Wanganui District Council v Mwh New Zealand Ltd
| Jurisdiction | New Zealand |
| Judge | Smith |
| Judgment Date | 02 June 2015 |
| Neutral Citation | [2015] NZHC 1198 |
| Docket Number | CIV-2013-483-153 |
| Court | High Court |
| Date | 02 June 2015 |
IN THE HIGH COURT OF NEW ZEALAND WANGANUI REGISTRY
CIV-2013-483-153
F M R Cooke QC and D Halliwell for Plaintiff
R J Fowler QC and A McIntyre for Defendant
Application to strike out a cause of action in negligence on the ground that it was out of time under s4 Limitation Act 1950 (tort actions not brought after the expiration of 6 years from the date on which the cause of action accrued) — in 2000, the plaintiff Council had retained the defendant engineering firm to develop a concept for, a new sewage/stormwater disposal facility, which included a wastewater treatment plant (the plant) — under a separate contract entered into shortly after the concept design was adopted in 2004, the defendant was also to project-manage the design and construction of the plant and associated works — construction of the plant was completed on or about 1 July 2007 — the plant did not meet regulatory requirements under the Resource Management Act 1991 and the Council was faced with substantial costs for remediation and repair — the Council filed proceedings on 30 August 2013 alleging negligence in respect of the concept design — the defendant said that the proceeding was time barred as the cause of action arose before 30 August 2007, which was the date that was six years before the proceeding was filed — whether the Council had pleaded an ongoing duty in respect of the concept design that extended beyond 30 August 2007 — whether it was reasonably arguable that the Council did not suffer loss or damage in respect of the concept design until sometime after 30 August 2007 — whether the discretion to strike out should not be exercised as the proceeding dealt with an unsettled area of law.
The issue was: whether the Council had pleaded that MWH owed an ongoing duty in respect of the concept design that extended beyond 30 August 2007 and that breaches of that ongoing duty occurred after that date; whether it was reasonably arguable that the Council did not suffer loss or damage as a result of any breach in respect of the concept design (being a breach which occurred before 30 August 2007) until sometime after 30 August 2007; and whether the discretion to strike out should not be exercised as the proceeding dealt with an unsettled area of law.
Held: In Westland District Council v York, the Court of Appeal (CA) observed that limitation was ordinarily a trial issue, so that a claim should be struck out on limitation grounds only when it was plainly statute — barred. Courts would hesitate to strike claims out in developing or unsettled fields of law.
There was a degree of artificiality in separating the Council's two causes of action, and dealing solely with the limitation issue as it might apply to the cause of action based on an allegedly deficient concept design. While separate contracts were entered into for the concept design and the detailed design and commissioning, the present causes of action were both based in negligence, and it appeared from the pleaded terms of the detailed design contract that MWH assumed, from June 2005, an obligation to revisit and confirm its design concept. It might well be arguable that, following its entry into the design and commissioning contract, MWH remained under a duty to check that its concept design remained appropriate, and to correct any errors in it.
However, the question was not whether an ongoing duty of care was owed, as the Council submitted, but whether any such ongoing duty of care (in respect of the concept design) had been pleaded. The particulars pleaded were particulars of breaches of duty in the making of a recommendation which was made long before 30 August 2007. The pleading was therefore directed to a point in time well before 30 August 2007. There was no pleading in the first cause of action of any ongoing duty to correct, and no specific breach of such a duty was pleaded. The Council could not rely on the “breach of an ongoing duty after 30 August 2007” argument to defeat the strike-out application.
Subject to the possible application of Invercargill City Council v Hamlin, this case would fall into the “flawed asset” category of case described in Davys Burton v Thom. The Council received a defective asset in the form of the negligent advice from MWH on the concept design. On the face of it, that damage was suffered not later than the point at which the Council acted on the advice by adopting the design.
If the Council had discovered some time during the construction of the plant that the concept design advice was flawed, and that the plant would not meet the relevant regulatory requirements, it could have succeeded in a suit against MWH on the basis that it had then suffered quantifiable loss. Potential measures of that loss would have been the Council's costs incurred in commissioning the defective design and the construction up to that point, and the costs of commissioning another, non — defective, design. The Council was immediately financially worse off when it adopted the defective concept desig n and acted on it by building the plant. All of that occurred before 30 August 2007. If the Davys Burton analysis was applicable in this case, the claim based on negligent advice in the concept design was clearly out of time.
The issue was whether this case should or might be categorised as a Hamlin — type case, where damage did not occur before there was a diminution in value of the relevant property, something which could not occur before a prospective purchaser would be aware of the relevant defects and be unwilling to pay what would otherwise (if it were not for the now — known defects) have been the market value of the property. How far the Hamlin line of authority on the point at which damage occurred extended, was by no means clear.
In Westland District Council v York , the CA observed that the reasonable discoverability approach had been restricted in its application to cases concerned with latent defects in buildings and a few other limited classes of case. In this case, there was insufficient evidence to determine finally that the plant did not qualify as a “building” for that purpose, or whether the alleged defects in this case were plainly latent. The design was a novel one, with a degree of complexity. A team of peer reviewers did not detect the design defects which the Council said had since come to light. It would be unsafe on the limited evidence available on a strike — out application to conclude either that the plant was not a “building”, or that any defects in the concept design should not properly be characterised as latent, so as to engage the Hamlin line of authority, and so set back the date from which time began to run against the Council to the point at which the concept design defects would have been reasonably discoverable. There was insufficient evidence to conclude that that date might not have been after 30 August 2007.
MWH had not satisfied the high threshold of showing that the Council could not succeed on this issue. Further the area of law as to when damage should be deemed to have first occurred was by no means certain. That was also a significant factor pointing against the strike-out application succeeding.
There would be very little utility in striking out the Council's first cause of action. The evidence at trial would, of necessity, traverse the facts relevant to both of the Council's causes of action, even if the first cause of action had been struck out. The Court's discretion on a strike-out application was broad enough that it could decline to strike out part of a party's pleading where a substantial number of the issues arising on the impugned part of the pleading would need to be addressed in any event at the hearing. The trial was only approximately three months away, and little would be gained by striking out the first cause of action now, rather than having it fully considered by the Court at trial, with the benefit of all of the evidence.
Application for strike out dismissed.
JUDGMENT OF ASSOCIATE JUDGE Smith
This is an application by the defendant firm of engineers (MWH) to strike out one of two causes of action pleaded by the plaintiff (the Council), on the ground that the cause of action was filed out of time.
The Council retained MWH to develop a concept for, and to design, a new sewage/stormwater disposal facility for the city of Wanganui. MWH was also retained to oversee the construction of the system, which included a wastewater treatment plant (the plant).
The Council says that when the system was eventually commissioned, it failed: it did not work in accordance with regulatory standards, or meet the normal requirements of a sewerage/stormwater system. There were a number of issues, including an unpleasant odour given off by a contaminant discharged into the water at the plant. The local regional council issued an abatement notice in respect of various ways in which the system failed to meet regulatory standards, and eventually, in 2013, the Environment Court made an enforcement order against the Council.
The Council, faced with substantial costs for remediation and repairs, issued this proceeding against MWH on 30 August 2013.
The Council pleads two causes of action against MWH, both in the tort of negligence. First, it says that MWH was negligent in various respects in relation to the concept design for the plant. In a second (and/or alternative) cause of action, the Council pleads negligence in relation to the detailed design and commissioning of the plant.
MWH filed a defence on 4 October 2013, in which it denied liability and pleaded a number of affirmative defences.
One of those defences is that the Council's claims are statute-barred under s 4 of the Limitation Act 1950, which...
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