Prestidge and Another v Auckland City Council Ors Hc Ak

JurisdictionNew Zealand
CourtHigh Court
JudgeAbbott
Judgment Date30 June 2011
Docket NumberCIV 2008-404-008504

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2008-404-008504

BETWEEN
Ross Leonard Prestidge and Deborah Phyllis Burns
Plaintiffs
and
Auckland City Council
First Defendant

and

Donald Russell Mckee
Second Defendant

and

Tarzan Design Limited
Third Defendant

and

R O & J Lonergan Builders Limited
Fourth Defendant

and

Jeanette Lonergan
Fifth Defendant

and

Donald Fairley
Sixth Defendant
Counsel:

W A McCartney for plaintiffs/respondents

E Telle/C A Anderson for second named fifth defendant/applicant

Application by fifth defendant for strike out or summary judgment in the alternative against plaintiffs — substantive proceedings were for breach of duty of care in respect of defective building constructed by partnership allegedly consisting of fifth defendant and her deceased husband — fifth defendant argued that the claim against her should be struck out as she was not a partner in the construction of the building and had only later signed the partnership agreement for tax purposes — whether fifth defendant entitled to strike out application against herself and summary judgment against the plaintiffs on the claim.

The issues were: whether L, having signed the partnership deed, could maintain on the facts that she was not in partnership at the time of the construction of the house; whether there was an arguable cause of action.

Held: L could not succeed on arguments of contractual mistake or non est factum as they were unsuitable for summary judgment.

It was not appropriate to strike out the claim against L. While there was extrinsic evidence (such as the prenuptial agreement and separate bank accounts) that showed that L and her husband had decided ahead of their marriage to keep their finances separate, the difficulty for L was that it was inconsistent with the express language of the partnership deed. The issue of whether there was a partnership in existence at the time of construction of the Ps' house would be a mixed question of law and fact.

The partnership deed stated expressly that she and her deceased husband had been carrying on a partnership under an oral agreement. There was inconsistency with the partnership deed, and uncertainty surrounding its purpose. It appeared that the house was complete by the time L signed the deed. However the court had to be satisfied that despite the express wording in the deed, there was in fact no partnership, and it would benefit from examination of L and her accountants at hearing.

Application for strike-out or for summary judgment dismissed.

JUDGMENT OF ASSOCIATE JUDGE Abbott

1

This case concerns a leaky building at Tuarangi Road, Grey Lynn, Auckland. The plaintiffs are the current owners of the property.

2

Mrs Jeanette Lonergan is the widow of Ross Lonergan, who built the house on the property between about February 2000 and March 2001. Mr and Mrs Lonergan married relatively late in life (it was a second marriage for both). They were joined as fifth defendants on 16 June 2010, on the basis that they were in partnership at the time Mr Lonergan built the house.

3

Mrs Lonergan applied promptly to strike out the claim against Mr Lonergan's estate (on the grounds that he had died in January 2010 and the claim against the estate was barred by s 3(3) of the Law Reform Act 1936) and against herself (on the grounds that she was not in partnership with Mr Lonergan at any material time). In the alternative, Mrs Lonergan sought summary judgment against the plaintiffs on the claim.

4

The plaintiffs accepted that the claim against Mr Lonergan was statute- barred, but have opposed Mrs Lonergan's application on the basis that she was in a business partnership with Mr Lonergan at material times and thereby jointly and severally liable for any defective building work by Mr Lonergan.

5

The gist of Mrs Lonergan's case is that she was never in partnership with Mr Lonergan in his building business but signed the partnership deed in late March 2001 to assist him for accounting and tax purposes, and relying on advice from Mr Lonergan's accountants that it would not give rise to any personal liability in relation to the business. She contends that the plaintiffs' claim that she was trading in partnership with Mr Lonergan is demonstrably incorrect and should therefore be struck out, or that she should be granted summary judgment.

6

The plaintiffs say that it is a question of fact whether Mrs Lonergan was in partnership with her late husband at material times. They say that her contention that she was not is inconsistent with contemporary documents and should not be determined summarily.

Objection to affidavits
7

Mrs Lonergan has sworn four affidavits, and has also filed supporting affidavits by a further five persons. At the start of the hearing, counsel for the plaintiffs objected to the last three of Mrs Lonergan's affidavits and three of the five supporting affidavits being read, on the grounds that they were not truly in reply, and some of the material in them was either hearsay or opinion for which a proper foundation had not been given.

8

Mrs Lonergan swore one affidavit in support of her application and also filed one supporting affidavit at that time. The supporting affidavit related to the application to strike out the claim against Mr Longergan, as did part of Mrs Lonergan's affidavit. The rest of her affidavit was relatively concise, and comprised an explanation as to why she signed a partnership deed (to assist Mr Lonergan on accounting and tax aspects of his business, and on advice from his accountants that it would not create any personal liability for her). The plaintiffs provided a brief affidavit in support of their opposition, primarily responding to the application in respect of Mr Longergan's estate, but also attaching a document obtained from Auckland City Council's property file (as to advice of completion of the building work) which named “R O & J N Lonergan Builders” as the builder of the house. On the basis of these contentions, there was little to which Mrs Lonergan could reply.

9

Nearly three months after filing of the notice of opposition, the plaintiffs filed a third amended statement of claim removing Mr Lonergan (he had been struck out at a case management conference some six weeks before), which pleaded the plaintiffs' claim solely against Mrs Lonergan. The relevant parts of the claim were:

  • 6. At all material times the fifth defendant traded in partnership with her late husband, Ross Lonergan, in a building partnership known as “R.O. & J. Lonergan Builders” and/or “R & J Lonergan” (“the Lonergan Partnership”).

  • 7. The Lonergan Partnership was contracted by the second defendant to build the house, and Ross Lonergan personally built the house in his capacity as a partner in the Lonergan Partnership.

  • ….

  • 37. Ross Lonergan personally built the house in his capacity as a partner in the Lonergan Partnership.

  • 38. Ross Lonergan owed a duty of care to the plaintiffs not to construct the house with the defects.

  • 39. Ross Lonergan breached that duty of care by constructing the house with the defects.

  • 40. As a result of Ross Lonergan's breaches of duty, the plaintiffs have suffered the losses set out in paragraph 23 above.

  • 41. The fifth defendant is jointly liable for Ross Lonergan's acts and omissions in building the houses, pursuant to s2 Partnership Act 1908.

10

It is not in dispute that the reference to s 2 of the Partnership Act is incorrect, and the plaintiffs will need to amend that to read s 4(1).

11

Mrs Lonergan subsequently filed:

  • (a) An affidavit by a supplier to Mr Lonergan's business as to a change in name to the trading account some time in 1999, but stating that Mrs Lonergan never had any dealings with that supplier.

  • (b) A second affidavit of Mrs Lonergan and supporting affidavits from her two daughters, in which Mrs Lonergan expanded upon evidence given in her first affidavit, and appended a pre-nuptial agreement and documents evidencing the trading arrangements between the business and its suppliers that had been located in the late Mr Lonergan's documents. Mrs Lonergan's daughters gave evidence as to their understanding of the basis on which their mother had signed the partnership deed.

  • (c) Shortly afterwards, Mrs Lonergan filed a third affidavit and an amended application, as a result of having obtained further documents from Mr Lonergan's accountants, which caused Mrs Lonergan to correct her earlier evidence and state that she entered into the partnership deed in March 2001 and not when it was dated (October 1999).

  • (d) A few days later, Mrs Lonergan filed her fourth affidavit, expanding on the evidence given in her third affidavit as to documents obtained from Mr Lonergan's accountants, and producing copies of her financial statements, tax summaries and tax records, bank statements for the business and for her own personal account, copies of letters making inquiries from suppliers to the business, a copy of a trust deed for a trust that Mrs Lonergan had established to protect her assets in 1999, and copies of titles for properties showing that Mr and Mrs Lonergan kept their pre-existing properties in their own names.

  • (e) At the same time, Mr Lonergan's accountant provided an affidavit in which he produced copies of documents from his firm's file.

12

This sequence of production of evidence needs to be considered in context. Mrs Lonergan was 79 years of age when the claim was served on her. Mr Lonergan had died some six months before. She did not remember the sequence of events clearly, but did recall being asked to sign the partnership agreement to assist Mr Lonergan, and thought that that must have been about the time that the deed was dated.

13

Mrs Lonergan's case, from the outset, has...

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