Westland District Council v York
| Jurisdiction | New Zealand |
| Judge | Miller J |
| Judgment Date | 10 March 2014 |
| Neutral Citation | [2014] NZCA 59 |
| Docket Number | CA774/2013 |
| Court | Court of Appeal |
| Date | 10 March 2014 |
and
[2014] NZCA 59
Wild, Miller and Dobson JJ
CA774/2013
IN THE COURT OF APPEAL OF NEW ZEALAND
Appeal against the High Court's refusal to strike out the respondents' claim as having no prospect of success because it was time barred — respondents had obtained a LIM from appellant council prior to purchasing a motel in 2005 — LIM omitted details of proposals for an earthquake avoidance zone along the alpine fault — respondents said they had only discovered this information when the zone was suggested in 2010 — claimed economic loss for diminution in the motel's value stemmed from this time and relied on doctrine of reasonable discoverability — whether the respondents had suffered economic loss when they paid for the motel in 2005 and their claim was outside the limitation period.
D J Neutze for Appellant
J E Bayley for Respondents
-
A The appeal is allowed. The claim is struck out as having no prospects of success.
-
B The respondents must pay the appellant costs in this Court for a standard appeal on a band A basis.
REASONS OF THE COURT
(Given by Miller J)
In September 2005 the respondents settled the purchase of a motel at Franz Josef, having first obtained from the appellant Council a Land Information Memorandum (LIM). The LIM is said to have been negligently prepared, in that it omitted information known to the Council about the location of the Alpine Fault, the damage that the town might suffer from a large earthquake, and a Government suggestion that local authorities should create fault avoidance zones along fault lines. The respondents say that not before November 2010, when the Council first mooted such a zone, did they discover these omissions. A zone was formally notified in 2012. It would affect the motel.
The respondents sued in July 2012. The Council met them with an application to strike the claim out on limitation grounds. David Gendall J dismissed the application, and the Council now appeals. 1
The respondents say they suffered economic loss through diminution in the motel's market value. The appeal turns on when they suffered it. The Council says, accepting the pleaded facts for present purposes, that they must have suffered loss by 30 September 2005, when they paid more for the motel than it was worth. If so, the six-year limitation period in the Limitation Act 1950, which still governs this case, bars their claim. 2 The respondents say that they suffered no loss until the property market responded to the information omitted from the LIM, and that did not happen until, at earliest, November 2010. If so, they brought their claim within time.
The amended statement of claim pleads that: Mr York bought the motel as agent for Alpine Glacier Motel Ltd, which had yet to be formed, and later nominated it as purchaser; the price was $2,400,000 for the land and buildings and, under a separate but collateral agreement, $800,000 for the business; the land sale agreement was conditional upon a LIM, which the Council provided on 19 August 2005; under
The notion of special features doubtless came from s 44A(2) of the Local Government Official Information and Meetings Act 1987, which required that the Council record in a LIM any known information identifying special features or characteristics of the land, unless such information was already apparent from the district scheme. Special features included “potential erosion, avulsion, falling debris, subsidence, slippage, alluvion, or inundation…”. The Council is said to have owed the respondents a duty of care to gather and hold relevant information that was reasonably obtainable, and to include it in the LIM.
A good deal of information about the Alpine Fault is said to have been in the Council's possession when it issued the LIM. The substance of this information comprises the approximate location of the fault, which is said to lie close to the motel, the likely impact of a major earthquake having regard to existing building standards, and a recommendation from the Ministry for the Environment that local authorities establish fault avoidance zones 20 metres either side of known faults. The LIM disclosed none of this. The respondents say that it all amounted to special features of the motel land, and that if given disclosure they would not have bought the motel.
The respondents next say that they first learned of the possibility of a fault avoidance zone in Franz Josef about November 2010. The Council proposed such a zone in 2012. The necessary change to the District Plan is still negotiating its way through planning processes.
It is said that the zone and change to the Plan caused the market value of the land and business to fall by $2,850,000:
It will be seen that the respondents claim the value of the motel assets had increased since 2005.
| Property Value | Business Value | Total | |
| Pre-Fault Avoidance Zone (November 2010) | $2,700,000 | $925,000 | $3,625,000 |
| After Plan Change Announcement | $550,000 | $225,000 | $775,000 |
| Diminution in Value | $2,150,000 | $700,000 | $2,850,000 |
The Council denies most of the allegations. Notably, it says that it did not know in 2005 just where the Alpine Fault lay, nor could it estimate with any precision where a fault avoidance zone might be established, nor had it proposed such a zone; further, the respondents' loss, if any, was actually caused by the proposal to create the zone, in respect of which a duty of care could not possibly be owed.
We need not rehearse the settled principles governing strike-out applications, 3 but two points should be made: limitation is ordinarily a trial issue, so a claim should be struck out on that ground only when it is plainly statute-barred, 4 and courts hesitate to strike claims out in developing or unsettled fields of law. 5 We make the latter point because Mr Bayley relied on Invercargill City Council v Hamlin, which concerned the still-developing field of local authority liability for building defects. 6
We turn to isolate the issue for decision.
The respondents sue in tort, relying on a local authority's duty of care when completing a LIM. The cause of action is negligent misstatement. 7 We will assume that the pleaded information about fault location and zoning was negligently omitted from the LIM so as to found a cause of action. That happened on 19 August 2005,
A cause of action accrues only when the material facts necessary to establish all of its elements are present. 8 Loss attributed to the breach of duty is an element of this cause of action. For accrual purposes the loss must be material, but it need not be complete, or readily measured. 9 We assume that the omitted information affected the market value of the motel, but the loss was not experienced, as a matter of fact, until the information was first revealed in November 2010.
The respondents claim that they suffered loss not with the transaction but later, when the market learned of the omitted information: put another way, until the information became public the motel was not worth less than what they paid for it. They characterise the case as one of contingent loss, the contingency being the market's discovery of the omitted information. The Council responds that the case is materially indistinguishable from Marlborough District Council v Altimarloch Joint Venture Ltd, in which the Supreme Court held that the purchasers' loss from a negligently prepared LIM was suffered when they committed themselves to a price exceeding the property's actual worth. 10 The occurrence that caused loss having happened, the Council says, time began to run whether or not the respondents knew it.
So the issue is narrow: whether the respondents suffered economic loss by 30 September 2005, when they paid for the motel. If on the pleaded facts they must have done so, their cause of action is statute-barred. But if the loss was arguably delayed until the omitted information became public, the limitation defence must be reserved for trial.
We begin with Altimarloch, which established that a local authority which negligently issues a LIM is liable in negligent misstatement to recipient purchasers who rely on it to their detriment. The LIM stated that the vendors could take 1,500 cubic metres of water per day from a stream for irrigation. Known to the Council, but overlooked in the LIM, was the vendors' transfer of half of their rights in a previous transaction. By lamentable coincidence the vendors' agents independently misrepresented the water rights, with the result that the vendors, who knew nothing of all this, were liable in contract. 11 The misrepresentations led the purchasers to pay more for the property than it was worth. 12
The Supreme Court had to decide how damages ought to be assessed against the Council in tort when the vendors must make good the loss in contract. The Council argued that the purchasers suffered no loss attributable to the LIM, for their contractual right to compensation from the vendors must be valued and brought into account when determining whether the Council caused them loss. This required that the Court decide when the purchasers' cause of action against the Council accrued. Its decision on the point is express or plainly apparent from the four substantive judgments; the purchasers suffered loss, and their cause of action accrued, when they committed in ignorance to pay more than the...
To continue reading
Request your trial
-
Donald Owen MacDonald, Judith Mary MacDonald, John Laurence Armstrong and Wayne Henry Hanna v Somerset Smith Partners
...Kingdom Court of Appeal decision in Shore v Sedgwick, 17 which was cited with approval by the New Zealand Court of Appeal in Westland District Council v York. 66 Toogood J summarised the facts in Shore as follows: 19 In Shore v Sedgwick Financial Services, the plaintiff began proceedings in......
-
Wanganui District Council v Mwh New Zealand Ltd
...are put at not less than $4.1 million. Legal principles applicable to strike-out applications made on limitation grounds 34 In Westland District Council v York, the Court of Appeal observed that limitation is ordinarily a trial issue, so that a claim should be struck out on limitation groun......