Paine v Carter Holt Harvey Ltd

JurisdictionNew Zealand
JudgeDowns J
Judgment Date11 July 2019
Neutral Citation[2019] NZHC 1614
CourtHigh Court
Docket NumberCIV-2018-404-001143
Date11 July 2019

[2019] NZHC 1614

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-001143

UNDER the Consumer Guarantees Act 1993, Fair Trading Act 1996 and High Court Rule 4.24

Between
David Eric Paine and Lynda Caroline Bowers
First Plaintiffs
Kevin Bryan Start and Florence Elizabeth Start
Second Plaintiffs
Donald Bramwell Jackson and Heather May Proctor Jackson, and Donald Bramwell Jackson, Heath May Proctor Jackson and Holland Beckett Trustee No. 11 Limited as Trustees of the Jackson Family Trust 2011
Third Plaintiffs
Stephen Mathew Devcich, Jessie Diana Devchich and Johnny Charles August as Trustees of the Devcich Family Trust
Fourth Plaintiffs
and
Carter Holt Harvey Limited
Defendant

And

Auckland Council and Ors
First to Twenty-Ninth Third Parties
Counsel:

AS Ross QC and RA Havelock for Plaintiffs

JG Miles QC, M Heard and ED Nilsson for Defendant FP Divich for Second to Eight, Tenth, Thirteenth, Seventeenth to Nineteenth, Twenty-First to Twenty-Third, Twenty-Fifth, Twenty-Seventh and Twenty-Ninth Third Parties (granted leave to withdraw, abides decision of the Court)

Civil Procedure — defective building product — representative claim — whether permission required — whether litigation funding agreement was an abuse of process

Application by the plaintiffs for timetable directions in relation to the possible staging of trials concerning claims about a building product, Shadowclad, an external cladding product manufactured, supplied and promoted by Carter Holt Harvey Ltd (“Cater Holt”). The plaintiffs filed a claim against Carter Holt, alleging Shadowclad was inherently defective. The claim was representative and funded by a litigation funder. Carter Holt filed an application to stay or dismiss the claim on the basis it was an abuse of process. Carter Holt submitted the claim had been brought without the Court's permission under r4.24(b) High Court Rules (“HCR”) (persons having same interest) because of the presence of a litigation funder; the plaintiff's solicitor had made misleading statements in promoting the claim and the funding arrangements were objectionable because the funder had an improper level of control. Carter Holt also sought leave to appeal and earlier decision which granted in part an application for further particulars on the grounds that \proposed appeal raised arguable errors of law of significant importance to Carter Holt, and issues of wider significance or precedential value.

The issues were: whether the plaintiffs required permission to bring their claim, whether the plaintiff's solicitor had wrongfully encouraged meritless claims by misleading information;

whether the funding agreement constituted an abuse of process

On the face of r4.24 HCR, permission was not required when consent of those with the same interest had been obtained. Those represented by the plaintiffs had agreed to that. There was no doubt or dispute that those concerned had the same interest. Everyone owned homes clad in Shadowclad. The presence of a funder did not affect that. There was no reason in principle to introduce a requirement the rule did not itself insist on. The plaintiffs had not needed to seek permission under r4.24(b) HCR before bringing their claim.

The solicitor had made misleading statements about the value of the claim but statements comparing it to a Crown proceeding against Cart Holt and statements regarding lack of alternative means of redress were not misleading. Nor had the solicitor encouraged meritless claims. The misleading statements fell well short of an abuse of process

The funding agreement precluded the finder from controlling the claim. The representative claimant was to give “day to day instructions” to the solicitor without direction from the funder.

It was also unremarkable that the funder set the budget without reference to the plaintiffs as it was expending its own money. The Funder not have control over, or the right to make decisions in, the claim, save for security for costs. The significant power vested in a representative claimant was not inappropriate. There was nothing objectionable about the agreement being governed by English law, or the funder being resident elsewhere

Carter Holt's contention that the particulars judgment failed to address its “primary argument” particularisation of alleged defects was necessary to demonstrate their nature, location and extent was not arguable in the sense it enjoyed real prospect of appellate success. The judgment had not exempted the plaintiffs from providing particulars. It held those provided by the plaintiffs were adequate given the pleadings.

Permission for an appeal was declined.

Timetable directions were given.

JUDGMENT OF Downs J

This judgment was delivered by me on Thursday, 11 July 2019 at 3 pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Table of contents

The issues

[1]

Abuse of process application

Did the plaintiffs require permission to bring their claim?

[5]

Wrongful encouragement of meritless claims by misleading information?

[22]

Comparisons with the Crown's claim

[30]

Other means of redress

[37]

About the value of the claim

[43]

Many meritless claims?

[55]

The funding agreement

[61]

Carter Holt's submission

[67]

Analysis

[68]

Discovery

[84]

Do the statements to the National Business Review amount to an abuse of process?

[88]

Permission to appeal in relation to particulars and an associated stay

[95]

Principle

[97]

Arguable errors of significant importance to Carter Holt?

[98]

Issues of wider significance or precedential value?

[113]

A stay pending appeal?

[117]

Directions in relation to the plaintiffs' application for case management

[120]

Costs

[123]

The issues
1

Shadowclad is a form of external cladding. It is made, supplied and promoted by Carter Holt Harvey Ltd. 1 The plaintiffs have Shadowclad on their homes. On 13 June 2018, the plaintiffs filed a claim against Carter Holt, alleging Shadowclad is inherently defective. The claim is representative. And, funded by a litigation funder.

2

On 7 June 2019, Carter Holt filed an application to stay or dismiss the claim. Carter Holt contends it is an abuse of process. Carter Holt submits the claim has been brought without the Court's (necessary) permission; the plaintiffs' solicitor made misleading statements in promoting the claim; and funding arrangements are objectionable. Taken together, Carter Holt contends an exceptional remedy is justified.

3

The plaintiffs refute Carter Holt's analysis and note the defendant has taken almost a year to bring its application.

4

Carter Holt also seeks permission to appeal a ruling I made in March this year, 2 and a stay of the claim until its appeal is heard. The plaintiffs seek timetable directions in relation to the possible staging of trials. 3 More about all these later.

Abuse of process application
Did the plaintiffs require permission to bring their claim?
5

This limb of the abuse of process application requires only a little legal background; other background is given as the judgment unfolds.

6

Rule 4.24 of the High Court Rules 2016 provides for representative proceedings—when someone sues or sued on behalf of another or others—and all have the same interest in subject matter. The rule provides:

4.24 Persons having same interest

One or more persons may sue or be sued on behalf of, or for the benefit of, all persons with the same interest in the subject matter of a proceeding—

  • (a) with the consent of the other persons who have the same interest; or

  • (b) as directed by the court on an application made by a party or intending party to the proceeding.

7

As will be apparent, the rule allows representative proceedings in two different situations. First, when those who are to be represented agree to being so; para (a). Second, when the Court grants permission for the representative proceeding; para (b). The second situation obviously requires a (successful) application for permission. The first does not; the suit may be brought or defended as of right.

8

It is common ground those represented by the plaintiffs agreed to just that before the claim was filed in June 2018, or later by those who have since joined the

claim. 4 But, Carter Holt contends the plaintiffs' claim is within the second situation governed by para (b). Central to this argument is the presence of a litigation funder. Carter Holt contends funded representative actions require close supervision by the Courts on a range of issues, including:

… how the claim is advertised and promoted, what safeguards are in place to ensure accurate communications with represented persons during the course of the claim, whether the terms of funding are appropriate or are unfair or oppressive, whether the proceeding should continue on a representative basis and on what terms, the terms of participation, whether a claim should be conducted on an “opt-in” or “opt-out” basis and what the opt-in or opt-out dates should be.

9

Carter Holt argues this supervision cannot be easily exercised if plaintiffs do not seek permission under r 4.24(b). So, it contends an application for permission “is a prerequisite to bringing a funded representative proceeding”. If this were not so, Courts would be confronted with the difficulty of supervising matters “plaintiffs have elected not to inform the Court or the defendant of”, with the defendant then being “roundly criticised as being ‘tactical’ by the plaintiffs for raising those very matters and asking the Court to exercise supervisory jurisdiction over them”.

10

In short, Carter Holt contends funded representative proceedings should be treated as a sui generis category irrespective of the consent of those represented, and...

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