Wrightson Ltd v Blackmount Forests Ltd and Anor

• Jurisdiction: New Zealand
• Judge: Chambers J
• Judgment Date: 20 December 2010
• Neutral Citation: [2010] NZCA 631
• Docket Number: CA311/2009
• Court: Court of Appeal
• Date: 20 December 2010

Between

Wrightson Limited

Appellant

and

Blackmount Forests Limited

First Respondent

Brunel Peak Forests Limited

Second Respondent

[2010] NZCA 631

Court:

William Young P, Glazebrook and Chambers JJ

CA311/2009

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a High Court decision dismissing the appellant's application for strike out based on limitation — parties entered into a management contract for forestry operation — respondent alleged land not suitable for planting which the appellant concealed — whether the respondent could extend the limitation period under s28(b) Limitation Act 1950 (postponement of limitation period in case of fraud or mistake) — what test was applied to limitation matters on a strike-out application — whether the respondent had to prove the appellant wilfully concealed the true position of the land — whether the negligence or Contractual Mistakes Act 1977 claims were frivolous or an abuse of process.

Counsel:

M G Ring QC and D H McLellan for Appellant

J G Miles QC and S A Grant for Respondents

• A The appeal is dismissed.

• B The appellant must pay the respondent costs for a complex appeal on a band A basis and usual disbursements.

JUDGMENT OF THE COURT

REASONS OF THE COURT

(Given by Chambers J)

Table of Contents

	Para No
A forestry venture in Southland	[1]
Issues on the appeal	[9]
What test is applied to limitation matters on a strike-out application?	[16]
Is the contract cause of action frivolous, vexatious or an abuse of process?
The contract claim	[20]
A duty to disclose the facts	[39]
Deciding not to disclose the facts	[43]
Is the negligence cause of action frivolous, vexatious or an abuse of process?
The negligence claim	[60]
A duty to disclose the facts	[74]
Deciding not to disclose the facts	[77]
Where to from here?	[81]

A forestry venture in Southland

1 On 19 November 1997, Blackmount Forests Ltd, 1 the first respondent, entered into a conditional agreement with Trinity Foundation (Services No 2) Ltd. This agreement provided that 374 hectares of land owned by Trinity in Southland were to be used by Blackmount to establish and harvest a Douglas fir forest. Blackmount was required to use Wrightson Ltd, the appellant, to plant and manage the forest. There was also a provision for Trinity to procure a certificate from Wrightson identifying and measuring the area that was suitable for Douglas fir trees. The agreement was conditional on Blackmount carrying out due diligence.

2 On 25 November 1997, Wrightson certified that 340 of the 374 hectares were suitable for planting in Douglas fir (the suitability certificate). Wrightson also advised Blackmount that the areas suitable for planting would have a site index of 34 metres, which is said to be a favourable indication of the potential growth of, and so revenue from, the forest (the site index statement).

3 Blackmount pleads that on 26 November 1997, in reliance on these representations about the forest, it declared the agreement with Trinity unconditional and entered into a forestry management agreement with Wrightson.

4 The initial planting of the Douglas fir trees was completed in 1998. Under the management agreement, Wrightson was required to provide quarterly reports to Blackmount. Blackmount says that these reports painted a favourable picture of the state of the forest. No major health or growth problems were reported. In particular, there was no suggestion in the reports that the representations earlier made about the total area suitable for planting, or the site index statement, were inaccurate.

5 Blackmount says it discovered in August 2002 that, contrary to the suitability certificate, only 270 of the 374 hectares were suitable for Douglas fir. Blackmount further says it discovered in August 2006 that the site index statement was also incorrect, and that only 220 hectares of Douglas fir trees could be expected to achieve the represented 34 metre index.

6 Blackmount issued proceedings in July 2004. It sued Trinity under the Fair Trading Act 1986 and sought relief under the Contractual Mistakes Act 1977. Its claim at that time against Wrightson was only under the Fair Trading Act. In August 2006, however, it filed a third amended statement of claim. Blackmount pleaded for the first time causes of action in contract and negligence against Wrightson.

7 Wrightson applied to have the proceedings struck out on the basis that all causes of action were time-barred. Associate Judge Faire struck out Blackmount's Fair Trading Act cause of action but declined to strike out the claims for breach of contract and in negligence. 2 The Judge considered it fairly arguable that Blackmount could rely on s 28(b) of the Limitation Act 1950 to extend the ordinary limitation periods which Blackmount accepts would, but for s 28(b), prevent its suits in contract and negligence. Section 28(b) operates to postpone the start of a limitation period where a defendant has fraudulently concealed the facts which give rise to the relevant cause of action. In such a case time begins to run only from the date the fraud is discovered or is reasonably discoverable. In reaching this conclusion, the Judge rejected Wrightson's submission that Blackmount, in order to claim the

benefit of s 28(b), needed to allege specifically that Wrightson had deliberately concealed the true position

8 Wrightson did not succeed in its application for review of the Judge's decision. Chisholm J essentially agreed with the Associate Judge. 3 He did not address Blackmount's cross-review of the decision to strike out the Fair Trading Act cause of action. Subsequently, Chisholm J granted leave to appeal to this Court. 4

Issues on the appeal

9 The appeal was presented to us very much in the nature of a legal moot on the meaning of s 28(b), with not much attempt to engage with the pleaded facts of the case and the answers Blackmount had given to various requests for particulars. We ploughed through numerous cases with a view to trying to work out what the phrase “concealed by the fraud of [the defendant]” means in s 28(b). In particular, the argument, as framed by Mr Ring QC, for Wrightson, turned on whether Blackmount had to show Wrightson had “deliberately” concealed the true position. If it did, Mr Ring claimed victory because of an answer Blackmount had given to a request for particulars. The crucial question and answer, as Mr Ring saw it, were: 5

Do the plaintiffs allege that Wrightson's alleged concealment of the matters referred to was wilful?

Not in the sense that the term “wilful” is used when alleging common law fraud, but in the sense that the concealment was non-disclosure in circumstances where there was a duty to disclose the facts, so as to amount to equitable fraud for the purposes of s 28(b) of the Limitation Act 1950.

10 It was the central feature of Mr Ring's argument that Blackmount did not allege that anyone at Wrightson had wilfully or deliberately concealed the true position. This meant, he said, that Blackmount could not succeed under s 28(b), with the consequence that the causes of action in contract and negligence should be struck out.

11 The answer to the request for particulars was, it has to be said, lawyerly. Whatever clarity it might originally have had was completely dispelled by the end of oral argument. Although Mr Miles QC, for Blackmount, continued to support the view that s 28(b) did not require a deliberate decision not to disclose, as Associate Judge Faire and Chisholm J had found, he said that, even if he was wrong in that submission, Blackmount would assert that Wrightson's concealment of relevant matters was deliberate. He referred us to other answers to requests for particulars by way of identification of those with the requisite knowledge and intent.

12 It is not satisfactory to determine something as important as a strike-out application on the basis of one answer to a request for particulars, an answer which was never very clear in its meaning to start with and which has now been effectively disavowed. We prefer not to deal with this appeal on a legalistic basis, examining simply what s 28(b) means in the abstract. Looked at academically, the paragraph is “an inapt and inelegant expression which [has] caused much difficulty”. 6 Instead, we prefer to approach the issues in a very fact-specific way: what will Blackmount have to prove at trial if the limitation period is to be postponed? The expression, “the right of action is concealed by the fraud of [the defendant]”, should be interpreted in light of the factual circumstances in which it arguably arises. Of course, the facts have yet to be determined, but, as is common on strike-out applications, the Court proceeds on the facts as pleaded in the statement of claim and as supplemented, in this case, by answers to requests for particulars. If approached in a fact-specific way, the answer to the question whether Blackmount's claim should be struck out at this stage becomes clear. We shall analyse the issues in this appeal under three headings.

13 First, we shall set out the test to be applied where a defendant is seeking to strike out a claim on the basis that it is time-barred.

14 Next, we shall investigate whether Wrightson has established that the contract cause of action is so clearly statute-barred that Blackmount's claim can properly be regarded as frivolous, vexatious or an abuse of process.

15 Thirdly, we shall investigate the same question with respect to the negligence cause of action.

What test is applied to limitation matters on a strike-out application?

16 Of the three principal questions we have to answer on this appeal, this is the easy one. That is because the Supreme Court had to deal with the same question in Murray v Morel & Co Ltd. 7 Various landowners had...