Westland District Council v York

JurisdictionNew Zealand
CourtCourt of Appeal
JudgeMiller J
Judgment Date10 Mar 2014
Neutral Citation[2014] NZCA 59
Docket NumberCA774/2013

[2014] NZCA 59

IN THE COURT OF APPEAL OF NEW ZEALAND

Court:

Wild, Miller and Dobson JJ

CA774/2013

BETWEEN
Westland District Council
Appellant
and
Peter Charles York
First Respondent

and

Alpine Glacier Motel Limited
Second Respondent
Counsel:

D J Neutze for Appellant

J E Bayley for Respondents

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.

Held: A cause of action accrued when the material facts necessary to establish all of its elements were present. Loss attributed to the breach of duty was an element of this cause of action. For accrual purposes the loss had to be material, but it did not need to be complete, or readily measured.

It would be assumed 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 facts of this case were relevantly similar to Altimarloch 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.

The proposition that the respondents suffered loss from the council's negligent omission only when the land's special features were discovered led to the doctrine of reasonable discoverability ( Invercargill City v Hamlin). A cause of action accrued when the material facts occurred, not when the plaintiff first learnt of them. In Murray v Morel Co Ltd the Court declined to extend reasonable discoverability beyond the few classes of case — one being latent defects in buildings — in which it had already been recognised.

A second difficulty with reasonable discoverability was that the damage was not latent. In the dwelling cases which Hamlin exemplified the owner's economic loss stemmed from physical defects that were at first covered up and hence latent or undiscoverable. In this case the omitted information was in the council records all along, and it was not unique to this property. It may even have been a matter of public record.

This was not a contingent liability case. It was a transaction case, meaning that through some wrong the plaintiff suffered diminution in the value of an existing asset or disappointment in the value of an asset acquired. The plaintiff's damage happened with the transaction, although the loss might not have been quantifiable at once.

Until 2010 a contingent quality attached to the respondents' loss as the market did not know the omitted information and the respondents might have sold the motel without experiencing a loss. This proposition assumed that a hypothetical purchaser on the open market would not bother with a LIM or, a LIM having been sought, the council would again negligently omit the information, and further that the information would not meantime become public by other means.

But in a transaction case, contingency about loss did not ordinarily prevent time running ( Nykredit Bank v Edward Erdman Group (No 2) — which held that “damage” in economic loss claims included contingent damage).

Altimarloch was not relevantly distinguishable. The present case was a transaction case, and on the pleaded facts the respondents must have suffered material loss when they bought the motel at a price which exceeded its worth. That loss was suffered, at the latest, on 30 September 2005. It followed that the claim was out of time.

Appeal allowed. Claim struck out as having no prospects of success.

JUDGMENT OF THE COURT
  • 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)

Introduction
1

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.

2

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

3

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 pleadings
4

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 heading “Special Land Features” the LIM stated “no information located”; and the transaction settled on 30 September 2005.
5

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.

6

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.

7

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.

8

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

9

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.

Strike-out
10

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

The issue
11

We turn to isolate the issue for decision.

12

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,

when the LIM was provided. The respondents do not say that the Council did anything...

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