MARLEY NEW ZEALAND LIMITED v SKELLERUP RUBBER SERVICES LIMITED [2013] NZHC 1653

MARLEY NEW ZEALAND LIMITED v SKELLERUP RUBBER SERVICES LIMITED [2013] NZHC 1653 [2 July 2013]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2012-404-001857[2013] NZHC 1653BETWEEN MARLEY NEW ZEALAND LIMITEDPlaintiffAND SKELLERUP RUBBER SERVICESLIMITEDDefendantHearing: 26 June 2013Appearances: R M Gapes and JWS Baigent for the PlaintiffJ E Hodder QC and JWJ Graham for the DefendantJudgment: 2 July 2013[RESERVED] JUDGMENT OF WYLIE JThis judgment was delivered by Justice Wylieon 2 July 2013 at 4.30 pmPursuant to r 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Introduction[1] There are two applications before the Court. They are as follows:(a) an application by Marley New Zealand Limited ("Marley") for an order that Skellerup Rubber Services Limited ("Skellerup") file andserve a more explicit statement of defence.(b) an application by Marley that Skellerup provide answers to interrogatories, and particular discovery.[2] Both applications are opposed by Skellerup.[3] The second application did not proceed to a hearing. The parties reached agreement in relation to it. Marley withdrew the application. By consent, costs in relation to it are reserved as costs in the cause.[4] This judgment deals only with Marley's application that Skellerup file a moreexplicit statement of defence.Background[5] The background is helpfully summarised in a reserved judgment of Associate Judge Sargisson, issued on 17 June 2013.1 I adopt her description of the dispute as follows:[4] Marley is a manufacturer of PVC pipes. Skellerup is a manufacturer and distributor of rubber rings that serve as seals in pipes. Between 2006 and 2009 Marley purchased quantities of these rings from Skellerup which itfitted into its own PVC pipes[6] From December 2008 onwards, Marley received complaints that various irrigation and other water and sewerage systems utilising the pipes were leaking. It contends that subsequent investigation revealed that the fitted rings were defective in that they did not comply with the compression set requirements of the relevant Australian and New Zealand standards, and on release from compression the rings failed to recover their pre- compression shape. The result was that the rings did not perform as watertight seals for the pipe joints as intended and water leaked out.1 Marley NZ Ltd v Skellerup Rubber Services Ltd & Ors [2013] NZHC 1443.[7] Marley now sues Skellerup for "loss and damage" suffered as a "sufficiently proximate consequence" of Skellerup's actions.[8] In its statement of claim Marley relies on two causes of action. The first alleges breach of contractual obligations, and the second and alternative cause of action is in negligence.[6] The damages sought by Marley are estimated to be $7,314,192 as at 31 December 2012.The application[7] If a pleading is considered to be deficient, pursuant to r 5.21, one party may, by notice, seek to require the other party to provide such further particulars as are necessary to give fair notice of the cause of action or ground of defence pleaded.[8] Here, notice under r 5.21 was given by Marley to Skellerup on 13 February2013. As I understand it, Skellerup's response was to make available to Marley itsdraft third amended statement of defence, and assert that it complies with the notice and the relevant rules. Marley says that the draft statement of defence is still deficient and that it does not comply with the rules. It seeks an order under r 5.21(3).[9] The application is unusual in that it seeks that Skellerup should amend a third amended statement of defence, which has not, as yet, been filed. Moreover, it is intended that yet a further amended statement of claim will shortly be filed and that the third amended statement of defence will respond to this third amended statement of claim.[10] A helpful affidavit setting out the history of those proceedings has been filed by a Ms Gray. At present, the relevant pleadings on the Court file are a second amended statement of claim dated 13 May 2013, and a second amended statement of defence filed on 18 March 2013.[11] I discussed this matter with counsel. I pointed out to them that it is not the practice of the Court to give proleptic answers to putative pleadings. Both however were agreed that it was appropriate for the Court to consider the draft third amendedstatement of defence, notwithstanding that it has not been filed. Mr Hodder QC appearing for Skellerup told me that, subject only to any directions that may be given by the Court, the third amended statement of defence is ready to be filed.Relevant legal principles[12] The primary purpose of all pleadings is to define the issues and thereby to inform the parties in advance of the case they have to meet and so enable them to take steps to deal with it.2[13] The function of the provision of particulars under r 5.21 is, inter alia, to inform the other party of the nature of the case it has to meet, as distinguished from the mode in which the case will be proved, to enable the other party to focus on what evidence ought to be prepared, and to limit and define the issues. The object is to ensure that litigation can be conducted fairly, openly, without surprises, and in a way which reduces hearing time and saves cost. 3[14] This is consistent with r 1.2. The objective of the rules generally is to secure the just, speedy and inexpensive determination of proceedings.[15] The application relies primarily on r 5.48. It provides as follows:5.48 Requirements of statement of defence(1) The statement of defence must either admit or deny the allegations of fact in the statement of claim, but a defendant does not have to plead to an allegation that does not affect that defendant.(2) A denial of an allegation of fact in the statement of claim must not be evasive. Points must be answered in substance. If for example, it is alleged that the defendant received a sum of money, it is not sufficient to deny receipt of the particular amount. Rather, the defendant must deny receipt of that sum or any part of it, or set out how much was received. When a matter is alleged with circumstances it is not sufficient to deny it as alleged with those circumstances. In all cases a fair and substantial answer must be given.(3) An allegation not denied is treated as being admitted.(4) An affirmative defence must be pleaded.2 Farrell v Secretary of State [1980] 1 All ER 166 (HL) at 173.3 Securitibank (in rec and in liq) Ltd v Rutherford (No 25) HC Auckland A 355/81, 10 October 1983 at 10.(5) The statement of defence must give particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances sufficient to inform the court, the plaintiff, and any other parties of the defendant's defence.[16] As is noted in McGechan, a statement of defence must admit or deny, in substance and without evasion, allegations of fact in a statement of claim. Sufficient particulars must be given to inform the Court and other parties of the defence.4 A statement of defence should answer specific allegations either by admission or denial, state any affirmative defence, and be clear and particular.5[17] In recent years, the High Court Rules have moved towards favouring greater disclosure.6 A series of bare denials is not generally acceptable under principles of modern pleading.7 Nor is a statement of defence which consists of a series of denials which do no more than put the plaintiff to proof and provide no answer in substance to what is alleged.8 Obviously, however, what detail is necessary will depend upon the facts of each case.9[18] As a general proposition, where a statement of claim contains more than one allegation in a single paragraph, it is necessary for the defendant to isolate every allegation made by the plaintiff and either admit or deny it.10 If any allegation in a statement of claim is not denied, it is deemed to be admitted.11 Defendants are not however required to plead to particulars in a statement of claim, but only to material facts.12[19] The position has been summarised by various commentators. It has been noted that the modern approach to pleading requires a proper disclosure of thedefendant's case and all the avenues it intends to pursue.13 Further, if a defendant is denying an allegation, the denial should answer the substance of the allegation without evasion. It should be clear as to how far the allegation has been admitted or4 McGechan on Procedure (online ed, Brookers) at [HR5.48 – Synopsis].5 Ibid at [HR5.48.01].6 Sim's Court Practice (online ed, LexisNexis) at [HCR5.21.3], citing Commerce Commission v Qantas Airways Ltd (No 2) (1992) 5 PRNZ 227 (HC) at 230.7 Ancare NZ Ltd v Ciba-Geigy NZ Ltd (1997) 11 PRNZ 398 (CA) at 399.8 Dougall & Co Nominees v Copeland [1981] 2 NZLR 437 (HC) at 439.9 Securitibank (in rec and in liq) Ltd v Rutherford (No 25), above n3, at 11.10 A Beck, Principles of Civil Procedure, (3rd ed, Thomson Reuters, Wellington, 2012) at [7.3.2].11 High Court Rules, r 5.48(3).12 Walker v Bennett (2009) 19 PRNZ 350.13 A Beck, above n 10, at [7.3.1].denied.14 Evasive answers, as a result of which uncertainty exists as to what extent allegations in the statement of claim have been admitted, frustrate the object of this rule, and are prohibited by r 5.48(2). A defendant is required to expressly answer each point in substance.15Submissions[20] Mr Gapes on behalf of Marley was particularly critical of various paragraphs in the draft third amended statement of defence where Skellerup pleads as follows: it repeats paragraphs [X and/to Y] and denies paragraph [Z].He argued that these pleadings did not explain the substance of Skellerup's defence,and that they were either evasive, or insufficient, and not in accordance with r 5.48. He argued that Marley has chosen to frame its pleadings by making allegations of material fact, to which it is entitled to require an answer.16[21] Mr Hodder argued that Skellerup's pleading complied with r 5.48, and thatSkellerup was entitled to deny Marley's case, and each pleaded allegation that isproperly disputed. He argued that, affirmative defences aside, a defendant is not required to plead an alternative perception of each of the plaintiff's allegation. Healso noted that a defendant is not required to plead to particulars in a statement of claim, and that despite the way in which the statement of claim has been framed,many of Marley's allegations are in fact particulars, rather than assertions of material fact.Analysis[22] Marley does not take issue with [1]–[5] of the draft third amended statement of defence.[23] Difficulties however arise with [6]. In my view, the difficulties run through a number of paragraphs in the draft statement of defence.14 Brookers Civil Litigation Precedents (online ed, Brookers, 2010) at [1.4.4] "Content ofstatement of defence".15 McGechan on Procedure, above n 4, at [HR5.48.07].16 Walker v Bennett, above n 12; Mu v Body Corporate 312431 [2012] NZHC 571 at [20].[24] In the second amended statement of claim, Marley pleaded as follows:6. The sales and purchases of the rings ordered as recorded in the purchase orders were made pursuant to contractual agreements between Marley and Skellerup (the contractual agreements) whichMarley then went on:(a) in [6.1], to assert that the contractual arrangements were partly in writing, partly by and/or implied from conduct, partly oral, and partly implied by statute,(b) in [6.2], to set out those parts of contractual agreements which it says were in writing, by reference to relevant correspondence and written materials,(c) in [6.3], to assert that the contractual arrangements in each case included the general conditions of supply which were stated on the purchase orders,(d) in [6.4], to detail the contractual agreements which it alleges ought to be implied from conduct,(e) in [6.5], to assert what oral discussions it says form part of the contract, and(f) in [6.6], to refer to the terms of the contract which it says were implied by operation of the Sale of Goods Act 1908.[25] Subparas (6.1)–(6.6) inclusive have been pleaded as statements of material fact, and not as particulars. They are in some respects unsatisfactory. For example, [6.2](b) says that, to the extent that the contractual agreements were in writing, theywere contained or recorded in, or are to be inferred from, inter alia, "relevanttechnical specifications, eg. produced by Waivin for the rings, etc". This is not satisfactory pleading and Skellerup cannot be expected to plead to it. As I understand it, this is one of the matters that Marley intends tightening up in its third amended statement of claim. Other subparagraphs clearly contain assertions of law,and again, Skellerup is not required to plead to those assertions. Moreover, some of the pleadings appear to be particulars, rather than statements of material fact, even though they are not stated to be such. A defendant is not required to go through each allegation and decide whether it is a particular or not. However, Skellerup has not made application in respect of the pleadings in the second amended statement of claim. Accordingly, I have to take that document as it currently stands.[26] Skellerup's proposed response in the third amended statement of claim is asfollows:In response to paragraph 6, Skellerup admits the fact of the sale and purchases of the rings referred to in the Schedule (Schedule rings), and the existence and text of those documents properly particularised in paragraph 6 (or in the additional particulars provided in March 2013), but otherwise denies (and declines to plead to the Marley allegations of law, including those in ) paragraph 6. (If, which is denied, Skellerup is required to plead to those allegations of law, it denies them and says that the sales and purchases involved separate contracts, following offers to purchase in each purchase order, which were subject only to the general law as modified by Skellerup'sterms and conditions of trade.)Skellerup does not currently propose to plead specifically to each of the allegations contained in [6.1]–[6.6] of the second amended statement of claim.[27] I have a number of difficulties with Skellerup's proposed response to [6] of Marley's second amended statement of claim:(a) First, Skellerup has chosen to define the rings referred to in a scheduleforming part of the statement of claim as "Schedule rings". Marley, in[4] of its statement of claim, which Skellerup admits, referred to theserings simply as "the rings". The rules do not preclude Skellerupadopting its own definitions, and whether it does or does not do so is a matter of style for it. However, the rules do require that a statement of defence is not evasive and case law requires that it be clear and unambiguous. Is Skellerup intending to refer to something different? Both the Court and Marley are entitled to know.(b) Secondly, in my view, Skellerup is in error when it asserts that [6.1]–[6.6] are allegations of law. In my judgment, they are in large partallegations of fact made by Marley as to what it says comprised the contractual agreements between it and Skellerup. I say in large part because in some respects, the pleading goes beyond a factual assertion.17 Skellerup cannot be required to plead to allegations of law. This aside, Skellerup has not pleaded to each of the factual allegations made by Marley. It should have done so pursuant to r 5.48(1) and (2).(c) Thirdly, Skellerup must answer each allegation fairly and in substance. The Court and Marley are entitled to know whether Skellerup accepts that any aspect or aspects of the contractual arrangements which Marley has set out in its statement of claim are accepted by Skellerup, whether in respect of all, or some of the purchases. If Skellerup accepts that some of the purchases were subject, for example, to technical specifications, or standards, then it should say so, and identify which purchases fall into this category, and what specifications or standards it accepts applied.(d) Fourthly, it is unsatisfactory when Skellerup refers to the existenceand text of documents which are "properly particularised". Thisproposed pleading avoids the question of what documents it is that Skellerup accepts have been properly particularised. Mr Hodder accepted that the pleading requires clarification in this regard.(e) Fifthly, if Skellerup is going to assert that the sales and purchases involved separate contracts, it needs to make it clear whether that assertion is made in respect of all or only some of the sales and purchases. If it says that the offers to purchase were subject only to the general law as modified in its terms and conditions of trade, it needs to make it clear what general law it says applied and what terms and conditions of trade it relies on as modifying that general law.In my view, Skellerup's draft pleading to [6] in the second amended statement ofclaim is not sufficient to inform the Court, and Marley, of Skellerup's defence. It is17 For example [6.4](b)(vii)not clear from the draft pleading what it is that Skellerup intends to admit or what itintends to deny. It does not give a fair and substantial answer to Marley's detailedassertions.[28] As I have already noted, Skellerup's failure to plead to [6] properly, and in accordance with r 5.48, flows through into many of Marley's other complaints,because the statement of claim adopts a stepped approach, with each allegation feeding into the next.[29] For example, [7] in the second amended statement of claim asserts that the general conditions of supply stated on the purchase orders included various conditions, some of which are quoted. There is clearly a reference back to [6.3],although this is not stated. Skellerup's proposed defence reads as follows:Skellerup admits the existence and text of the general conditions of supplystated on the purchase orders provided behind tabs 2 and 3 of Marley's initialdisclosure bundle, repeats paragraph 6, above, and otherwise denies paragraph 7.[30] Again, there are difficulties with this proposed pleading:(a) The Court does not know what has been provided behind tabs 2 and 3of Marley's initial disclosure bundle.(b) The reference back to [6] in the draft statement of defence is unhelpful, because [6] is an inadequate pleading. The position should become clearer once Skellerup pleads specifically to [6.3] of the second amended statement of claim. Skellerup will then be able to refer specifically to its pleading to [6.3] in the second amended statement of claim, rather than to the whole of its pleading to [6].(c) The reference in the draft statement of defence to "otherwise" denying[7] does not advance matters. Because it is unclear what is admittedand what is denied in [6], the use of the word "otherwise" lacksprecision. Moreover, because [7] in the second amended statement of claim does no more than assert that particular conditions were included in the general conditions of supply, which Skellerup admitsexisted, and accepts contained the text quoted, it is difficult to see that the final sentence of [7] in the draft statement of defence adds to the pleading.[31] Paragraph 8 of the second amended statement of claim pleads that the rings supplied by Skellerup to Marley were required to be supplied in accordance with various standards which are identified by particular reference numbers. There is a reference back to parts of [6] and [7] in the second amended statement of claim.[32] Skellerup's proposed response is to repeat its pleading to paragraphs [6] and[7], and otherwise deny [8].[33] Once Skellerup makes clear what its stance is in relation to Marley'sassertion that relevant standards had to be met, as alleged in [6.2], [6.3], [6.4](b) and [7] (insofar as it sets out condition 4.1 said to form part of the purchase orders), in the second amended statement of claim, then the position should become clearer. As presently drafted, [8] in the draft third amended statement of claim does not providea substantive response to Marley's pleading. In my view, Skellerup should make itclear whether it accepts any of the allegations in [8] of the amended statement of claim, that is to say, whether it accepts the applicability of all or any of the numbered standards. If it accepts that certain standards applied at certain times, and/or applied in relation to specific aspects of the supply of the rubber rings, then that should be made clear.[34] In [9] and [10] of its proposed statement of defence, Skellerup repeats its pleading in [6]. I repeat my view that this causes problems, because [6] is not an adequate pleading.[35] In [11], Marley pleads that the rings were goods of a description which it was, at all material times, in the course of Skellerup's business to sell. Skellerup'sproposed pleading is to admit selling the rings to Marley, and admit that part of its business included the selling of such rings. It then repeats [6] in its statement of defence, and otherwise denies [11]. In my view, this is not a satisfactory pleading. The reference back to [6] does not advance matters, and the use of the word"otherwise" is unhelpful, because, as I have noted, it is not clear from [6] what it isthat Skellerup admits or denies. Marley is making a simple and straightforward allegation. It is entitled to a simple and non-evasive response. Is its allegation admitted or denied?[36] A large number of paragraphs in the amended statement of claim have been responded to by repeating earlier paragraphs in the statement of defence and otherwise denying the allegation. For example, [12], [13], [14] and [15] of the statement of claim had been responded to by Skellerup in its draft statement of defence by referring to [6]–[11], [6]–[12], [6]–[13] and [6]–[14] respectively and then otherwise denying the paragraph being pleaded to. There is similar pleading in [16], [21], [22], [23], [24], [25], [28], [29], [30], [31] and [34] of the draft statement of defence.[37] In my view, this type of pleading is, in the circumstances of this case, unsatisfactory and evasive pleading. There can of course be no objection to an earlier pleading being repeated, but the earlier pleading must be clear in itself and the part of the pleading repeated must respond directly to a specific factual allegation made. If the repetition only deals in part with the allegations made in a paragraph, the pleading in the statement of defence must go on to say whether the other factual assertions are admitted or denied.[38] The draft statement of defence in its present form is impenetrable. It fails to clearly explain which part of the corresponding paragraph is being admitted and which is being denied. It does not provide a clear, direct and fair response to the specific allegations in the corresponding paragraph of the statement of claim, as distinct from the response to allegations in other paragraphs of the statement of claim. It fails to clearly answer the specific points in the corresponding paragraphs of the statement of claim in substance, and it does not disclose adequately such case as Skellerup may have, or the avenues it intends to pursue.[39] Moreover, in my judgment, the approach adopted by Skellerup in its draft third amended statement of defence is unclear, confusing and cumbersome. It is difficult and time consuming for the reader, and does not answer the statement of claim in a fair way.[40] I give three examples:(a) In [12] in the statement of claim, it is asserted that the rings were bought by description by Marley from Skellerup, and that Skellerup dealt in goods of that description. Two factual assertions are made. There is no clear answer to either of these assertions. Nor is there any clear answer to the simple assertion that each of the purchase orders contained a description of the rings to be sold by Skellerup, and purchased by Marley. For Skellerup to simply repeat its [6]–[11] of its statement of defence and otherwise deny [12] in the statement of claim, is unsatisfactory. It simply is not clear which of the repeated paragraphs respond to the factual allegations made. For the avoidance of doubt, I record that the balance of [12] in the second amended statement of claim goes on to refer to matters of law. Skellerup cannot be required to plead to those allegations. Nor does Marley suggest that it should do so.(b) In [22], Marley asserts that the rings and the various systems Skellerup supplied were defective, that they did not comply with compression set requirements, and that on release from compression,the rings' recovery of their pre-compression shape was inadequate.Skellerup's draft response is to deny that the rings were defective, orthat they were non-compliant with relevant standards. Otherwise, it simply repeats its pleadings in other paragraphs. This partiallyanswers Marley's pleading. However, it is not clear whetherSkellerup accepts or denies:(i) That the compression set requirements of the relevant standards applied; or(ii) That the rings complied with the compression set requirements of the relevant standards; or(iii) On release from compression, whether the rings' recovery ofthe pre-compression shape was inadequate.(c) In [25], Marley asserts that the defective rings caused the various systems supplied by it to not perform correctly. Skellerup denies this, and says that any leaking was caused by the negligent installation of systems by third party installers. It gives no detail. Mr Hodder, in the course of the hearing, accepted this assertion and confirmed that Skellerup is happy to give particulars of this allegation. While there can be no objection to Skellerup repeating its pleading in [6] and [7], it does emphasise the point I have made above, that there is a need for those paragraphs to be tidied up, so that they present a fair and sufficient statement, to inform both the Court, and Marley, ofSkellerup's defence.[41] I will not unnecessarily lengthen this judgment by going on to refer to other examples. Nor do I propose to make a formal order at this stage, because in my view, it is premature to do so. The statement of claim to which Skellerup will have to plead is not yet filed. Nor is the statement of defence which Marley criticises. Rather, I record my view that the draft third amended statement of defence is not an adequate pleading to the second amended statement of claim. In my judgment, Skellerup must ensure that its amended statement of defence, when filed,(a) Includes a clear, direct, fair and substantial answer to each factual allegation made in each corresponding paragraph in the statement of claim;(b) Does not to rely upon cross references to other paragraph(s) in the amended statement of defence, unless the paragraph(s) referred to provide a clear, direct, fair and substantial answer to the corresponding paragraph in the statement of claim;(c) Does not contain bare denials unless those denials provide a clear, direct, fair and substantial answer to the corresponding paragraph in the relevant amended statement of claim, and no further detail is required from Skellerup to fully and fairly give a fair and substantialanswer to Marley's allegations;[42] I reserve leave for Marley to come back and seek formal orders once theamended pleadings have been filed if it is still unhappy with Skellerup's amendedstatement of defence.[43] Given that I am not at this stage making any formal order, it seems to me appropriate to reserve the costs of this application, either for further consideration when Marley seeks formal orders, or as part of the cause if it does not do so.[44] If there is any disagreement with this approach, then I direct as follows:(a) Marley is to file and serve a memorandum in relation to costs within 10 working days of the date of release of this reserved judgment;(b) Skellerup is to file and serve a response within a further 10 working days;(c) Memoranda are not to exceed five pages in length;I will then deal with the issue of costs on the papers, unless I require the assistance of counsel._________________________Wylie J