|
|
Home
| Databases
| WorldLII
| Search
| Feedback
High Court of New Zealand Decisions |
Last Updated: 26 March 2010
IN THE HIGH COURT OF NEW ZEALAND
NAPIER REGISTRY
CIV 2009-441-000593
BETWEEN WARREN JAMES BAYLISS AND
SUSAN MARY BAYLISS Appellants
AND CENTRAL HAWKES BAY DISTRICT COUNCIL
Respondent
Hearing: 18 November 2009
Appearances: M Courtney for Appellants
S Thodey for Respondent
Judgment: 22 February 2010 at 11:00am
(RESERVED) JUDGMENT OF ANDREWS J
This judgment is delivered by me on 22 February 2010 at 11am
pursuant to r 11.5 of the High Court Rules.
..................................................... Registrar / Deputy Registrar
Solicitors:
Davidson Armstrong & Campbell, PO Box 54, Waipukurau 4242 (for Appellants)
Heaney & Co, PO Box 105391, Auckland City 1143 (for Respondent) Counsel:
M A Courtney, PO Box 12022, Ahuriri, Napier 4144
BAYLISS AND BAYLISS V CENTRAL HAWKES BAY DISTRICT COUNCIL HC NAP CIV 2009-441-
000593 22 February 2010
Introduction
[1] On 16 August 2009 Judge G A Rea granted an application by the respondent
(as defendant) for summary judgment against the appellants (as plaintiffs) in the appellant’s proceeding against the respondent.[1] The appellants appeal against the grant of summary judgment against them.
[2] The central issue on appeal is whether the District Court Judge erred in holding that the appellants’ claim is barred by the Limitation Act 1950.
Background
[3] In February 1999 the appellants entered into an agreement to buy a house at
1 Ruataniwha Street, Waipawa (“the property”). The purchase was settled on 23
March 1999.
[4] Prior to entering into the agreement to buy the property, the appellants requested a “LIM report” from the respondent, in relation to matters affecting the property, pursuant to s 44A(1) of the Local Government Official Information and Meetings Act 1987. In their claim against the respondent, the appellants alleged that the respondents had a mandatory statutory duty to include in the LIM report information identifying any special features or characteristics of the property relating to subsidence which were known to the respondent at the time.
[5] I record that counsel asked that I accept, for the purposes of this appeal, that a claim for breach of statutory duty can be founded on a LIM report. Counsel advised that the issue as to whether a Local Authority has a statutory duty in relation to the provision of a LIM report is presently before the Court of Appeal for determination.[2]
[6] The respondent issued the LIM report on 28 January 1999. The appellants allege that the report failed to disclose or include information about actual or
potential subsidence at the property. In particular, the appellants allege that the following matters were known to the respondent but not disclosed:
a report on the property. The report focused on the owners’ concerns regarding a de-commissioned stormwater drainage pipe beneath the property and the pile foundations beneath the house. Mr Robinson made recommendations as to remedial work. The owners and the respondent entered into a settlement deed dated 12 November 1997, in relation to the owners’ claim. The respondent agreed to pay for the remedial work recommended by Mr Robinson. That work was carried out in November 1997.
[7] As noted earlier, the appellants agreed to buy the property in early 1999. Their agreement was subject to finance, a builder’s report, and receipt of a satisfactory LIM report. The LIM report included the following:
a) Under the heading “Building”:
5/12/97 BUILDING CONSENT 970408 : RELEVELLING ON EXISTING PILES. :
Code Compliance Certificate issued 11/12/97
[8] In March 2001 the appellants contacted the respondent about cracks that had appeared in the walls and back porch of the house. The respondent engaged Mr Robinson to provide a report. Mr Robinson’s report, dated 1 May 2001, was not provided to the appellants, and they were not aware of it until 2006.
[9] In July 2010 the appellants again wrote to the respondent about cracks and movement beneath the house. The respondent engaged Opus International Consultants Limited (“Opus”) to inspect the property and provide a report. Opus’ report was provided to the respondent in October 2001 and to the appellants in December 2001. On the basis of the Opus report (and being unaware of Mr Robinson’s 1996 and 2001 reports) the appellants concluded there were no issues of concern.
[10] In March 2003 the appellants went to live in the United Kingdom. The house was tenanted. In May 2006 they were advised of deterioration in the house, with the cracks having become much worse. They sought advice from an engineer. Quite coincidentally, that engineer was Mr Robinson. The appellants then became aware
of Mr Robinson’s 1996 report and, subsequently, other documents on the respondent’s file for the property, including the settlement with the then owners which led to remedial work being undertaken in November 1997. The appellants allege that it was not until 2006 that they realised the full extent of damage to the house, and the repairs that would be required.
The appellant’s claim
[11] The appellant’s original statement of claim was dated 3 October 2007, and filed in the District Court at Waipukurau on 4 October 2007. They filed an amended statement of claim on 1 April 2008. In essence, their claim is that the respondent breached a mandatory statutory duty by failing to include in the LIM report information identifying any special features of the property relating to subsidence: in particular, by failing to disclose Mr Robinson’s 1996 report, and the settlement deed of 12 November 1997.
[12] The appellants allege that once a person intending to purchase the property became aware of the subsidence issue described in Mr Robinson’s 1996 report, and/or became aware of the information held by the respondent relating to the history of the property, the market value of the property would decrease. They claimed a total of $125,000, comprising repair, remedial, and reinstatement costs of $95,000 and $30,000 for a permanent loss in value of the property.
[13] The respondent has filed statements of defence to both the original and amended statements of claim. As relevant to this appeal, both statements of defence plead that the appellant’s proceeding is barred by the Limitation Act 1950.
Application for summary judgment
[14] The respondent applied for summary judgment in its favour against the appellants, on the grounds that the appellant’s claim, being statute-barred, cannot succeed. The respondent submitted that the appellants’ proceeding for breach of statutory duty (a tort) was required to be brought within six years of the cause of action accruing, and that this occurred either on the date of the LIM report (28 January 1999) or on the date the appellants settled the purchase (26 February 1999). The proceeding was filed on 4 October 2007, some 8½ years after either date.
[15] The appellants opposed the application for summary judgment, on the grounds that the limitation period did not start to run until 2006, when the appellants became aware of Mr Robinson’s 1996 report or, alternatively, when they received the Opus report in December 2001. If their argument were accepted in respect of either date, their proceeding would not be statute-barred.
District Court judgment
[16] The Judge referred first to the judgment of the Court of Appeal in Williams v Attorney-General[3] in which it was held that a cause of action accrues on the date when every fact exists which it would be necessary for the plaintiff to prove in order
to support his or her right to the judgment of a court. The Judge then held at [21]
that:
... the cause of action in this case arose when [the appellants] entered into the agreement to buy the house or at the latest when they settled the purchase. At that point in time they suffered a loss that was not dependent on any further contingencies. No cause of action arose when [the appellants], or an objective observer became aware of the situation, nor when the problem became “reasonably discoverable”.
[17] In reaching that conclusion the Judge referred to two judgments of the Supreme Court: Thom v Davys Burton (“Thom”),[4] and Trustees Executors Ltd v P J Murray & Ors (“Trustees Executors”).[5] These judgments will be discussed in detail later in this judgment. The Judge found support from both judgments for holding that the appellants’ cause of action accrued when they entered into the agreement to buy the property, not at some later date.
[18] Further, the Judge considered that because the appellants had restricted their claim against the respondent to a cause of action of breach of statutory duty, it was not necessary to consider authorities such as the Privy Council’s judgment in Hamlin
v Invercargill City Council (“Hamlin (PC)”).[6]
Grounds of appeal
[19] The appeal was on the grounds that it was inappropriate that summary judgment be given for the respondent, because there were disputed issues of material fact and difficult questions of law to be determined. In particular, the appellants contend that the Judge erred in finding that:
a) The limitation period began to run when the appellants received the
LIM report;
c) Because of the manner in which the appellants had pleaded their case,
it was not necessary to consider authorities such as Hamlin (PC); and
[20] The appeal turns on the Judge’s decision that time began to run either on the date of the LIM report, or on the date the appellants settled the purchase of the property.
The Limitation Act 1950
[21] Section 4 of the Limitation Act 1950 provides:
(1) Except as otherwise provided in this Act or in subpart 3 of Part 2 of the Prisoners’ and Victims’ Claims Act 2005, 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:
...
[22] The appellants’ proceeding was commenced on 4 October 2007. Therefore,
in order to escape any challenge as to the cause of action being statute-barred, the cause of action must have accrued after 4 October 2001.
[23] A cause of action accrues when the elements necessary to prove the claim all exist. In his judgment in the Court of Appeal in Invercargill City Council v Hamlin (“Hamlin (CA)”)[7] McKay J said:
The ordinary time limit for an action in contract or in tort is thus calculated from the date on which the cause of action accrued. The phrase “cause of action” has been defined as meaning every fact which it will be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the court: Cooke v Gill (1873) LR8 CP107 at p106 and Read v Brown (1888) 22 QBD128 (CA). In contract the cause of action accrues as soon as there has been a breach of contract. In an action in tort based on a wrongful act which is actionable per se without proof of actual damage, the cause of action will accrue at the time the act was committed. Where the claim is based on negligence, however, damage is an essential part of the case of action, and until the damage has occurred the cause of action is not complete.
This is described as ‘familiar law’ in the judgment of this Court delivered by
Cooke P in Askin v Knox at p 254. ...
[24] In order to make out a claim for breach of statutory duty, a plaintiff must prove:
a) The existence of a statutory duty enforceable by private action;
b) That the statutory duty lies on the defendant;
c) The duty is owed to the plaintiff;
d) There has been a breach of the duty; and
e) The breach caused or materially contributed to the plaintiff’s loss.[8]
[25] Thus, if the respondent owed a statutory duty to the appellants, and if the respondent breached it by providing a defective LIM report, then the first four elements of a claim for breach of statutory duty would exist at the time the appellants received the LIM report. The accrual of the cause of action therefore depends on when the appellants suffered a loss which was caused or materially contributed to by the breach.
Approach on appeal
[26] The appellants are exercising a general right of appeal under s 72 of the District Court’s Act 1947. As such the approach to be followed is that set out by the Supreme Court in Austin, Nichols & Co Limited v Stichting Lodestar.[9] The Court held that, in a general appeal, the appeal court has the responsibility of arriving at its own assessment of the merits of a case, even where the appeal Court’s opinion involves an assessment of fact and degree and entails a value judgment.
[27] In deciding whether to grant the respondent’s application for summary judgment, the District Court Judge in this case was exercising a discretion. In such
cases the principles set out by the Court of Appeal in May v May[10] apply, and an
appellant must show that the Judge acted on a wrong principle, failed to take into account a relevant matter, took into account an irrelevant matter, or was otherwise plainly wrong.[11]
[28] In this case, the appellant’s appeal was argued on the basis of errors of law
(as to when time ran for limitation purposes) so essentially they approached the appeal as being against the exercise of a discretion.
Preliminary matters
[29] It has already been noted that this appeal turns on the question of when the appellants’ cause of action accrued. It is appropriate to record that counsel agreed that:
remitted back to the District Court for determination on the evidence.
Summary of submissions
Appellants
[30] Mr Courtney submitted that the appellants’ claim is for economic loss, thus their cause of action did not accrue until the market value of the property fell. He submitted that had the appellants sold the property immediately after they purchased
it, there would have been no loss, because a subsequent purchaser would have had the same information as did the appellants. The appellants’ loss occurred when the defects in the property became apparent to the market.
[31] Mr Courtney submitted that although the appellants’ claim was not of a latent defect in the property (the alleged breach is the provision of the LIM report), it is analogous to the latent defect cases in that the appellants’ cause of action did not accrue until the appellants (and the market) knew that the LIM report was defective.
Respondent
[32] Ms Thodey submitted that the District Court Judge was correct in law in holding that the “occurrence” from which the limitation period ran was the transaction – the appellants’ purchase of the property. She submitted that the appellants suffered loss when they committed themselves to buying the property.
[33] Ms Thodey submitted that the court should not apply Hamlin (PC) by analogy, and that the Privy Council’s reasoning with respect to latent building defects should not be taken out of the confines of those cases and applied elsewhere. She submitted that there would be major implications of doing so, not the least of which is that the “longstop” modification to the limitation period for latent building defect claims enacted in the Building Act 1991[13] would not apply outside of those claims.
The authorities: approaches to accrual of causes of action
[34] Because Mr Courtney submitted that the court should apply Hamlin (PC) by analogy, it is appropriate to start with the judgments of the Court of Appeal and Privy Council in Hamlin.
Hamlin (CA)
[35] Mr Hamlin claimed against the Invercargill City Council for negligence by a building inspector who approved the foundations of the house built for him. Some
17 years later the foundations were found to be defective. The trial Judge found that
a reasonable ordinary prudent home-owner in New Zealand would not have discovered that the true cause of cracks in walls and jamming of doors was subsidence of foundations until an expert builder was engaged. Hence, a Limitation Act defence failed. The Council appealed to the Court of Appeal.
[36] Five separate judgments were delivered by the Court of Appeal. The judgment of the majority (Cooke P, Richardson, Casey, and Gault JJ) applied reasonable discoverability to the latent defect in Mr Hamlin’s house. Cooke P, at
520, suggested that a strict occurrence test could result in injustice and, at 522, suggested that in latent defect cases the loss only occurred when the market became aware of the defect. Similarly, at 534, Gault J held that, as the house could be sold with no loss until the defect became reasonably discoverable, the cause of action would only accrue when the defect was reasonably discoverable, not before.
Hamlin (PC)
[37] The Council appealed to the Privy Council. In delivering the judgment of
Their Lordships Lord Lloyd said:[14]
Once it is appreciated that the loss in respect of which the plaintiff in the present case is suing is loss to his pocket, and not for physical damage to the house or foundations, then most, if not all the difficulties surrounding the limitation question fall away. The plaintiff’s loss occurs when the market
value of the house is depreciated by reason of the defective foundations, and not before. If he resells the house at full value before the defect is discovered, he has suffered no loss. Thus in the common case the occurrence of the loss and the discovery of the loss will coincide.
...
In other words, the cause of action accrues when the cracks become so bad,
or the defects so obvious, that any reasonable homeowner would call in an expert. Since the defects would then be 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. Their Lordships do not think it is possible to define the moment more accurately. ...
... The approach is consistent with the underlying principle that a cause of action accrues when, but not before, all the elements necessary to support the plaintiff’s claim 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. The existence of such a crack is thus irrelevant to the cause of action. It follows that the Judge applied the right test in law.
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.
Trustees Executors
[38] This case concerned an allotment of securities (shares in a forestry partnership) said to have been invalid and of no effect. Members of the public (“the investors”) who had purchased units in the partnership had issued proceedings against Morel & Co and Trustees Executors when the venture failed and they suffered loss. The investors claimed under ten causes of action.
[39] Two matters were at issue. The first was whether there had been a breach of
s 37(2) of the Securities Act 1978. The investors alleged that the amount stated in the registered prospectus as the minimum amount which needed to be raised had not been paid to, and received by, the issuer within four months after the date of the prospectus. Determination of that issue depended on whether a cheque supplied to the issuer by the relevant subscribers qualified as a payment and receipt in terms of s 37(2)(a).
[40] The second issue was whether the proceedings had been brought out of time. The allotment of securities had occurred in December 1994, but proceedings were not brought until 2003.
[41] The High Court struck out all causes of action, finding that the allotments were valid and that the causes of action were time-barred under the Limitation Act. The Court of Appeal reinstated all but two causes of action. The Supreme Court held that all causes of action against Trustees Executors were to be struck out, on the basis that the allotment was valid. The Court held that five causes of action against Morel & Co could not be sustained, again on the basis that the allotment was valid. A sixth cause of action, based on breach of fiduciary duty, remained and a final cause of action against Morel & Co was struck out as time-barred.
[42] It is the Supreme Court’s consideration of the limitation issue that is relevant
to the present case. The investors had argued that the proper construction of references in the Limitation Act to the accrual of a cause of action were not to the time when the events constituting the cause of action occurred, but rather to the time when a plaintiff acquired, or ought to have acquired, knowledge that those events had occurred. That is, it was submitted that a cause of action does not accrue on “occurrence” of events but on “reasonable discoverability” of those events.
[43] The investors submitted that the approach of the New Zealand Courts to cases involving latent defects in buildings (Hamlin) sexual abuse (for example,
S v G[15]), and bodily injury (for example, G D Searle v Gunn[16]), should lead logically
to reasonable discoverability being applied “across the board in the limitation field”.[17] That argument was rejected by the majority of the Supreme Court.[18]
[44] The judgment of Tipping J includes a detailed discussion of the judgments of the Court of Appeal and Privy Council in Hamlin and the judgments of the Court of Appeal in S v G and G D Searle, both of which referred to Hamlin. At [41] he noted
that the Privy Council in Hamlin had abstained, as had the Court of Appeal, from
considering whether the “reasonable discoverability test” should be of more general application than to latent defects in buildings. At [42] he commented on the Privy Council’s judgment in Hamlin as follows:
The reasoning of the Privy Council means that cases of the Hamlin kind do not involve any departure from the conventional approach to when a cause
of action accrues. The element of knowledge or discoverability affects when
the loss occurs. Only through that issue does it affect when the cause of action accrues. The focus remains upon occurrence of loss rather than on discoverability of a loss which has already occurred. ...
[45] Tipping J referred again to the Hamlin judgments in his discussion of S v G
and G D Searle. At [53] he observed that:
The discoverability issue [in Hamlin] related to an element of the cause of action. No cause of action accrued until loss occurred and loss did not occur until it was discovered or was reasonably discoverable.
[46] Then at [55] Tipping J said:
... Hamlin cannot, however, for reasons already identified, be regarded as a case which logically supports a general extension of the reasonable discoverability test. The reasoning of the Privy Council keeps Hamlin-type cases within the mainstream.
[47] At [63] Tipping J discussed the relevance of knowledge or discoverability.
... Unless the element of knowledge or discoverability can properly be regarded as forming a part of the cause of action itself, as the Privy Council did in Hamlin, it is difficult to view reasonable discoverability as affording a general extension of the period of time which the legislature has prescribed from accrual. The concept of accrual for limitation purposes can hardly be “construed” as involving knowledge in some circumstances but not in others.
[48] Tipping J’s conclusion as to a general test of “reasonable discoverability” is
at [69] and [74]:
[69] 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 a 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
understand. The circumstances of postponement and extension have themselves been similarly framed.
...
[74] Against this background and the factors I have discussed, the introduction, by decision of this Court, of such a fundamental change as that proposed in this case would be to alter in a substantial way the balance which Parliament has struck between the interests of plaintiffs and defendants. That change would be substantially to the advantage of plaintiffs and substantially to the disadvantage of defendants. ...
[49] Blanchard J did not touch on Hamlin, but agreed (at [2]) that recognition of a general doctrine of reasonable discoverability is properly a matter for Parliament.
[50] McGrath J agreed that the investors’ final cause of action against Morel & Co should be struck out as time-barred. At [101] he rejected reasonable discoverability
as a generally-applicable principle in New Zealand tort law for deciding whether a cause of action had occurred. However, he went on to say:
... In the continuing absence of New Zealand of legislative reforms enacted by other jurisdictions, the application of reasonable discoverability, to determine whether a cause of action has accrued in tort, remains a matter of judgment to be made in particular situations having regard to decided cases and analogies that can be fairly drawn from them. In that regard it must be borne in mind that the unfairness to plaintiffs, if damages treated as arising before they knew or ought to have known of it, in some situations will be matched and outweighed if allegations of wrongful conduct can be raised many years after what is complained of happened. I understand this to be the concern of Cooke P in Hamlin when he said that his preference was to proceed step by step. Provided the Hamlin principle is applied on this basis, I regard it as sound in principle and a valuable development in New Zealand law. I would affirm it.
[51] At [102] McGrath J observed that he saw “little analogy between the circumstances of the present case and those in the cases where the Court of Appeal has applied the approach it first took in Hamlin”.
[52] Henry J (at [142]) also rejected reasonable discoverability as a general proposition.
[53] Gault J, dissenting, observed at [112] that, in his view, the Privy Council’s reasoning in Hamlin was “unconvincing”. He went on to say, at [113],:
By characterising the damage in Hamlin as economic loss so it did not occur until discovered, the Privy Council, in effect, was upholding a reasonable
discoverability approach. That approach put claimants for economic loss in
a better position than those suffering other forms of damage or injury.
[54] Then at [115], Gault J said:
In my view it is preferable to adopt some flexibility in interpreting when the cause of action accrues under s 4 of the Limitation Act according to particular causes of action where that serves the ends of justice. That is essentially what the Privy Council did in its decision in Hamlin. Of course, the matter must be approached in a principled way but I find no difficulty in the proposition for New Zealand that a cause of action has not arisen when the prospective plaintiff does not know and cannot reasonably ascertain that a claim exists. I am well aware that the position of potential defendants must be considered but in my view the balance is in favour of the ignorant plaintiff.
[55] It is clear that he majority of the Supreme Court in Trustees Executors rejected the submission that “reasonable discoverability” can be applied as a general test as to when a cause of action has accrued. However, it appears that Blanchard, Tipping, and Henry JJ agreed that in cases of claims for economic loss, reasonable discoverability is an element of the accrual of part of the cause of action. Thus, in a latent defect case such as Hamlin economic loss (a necessary element of the cause of action) does not occur until the market value of the property is affected on the defects’ becoming reasonably discoverable. Thus reasonable discoverability applies where it is a pre-requisite for loss.
Thom
[56] In March 1990, Mr Thom hired a lawyer to prepare a pre-nuptial property agreement, to contract out of the provisions of the Matrimonial Property Act 1976.[19]
Mr Thom took the agreement to the United States for execution by his wife, an American citizen. The Notary Public who witnessed her signature to the agreement felt unable to explain to her the “effect and implications of the agreement” because of lack of familiarity with New Zealand law, and therefore did not give the certificate required by s 21(6) of the Matrimonial Property Act. In the absence of compliance with those requirements (non-compliance with the requirement for a certificate being apparent on the face of the agreement), the agreement was void under s 21(8)(a).
[57] Mr Thom’s marriage broke down in 1998. Mrs Thom then brought a claim under the Matrimonial Property Act for determination of her interest in the matrimonial property and Mr Thom applied to have the agreement given effect pursuant to s 21(9) of the Act, pursuant to which the Court can declare a defective agreement to have effect in whole or in part if “satisfied that the non-compliance has not materially prejudiced the interests of any party to the agreement”. The Family Court declined to exercise its discretion to treat the agreement as effective. Mr Thom then brought a claim in negligence against the solicitors who had acted for him in preparing the agreement and advising as to his wife’s execution of it.
[58] The District Court found that the solicitors had been negligent, but that Mr Thom’s claim was out of time. On appeal to the High Court, Simon France J found that Mr Thom only suffered loss when the Family Court refused to give effect to the “prima facie void” agreement. The Court of Appeal allowed the solicitors’ appeal, finding that Mr Thom had suffered loss immediately upon entry into the agreement. The Supreme Court unanimously dismissed Mr Thom’s appeal. Judgments were delivered by Elias CJ; Blanchard J; and Tipping, McGrath, and Wilson JJ (delivered by Wilson J).
[59] Elias J found (at [15]) that it was not necessary to consider whether the cause
of action should be treated as arising only when the damage was reasonably discoverable by Mr Thom (in extension of the Hamlin approach) because the District Court had found that the defect in the agreement was reasonably discoverable by Mr Thom from the time the agreement was executed. She found (at [19]) that Mr Thom’s loss was “based on the immediate consequences of the defendant’s solicitors not doing their duty”. Immediate quantifiable damage had arisen, even though further damage arising from the flawed transaction remained contingent. However, those further contingencies went only to quantum and did not affect the fact that his loss was suffered on the date of the breach of duty, because Mr Thom had not received what he should have received.[20]
[60] Wilson J summarised his conclusions as to when a cause of action in tort for negligence arises at [46], as follows:
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 v Shanahan [1998] 3 NZLR 529 (CA)]) 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.
[61] Blanchard J agreed (at [29]) that Mr Thom had received a flawed asset, namely an agreement which was void unless validated. He had suffered an immediate detriment, which could be measured.
The present case
[62] As set out in Trustees Executors, it is necessary to establish when the events comprising the cause of action occurred. As discussed by Tipping J in his discussion
of Hamlin, the appellants’ cause of action for economic loss involves an element of loss. Accordingly, the question is when loss first occurred.
[63] Mr Courtney submitted that the appellants did not suffer any immediate loss
on receiving the LIM report, or on relying on it to purchase the property. He submitted that, like Mr Hamlin, they owned a defective property, but not a property that was manifestly defective. They could have on-sold without loss. Accordingly, he submitted, Hamlin (PC) should be applied by analogy, and the court should find that loss occurred when the appellants and the market discovered the problems with the house.
[64] Ms Thodey submitted that Hamlin (PC) could not be applied by analogy. However, the reasons put forward for distinguishing Hamlin (PC) do not take account of the analysis of that judgment in Trustees Executors. In Trustees Executors the majority found that the Privy Council had determined Hamlin on the
grounds that no economic loss occurred until the market value of Mr Hamlin’s house had fallen.
[65] Nor do Ms Thodey’s submissions with respect to the “long-stop” provisions
of the Building Act provide grounds for not applying Hamlin (PC) by analogy. The long-stop provision was introduced after Hamlin to protect potential defendants in “latent defect” cases from facing liability long after their last action in relation to a building. It is clear that the long-stop provisions of the Building Act do not apply in the present case.
[66] However, the fact that the present case is not covered under the long-stop provisions is not indicative of any intention on the part of Parliament that Hamlin (PC) should not be applied by analogy. There is no indication that the possibility of
a claim for breach of statutory duty for a defective LIM report was considered when the long-stop provision was introduced, nor that Parliament considered the possibility of the reasoning in Hamlin (PC) being applied to cases outside the Building Act.
[67] It follows that I have concluded that the District Court Judge was in error in concluding that it was not necessary to consider Hamlin.
[68] 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. I also accept that it
is arguable (and again not able to be rejected on summary judgment) that the defect
in the LIM report, and the loss in value in the property, were not reasonably discoverable on receipt of the LIM report and purchase of the property.
[69] Accordingly, I accept that it could not be concluded, on a summary judgment application, that the appellants were not in a similar situation to that of Mr Hamlin,
or that the Privy Council’s reasoning in Hamlin could not be applied to them, by analogy.
[70] The appellants’ case is, of course, different from that of Hamlin and the “latent defect” cases. However, the factor in Hamlin (PC) that is applicable is the kind and timing of the loss. The loss discussed in Hamlin (PC) is economic loss, which occurs when the market value of the property falls. The loss being claimed by the appellants is, in effect, identical: a permanent fall in market value and costs of repair. Both losses claimed are economic loss.
[71] Application of the Hamlin (PC) reasoning by analogy is not precluded by the Supreme Court’s judgment in Trustees Executors. 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.
[72] Further, I have concluded that the District Court Judge erred in applying Thom, in particular in finding that the LIM report was similar to Mr Thom’s defective pre-nuptial agreement. The two can be distinguished:
a) Mr Thom suffered loss in entering into the pre-nuptial agreement.
From the moment that Mrs Thom signed the agreement, Mr Thom had
a defective asset, which would have cost him (in legal fees) to remedy. In contrast, the appellants suffered no loss until the value of the property fell.
d) The damages claimed by the appellants reflect the diminution in value
of the house, not any flaws in the LIM report itself. The appellants suffered loss not in receiving a defective asset from the Council, but
in relying on the LIM report to buy a house that (assuming the loss was not already reasonably discoverable) lost its value later. Mr Thom had a defective asset (the pre-nuptial agreement) from the start.
Conclusion
[73] 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 appellant’s 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 appellants cannot succeed in their argument that the cause of action accrued at a later date.
[74] I have concluded that it is appropriate for the appellant’s claim against the respondent to be remitted back to the District Court, for determination on a defended basis.
[75] It would seem appropriate that costs should follow the event, and that the appellant’s are entitled to costs in their favour. If there is any dispute as to costs,
then memoranda are to be submitted: that for the appellants within 21 days of the
date of this judgment and that for the respondent within a further 21 days.
Andrews J
[1] W J Bayliss
and S M Bayliss v The Mayor and Councillors of the Central Hawkes
Bay
District Council, DC Waipukurau CIV 2007-081-72 6 August
2009
[2] North Shore City Council v Body Corporate 188529 & Ors, CA673/2008.
[3] [1990] 1 NZLR 646
(CA) at 678.
[4]
[2008] NZSC 65, [2009] 1 NZLR 437
(SC).
[5]
[2007] NZSC 27, reported as Murray v Morel [2007] 3 NZLR 721
(SC).
[6] [1996] 1 NZLR 513 (PC).
[7] [1994] 3 NZLR
513, at 536-537.
[8]
See Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Brookers,
Wellington) at
395-415
[9]
[2008] 2 NZLR 141 at [5] and [16].
[10] (1982) 1 NZFLR
165 (CA).
[11]
At 170 per McMullin J. See Blackstone v Blackstone [2008] NZCA 312; (2008) 19 PRNZ
40 (CA).
[12] See Trustees Executors at [69], per Tipping J.
[13] Building Act 1991, s 91(2). Continued in the Building Act 2001 as s 393(2)
[14] Hamlin
(PC) at
526
[15]
[1995] 3 NZLR 681
(CA).
[16]
[1996] 2 NZLR 129
(CA).
[17]
Trustees Executors at [38] per Tipping J.
[18] Blanchard, Tipping, McGrath and Henry JJ. Gault J dissented.
[19] Now renamed the Property (Relationships) Act 1976.
[20] At [21].
[21] Thom at [15] per Elias CJ
NZLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.nzlii.org/nz/cases/NZHC/2010/275.html