NAPIER CITY COUNCIL v LOCAL GOVERNMENT MUTUAL FUNDS TRUSTEE LIMITED [2019] NZHC 2643

NAPIER CITY COUNCIL v LOCAL GOVERNMENT MUTUAL FUNDS TRUSTEE LIMITED [2019] NZHC2643 [16 October 2019]IN THE HIGH COURT OF NEW ZEALANDNAPIER REGISTRYI TE KŌTI MATUA O AOTEAROAAHURIRI ROHECIV-2017-441-70[2019] NZHC 2643BETWEEN NAPIER CITY COUNCILPlaintiffAND LOCAL GOVERNMENT MUTUALFUNDS TRUSTEE LIMITEDDefendantHearing: 10 October 2019Written submissions filed 10, 14 and 15 October 2019Appearances: D H McLellan QC for PlaintiffM Ring QC for DefendantJudgment: 16 October 2019JUDGMENT OF GRICE J(Application for adjournment and various directions)[1] This matter has been set down for a 10 day hearing trial scheduled to start on11 November 2019 in the Napier High Court. The defendant, Local GovernmentMutual Funds Trustee (Riskpool), has applied for an adjournment. This is opposed.[2] Riskpool says due to a number of factors but in particular the recent deliveryof a Court of Appeal decision in this matter, it is not ready to proceed.Background[3] The Court of Appeal decision delivered on 20 September 2019 set out thereasons for its refusal to allow the appeal against the High Court decision to strikeoutthe proceedings.1 The result of the appeal had been conveyed to the parties on 3September 2019 after the hearing on that date.2[4] A summary of the background is set out in the Court of Appeal reasons decisionas follows:3[6] In 2013 the body corporate and individual freehold and leaseholdinterest holders in the Waterfront Apartment complex in Humber Street,Napier issued proceedings against the Council and a number of otherdefendants. The latter included the developer, principal contractor, architectand various subcontractors involved in the development of the complex.[7] The Waterfront plaintiffs' claim against the Council was cast inrelatively simple terms: that the Council owed each of the plaintiffs a duty toexercise reasonable skill and care in performing certain functions under theBuilding Act 2004 — issuing building consents, inspecting the building work,and issuing code compliance certificates. The claim then alleged that, inbreach of those duties, the Council: (1) issued consents where there were notreasonable grounds to be satisfied that the proposed work would comply withthe building code; (2) failed to ensure a sufficient inspection regime wasundertaken; and (3) issued code compliance certificates when it did not havereasonable grounds to be satisfied that the building work complied with thebuilding code. It was claimed that these breaches caused or contributed to anumber of scheduled defects. These are set out in a schedule to the statementof claim. The defects alleged number 22 in all. Defects 1 to 14 concern wateringress. Defects 15 to 21 concern fire protection. Defect 22 concerns analleged structural defect in a wall. In consequence the Waterfront plaintiffsclaimed costs for remediation, consequential losses, and an additional sum byway of general damages.[8] In February 2019 the Waterfront proceedings were settled byagreement. The Council seeks indemnity for its contribution and costs fromRiskpool.[5] The strikeout application turned on an interpretation of an exclusion clause inthe insurance contract. On Riskpool's interpretation of the exclusion clause in theinsurance contract the Council would have been prevented from pursuing itssubstantive claim[6] The proceedings were issued in June 2017 in the High Court at Auckland buttransferred to the Napier Registry to be heard at the same time as the proceedings1 Napier City Council v Local Government Mutual Funds Trustee Ltd [2018] NZHC 2269. Thematter was then in the Auckland registry.2 Local Government Mutual Funds Trustee Ltd v Napier City Council [2019] NZCA 444 (Reasons).3 Local Government Mutual Funds Trustee Ltd v Napier City Council [2019] NZCA 444 (Reasons)at [6]–[8]. Footnotes omitted.brought by the Waterfront Apartment owners against Napier City Council which hadbeen commenced in the Napier registry. The Waterfront proceedings were settled onterms recorded in a settlement agreement in February 2019. The time allocated for thehearing was shortened as a result.[7] Timetable directions in this matter were made in November 2018. It iscommon ground that neither party has complied with them. A brief case managementminute4 in March 2019 records that both counsel had agreed that the fixturecommencing on 11 November 2019 should remain in place despite the appeal pending.Leave had been granted to appeal on 7 March 2019 (following a joint memorandumadvising there was no opposition to the leave application).5Principles[8] The principles applying to an application for adjournment are well known. Theapplication is made under r 10.2 which provides:10.2 Adjournment of trialThe court may, before or at the trial, if it is in the interests of justice, postponeor adjourn the trial for any time, to any place, and upon any terms it thinksjust.[9] The interests of justice are the overriding considerations.6 That includes justiceto both parties as well as other litigants. It also involves consideration of the ability ofthe Court to manage and hear matters efficiently and within a reasonable time frame.Application for adjournment[10] The application for this adjournment by Riskpool was made on 7 October2019, although that possibility was referred to in Riskpool's memorandum respondingto Napier City Council's application for directions and a telephone conference of26 September 2019. The memoranda filed by the respective parties indicates they donot agree on the steps necessary to ready the matter for trial.4 Minute of Teleconference of Collins J, CIV-2017-441-70, 15 March 2019.5 Napier City Council v Local Government Mutual Funds Trustee Ltd [2018] NZHC 2269; Minuteof Hinton J, CIV-2017-441-70, 7 March 2019.6 NZ Iron Sands Holdings Ltd v Toward Industries Ltd [2019] NZHC 251 at [13].[11] Counsel for each party appeared at this teleconference which was brought onat short notice.7[12] In summary, the grounds put forward in support of the adjournment byRiskpool are:(a) Neither party has complied with the timetable directions. The reasonfor this appears to be that the parties were awaiting the outcome of theCourt of Appeal decision on the appeal from the High Court refusal tostrike out the proceedings.(b) The pleadings need revisiting and in addition the issues should bedetermined before trial. Pleadings have not closed.(c) In order to ensure an efficient hearing, not only do the issues need to beclarified, but a determination of who bears the onus on particularmatters is required. In addition, discovery has not been completed.This is likely to be extensive due to the need to deal with thebackground or the relevant wording in the policy. This was highlightedin the Court of Appeal judgment.(d) It would be unfair if because of time constraints if it was not able to beready for trial because of a severely truncated pre-trial timetable.(e) It challenges the admissibility of the parts of a brief of evidence ofWayne Jack (Napier City Council's CEO) served on it on 1 October2019. The brief should have been served according to the timetable inMay 2019. Riskpool has given the appropriate notice of that challenge.The admissibility issues, it says, have not been resolved and areunlikely to be resolved within the prescribed timeframe.(f) Three of its witnesses face difficulties with availability for trial. One,Mr Carpenter, has been seriously ill, although back at work on a part-7 To fit in with counsels' availability.time basis. Mr Sole (Riskpool's former CEO) is overseas andMr Heaney QC (Riskpool's former legal advisor) is also overseas andnot due back until late October. His availability to give evidence is notyet known. Two of the witnesses are to be called to cover thebackground to the wording referred to by the Court of Appeal in itsdecision of 20 September 2019. No affidavits were filed in relation tothe witness availability. However, the issues and circumstances werecovered in Council's memorandum and Mr Ring QC spoke to those. Inview of the shortness of time I am prepared to accept counsels'assurances in the memorandum as to the difficulties faced in makingthose witnesses available for the trial. To require affidavits to be filedwould further prolong matters and would add to the uncertaintiessurrounding whether the trial will proceed with the fixture looming.[13] Riskpool points to the importance of the issues in the proceedings both as tothe sum in issue (in excess of $12 million) and the importance of the interpretation ofthe exclusion clause which is apparently used in a number of insurance documentsproviding cover for not only Napier City Council but other councils acrossNew Zealand.[14] Napier City Council opposes the application for adjournment.Mr McLellan QC agreed that the parties had expressed some uncertainty at the lastcase management teleconference in March 2019 about whether the matter would beready for trial, given that leave to appeal had only been recently granted. However,he pointed to a comment in passing by one of the judges in the course of the hearingthat he saw no reason why the trial should be delayed by the Court of Appeal decision.Napier City Council saw the issues as straight forward and considered that theproposed issues and steps to trial sought by Riskpool were not necessary.[15] Nevertheless, it is common ground that due to a number of reasons, includingcounsel unavailability, the hearing in the Court of Appeal was held much later thanhad been anticipated by counsel. Counsel for Riskpool submitted that if counsel andthe Judge had been aware that the appeal would not be heard until September 2019 itis highly likely the fixture would have been vacated at that stage.[16] In addition, Napier City Council oppose the adjournment on the basis that:(a) The application for adjournment is too late.(b) The matters that Riskpool now raise as requiring resolution before trialare matters that can either be dealt with at trial or issues which are notnecessary to explore at the present time.[17] Napier City Council also submits that Riskpool's failure to prepare is not agood ground for it to be granted an adjournment. In response there was somesuggestion the delay in getting the appeal ready was partially due to unavailability onNapier City Council's part. It is not necessary to resolve that issue. In my view thedelays in resolving the strike out application were unforeseen by either party. It is alsoobvious the timetable has not been met by either party and there are further issuesincluding the completion of discovery which have become apparent as a result of theCourt of Appeal decision.[18] Napier City Council points to the comments of Justice Venning NZ Iron SandsHolding Ltd8 where he noted that when considering an application for an adjournment,in the interests of justice generally, it is not only the interests of both parties tolitigation before the Court (generally) but also relevant is the credibility of the Court'sprocesses.9[19] In that case an application for adjournment of a five week fixture in thecommercial list was refused. The basis for the adjournment sought the unavailabilityof a witness (an alternative expert). The Judge concluded that the fixture lengthallocated was appropriate, it having been originally allocated for a four week trial andextended with assurances from counsel that it would be possible to be heard within theextended time. In addition, the Judge was not satisfied that an alternative expert couldnot be obtained by the applicant. The exchange of a substantial number of briefs hadtaken place, the interlocutories had apparently been completed and the matter was dueto be heard in the commercial list.8 NZ Iron Sands Ltd v Toward Industries Ltd [2019] NZHC 2516.9 NZ Iron Sands Ltd v Toward Industries Ltd [2019] NZHC 2516 at [37].[20] In this case the timetable has not been complied with and it is only recentlythat the Court of Appeal has dealt with the application for strike out. It seems bothparties were content to leave the preparation of trial until after that occurred.According to Riskpool there do appear to be a number of legal issues arising, whichperhaps should have been obvious throughout, but have only come into sharp reliefafter the decision of the Court of Appeal. It would be more efficient to deal with thoseissues and to timetable further steps to deal with any further interlocutories before thematter goes to hearing.[21] I also note the unavailability of Riskpool's witnesses. While Riskpool shouldhave ensured they were available, it is apparent that it would be in a very difficultposition if the matter does proceed without those witnesses, as at least two of themmay be key in relation to the background of the policy wording. While Napier CityCouncil argue their evidence could be taken from a distance, that requires furtherarrangements and uncertainty with the trial dates looming.[22] As an alternative option Napier City Council submitted it would be appropriateto deal with the substantive issue (the interpretation of the exclusion clause) on thedates already allocated and the quantum issues could be dealt with at a later date.Riskpool opposed that option. It said that the unavailable witnesses would be givingevidence as to the substantive issues, not just on quantum. In addition, the difficultiesit saw with the timetable and failure to identify the issues for trial were relevant to thesubstantive issue.[23] In my view, it is unlikely to be efficient nor save much time by separating thetrial into two parts at this late stage. It is not clear exactly what would be covered ineach part. The same witnesses are likely to be required for each part. In my viewwithout some precision over what would be dealt with and more clarity as to how theycould be dealt with effectively it would be counterproductive at this late stage to splitthe trial.[24] In relation to the prejudice to the Council attendant on delay, I note its claimincludes an interest component which will go some way to compensating it for delayif it is successful. No particular prejudice other than that resulting generally fromdelay is apparent.[25] Accordingly, having considered the competing issues I am of the view that theinterests of justice require this matter be adjourned. The timetable has not beencomplied with. There are outstanding matters including the refinement of the issuesand the resolution pre-trial of matters raised in particular by Riskpool which shouldbe dealt with or at least properly considered before the hearing both for the Court'sbenefit and to ensure the trial time is used efficiently. I also take into account that thedecision of the Court of Appeal may have raised issues which were not properlyconsidered by the parties before the delivery of the Court of Appeal decision less thana month before the application for adjournment was made. The amount involved issubstantial and the issues involved have implications for a number of other localauthorities as well as the present plaintiff. I also note the pleadings may requireamendment. Mindful of Napier City Council's position however the trial should berescheduled as soon as possible.Next steps[26] Counsel indicated that they may prefer the matter to be transferred back toAuckland. The file was transferred to Napier from Auckland because of the nowsettled Waterfront proceedings. Therefore, the reason for the transfer to Napier nolonger exists. It would be appropriate for the matter to be transferred to Auckland.However, there is trial time available in Wellington (rather than Napier) for the matterto be heard over two weeks commencing 29 June.[27] Riskpool has suggested two days of the fixture time be set for a casemanagement/issues conference. As the two week fixture is to be vacated, 12 and 13November 2019 are available for a case management/issues conference to be heard inWellington (rather than Napier).[28] However, I seek submissions from counsel on the setting of the casemanagement conference/issues conference, the place of the hearing and/or whether thedates indicated for trial dates should be allocated.[29] Counsel should file memoranda, or preferably a joint memorandum, as to howthey wish to progress this. The fixture dates in Wellington are being held pendingconsideration by counsel. Counsel will need to confer. Memoranda should be filedon or before 21 October 2019.[30] If the matter were to proceed to a case management/issues conference on thetwo days suggested in Wellington counsel should file a joint memorandum as to theissues, proposed timetable and directions and any other outstanding matters whichneed to be dealt with on or before 7 November 2019.Conclusion[31] The fixture set for two weeks commencing 11 November 2020 in the NapierHigh Court is vacated. The 12 and 13 November (to be heard in Wellington) areallocated for a case management/issues conference (to be confirmed by counsel).[32] Napier City Council seeks costs on the adjournment application. It appearsappropriate that costs be awarded in its favour in view of the late application for theadjournment. However, if counsel are unable to agree on the position in relation tocosts the plaintiff should file an application and a memorandum in relation to costs onor before three days from the date of this judgment. The defendant should file anyresponse within a further three days._________________Grice JSolicitors:Wilson Harle, AucklandYoung Hunter Lawyers, Christchurch