Dorchester Finance Ltd v Deloitte and Anor
| Jurisdiction | New Zealand |
| Judge | Venning J |
| Judgment Date | 17 December 2010 |
| Neutral Citation | [2010] NZHC 2294 |
| Docket Number | CIV-2010-404-006442 |
| Court | High Court |
| Date | 17 December 2010 |
Under S 24C(4) of the Judicature Act 1908
and
[2010] NZHC 2294
Venning J
CIV-2010-404-006442
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
Application for a determination as to the construction of a limit on action clause — first and second defendants entered into an agreement for services — second defendant was trustee of the plaintiff — agreement contained a clause which imposed a limit of one year for bringing an action arising from the engagement — whether the debt was still owed to the first defendant after the expiry of one year — whether a revised or new invoice started time running again — whether the limitation clause extinguished the obligation to pay the debt.
M V Robinson and G K Holm-Hansen for Plaintiffs
R G Simpson and J Q Wilson for First Defendant
S Barker for Second Defendant
JUDGMENT OF Venning J
This judgment was delivered by me on 17 December 2010 at 4.45 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
As its name suggests, Dorchester Finance Limited is a finance company. As its name also suggests, Perpetual Trust Limited is a trustee company. It has been appointed as trustee of Dorchester's debt securities. In 1998 Dorchester, like a number of other finance companies, encountered financial difficulties. It took advice about a deferred repayment plan. Perpetual engaged Deloitte to provide an independent assessment of Dorchester's plan.
Before commencing the assessment, Deloitte required Perpetual to execute an engagement letter. Dorchester was also required to countersign the letter of engagement between Deloitte and Perpetual.
The engagement letter contained a limit on action clause, which imposed a limit of one year for bringing an action arising from the engagement, including for non-payment.
Deloitte completed its review of Dorchester's plan and rendered invoices dated 30 September 2008 and 24 November 2008 to Perpetual. The invoices totalled $198,628.00 (excluding GST). Perpetual discussed the review and the invoices with Deloitte. It raised a query about the fees charged. Perpetual and Deloitte had a number of further communications about the fee. In the event Perpetual did not pass the invoices on to Dorchester until 17 December 2009.
In mid 2010 Deloitte and Perpetual agreed to a review of Deloitte's charges. Mr Waller, an independent consultant, conducted the review and recommended the fee should be fixed at the revised sum of $140,000, excluding GST and disbursements. Deloitte issued a new invoice dated 30 August 2010 for that revised sum, and at the same time issued a credit note for the sums due under the earlier invoices.
Perpetual wants to pay Deloitte the revised sum and to recover the payment from Dorchester in terms of the Trust Deed. Dorchester takes the view Perpetual has no obligation to pay Deloitte either the revised or any other sum.
To resolve that issue, Dorchester issued these proceedings seeking a determination as to the proper construction of the limit on action clause and, in particular, whether Perpetual is liable to pay Deloitte the amount claimed under the first and second or revised invoices.
Deloitte and Perpetual have brought counterclaims seeking declarations that:
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a) the contractual limitation period will not expire until 12 months after the Waller report; and/or
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b) the revised invoice started time running under the contractual limitation period afresh so the period will not expire until 20 September 2011; and/or
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c) Perpetual is entitled to pay Deloitte's fees and to recover them from Dorchester, irrespective of whether the contractual limitation provision applies to Deloitte's claim for recovery of its fees.
The pleadings raise the following issues for the Court: a) The effect of the limit on action clause from Dorchester's point of view.
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b) Does the Waller report extend the time under the limit on action clause, or does the revised invoice issued following the report, restart time running?
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c) The interpretation of the limit on action clause.
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d) If Deloitte is prevented by the limit on action clause from taking action against Perpetual for its fees can Perpetual nevertheless pay the fee as it wants to?
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e) If Perpetual pays the fee to Deloitte is Perpetual entitled to be indemnified under the provisions of the Trust Deed?
The limit on action clause provides:
Limit on action
No action, regardless of form, arising under or relating to this engagement, may be brought by either party more than one year after the cause of action has accrued, except that an action for non-payment may be brought by a party not later than one year following the date of the last payment due to such party hereunder.
The clause was contained in the engagement letter between Deloitte and Perpetual. The letter also incorporated Deloitte's master terms of business. As the contracting parties, Perpetual and Deloitte agreed to the review on the terms and conditions set out in the engagement letter and the master terms of business.
Dorchester also confirmed its agreement that it would be bound by, inter alia, the limit on action clause as follows:
Dorchester Finance Limited (‘Dorchester’):
•Accepts and agrees to the constraints, limitations and disclaimers contained in this engagement letter and the Master Terms of Business;
•Accepts and agrees that clause 9 of the Master Terms of Business that form a part of this engagement letter, which clause limits the liability of Deloitte and any other DTT party, applies to both Dorchester and Perpetual;
In both cases as if Dorchester is also defined as the Client for the purposes of this clause; and Agrees that any information obtained by Deloitte in relation to this engagement may be disclosed to Perpetual (and through Perpetual, the secured investors) whether or not such disclosure is in Dorchester's interests.
(emphasis added)
The highlighted wording effectively brought Dorchester within the definition of client for the limited purposes identified in the clause. The provision did not constitute Dorchester as Deloitte's client but rather confirmed Dorchester's agreement to be bound by the limitations and constraints that the party referred to as the client in the engagement letter and master terms of business was bound by, where applicable.
For present purposes, other than the limit on action for non-payment, the limitations and constraints in the engagement letter and master terms of business are not relevant.
Even in relation to the limit on action for non-payment clause, Dorchester did not obtain any particular rights by executing the letter in the terms it did. Perpetual engaged Deloitte to enable Perpetual to satisfy its obligations as trustee under the Trust Deed. The obligation to pay Deloitte's fee rested with Perpetual, as confirmed by the engagement letter. By signing the addendum to the engagement letter as required by Deloitte, Dorchester agreed that its rights against Deloitte (and DTT) were limited but Dorchester did not obtain any independent right to prevent Deloitte recovering its fee from Perpetual under the limit on action for non-payment clause. That right lies with Perpetual only.
Mr Robinson submitted that the reference to the date of the last payment due in the limit on action clause was to payment being due 20 days after the date of the invoice, in this case 14 December 2008, so that the latest date for Deloitte to commence an action for payment of its fees would have been 14 December 2009.
In response, Mr Simpson first submitted that the limitation period under the limit on action clause did not commence until the fee dispute was resolved by Mr Waller's report.
The evidence of Mr Lithgow and Mr Pardington establishes that Perpetual initially queried the level of the fees in December 2008 and then later, after Deloitte provided further information in November 2009, Perpetual and Deloitte agreed a process in good faith, in early 2010, to resolve the issue of the fee by requesting Mr Waller to review Deloitte's work and charges.
It has to be observed that Deloitte took some time to respond to the queries that Perpetual raised about the fees charged. After Perpetual advised, in early December 2008, they wished to discuss the fees Deloitte did not respond in substance until 6 November 2009 when Mr Pardington summarised the work done and the difficulties that had arisen during the course of the engagement. The only reason Mr Pardington gives for the delay in responding to the enquiry is that, along with a number of other insolvency practitioners, he was particularly busy in 2009.
The latest date for Deloitte to commence an action to recover the fees in the first and second invoices was 14 December 2009. Perpetual did not even pass the invoices on to Dorchester until 17 December 2009. Deloitte's argument that as the contracting parties, Deloitte and Perpetual, had agreed to review the fee (in accordance with the dispute resolution clause) the limit on action clause would not take effect until that process was completed would have more effect, and could perhaps support an estoppel argument, if the review had been commenced before 14 December 2009 when the limit on action clause was engaged. However, Mr Waller was not engaged until June 2010 and the review was not commenced until well after the limit on action clause was engaged and applied according to its terms. In the circumstances the agreement to review the fee could not affect the contractual limitation period which applied as from 14 December 2009.
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