WEAVER & ANOR v AUCKLAND COUNCIL [2017] NZCA 330

WEAVER & ANOR v AUCKLAND COUNCIL [2017] NZCA 330 [31 July 2017]IN THE COURT OF APPEAL OF NEW ZEALANDCA165/2016[2017] NZCA 330BETWEEN ANN-LOUISE EVELYN CHANTALWEAVER AND GRAHAM WILLIAMANDERSONAppellantsAND AUCKLAND COUNCILRespondentHearing: 15 March 2017Court: Brown, S France and J Williams JJCounsel: T J Rainey for AppellantsD J Barr for RespondentJudgment: 31 July 2017 at 3.30 pmJUDGMENT OF THE COURTA The appeal is allowed in part. The order that costs up until 20 November 2014 are to lie where they fall is set aside. An order that the respondent is to pay the appellants scale costs on a band 2B basis up to 20 November 2014, less 50 per cent, is substituted.B The appeal is otherwise dismissed.C The cross-appeal is allowed. The order that the respondent is entitled torecover a contribution to Flexco's costs of $16,318 from the appellants isset aside. An order directing that the respondent is entitled to recover a contribution to Flexco's costs of $48,954 from the appellants issubstituted.D Costs are to lie where they fall on the appeal and cross-appeal.____________________________________________________________________REASONS OF THE COURT(Given by J Williams J)[1] The appellants own a leaky home in Auckland. They sued, among other people, the vendor (HML Nominees Ltd) and the Auckland Council (the Council). Before Katz J, the appellants succeeded against the Council, but only to about half the pleaded loss.1 This was significantly less than an amount offered jointly by the defendants and certain third parties in a Calderbank letter about three months before trial.[2] In a separate judgment Katz J then ordered that:2(a) costs as between the appellants and the Council for the period prior to the joint Calderbank offer should lie where they fall;3(b) the appellants were to pay the Council costs, including a 50 per cent uplift, for the period post the Calderbank offer;4(c) the Council was to pay scale costs with a 50 per cent uplift to Flexco (NZ) Ltd (Flexco), a third party it had joined but against which it failed;5 and(d) the Council was entitled to recover, in essence, a one-third contribution from the appellants in relation to the Flexco award.6[3] In this appeal and cross-appeal, the appellants challenge the awards made against them, and the Council challenges one aspect of the award in its favour.[4] The appellants appeal on the grounds that:1 Weaver v HML Nominees Ltd [2015] NZHC 2080 [Substantive judgment].2 Weaver v HML Nominees Ltd [2016] NZHC 473 [Costs judgment].3 At [15].4 In the sum of $52,237.50 plus disbursements of $15,274.76: at [34].5 In the sum of $48,954.00: at [66(b)].6 At [72].(a) the Judge erred in awarding costs in favour of the Council:(i) by analysing costs in two stages: pre- and post-Calderbank offer;(ii) in relation to costs pre-Calderbank offer, by awarding costs against them when they were in substance the successful party; and(iii) by uplifting costs for the post-Calderbank offer period; and(b) the Judge erred in ordering the appellants to contribute to theCouncil's costs liability to Flexco because:(i) the appellants' claim was not "effectively against" Flexco asthe Judge had suggested;(ii) the Council did not need to join Flexco as a third party; and(iii) there was no logical connection between any negligence of the Council and their loss.[5] The Council cross-appeals against the Flexco costs award on the ground that Katz J should have awarded the Council full indemnity from the appellants in respect of its costs liability to Flexco.Background and substantive High Court judgment[6] The appellants own a property in St Mary's Bay, Auckland. In 2004, whenthe property was owned by HML Nominees, it was discovered to be leaky. Remediation was carried out between 2005 and 2006, which involved attaching stone slips to the exterior cladding. Code compliance certificates were issued by the Council in October 2006. In early 2007, some of the stone slips delaminated and fell away compromising weather tightness. Further remediation work was carried out on these areas.[7] In September 2007 HML Nominees sold the house to the appellants. Around 18 months later yet further stone slips delaminated and began falling away. The appellants sought a report from a building surveyor who identified various defects in the stone cladding as well as other minor unrelated defects. A full re-clad was required. Katz J found that a number of factors caused the stone cladding system to fail. These included failure to faithfully follow the cladding system certified in the building consent and the use of inferior waterproofing and adhesive methods.7[8] The appellants sought to recover the cost of the re-clad and remedying other defects from the following parties:(a) HML Nominees (as vendor);(b) Ms Moore (as remediation project manager); and(c) the Council (as the regulatory authority which issued the building consents and code compliance certificates).[9] The three defendants in turn joined nine third parties between them, only three of which remained active in the trial: Stonescapes Ltd (which undertook the stone works), Flexco (which distributed the Flexi-Seal waterproofing membrane that was intended to be used but, in the event, was not), and Mohan Roofing Services Ltd (the roofing contractor).[10] HML Nominees was held to be liable to the appellants for breach of vendor warranties because the stone-cladding work did not comply with the building consents.8[11] The Council was held to have breached its duty of care because, when issuing the building consents, it failed to make inquiries to ensure that the proposed alternative solution in relation to the stone cladding would comply with the buildingcode. But, the Judge found, this did not cause the appellants' loss in fact.9 That was7 Substantive judgment, above n 1, at [49].8 At [69].9 At [87]–[88].because, the Judge found, and the parties agreed, that had the system been installed in the manner described in the building consent, it would have complied. The Council was also found to have breached its duty of care in relation to inspections of the stone cladding work and in issuing a code compliance certificate for it.10 The Council had failed to ensure the system was installed in accordance with its consent.This breach was found to have caused the appellants' loss.[12] The Council's third party claim against Flexco was in negligentmis-statement in relation to a statement provided by Flexco to support the application for building consent. This claim failed.11 The Judge found that if the stone cladding system had been installed in accordance with the building consent asapproved, using Flexco's sealing system, the stone cladding would not have failed.[13] As to quantum, Katz J found that both HML Nominees and the Council were liable in respect of the cost of remediating the stone cladding in the sum of $96,406.22.12 The Council, however, was entitled to a contribution of 60 per cent from Stonescapes (now in liquidation) in respect of their defective workmanship. The Council and HML Nominees were each also ordered to pay the appellants $10,000 in general damages.[14] Prior to trial the Judge had gone to some lengths to encourage the parties to resolve the matter without the need for further recourse to the courts, given the quantum involved.13 In a Calderbank letter sent on 20 November 2014 (about three months prior to trial) by the Council and other parties, a joint settlement offer of $197,500 was put to the appellants — effectively the entire amount claimed less interest, costs and disbursements. This was a good deal more than the final award against the Council which was for $108,525.20 ($96,406.22, plus $10,000 in special damages and $2,118.98 for a claim in relation to defective chimney repairs).10 At [95].11 At [136]–[138].12 At [197]–[199]. The Council was also liable to pay $2,118.98 in respect of remediating the chimney cap flashing and installing a new flue vent.13 The statement sought specific damages of $186,682.41 plus $50,000 in general damages.Pre-Calderbank costsJudgment[15] The Judge chose to separate her consideration of the costs application between matters arising prior to the Calderbank offer on 20 November 2014 and matters arising after that offer. The Judge decided costs should lie where they fall for the period prior to the Calderbank offer because the appellants had won on roughly 50 per cent of the claim in value in relation to claims that took roughly 50 per cent of the hearing time.14Submissions[16] The appellants argue that Katz J's error was to disregard the fact that theywere ultimately successful, even if not to the full extent claimed. In doing so she contravened the usual costs principle that the "loser" pays. The Judge, it wassubmitted, erred in viewing pre-Calderbank costs through the prism of the Calderbank offer as the effect overall was to double the costs effect of the offer.[17] The Council argued that Katz J was correct. Although there was only one cause of action, the appellants had failed in relation to a major issue in complex multi issue proceedings. The hearing of that issue had significantly increased theCouncil's costs. The Council argued that r 14.7(d) of the High Court Rules was drafted to give the Judge just the discretion she exercised in this kind of situation. In addition, it was argued, Katz J had the advantage of being in the best position to assess the time and expense involved in airing the issue upon which the appellants failed.Analysis[18] It was not necessary for Katz J to divide her analysis of the costs issues between the pre and post-Calderbank phases of this litigation. An alternative would have been to deal with matters in the round, taking the mid procedure offer into14 Costs judgment, above n 2, at [15].account in that assessment. Both approaches are acceptable, but care is needed if the divided approach is taken.[19] The starting point is that costs are discretionary.15 As this Court recently noted in Water Guard NZ Ltd v Midgen Enterprises Ltd:16 an appellate court should not interfere unless, in accordance with settled principles, it is satisfied that in exercising his statutory discretion the Judge acted on a wrong principle, failed to take into account some relevant factor, took into account an irrelevant factor, or was plainly wrong.[20] But it is well settled that the party that lost should pay the costs of the party that won.17 The Supreme Court in Shirley v Wairarapa District Health Board, inreferring to what is now r 14.2(a), made clear that the "loser, and only the loser,pays", unless there are exceptional reasons.18[21] Recourse may then be had in search of such reasons to r 14.7(d) of the HighCourt Rules, which gives the Court discretion "despite rr 14.2 to 14.5," to refuse toaward costs to the successful party if, notwithstanding overall success, "that partyhas failed in relation to a cause of action or issue which significantly increased thecosts of the party opposing costs." The same rule also empowers the Court to reducecosts in such circumstances.[22] In concluding that costs should lie where they fall in relation to the pre- Calderbank costs, the Judge looked to the decision of this Court in Packing In Ltd (in liq) formerly known as Bond Cargo Ltd v Chilcott.19 This was a case in which the liquidators issued notices under s 292 of the Companies Act in relation to 14 voidable transactions. Eleven notices were set aside while notices in respect of three transactions were upheld. The affirmed notices represented somewhat more than half of the overall value of the transactions covered by all notices.15 High Court Rules, r 14.1.16 Water Guard NZ Ltd v Midgen Enterprises Ltd [2017] NZCA 36 at [11] (footnotes omitted). See also the authorities cited there including Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [15].17 High Court Rules, r 14.2(a).18 Shirley, above n 17, at [19] (emphasis added).19 Packing In Ltd (in liq) formerly known as Bond Cargo Ltd v Chilcott (2003) 16 PRNZ 869 (CA).[23] The High Court had ordered that Bond pay the costs of the liquidators of a separate company, WSA (NZ) Ltd, in relation to the proceeding. This Court considered that, in circumstances where each party has had a similar measure of success, a strict focus on who won and who lost is not helpful. Instead the startingpoint should be the premise that "approximately equal success and failure attended the efforts of both sides".20 From there, the Court found an assessment ofcomparative hearing time and any other relevant matters is required in order to "do justice to both sides, bearing in mind all material features of the case."21 The Court concluded:22Success or failure in this context is better assessed by a realistic appraisal of the end result rather than by focusing who initiated what step, and the extent to which that step succeeded or failed.[24] While understandable in its own context, we do not consider that Packing Inis authority for the proposition that in a damages claim it should be routine for the Judge dealing with costs to be required to unpick what happened in quite the detail undertaken in that case.[25] Voidable transaction notices are a particular procedure. In Packing In theorders sought by Bond under s 294(4) of the Companies Act were to set aside the voidable transaction notices issued by the liquidators of WSA (NZ) Ltd. The High Court did not itself set aside the transactions in which the liquidators were successful but rather declined to order that they not be set aside.23 Bond on the other hand had succeeded in obtaining orders that reversed the statutory voiding process in relation to 11 of the transactions amounting to more than half of the value of the notices. It was, in the context of that particular statutory procedure, not at all clear how to identify a winner. Both sides got a portion of the money they wanted: Bond savedaround $60,000 that it would have lost on the strength of the liquidators' notice to setaside, and the liquidators got around $50,000 because their notices were upheld to that extent. This was rather more like the situation of equally successful claimants and counter-claimants.20 At [5].21 At [5].22 At [6].23 At [4].[26] In the present case however, the only party to have succeeded by any"realistic appraisal" were the appellants. It is true that they did not succeed to thefull extent of their claim but only to roughly half that extent, yet success on more limited terms is still success. We do not therefore see a proper basis upon which the usual rule that the party who fails with respect to a proceeding should pay costs to the party who succeeds should not apply. That said, it is appropriate that the costs ultimately awarded to the appellants should be reduced in accordance with r 14.7(d) because, although the appellants succeeded, the time and resources necessary for the respondent to meet ultimately unsuccessful arguments significantly increased its costs. Like Katz J, we assess that increase at around 100 per cent or roughly a doubling of effort and time. A reduction in entitlement by half is therefore appropriate.[27] We note that the Council discussed in detail the decision of this Court inWater Guard, to which we have already made reference.24 As it is a recent decision, it is appropriate to address its relevance to this appeal. In Water Guard the HighCourt found liability established as to 25 per cent of the plaintiff's claim, and thecase settled for approximately $67,500 on the eve of the damages quantum hearing. The original claim was for $511,100. Calderbank offers had been made before the first liability trial at $40,000 and then $50,000. The High Court awarded the defendant 75 per cent of its costs but declined to award the plaintiff 25 per cent of its costs because, despite its success, it had taken an unreasonable approach to settlement. For the period after the liability trial but before settlement, the High Court left costs to lie where they fell.[28] This Court overturned the 75 per cent award to Water Guard on the basis that this award failed to give effect to the principle that costs ought to follow the event.25Limited success and unreasonable behaviour can be sufficiently provided for, the Court held, by reducing costs against the losing party, even to zero if necessary, but it was contrary to principle to award costs to the losing side. A reduction to zero was, this Court found, justified on the facts of the case.2624 At [19] above.25 Water Guard, above n 16, at [13].26 At [13] and [15].[29] Thus, although at a superficial level, the result appears to favour theCouncil's argument in this appeal, the Court's reasoning does not. The dominant principle that the loser should pay was, in that case, only displaced by poor behaviour on the part of the winner. Crucially, this Court found that there was no principled basis upon which costs could be awarded in favour of the losing party. In the case before us however, unreasonable behaviour by the winner is only an issue, if at all, after the Calderbank offer was made. Accordingly, the appellants ought to have been entitled to costs, albeit reduced by 50 per cent to take account of the timeand effort expended to meet the appellants' unsuccessful arguments, up to that pointof the Calderbank offer, applying the reasoning in Water Guard.Uplift post-CalderbankJudgment[30] As to costs post-Calderbank offer, the Judge awarded the Council costs in accordance with orthodox principles — the ultimate award being less than the sum offered in settlement.27 But the Judge uplifted the award by 50 per cent on the basisthat the appellants' conduct needlessly prolonged the proceedings and caused the Council unnecessary expense.28 Further, the offer was made at a time when the appellants should have been well placed to undertake a realistic assessment of the offer.29 This made their effective refusal to engage with the defendants unreasonable.30Submissions[31] The appellants accept that it was appropriate for the Council to be awarded ordinary costs following receipt of the Calderbank letter containing an offer that exceeded the ultimate damages award. But the appellants submit that the 50 per cent uplift for that period cannot be supported.27 Per r 14.11(3) of the High Court Rules.28 Per r 14.7(f)(v).29 Costs judgment, above n 2, at [31].30 At [32].[32] The appellants argued that their rejection of the Calderbank offer was not unreasonable. They pointed to the fact that in a separate judgment in which Katz J stayed, on an interim basis, the enforcement of her substantive judgment against the Council,31 the Judge accepted that the appellants' unsuccessful arguments werenonetheless tenable. The appellants argued further that their rejection of the offer was reasonable given the amount of work they had already carried out at that stage in preparation for trial.[33] In addition, the appellants argued, all parties were aware of an earlier Department of Building and Housing determination that had found all damage proved,32 and, while in the appellants' subsequent argument at trial that the Council should be estopped from running the same opposition in the High Court, Katz Jfound against the appellants, this was only by a "narrow margin".33Analysis[34] In our view, the uplift was justified.[35] Firstly, the Calderbank offer was essentially the entire amount claimed (and twice that won), less interest and costs. Even without the benefit of hindsight, this was a reasonable offer when weighed against the possibility (always real in litigation) of less than complete success in Court. That remained the case even though the appellants had then genuinely thought that their case was stronger than it turned out to be. There was no reasonable basis for turning it down.[36] Secondly, the appellants argued that it was reasonable to take account of the resources already expended to that point. The offer had been made on the day the plaintiffs had served their expert evidence. We do not think that is a good argument. The terms of r 14.6 of the High Court Rules run counter to this sort of sunk-cost31 Following the substantive judgment, the appellants and HML Trustees had settled HML'sconcurrent liability and the Council sought an interim stay to allow argument in due course overwhether the settlement of HML's claim effectively discharged Council's concurrent liability. The Council's argument ultimately failed: see Weaver v HML Nominees Ltd [2016] NZHC 476.32 Regarding the issuing of code compliance certificates for the recladding of a house at 7ASeymour Street, St Mary's Bay, Auckland Ministry of Business, Innovation and Employment (Building and Housing) Determination 2013/031, 10 June 2013.33 Substantive judgment, above n 1, at [119].justification. Rather, the focus of that rule is squarely on providing strong disincentives to litigants throwing good money after bad, or in this case, good money after far less good money.[37] Thirdly, we agree with Katz J that the appellants behaved unreasonably. They effectively refused to engage with a reasonable offer. The Judge had earlier intervened to encourage settlement discussions because of the modest sums claimed. The appellants would not engage in face-to-face negotiations but invited a written offer. When one was given, they did not make a genuine response. The appellants say that they did in fact respond with a counter-offer. Evidence of this was notadduced in the High Court and although the "counter-offer" was provided to us, no application was made in this Court for leave to adduce it. But even if the counter- offer was properly before us, or Katz J, it could not have made a difference. The counter-offer (at $290,000) was expressed to be "not negotiable". The letter was dated 17 December 2014. It provided that the offer would expire two days earlier, on 15 December 2014 (the date for final payment of court scheduling fees). This cannot have been a serious attempt at engagement with the Calderbank offer.[38] Overall, we are satisfied that the uplift was well within Katz J's discretion.The Flexco appeal and cross-appealJudgment[39] It was common ground that an award of scale costs in favour of Flexco was appropriate. However, Katz J uplifted that award by 50 per cent on the basis that, prior to trial, it became clear that a third party claim against Flexco could not possibly succeed, and it was unreasonable for the Council to maintain its third party notice at that point.34 Secondly, the Judge found that the appellants contributed tothe problem and should be required to contribute half of the Council's scale costs35— essentially one-third of the total costs award against the Council. The Judge reasoned that, had the appellants not pursued a meritless building consent claim against the Council, the Council would not have been required to issue the third34 Costs judgment, above n 2, at [59].35 At [69] and [72].party claim. The appellants' contribution of 50 per cent of scale costs recognised that responsibility. But, the Judge considered, the Council's stubborn maintenance ofthe third party claim even after the facts made it clear that the claim would never succeed was the Council's sole responsibility and the appellants should not be required to contribute to the uplift.36Submissions[40] The appellants challenge the contribution order for one-third of the Council's cost liability to Flexco (that is half of Flexco's scale costs prior to the 50 per cent uplift). The appellants submit that Flexco was never their true target and the Council did not need to join Flexco in order to meet the appellants' case. The appellants'case was about the Council negligently granting consent with insufficient information, alleging a lack of care by the Council over the consent rather than reliance on a negligent mis-statement by another party. There was thus no logicalconnection between the appellants' claim and the joinder of Flexco.[41] The Council cross-appealed in relation to the contribution of the appellants. The Council argued that the contribution order was insufficiently generous and the appellants ought to have been required to pay all of the Council's costs liability to Flexco — both the scale costs and the uplift. The Council accepts that once the views of experts became available, neither the appellants' claim nor the third party claim was likely to succeed. But, the Council submitted, it took a reasonable stance when it wrote to the appellants advising them of the position and putting them on notice that a costs claim for full indemnity would be made if the appellants proceeded.[42] In response to this advice, the Council argued, the appellants obdurately maintained that their primary claim would succeed. The Council cannot be fairly criticised when, faced with that stance, it decided to maintain its third party claim. It was submitted that a prudent solicitor would not have advised the Council to withdraw the claim against Flexco in those circumstances. On this basis, the Council36 At [72].submitted the appellants should be required to provide a full contribution to theCouncil's costs liability to Flexco.Analysis[43] The general principle is that a successful defendant will only be called on tomeet a third party's costs if the joinder of that party was unnecessary to the defenceor was for some other reason unjustified.37[44] The pleaded claim here was that the Council had issued a building consent for remedial work where the specifications upon which the consent relied could not have satisfied a reasonably skilled and prudent Council officer that the work would comply with the building code, even if the work adhered to those specifications. The logic in the joinder of Flexco was that one of the specifications the Council relied onwas Flexco's Flexi-Seal system. This system was described in a letter provided by Flexco to the supplier which explained how the stone slips would be adhered to theexterior cladding using Flexco's products. It was intended to provide comfort toCouncil in assessing the building consent application.[45] Councils will often rely on producer statements in relation to materials and systems relevant to the issuing of building consents. The joinder of those who make such statements is therefore almost inevitable in such litigation. It is not necessarythat the third party be the plaintiff's "real target". Joinder of such parties is stillproperly seen as justified even where the alleged liability is shared or concurrent.[46] There was, we agree with Katz J, an obvious nexus between the appellants' claim and Flexco's contribution to the problem had the Council been found liable innegligence. The specifications were Flexco's. We therefore agree with Katz J that the appellants ought to have been called upon to contribute to the Council's scalecosts. The authorities are clear however that a successful defendant can expect an unsuccessful plaintiff to meet all of the costs of a third party reasonably and justifiably joined by that defendant unless there is some particular reason not toadopt that approach. Here, Katz J effectively reduced the appellants' responsibility37 See Shirley, above n 16, at[22] and n 18, affirming the principle set out in Money World NZ 2000 Ltd v KVB Kunlun NZ Ltd HC Auckland CIV-2003-404-2542, 23 September 2005 at [33].to 50 per cent of scale costs because the Council should have realised after discovery and evidence exchange that its claim could not succeed. In short, there came a point at which the joinder could no longer be considered reasonable or justified.[47] This had a second impact in costs terms in the Judge's view. It also justified a 50 per cent uplift in relation to the Council's liability to Flexco. This, the Judgeconsidered, matched the uplift imposed on the appellants in relation to their conductafter the Council's Calderbank offer.38[48] We accept Katz J's primary point that the Council realised well before trialthat the evidence was insufficient for the appellants to establish causation and this meant its third party claim against Flexco was likely to fail.[49] If this was the only consideration, we would have been inclined to agree withthe Judge's conclusion that the appellants had reduced responsibility for Flexco'scosts. But three months before trial, the Council wrote to the appellants setting out its view of the evidence on causation and inviting the appellants to withdraw this aspect of their claim because it was unwinnable. The Council, via its solicitors, advised, responsibly in our view:The claim in relation to the building consent is separate and distinguishable from the remainder of the claim. However, while it remains on foot, the Council is required to protect its position by pursuing the above third parties.[50] The reply from the appellants' solicitors two weeks later on 17 December 2014 was in these terms:With respect, your understanding of what is necessary for the plaintiffs toestablish causation in this case is wrong. But even assuming that this aspect of the plaintiffs' claim against the Council does not succeed, thenotion that this justifies the plaintiffs being liable for any costs the Council may have to pay to the third parties is fanciful.[51] Two days later the Council's solicitors replied:[I]f the plaintiffs are unsuccessful or only partly successful , it is the Council's position that the plaintiffs will be liable for the costs of the third parties that were joined in respect of the unsuccessful part of the claim.38 Costs judgment, above n 2, at [72].[52] In communicating to the appellants in this way, we consider the Council had done all it was required to do. Beyond that, responsibility lay with the appellants forthe time and resource expended by Flexco in defending the Council's claim because they chose not to heed the Council's warning. We agree with the Council that it setsthe bar too high to expect a prudent solicitor to advise a defendant to discontinue aflawed third party claim in the face of the plaintiffs' obdurate refusal to withdraw itsequally flawed co-ordinate primary claim. Maintenance of the third party claim remained reasonable and necessary as a result.[53] It follows that the appellants will be liable for all of the Council's liability topay Flexco costs, including the 50 per cent uplift, which we agree was well-justified in the circumstances.Result[54] The appeal is allowed in part. The order that costs up until 20 November 2014 are to lie where they fall is set aside. An order that the respondent is to pay the appellants scale costs on a band 2B basis up to 20 November 2014, less 50 per cent, is substituted.[55] The appeal is otherwise dismissed.[56] The cross-appeal is allowed. The order that the respondent is entitled torecover a contribution to Flexco's costs of $16,318 from the appellants is set aside.An order directing that the respondent is entitled to recover a contribution toFlexco's costs of $48,954 from the appellants is substituted.[57] Costs are to lie where they fall on the appeal and cross-appeal.Solicitors:Rainey Law, Auckland for AppellantsSimpson Grierson, Auckland for Respondent