factual investigation into the trust accounts and specifically against trying to pursue legal redress in respect of monies which might be or might have been received into either trust account but not paid to it in accordance with the agreement. Instead, he advised that it would recover the unpaid balance of Walkers Nurseries’ sale proceeds by proceedings in contract against the principals of Horticultural Contact, Messrs Bush and Radburnd.
• As a result of the unjust enrichment of the bank, Walkers Nurseries’ seasonal production programme was de-stabilised and it substantially lost its seasonal cashflow. On 13 May 1988 receivers were appointed.
• Although Carlile Dowling did issue proceedings against Messrs Bush and
Radburnd and summary judgment was entered against Mr Bush for
$254,828.96, and he was subsequently adjudged bankrupt on the plaintiff’s petition, no monies were available from his bankruptcy to satisfy the judgment.
[28] In the circumstances, the plaintiff claims that the defendant, through
Mr Thornton, breached its contract of retainer and was negligent by:
• Failing to follow its instructions to investigate Horticultural Contact’s use of the two trust accounts;
• Wrongly and without any adequate enquiry, advising against investigating the trust accounts;
• Wrongly and without adequate enquiry advising that Mr Bush was wealthy enough to satisfy any judgment;
• Wrongly and without adequate enquiry advising it to pursue an in personum remedy in contract against Messrs Bush and Radburnd;
• Failing to advise it that it had remedies against the National Bank (including an in rem remedy) over the Walkers Nurseries’ sale proceeds in respect of the bank’s unjust enrichment;
• Failing to discover that an alleged agreement to mortgage did not exist;
• Failing to protect its interests by taking steps to challenge the National Bank over the bank’s unjust enrichment from the Walkers Nurseries’ sale proceeds;
• Failing to take adequate steps to verify the National Bank’s alleged agreement to mortgage and therefore failing to discover that the alleged agreement to mortgage did not exist; and
• Generally failing to make any or adequate inquiries and to adequately advise and/or take steps to protect its interests in respect of the recovery of the Walkers Nurseries’ sale proceeds based on the information, documents and instructions given to Mr Thornton.
[29] The plaintiff says that, as a result, it lost various opportunities, the value of which it quantifies as follows:
• In May 1988 to recover from the National Bank the
unpaid balance of the Walkers Nurseries’ sale proceeds: $ 254,828.96
• To avoid receivership losses arising from the forced sale
of stock in August 1988: $ 461,000.00
• To pursue the National Bank in May 1988 for the
unharvested squash crop: $ 40,000.00
• To avoid receivership costs incurred during May 1988 to
March 1993: $ 56,080.53 [30] In addition, it claims that it:
• Lost anticipated future profits: $ 6,000,000.00
• Wasted legal costs in pursuing worthless remedies
against Messrs Bush and Radburnd:
$ 13,643.00
• Lost the opportunity to avoid legal costs in relation to
the claim against the National Bank: $ 430,952.12
[31] Alternatively, the plaintiff claims the difference between the remedy it achieved on settlement with the National Bank on 23 December 2003 compared to the relative current value of the result reasonably achievable in 1988/1989.
Submissions
[32] Mr Crossland submitted that up until 2 August 2001, when Ellis J delivered his judgment in the proceedings by Walkers Nurseries against the National Bank, the immediate and only cause of the plaintiff’s loss was the failure of Messrs Bush and Radburnd to satisfy the judgments obtained against them. Any damage the plaintiff sustained from Carlile Dowling’s negligent omission to follow instructions to investigate the Horticultural Contact’s accounts and/or to pursue the National Bank only arose when Ellis J found that the bank had knowingly taken its money from a broker (trust) account. Until then, the damage was contingent. There could be no actionable claim in negligence against Carlile Dowling for overlooking Walkers Nurseries claim against the bank if that claim itself was not made out. If Walkers Nurseries lost its case against the bank the alleged breaches would have caused no loss, and it did not matter when that happened. On the other hand, there was a clear difference between a win for Carlile Dowling against the bank in 1988 or
1989 and 2003. That was because the result achieved by Walkers Nurseries in 2003, through settlement, was inferior to that which it could have achieved in 1988 or
1989, had Carlile Dowling carried out its instructions at that stage.
[33] The defendant says that this is not a case of contingent liability at all. Ms Challis submitted that the damage giving rise to the negligence claim was sustained in 1988 or 1989 at the latest. Ellis J’s decision only had a bearing on the quantum of the loss, not the liability.
The law
[34] The issue of when a cause of action in negligence accrues was addressed most recently by the Court of Appeal in its judgment in Davys Burton v Thom. That case, like the present, involved a claim against a firm of solicitors for giving allegedly negligent advice.
[35] The facts are that, shortly before he was due to leave New Zealand for the United States where he was to be married, Mr Thom instructed Davys Burton to prepare a pre-nuptial agreement. This was to ensure that his home in Rotorua
remained his separate property. Mr Thom’s fiancée duly signed the agreement before the wedding. However, the execution was flawed as the notary public who witnessed her signature did not and could not provide the necessary certification about explaining the effects and implications of the agreement in New Zealand law.
[36] Some years later the parties returned to New Zealand and lived in Mr Thom’s home. After they separated Mr Thom applied to the Family Court for the pre-nuptial agreement to be validated. The application was declined and that decision was upheld on appeal. Mr Thom then issued proceedings against his former solicitors alleging negligence and breach of fiduciary duty and seeking damages amounting to the value of his wife’s share in the home, plus legal costs incurred.
[37] The District Court Judge found that the solicitor was negligent in failing to provide Mr Thom with written instructions that could be given to either his fiancée or the notary public. However, he dismissed the application because the limitation period had expired.
[38] On appeal to the High Court, Simon France J allowed the appeal on the limitation point. He held that, being a creature of statute, the agreement was contingent on Court decisions, both as to enforceability and the overall disposition of property. He said that until those decisions were taken it was incorrect to say that loss had accrued.
[39] The Court of Appeal allowed the appeal on the basis that Mr Thom suffered actual loss and damage at the latest when he and his wife moved into his home in New Zealand. Because that was more than six years before the proceedings were issued, the claim was statute barred.
[40] In reaching that decision the Court took the opportunity to comprehensively review the authorities on the accrual issue: on the one hand, the line of English decisions starting with Forster v Outred and Co [1982] 1 WLR 86 up to and including the decisions of the House of Lords in Nykredit Mortgage Bank PLC v Edward Erdman Group Limited (No 2) [1997] 1 WLR 1627 and Law Society v Sephton & Co [2006] 2 AC 543 and, on the other, the Australian approach
encapsulated in the decision of the High Court of Australia in Wardley Australia
Limited v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514.
[41] Many thousands of words have been written about when a cause of action accrues. In Wardley Brennan J adopted a two stage approach: first identify the loss or damage; then the date on which it was suffered can be ascertained – and to do that, he analysed what happened in terms of burdens suffered and benefits acquired. He said, at 536:
The loss or damage includes, of course, economic loss or damage which the plaintiff suffers. A plaintiff may suffer economic loss or damage in a number of ways: by payment of money, by transfer of property, by a diminution in the value of an asset or by the incurring of a liability. Whether loss or damage is actually suffered when any of those events occurs depends on the value of the benefit, if any, acquired by the plaintiff by paying the money, transferring the property, having the value of the asset diminished or incurring the liability. If the plaintiff acquires no benefit, the loss or damage is suffered when the event occurs. At that time the plaintiff’s net worth is reduced. And that is so even if the quantification of that loss or damage has not been sustainable. But if a benefit is acquired by the plaintiff, it may not be possible to ascertain whether loss or damage has been suffered at the time when the burden is borne – that is, at the time of the payment, the transfer, the diminution in value of the asset or the incurring of the liability. A transaction in which there are benefits and burdens results in loss or damage only if an adverse balance is struck. If a balance can not be struck until certain events occur, no loss is suffered until those events occur.
The quantification of the diminution in value of an asset or of a liability incurred or the value of any benefit acquired may not be ascertainable at the time when the burden of the transaction is borne. In that event, the suffering of any loss cannot be said to occur before it is reasonably ascertainable (not before it is ascertained) that the burdens which the plaintiff has borne are greater than the value of the benefits that the plaintiff has acquired or will acquire. In other words, no loss is suffered until it is reasonably ascertainable that, by bearing the burdens, the plaintiff is “worse off than if he had not entered into the transaction”.
[42] In Gilbert v Shanahan [1998] 3 NZLR 528 Tipping J, delivering the judgment of the Court of Appeal, preferred to talk of present and contingent liabilities. He said, at 543:
When a liability is said to be the loss or damage which the plaintiff has suffered, it is necessary on this approach to determine whether that liability is present or contingent. If it is a present liability there will be loss or damage when it is incurred, notwithstanding that it may not be dischargeable in whole or in part until a future date. If the liability is contingent, it will not amount to loss or damage unless and until the contingency is fulfilled.
[43] Arnold J adopted a similar approach in Davys Burton v Thom: He said:
[64] ... The authorities establish that where a plaintiff alleges that he or she has executed a document in accordance with a solicitor’s negligent advice, and has suffered loss as a result, the cause of action will generally accrue when the advice is acted upon. This will be so even though the full dimensions of the loss may not become apparent until some time later. As McGee Limitation Periods (5th ed 2006) says at [5.030]:
[I]n the overwhelming majority of cases the cause of action will accrue when the negligent advice is acted upon and ... this will usually be when the plaintiff executes a document.
[65] Broadly, the rationale for this is that when the document is executed the plaintiff will have a package of rights that is less than that which he sought and should have received. As Lord Walker put it in Law Society v Sephton:
[48] In all these cases the claimant has as a result of professional negligence suffered a diminution (sometimes immediately quantifiable, often not yet quantifiable) in the value of an existing asset of his, or has been disappointed (as against what he was entitled to expect) in an asset which he acquires, whether it is a house, a business arrangement, an insurance policy, or a claim for damages.
[66] However, this outcome is not automatic. As Neill LJ emphasised in DW Moore & Co Ltd v Ferrier [1988] 1 WLR 267 at 280 there is no presumption that loss arises at the time that the negligent advice from the solicitor is acted upon – it depends on when in the circumstances of the case actual damage occurs. It appears from their Lordships’ discussion in Law Society v Sephton that the critical issue in such a case is whether the plaintiff’s legal position has, through the solicitor’s negligence, been altered to his immediate, financial disadvantage (see Lord Walker at [43] and Lord Mance at [67]). If so, loss or damage accrues immediately even if the full measure of that loss may not become clear until a later point in time.
This case
[44] So what is the position here?
[45] When one looks at the plaintiff’s pleadings and evidence it is apparent that this is not, as Mr Crossland argued, a case of contingent liability. It is not a case such as Wardley or Sephton where liability depended upon the happening of some future event (in Sephton, the solicitors’ misappropriations not otherwise being made good and claims being made on the solicitors’ compensation fund; in Wardley, the ascertainment and quantification of the loss of the party to be indemnified). Like
Judge Faire, I am satisfied that the damage occurred almost immediately
Mr Thornton failed to act.
[46] Mr Crossland sought to draw a distinction between the immediate losses and disadvantages that Walkers Nurseries suffered through being placed in receivership which, he said, was caused by Horticultural Contact’s failure to pay its contractual debt or otherwise account for the monies it had received from the sale of Walkers Nurseries’ stock, on the one hand, and the loss of opportunity to bring a claim against the National Bank for unjust enrichment and to claim the consequential losses pleaded in the third amended statement of claim, on the other.
[47] I do not accept this argument. In my view the losses are intertwined. The claim is that, as a result of Carlile Dowling’s negligence, Walkers Nurseries did not receive the money it says was due to it; consequently it was unable to avoid going into receivership and/or incurring further costs and it lost the opportunity of receiving other monies and/or pursuing other claims. All the monetary claims, except that relating to the cost of pursuing the claim against the National Bank, were sustained or capable of being quantified in 1988/1989.
[48] As Ms Challis pointed out, this is apparent from the plaintiff’s own evidence. For example:
• On 21 April 1988 the National Bank had closed (unused), the trust account into which the plaintiff’s funds were supposed to be paid;
• The main Horticultural Contact trust account was being used to repay the National Bank’s lending for Mr Bush’s other business and business creditors. It was being conducted not as a trust account, but a typical debtor/creditor account;
• Mr Walker was shown planted stock and told it was the plaintiff’s stock, when in fact the plaintiff’s stock had been sold and the trust account misused;
• Between March 1987 and April 1988, Horticultural Contact received
$388.611.52 from the plaintiff’s stock and paid the plaintiff only
$211,654. This left an unpaid balance of $176,957.52.
[49] Adopting the test enunciated by Bingham LJ in DW Moore & Co Ltd v
Ferrier at [280], I am satisfied that the plaintiff suffered immediate damage in
1988/1989 simply because at that stage it did not get what it should have got. It had a present loss; Ellis J’s decision in 2001 did not alter anything. It simply made findings about the factual situation as it was in 1988 and 1989 and, in particular, confirmed the position with regard to the existence of the bank accounts and the use made of them by both Horticultural Contact and the bank. It served to quantify the amount of the loss suffered by the plaintiff, but it did not create that loss. That came into existence back in 1988, in the circumstances set out in the pleadings.
[50] The situation here is analogous to that considered by the House of Lords in Central Electricity Board v Halifax Corporation [1963] AC 785 cited in Pacific Coilcoaters Ltd v Interpress Associates Ltd [1998] 2 NZLR 19, 28. In Central Electricity Board v Halifax Corporation a claim to funds held under the provisions of the Electricity Acts of 1947 and 1957 could not be proved until the Minister decided the capacity in which they were held. Lord Reid held at 801 that no new right or liability came into existence when the Minister made his decision. No new property right was created; it merely enabled a pre-existing right to be enforced. And so it was with Ellis J’s decision.
[51] The fact that other nurserymen were unsuccessful in their claim against the bank has no bearing on my finding. They were concerned with a different factual situation. As Wild J said in Burns v The National Bank of New Zealand HC WN CIV-2002-485-913 14 November 2005 at [90]:
Walkers Nurseries dealt with Horticultural Contact on a different basis than did the Burns.
[52] Nor does the Court of Appeal decision in Davys Burton v Thom assist the plaintiff. In his original submissions Mr Crossland relied upon Simon France J’s finding that loss did not accrue until the Family Court had declared the pre-nuptial
agreement invalid. Because the Court of Appeal determined that liability accrued when the parties moved into Mr Thom’s house, it did not have to reach a final view about either the position when he received the advice and entered into the agreement or the impact of the Court decision. It did, however, make two points which are relevant for present purposes.
[53] First, it emphasised the discretionary nature of the Family Court’s decision under s 21(8)(a) and (b) of the Matrimonial Property Act 1976 – a very different type of decision from that which Ellis J had to make. Secondly it endorsed the “powerful policy argument” against treating the loss as accruing on the date of the Family Court decision, noting the observation of Lord Nicholls in Nykredit at 1633 that:
... within the bounds of sense and reasonableness the policy of the law should be to advance, rather than retard, the accrual of a cause of action. This is especially so if the law provides parallel causes of action in contract and in tort in respect of the same conduct. The disparity between the time when these parallel causes of action arise should be smaller, rather than greater.
[54] In all the circumstances I am satisfied that Judge Faire reached the correct decision on the accrual point. As the causes of action in both contract and negligence accrued by 15 February 1989, at the latest, the six year limitation period had well and truly elapsed by the time the second and third amended statements of claim, which introduced the current causes of action, were filed.
Whether a defendant’s negligence producing injury can not fuel a limitation exemption
[55] Mr Crossland also argued that it would be inconsistent and unjust for the lapse of time arising as a result of the defendant’s alleged negligence to fuel a limitation defence.
[56] This submission rests on the dictum of Deane J in Hawkins v Clayton & Ors
[1988] 164 CLR 539 (HCA) at 590 that:
It is arguable that the notion of unconscionable reliance upon the provisions of a statute of limitations which provides the foundation of the long established equitable jurisdiction to grant relief in a case of concealment of a cause of action until after a limitation period has expired (cf.s. 51(1) of the
Limitation Act) should, by analogy, be extended to cover cases such as these where the wrongful act at the one time inflicts the injury and, while its effect remains, precludes the bringing of an action for damages. It seems to me, however, that the preferable approach is to recognise that it could not have been a legislative intent that the effect of provisions such as s 14(1) of the Limitation Act should be that a cause of action for a wrongful act should be barred by lapse of time during a period in which the wrongful act itself effectively precluded the bringing of proceedings. On that approach, the reference in s 14(1) of the Act to the cause of action first accruing should be construed as excluding any period during which the wrongful act itself effectively precluded the institution of proceedings.
[57] Blanchard J endorsed Deane J’s dictum in G v S HC AK CP576/93 22 June
1994, but in the context of the reasonable discoverability rule, as did Cooke P in
Invercargill City Council v Hamlin [1994] 3 NZLR 513 at 522.
[58] Cooke P returned to the point in T v H [1995] 3 NZLR 37 at 43 where he said that Deane J’s dictum:
... produces much the same result as the [reasonable discoverability] approach ... with the difference that in relation to childhood sexual abuse (which was not the subject matter of Hawkins v Clayton) I prefer to speak in terms of the accrual at common law of a cause of action for psychological or psychiatric harm.
[59] In T v H that would have had the result that a cause of action against a child sexual abuser would not accrue until after their death when the victim obtained release from fear by learning of the death. However, I note that Hardie Boys J, with whom the majority concurred, was not comfortable with the approach taken by the President, saying at 54:
I think the concept of disability as I have explained it, together with the discoverability rule applied in appropriate cases, and the principles of fraudulent concealment now found in s 28 of the Limitation Act, which may well be very relevant in many cases of child abuse, must suffice to do such justice as it is possible in these cases.
[60] While I am prepared to accept, as Mr Crossland submitted, that Judge Faire erred in finding that:
[43] ... until September [1988] Mr Walker believed that the money from the proceeds of the plaintiffs’ stock had been received by the National Bank
I do not see how that assists the plaintiff. It simply means that the facts would better support a reasonable discoverability argument which, the plaintiff now concedes, is not open to it. And if that argument is not available, the Hawkins v Clayton approach, which has never had the same level of support in this country as the argument for the general application of the reasonable discoverability rule, can not be applied either.
[61] This result may well be seen to be unfair – but as Tipping J said in Trustees and Executors Ltd v Murray at [76], citing Lord Scanlan in Pirelli General Cable Works Ltd v Oscar Faber & Partners (A Firm) [1983] 2 AC 1 at 19, it is not for the Courts to substitute a new principle or rule of law for an existing statute law. What is required is a complete legislative overhaul of the Limitation Act.
Result
[62] For the foregoing reasons I dismiss the application for review and confirm
Judge Faire’s order striking out the third amended statement of claim.
Costs
[63] The defendant is entitled to an award of costs in its favour. If counsel are unable to resolve this issue, memoranda should be filed within 14 days of the release of this judgment.
M A Frater J
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/cases/NZHC/2007/1932.html