HUNT V NEW PLYMOUTH DISTRICT COUNCIL HC NWP CIV-2006-043-435

HUNT V NEW PLYMOUTH DISTRICT COUNCIL HC NWP CIV-2006-043-435 26 October 2010IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY CIV-2006-043-435BETWEEN R M HUNT Plaintiff AND NEW PLYMOUTH DISTRICT COUNCIL Defendant Hearing: 26 - 27 July 2010 Appearances: Mr Henry and Ms Towt for the plaintiff Mr Goddard QC, Mr Shackleton and Ms Blomfield for the defendant Judgment: 26 October 2010 at 4.00 pmJUDGMENT OF MALLON JContentsIntroduction ............................................................................................................... [1]The facts.................................................................................................................... [4]The pleading ........................................................................................................... [20]Duty ........................................................................................................................ [22]Misstatement ........................................................................................................... [43]Loss ......................................................................................................................... [44]Limitation Act ......................................................................................................... [55]Result ...................................................................................................................... [70]Costs........................................................................................................................ [71]Introduction[1] This negligence claim is one of a number made by the leaseholders of land in Waitara owned by the Council. In 1989 the Council informed leaseholders of its intention to pursue the steps necessary to permit the leaseholders to purchase the properties freehold. Further statements were made in 1994 and 1997 about this. By 2004 the Council had decided against facilitating freeholding of the land and instead decided to sell the land to the Crown as part of the Crown process to return land to Maori. [2] The claim seeks against the Council loss alleged to have been suffered in reliance on Council statements made in 1994 and 1997 about the prospects of the freehold of the land becoming available. Before me is an application by the Council for summary judgment or for an order striking out the claim. It is made on the basis that a duty of care is not made out, that there were no negligent misstatements, that the plaintiff could not reasonably rely on the statements, that no loss of a kind recoverable in tort is pleaded and that the claim is statute barred. [3] There were originally 155 Waitara leaseholders who made claims. Following a decision of the High Court 1 on 6 test cases which granted summary judgment in favour of the Council, a number of these claims were discontinued. There are currently 74 claims remaining, including this one. These remaining claimants have agreed that the outcome on the present application will determine the outcome of their claims.The facts2[4] All the Waitara leasehold land the subject of the claims brought against the Council was held pursuant to endowments or trusts which by statute restricted what1 Arms & Ors v New Plymouth District Council HC New Plymouth CIV-2006-043-000399, 14 May 2008.2 The background facts are set out in detail in Arms & Ors v New Plymouth District Council. The following description here is, in the main, a summary version.the Council was able to do with money received from the land. Most of the land was leased by the Council for residential purposes. From time to time the Council considered whether it should sell the freehold of the land to the leaseholders. In 1989 the Council resolved to "adopt a policy of permitting the owners of leasehold property in Waitara to purchase the freehold of those properties". It also resolved that "[p]rior to the application of any funds derived from the sale of leasehold properties an investigation be undertaken to determine the most satisfactory use of the capital, and one which will provide the greatest benefit to Waitara". [5] The Council received advice that under the existing statutory restrictions, and unless it were given statutory authority to do otherwise, proceeds from the sale of the freehold of the land to the leaseholders would have to be used to purchase other land to be held for the same purposes as that for which the leasehold land was held. A draft local Bill was prepared which, if enacted, would remove the restrictions so as to provide the Council with flexibility as to the purpose to which sale proceeds could be used. On 8 April 1991 the Council resolved to initiate the action necessary to promote the local legislation. In March 1992 the Council placed notices in the local newspaper advising that the Council "hereby notifies its intention to introduce a local bill". The notices referred to the Council's resolution to promote this legislation "to empower the Council to offer for sale the freehold of various leasehold properties at Waitara". The notice said that the purpose of the legislation was to release the restrictions which affected the land and to vest the land in the Council in fee-simple. [6] In June 1992 the Bill was introduced to Parliament. As foreshadowed, it provided for the land to vest in the Council in fee-simple and freed or discharged from the restrictions to which the land was subject. Submissions on the Bill were called for. The Council's submission said that the Bill would enable the Council to satisfy the wishes of a large number of leaseholders who would like to purchase the freehold interest in their properties. [7] In November 1992 the Council received a letter from the then Minister of Justice (later to become the Minister in charge of Treaty of Waitangi Negotiations). The letter advised of the Government's concern with the Bill. The letter advised that the Taranaki area was subject to a claim by Maori and that the Tribunal was verylikely to find that the Crown was culpable for the confiscation of the land. The letter advised that all the land subject to the Bill was part of the claim. The letter advised that the Government considered the enactment of the Bill would jeopardise the chances of a settlement of the claim and would be viewed by tribes as an offence by the Crown. The letter advised that the obstacles might be overcome if local Maori concerns over the Bill were able to be resolved through discussions with the Council. The letter referred to the Te Atiawa Tribunal Council (the Tribal Council) as having sought discussions with the Council and as being the only tribal group to have made submissions on the Bill. [8] After this there was correspondence between a sub-committee of the Council and the Tribal Council. The Tribal Council advised the Council that there was an issue about the correct representation of Te Atiawa which would be determined by the Maori Land Court, but that the Tribal Council was willing to meet with the Council. A meeting was scheduled for 9 December 1993. The Council also received correspondence from Te Runanga o Te Atiawa advising that the Te Runanga, and not the Tribal Council, represented five of the six hapu and requesting that their representatives also attend the meeting. It appears that the Council did not accede to this request. [9] According to handwritten notes of the meeting with the Council, at the meeting the Tribal Council advised that it wanted the land returned to Te Atiawa and that the Waitangi Tribunal process was expected to take a long time. The Council said that the return of any land to Te Atiawa was a matter for Te Atiawa and the Crown, that Council land was private land and those leaseholders who wanted to hold the land freehold should be allowed to do so. The Tribal Council said that the land had been taken by the Crown and given to the Council and the issue of whether Council land was private land was about to be tested in court. [10] On 13 December 2003 the Council passed a resolution which recorded principles for further discussions with Te Atiawa towards enabling the passage of the Bill. These principles included that any leaseholder who wished to purchase the freehold "shall be allowed to do so". It also included consideration being given to transferring vacant land to the Crown to return to Te Atiawa and for Te Atiawa toshare in the revenue from freeholding. The Tribal Council and Te Rununga O Te Atiawa were advised of this resolution in late December 2003. [11] On 19 January 2003 the local newspaper published an article which reported the Tribal Council as saying that it wanted the return of the land that was taken from it, that it disputed that Council land was not Crown land and that it was prepared to use disruptive tactics if its negotiations with the Council for the return of the land failed. [12] According to an affidavit filed in this proceeding, the Council was concerned that leaseholders were receiving misleading messages in the media. As a result the Mayor sent a letter to all the leaseholders which was in these terms (the January 1994 letter):January 1994 Dear Leaseholder RE: FREEHOLDING WAITARA LEASES There is a lot of concern in the community about the Leasehold sections in Waitara. There have recently been several misleading statements reported in the Newspapers. The rights of Waitara citizens are of the utmost importance to Council. We send this letter, because you need to have up-to-date, accurate information, from your Council. BACKGROUND In 1992 Council sponsored a special Bill (Act of Parliament) to amend the law relating to the way monies from the freeholding of lease land in Waitara could be used. The Te Atiawa Tribal Council made a submission to Parliament on the Bill and raised objections. The Minister of Justice, The Honourable Douglas Graham, noted that the land was either included in the disputed Waitara purchase or confiscated in 1863 after the land wars. He indicated that he was unhappy about the Bill proceeding until there had been consultation and discussions between the District Council and the Te Atiawa Tribal Council. Representatives of Council met with the Minister in May last year to clarify some points. Minister Graham confirmed that: 1. The Government, not Council , is responsible for obligations under the Treaty of Waitangi;2. He had been advised by the Crown Law Office that the Waitara land is not Crown land and it is privately owned by the New Plymouth District Council; 3. In his opinion, the Te Atiawa people have no claim against Council land; 4. The Government is willing to consider any matters that the District Council and the Te Atiawa people take to him. Our representatives have had several meetings with the Te Atiawa Tribal Council to try and resolve this issue for Leaseholders. RECENT PROGRESS After discussions in December 1993 between our representatives and the Te Atiawa Tribal Council, we agreed to a joint approach to the Minister which would bring benefits to the people of Waitara and to Te Atiawa. This approach involves: 1. Recognising that the individual rights of the people of Waitara occupying and leasing land in the disputed area should be preserved absolutely; 2. Ensuring that any Leaseholder who wished to freehold his or her land should be allowed to do so; 3. Looking at a proposal where vacant land owned by the Council could be transferred to Te Atiawa on condition that the Crown paid the Council the current true value for the land; 4. Negotiating with the Crown a level of compensation for Te Atiawa based on the lands revenue – from rent or freeholding – provided there was no loss to the Council, its ratepayers and citizens. THE COUNCIL'S COMMITMENT Finally, we are willing to assist Te Atiawa to obtain compensation from the Government for lands that were confiscated last century. The Council is committed to resolving this problem. We want harmony in the District. We wish to protect the rights of the Waitara Leaseholders, the benefits of our ownership of the land and to respect our obligations to the ratepayers of the District.[13] After this there were further discussions between the Council and the Tribal Council but no resolution was reached. In July 1994 the Council wrote to the Minister asking the Government to agree to the Bill proceeding. In January 1995 the Minister advised the Council that the Government was not prepared to support the Bill at this stage. The Minister said that the Government could reconsider once the Crown had determined how to address any proven grievances. A further letter wassent to the Council by the Minister in February 1994. The letter updated the Mayor on the progress with the resolution of the Taranaki Maori grievances and said that a decision by the Council to sell the leasehold properties might seriously harm the longer term prospects of a satisfactory resolution. [14] The Council took no steps to sell the leasehold properties in 1995 or 1996 although, in response to a question from the Select Committee, it advised that it did not wish to withdraw the Bill. [15] On 27 February 1997 the Mayor sent another letter to each of the leaseholders (the February 1997 letter). The Mayor referred to the January 1994 letter and advised that the purpose of the letter was "to advise on the current position" with the Bill. The letter set out the background, including that the Minister had requested "that the Council postpone making a decision on selling the leasehold properties until after the Treaty claims had been resolved". [16] The February 1997 letter went on to say:The Council is concerned at the slow progress being made in resolving the situation. All parties are in agreement that it is the Government and not the Council who is responsible for obligations under the Treaty of Waitangi; and the Government agrees that the Waitara land is not Crown land but that it is privately owned by the New Plymouth District Council. The Council's commitment to the Waitara leaseholders has not changed. The Council still considers the Waitara land to be freehold land and therefore not subject to any Treaty of Waitangi Claim; and the Council still recognises that the individual rights of the people of Waitara occupying and leasing land in the disputed area should be preserved absolutely. Unfortunately, until either an agreement can be reached between the Council and Iwi negotiators, or the Iwi and the Government reach a settlement on Treaty of Waitangi Claims, the Council is faced with somewhat of a stalemate in the freeholding of these leases. Just as the Council looks to protect the interest of the lessees in this situation, it also wishes to maintain a good relationship with Iwi that fall within its boundaries. Further, without the support of the Government, there is little chance of the Bill proceeding through Parliament. In summary, the Council is still committed to the Bill which if enacted will enable the freeholding of these lessees. It is also well aware of the complexities of the Taranaki Treaty of Waitangi Claims and the possible delays because of the depth and nature of the issues involved. The final outcome is possibly outside the Council's control however it will continue to try to influence a timely decision.[17] Over the next few years it seems that the Council had not changed its mind about wanting to freehold the land, but were waiting for the Crown to resolve the Taranaki Maori claims. However, with the enactment of the Local Government Act 2002 which (amongst other things) required the Council to develop a long-term strategic plan, the Council resolved in May 2002 to again give consideration to the leasehold land. In August 2002 it decided to ask the Government to put the Bill on hold pending its reconsideration. In November 2002 leaseholders were advised of the process that would be followed. That process included consultation and the commissioning of reports. [18] Following that process, on 12 August 2003 the Council made a preliminary decision to "facilitate the opportunity for the return of the Council's leasehold land ... to tangata whenua with mana whenua over those lands". There were further submissions and a final report leading to the Council resolving on 30 March 2004 to transfer the land to the Crown. In April 2004 the Council asked the Speaker of the House to arrange for the Bill to be withdrawn. [19] Since then there has been litigation which has stalled the negotiations with the Crown over the transfer of the land. As well as the claims represented by this proceeding and the High Court decision referred to above, 3 in an earlier proceeding the Waitara Leaseholders' Association Incorporated brought a proceeding contending that the Council's 30 March 2004 resolution was unlawful. The Association succeeded in the High Court 4 but this decision was overturned by the Court of Appeal 5 and an application for leave to appeal to the Supreme Court was dismissed. 6The pleading[20] An amended statement of claim dated 21 September 2009 contains the plaintiff's current pleading. There is one cause of action: negligent misstatement.3 At para [3].4 Waitara Leaseholders Association Inc v New Plymouth District Council HC New Plymouth CIV 2004-443-162, 4 November 2005.5 New Plymouth District Council v Waitara Leaseholders Association Inc [2007] NZCA 80.6 Waitara Leaseholders Association Inc v New Plymouth District Council [2007] NZSC 44.The pleading is as follows: a) the Plaintiff (Mr Hunt) was a joint leaseholder of the property with his brother, but after receiving the January 1994 letter from the Council he decided to purchase his brother's half share so that "he would own it outright and upgrade the property in readiness for the opportunity to freehold". The title was transferred into Mr Hunt's name on 15 February 1996 and after that he undertook extension renovations "over several years" at an approximate cost of $60,000. b) The Council owed the leaseholders a duty when publishing reports to them to accurately represent the likelihood of the Council being able to freehold the leasehold land. The January 1994 and February 1997 letters were inaccurate. The Council breached the duty of care it owed because of the inaccuracies (particulars of the inaccuracies in respect of each letter are set out). c) Through the January 1994 and the February 1997 letters the Council "created a reasonable belief in [Mr Hunt], who as a lay person understood the report to be a commitment by [the Council] upon which [he] could rely, that [he] would be able to freehold their property". The Council knew or was reckless if it did not know that "there was no chance of obtaining the empowering legislation that it required before it could freehold [the land]". If the Council had reported accurately it would have advised Mr Hunt in 1994 that the freehold of the land "would not be available" to him or it "would have provided [the leaseholders] with accurate information from which a reasonable person would have concluded that the freehold... would not be available". d) "[I]n the belief that he had a real chance of purchasing the freehold title to his leasehold land [Mr Hunt] ... made different decisions to [that] which he would have made had he received accurate reports from the [Council] as to the chance of his obtaining the freeholdtitle...". Mr Hunt "suffered damage due to the loss of value of his leasehold land" and by undertaking the renovations on the property referred to above. An enquiry as to the loss of value in the property is sought together with damages of $60,000. [21] During the hearing before me, and in response to concerns expressed by the Council about the inadequacies of the pleading, a memorandum was filed on behalf of Mr Hunt. The memorandum advised that the nature of the damage alleged to have been suffered by Mr Hunt was "economic loss being diminution in the value of the property once that misstatement became known to potential purchasers (ie. On, or about 12th August 2003)". It further advised that an enquiry as to loss was sought because it is anticipated that the Court will be faced with "a raft of properties to value" and this could be "dealt with by the experts in one convenient hearing".Duty[22] The Council submits that it did not owe Mr Hunt a duty of care of the kind alleged. [23] The amended statement of claim alleges a cause of action for negligent misstatement causing financial loss. The duty of care is alleged to be a duty owed by the Council to the leaseholders when publishing reports to them to accurately represent the likelihood of the Council being able to freehold the leasehold land. The duty of care is alleged to have been breached because the Council created a reasonable belief that leaseholders would be able to freehold their property when the accurate position was that freeholding would not be available. As explained by counsel for Mr Hunt, the Council was saying that there was a realistic chance of freeholding when they knew or ought to have known that there was not. It is alleged that Mr Hunt relied on the statements and suffered loss as a result. [24] In some cases, the existence or ambit of a duty of care is not an issue because it is well established that a duty of the kind alleged exists. Traditionally, for policy reasons, the courts did not recognise a duty of care for financial loss caused by negligent words. That changed with Hedley Byrne & Co Ltd v Heller & PartnersLtd,7 but still not every negligent misstatement causing financial loss gives rise to a duty of care. Where the duty of care alleged is not one that is already recognised by case law as existing, the New Zealand courts adopt the two-stage approach of considering "proximity" and policy, with the overall question being whether it is just and reasonable to impose a duty of care. 8 This approach applies to negligent misstatements causing financial loss as with other situations where duty of care is alleged. 9[25] In considering proximity the courts are considering whether there is a sufficiently close relationship between the plaintiff and the defendant so as to justify a duty of care being imposed. 10 In negligent misstatement cases, of particular relevance are the nature of the relationship between the plaintiff and the defendant and whether there is foreseeable and reasonable reliance by the plaintiff on what the defendant has said. 11 In considering policy, the courts consider the effect of recognising a duty on other legal duties and on society more generally. 12[26] Here counsel for Mr Hunt emphasises that the relationship between the Council and the leaseholders was one of landlord/tenant. He submits that the letters were landlord/tenant communications with the leaseholders being the named addressees. He submits that the letters were written by the Mayor to add credibility to what was said. He submits that in making the statements in January 1994 and February 1997 the Council knew and intended that the leaseholders would rely upon them. [27] The Council on the other hand emphasises the public law responsibilities of the Council and the need for it to communicate to those affected by its policy decisions for the purposes of democratic participation and accountability. The Council submits that in providing information about its policy decisions, the implementation of which was obviously uncertain (the Bill might not be enacted and7 [1964] AC 465 (HL).8 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [78].9 Attorney-General v Carter [2003] 2 NZLR 160.10 Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Thomson Reuters, Wellington, 2009) ("Todd") at [5.2.02].11 Todd at [5.8].12 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA) at [58].Council policy might change) any reliance on the statements was not reasonable and the Council cannot be taken to have assumed responsibility for that reliance. [28] In my view, both the business relationship the Council had as landlord and its public law responsibilities are relevant in considering whether a duty of care ought to be imposed. The January 1994 letter was sent to a particular class of the public: the leaseholders. The Council was writing to the leaseholders because it wanted to correct what it viewed to be misleading media reports. So far as there is evidence at this stage of those media reports, the media were reporting Te Atiawa concerns about the Council's plan to allow freeholding and its intention to seek the return of the land to it. In seeking to correct the media reports the Council advised the leaseholders that Treaty of Waitangi obligations were the Government's responsibility and that the Minister's view was that Te Atiawa had no claim against the land because it was private land. The letter advised the leaseholders that a joint approach was to be made to the Minister under which the rights of the leaseholders "should be preserved absolutely" and "ensuring" that any leaseholders who wished to obtain the freehold "should be allowed to do so". [29] This information was important to the leaseholders and the Council knew that. The issue of possible freeholding had been around for some years. The decision of the Council to promote the legislation which would enable freeholding to occur came after a petition from leaseholders seeking freeholding. The Council put time and effort into how it might be able to achieve freeholding. Te Atiawa's claims (as reported in the media) raised the possibility of a change in landlord and opposition to the Council's intention to allow leaseholders to obtain the freehold. The January 1994 letter refers to "a lot of concern", "the rights of Waitara citizens [being] of the utmost importance" and the "need" for the leaseholders to have "up- to-date, accurate information". [30] Given its importance to leaseholders, the Council must have known that leaseholders would be likely to read the January 1994 letter. And given the Council's reference to misleading media reports and its statement that it wanted the leaseholders to have accurate information, the Council must have known that leaseholders would be likely to consider the letter to accurately state the position.The letter reported on matters that the Council had discussed with the Minister and with the Tribal Council. Those were matters about which the Council had knowledge and the leaseholders did not. For these reasons, it was foreseeable by the Council that leaseholders would factor in the information provided by the Council in making decisions about the land. [31] Similar points apply to the February 1997 letter. It was sent to the leaseholders, who formed a particular class of the public. The Council knew that the status of the steps being pursued to achieve freeholding was important to the leaseholders. The letter was advising the leaseholders on the current position. That position concerned matters about which the Council had knowledge and the leaseholders did not. [32] These factors all point in favour of a duty of care. There are, however, some factors that point against a duty of care. Although the Council was the landlord, it is not suggested that there were any relevant terms of the lease concerning whether the Council was to provide information about its intentions regarding the land and/or opportunities for leaseholders to obtain the freehold. If the Council were merely a landlord without also having the Council's public law responsibilities and accountability, it presumably need not have advised the leaseholders about its intentions and actions to seek to give effect to those intentions. Further, the January 1994 letter did not say that the Council was providing the information in its capacity as landlord. It said that the Council was doing so because "[t]he rights of Waitara citizens are of the utmost importance to Council. We send this letter, because you need to have up-to-date, accurate information, from your Council". That is consistent with the Council wishing to keep its ratepayers informed on a matter affecting them. Similarly the February 1997 letter can be seen as a communication from the Council concerned to inform those affected by its actions. [33] It is also not clear that the Council could be taken to have known that some leaseholders (or Mr Hunt specifically) would make financial decisions about the land in reliance on the information in the letters and without further inquiry. Neither letter was written in response to a letter from Mr Hunt advising the Council that he wished to spend money on the property and he would only do so if the Counciladvised that the Council was still pursuing the enactment of the Bill or that Maori claimants would not prevent the enactment of the Bill. While leaseholders were not a party to the discussions with the Minister or the Tribal Council, leaseholders could have sought their own legal advice about whether the Council land could be the subject of claims by Maori. Also, leaseholders could have contacted the Tribal Council representative whose comments were the subject of the 19 January 2005 article in the local newspaper. [34] The Council places emphasis on the uncertainty that freeholding would occur. Pursuing the Bill to enable freeholding was the Council's policy at that time, but policy decisions of this kind can change for reasons including changes in Council personnel and changing public sentiments over time. Here the policy required the Bill to be enacted which in turn required Government support. Although the January 1994 letter was optimistic (referring to the Government wanting consultation and discussion with the Tribal Council and that a joint approach with the Tribal Council had been agreed) there was nothing in the letter to indicate that Government support was guaranteed. As stated in the January 1994 letter, freeholding was also dependent on negotiations with the Crown. The February 1997 letter referred to the "complexities" and said that "[t]he final outcome is possibly outside the Council's control". [35] In these circumstances I agree with the Council's submission that it could not have foreseen that leaseholders would make decisions on the basis that freeholding would definitely occur. Mr Hunt accepts this in that he does not put the case on the basis that the inaccuracy was in representing that freeholding would definitely occur. Rather it is said that there is a difference between some chance of freeholding occurring (as represented by the Council) and no chance (which Mr Hunt says was in fact the position). Even so, whether it is reasonable to rely on a representation of some chance of freeholding occurring would depend partly on the prospects of the chance as represented. For example, if the chance was low then it would not be reasonable for a leaseholder to make decisions on the basis that freeholding was likely. Mr Hunt pleads that the representation was of a "real chance" and it created a "reasonable belief" that he would be able to freehold. However the chance was dependent partly on matters outside the Council's or the leaseholders control. Inthose circumstances it would not be reasonable for Mr Hunt to have made financial decisions on the basis that the Council was assuming responsibility for financial loss suffered by him (or other leaseholders) if freeholding did not occur. Rather, because there was no certainty of freeholding, Mr Hunt should be taken as assuming the risk if it did not occur. [36] There are also policy considerations that point against a duty of care. The submissions for Mr Hunt did not address these policy issues. This was so even though it was the reason why the High Court Judge said in the earlier litigation:13 "I consider that the wider policy considerations tend against the existence of a duty of care such as the plaintiffs allege in this case ... I would if necessary be prepare to rule accordingly". [37] The Council submits that imposing a duty of care would be inconsistent with the scheme of the Local Government Act 2002 because it would hinder local authorities from making decisions in accordance with the current interests of its relevant communities. It is submitted that this would occur because a Council might be concerned not to alter an earlier policy decision because of concern about a damages claim. In my view this point would probably be decisive against there being any duty of care, if the alleged duty of care required the Council to hold to a policy decision communicated to a class of its ratepayers affected by the policy decision. But that is not what is alleged. [38] It is alleged that the Council communicated the facts about the prospects of freeholding inaccurately. It is alleged that it did so when also stating that it was making the communication because it wanted the affected persons to have accurate information, and in circumstances where the Council ought to have known that the affected persons would rely on what it said (subject to the discussion above). Here it might be said that the communication of the factual position was an operational matter (albeit that the factual position was discussing the Council's then policy). It might also be argued that the Council should be held accountable, in the interests of providing incentives for the Council to take care in its communications and13 Arms & Ors at [230].providing an effective remedy for loss suffered by persons who rely on inaccurate communications. [39] The Council's response to this point is to submit that a duty of care is not required for accountability because there are existing and adequate accountability mechanisms: political accountability (via Council meetings, media scrutiny and elections) and public law accountability (via information requests, complaints to the Ombudsman and judicial review). This response has some force in my view (although these accountability mechanisms might also ensure that policy decisions are made for relevant and appropriate reasons and not because of potential damages claims). [40] Overall my assessment at this stage, on the evidence before me and the submissions I have received, is that a duty of care is unlikely to be established. That is because the factors that point against a duty of care are stronger than those that point in favour of a duty of care. I am particularly doubtful that it would be just and reasonable to impose a duty of care on the Council in respect of financial loss suffered by a leaseholder who has made decisions on the basis of a representation as to a "chance" of freeholding, which by definition means that there was never any certainty that freeholding would occur. [41] That raises the question of whether further evidence at trial might alter my assessment. I was left unclear from the submissions for Mr Hunt what facts material to whether a duty of care should be imposed needed to be considered in the context of a substantive hearing. Perhaps a full examination of the facts that led to the January 1994 letter being sent would be helpful (ie what misleading reports were there, why did the Council see them as misleading, did the Council intend to say that a joint approach had been agreed with the Tribal Council, why did it say that when the Tribal Council had a seemingly different view and what did it intend to achieve by sending the letter). [42] For reasons which I will come to, it is not necessary for me to decide whether it would be appropriate to grant summary judgment to the defendant or to strike out the proceedings on this point and so in the end I leave it open.Misstatement[43] The Council initially submitted that the January 1994 and February 1997 letters contained no misstatement. At the hearing the Council accepted for the purposes of the applications before me that it was arguable that the information it provided in the January 1994 letter about the state of its discussions with Te Atiawa were incorrect and provided negligently. This contrasts with the position in the earlier High Court proceeding where the Judge concluded that the negligent misstatement cause of action could not succeed in light of the concession made by counsel for the plaintiff in that proceeding (a concession made prior to discovery) that the letters were accurate at the time they were written. 14 In light of the Council's position in relation to the January 1994 letter I do not need to consider this issue further.Loss[44] The Council submit that no relevant loss is pleaded. [45] The statement of claim as first filed pleaded that, if the Council's decision to pursue the freeholding option had not been reversed, the land would have been worth more. It claimed the increase in value that Mr Hunt had been deprived of. The amended statement of claim pleads that "in the belief that he had a real chance of purchasing the freehold title" Mr Hunt "made different decisions to [that] which he would have made had he received accurate" information from the Council. The claim is for "the loss of value of his leasehold land", as to which an enquiry is sought. There is also a claim for damages of $60,000 being the expenditure on the improvements. [46] Compensatory damages are intended to put a plaintiff in the position he or she would have been in if the defendant's "wrong" had not been committed. Where the defendant has breached a contract the wrong is the failure to perform the contract. In such a case, compensatory damages are intended to put the plaintiff in14 Arms & Ors at [221] and [231].the position he or she would have been in had the contract been performed. They compensate for the expectation of the bargain (ie expectation losses). In a tort claim for negligent misstatement, as here, the wrong is not that the defendant has said something that will not now occur, but that the defendant did not state the position accurately at the time. So compensatory damages are to put the plaintiff in the position he or should would have been if the position had been stated accurately. [47] The statement of claim as originally pleaded was a claim for expectation losses – that is, the loss in value of the land because the Council's freeholding policy was reversed. The amended statement of claim now seeks to tie back the loss to the harm from the inaccuracy rather than from the Council not adhering to what it promised. That is because it pleads that Mr Hunt made different decisions than he would have made if the information was accurate. That could form the basis of tort compensatory damages if those different decisions caused loss. [48] There is however no pleading, nor supporting evidence, that the different decisions made did cause loss. I agree with the Council's submission that expenditure per se (here purchasing the half share and carrying out the renovations) is not the same as loss. Mr Hunt now has a 100% share of a property with improvements. That has a value that may or may not be worth more than what he paid for the half share he purchased and for the improvements based on the real chance of freeholding becoming available. [49] It was in response to this point that the memorandum (refer [21] above) was filed during the hearing. As clarified by that memorandum, and as further explained at the hearing, the claim is that before August 2003 (when the Council changed its decision about pursuing freeholding) Mr Hunt had a property which had a market value at a level that factored in the freeholding prospects. Counsel for Mr Hunt says that after August 2003 the market value dropped. (He points to some general evidence that indicates this.) He says that Mr Hunt has suffered loss because he cannot now sell the property for the understanding he had of the property's value when he purchased the half-share and carried out the improvements.[50] Counsel for Mr Hunt submits that this is a claim for economic loss like the kind of loss suffered in Invercargill City Council v Hamlin.15 That case involved a claim by the purchaser of a property on which a house was built with defective foundations. The Council was sued for the negligence of the building inspector. The claim was for the cost of the repairs. The claim was successful in the High Court. The issues on appeal in the Court of Appeal and then the Privy Council were whether the Council owed a duty of care to the plaintiff for the actions of the building inspector and whether the claim was time-barred. [51] In considering the time bar point, Lord Lloyd of Berwick (delivering the judgment for their Lordships) said: 16Once it is appreciated that the loss in respect of which the plaintiff in the present case is suing is loss to the pocket, and not for physical damage to the house or foundations, then most, if not all the difficulties surrounding the limitation question fall away. The plaintiff's loss occurs when the market value of the house depreciated by reason of the defective foundations, and not before. If he resells the house at full value before the defect is discovered, he has suffered no loss. Thus in the common case the occurrence of the loss and the discovery of the loss will coincide. (emphasis added)[52] I understand counsel for Mr Hunt to rely on the italicised parts of this passage. However that statement does not mean that a loss of market value following discovery of negligence is always the measure of a plaintiff's loss when the claim is one for financial loss. In a case like Hamlin the wrong is the approval of defective foundations. If the negligence had not occurred the house would have had proper foundations and the purchaser would have had a house with a market value that reflected that. To put the plaintiff in the position he would have been in had the negligence not occurred he was entitled to the cost of the repairs (once repaired he would again have a house with a market value reflecting a house with proper foundations) or, alternatively (and depending partly on the cost of the repairs), for the diminution in market value because of the inadequate foundations. This is a traditional tort compensation case – the damages restore the plaintiff to the position he would have been in had the negligence not occurred.15 [1996] 1 NZLR 513.16 At 526.[53] In the present case the wrong was in stating that there was a prospect of freeholding when there was not. If the wrong had not occurred then the property would have had the value that it now has. It does not matter that Mr Hunt says that he would not have purchased the house at all or carried out the work. Mr Hunt could only recover if he paid more for the property than he would have if the negligence had not occurred, if the improvements are worth less than he spent on them because the prospect of freeholding has gone or (possibly) if he can show that he would not have spent the money at all had the correct information been supplied and that he is now worse off as a result. Otherwise he is seeking to obtain his expectation losses – that is what he thought the property would be worth if the prospects of freeholding were as the Council had stated them to be in January 1994 and February 1997 (to the extent, if any, that there was any expenditure in reliance on the February 1997 letter). [54] I consider that the appropriate course in respect of this defect in the plaintiff's claim is to strike out the pleading. That is because I consider that the defect is in the pleading (ie as pleaded there is no relevant loss). It is open to me to grant summary judgment in favour of the plaintiff because no relevant evidence of loss has been pointed to either and the plaintiff has had plenty of opportunity to and ought to have put forward his best case.17 However, plaintiff's counsel has pleaded and presented the case on an incorrect view of what is recoverable. It is not beyond the bounds of possibility that there is evidence that might support a claim for recoverable loss. If there is such evidence, this makes the next ground (Limitation Act) relied on by the Council relevant.Limitation Act[55] The Council submits that the claim is time-barred by the Limitation Act 1950. [56] Subject to some exceptions, a claim in tort must be brought within 6 years from the date the cause of action accrues. 18 It is accepted for Mr Hunt that the17 Johnson v Watson [2003] 1 NZLR 626 at 634.18 Section 4 of the Limitation Act 1950.negligent misstatement cause of action accrued at the latest on 12 August 2003 (when the Council resolved to facilitate the return of the land to the tangata whenua). As the amended statement of claim was filed more than 6 years after that date it would be time-barred if it pleaded a new cause of action. A cause of action accrues when "every fact exists which it would be necessary for the plaintiff to prove in order to support its right to the judgment of the Court". 19 When considering whether a pleaded cause of action is new, it is question of degree whether the pleading is essentially different from that which was pleaded earlier or whether the amendments merely alter the particulars with the essence of the claim remaining the same. 20 The concern is with changes of which no fair warning was given from the earlier pleading such that it would be unfair to put the defendant in peril of a judgment founded on the new matter. 21[57] Mr Hunt's original statement of claim was filed on 27 July 2006. It alleged three causes of action: breach of s 9 of the Fair Trading Act; promissory estoppel; and negligent misstatement. The negligent misstatement cause of action was pleaded as follows: a) the Council owed Mr Hunt a duty of care because: i) there was sufficient proximity between the Council and Mr Hunt for a duty of care to arise because the Council was carrying out a business (etc) activity in leasing out land and Mr Hunt was a lessee; ii) it was reasonably foreseeable that loss might be suffered by Mr Hunt if the Council failed to take adequate care;19 Williams v Attorney-General [1990] 1 NZLR 646 at 678; Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC) at 526.20 Smith v Wilkins and Davies Construction Company Ltd [1958] NZLR 958 at 961; cited in Chilcott v Goss [1995] 1 NZLR 263 at 273.21 Harris v Raggatt [1965] VR 779 at 786 cited in Gabites v Australasian T & G Mutual Life Assurance Society [1968] NZLR 1145 at 1151 and Chilcott at 273.iii) the Council assumed a duty of care to Mr Hunt by passing the resolution in 1989 and publicising it in the local newspapers, initiating in 1992 the Bill which would free the land from their existing trusts, and sending the January 1994 and February 1997 letters to the lessees including Mr Hunt; b) the Council breached its duty of care because: i) the Council negligently promised or created a reasonable belief in Mr Hunt that he would be given the right or option to freehold the land; ii) the Council negligently did not give the qualification that it was subject to a future Council not reversing the freeholding policy and implied that the Council would not change its mind; iii) at all times the Council had the power to allow or procure freeholding of the land; iv) in August 2003 and March 2004 the Council reversed its freeholding policy; c) Mr Hunt suffered loss: i) the land increased in value by a lesser amount than land which is freehold, the land increased less that it would have if the Council had not reversed its policy, and Mr Hunt has been deprived of the increase in value that has occurred in the Council's interest in the land "since the time that freeholding ought to have been allowed (on or before 12 August 2003)"; ii) Mr Hunt purchased his brother's half share of the lease and spent $60,000 in 1996 and 1997 on improvements and the increase in value in the lease estate from the improvements hasbeen less than it would have been if the freeholding policy had not been reversed; d) an enquiry into the loss suffered was sought. [58] The Council submits that the amended statement of claim pleads a new cause of action because: a) the amended statement of claim relies on different misstatements in that it refers to "a political possibility" or "real chance" of freeholding; b) the statement of claim only complained that no qualification was given that the policy would change whereas that is no longer the case; c) the statement of claim sought to recover the lost benefit of the increase in the value of freehold land as a result of the reversal of the policy and this loss is not pleaded at all in the amended statement of claim. [59] Counsel for Mr Hunt submits that the amended statement of claim does not introduce a new cause of action. I agree. Some of the particulars have changed, but the essence of the cause of action remains. 22[60] Both are claims for negligent misstatement in respect of what was said about the prospects of freeholding in the January 1994 and February 1997 letters. Although the statement of claim referred to a "promise" of freeholding, it went on to also plead "or created a reasonable belief" of freeholding. In the amended statement of claim the plaintiff no longer relies on a promise of freeholding, but the pleading that the Council created a reasonable belief remains.22 Dorman v J W Ellis & Co [1962] 2 WLR 250 provides a useful example of where amendments to a negligence claim were considered to amend particulars rather than to amount to a new claim.[61] A difference in the two pleadings is that in the statement of claim it is alleged that the negligence was in the Council not qualifying what was said by referring to the possibility of a future Council reversing the policy and implying that the Council would not change its mind. In the amended statement of claim the negligence is in inaccurately stating the prospects in that the letters created a reasonable belief of freeholding when there was no chance of that occurring. However I consider that this alters the particulars of the alleged negligence without it being a materially different claim. In both pleadings the issue was what was said about the prospects of freeholding and what ought to have been said if the Council were reporting the position accurately. In both the same documents would be discoverable and the relevant evidence would be substantially similar. From the time the statement of claim was issued the Council was on notice that the accuracy of what was said about the prospects of freeholding was in issue and so the amendment does not create unfair surprise to the Council. [62] A further difference is that the amended statement of claim pleads that Mr Hunt made decisions (buying the property and making improvements) that he would not have made had the Council stated the position accurately. But again I consider that this does not make the claim a new one. As discussed above the loss claimed remains (although it is not pleaded clearly) the loss of value in the property. In both the statement of claim and the amended statement of claim the comparison is between the value of the land if the prospects of freeholding had been as represented, and the value of the land as leasehold. With both pleadings the same documents would be discoverable and the relevant evidence would be substantially similar. [63] However, both the statement of claim and the amended statement of claim plead expectation losses which (as discussed above) are not recoverable in a case of this kind. If the claim were to be amended to plead that the loss was in paying too much for the property in light of the prospects of freeholding as they actually were compared with as they were represented, or in expenditure on improvements that were less valuable given the accurate prospects of freeholding as compared with the prospects as represented, or in some other way Mr Hunt was worse off because of his expenditure in reliance on the prospects of freeholding as represented, then such claim would face another difficulty raised by the Council.[64] The Council submits that a claim for this kind of loss would be time-barred. It submits that the time-bar would apply to the purchase of the property in 1996 and for all renovations carried out before 27 July 2000 (ie more than six years before the statement of claim was filed). It says that this is because the cause of action is made up of the negligent misstatements (alleged to have occurred principally in January 1994 and confirmed in February 1997), reliance on those statements (in purchasing the property and carrying out the improvements) and damages (the expenditure in reliance on the statements). [65] In a tort claim for negligent misstatement the cause of action accrues from the date that the damage occurs. This makes it necessary to determine when the damage occurred here. The choice is between when the expenditure in reliance on the statements was made or at a later point in time when it becomes known that the expenditure was too great. Relying on Hamlin, counsel for Mr Hunt submits that the loss is suffered when it becomes known that freeholding will not occur (August 2003) which causes the market value of the property to fall. [66] The rationale in Hamlin was that "in the case of a latent defect in a building the element of loss or damage which is necessary to support a claim for economic loss in tort does not exist so long as the market value of the house is unaffected". 23In Murray v Morel & Co Ltd24 the Supreme Court held that there was no general principle that a cause of action did not accrue for limitation purposes until the elements of the cause of action (including damage) were reasonably discoverable by the plaintiff. In a case like Hamlin discoverability of the defect affects when the damage occurs. Knowledge of the defect therefore forms part of the cause of action itself. [67] The Privy Council in Hamlin said that they "repeat that their advice on the limitation point is confined to the problem created by latent defects in buildings". 25Because Hamlin is confined to latent defects in buildings and there is no general principle of reasonable discoverability in relation to limitation periods, the question23 At 526.24 [2007] NZSC 27, [2007] 3 NZLR 721.25 At 526.here remains when did the damage occur. As commentators have said, and is apparent from the case law, "[d]etermination of exactly when financial damage happens may not be easy".26 Todd summarises the position this way: 27There is actual loss where a plaintiff incurs an existing liability or suffers an existing diminution in value of land or personal property or a chose in action. A cause of action accrues at that date even though there has been no demand on the liability, or the loss has not crystallised, or there has been no out-of-pocket expenditure. There is only a potential loss where a right or liability is subject to a contingency which may or may not occur. A cause of action accrues only when it does occur and actual damage is suffered.[68] In this case loss is not dependent on a contingency (as in Hamlin where there would be no loss unless and until the defects in the foundations become apparent). The loss here was in paying too much for the half share of the property or the improvements (or in some other way being worse off because of the expenditure), because the expenditure was made on the basis of the misstatement about the freeholding prospects. That loss occurred at the time the expenditure was made and was not dependent on any contingency. As discussed above, it differs from Hamlinbecause the "wrong" there was in not getting a house with proper foundations (and so the plaintiff was entitled to a house with proper foundations) whereas here Mr Hunt was being told something which was inaccurate (and so he was entitled to be put in the position he would have been if there had been no inaccuracy – ie. to have incurred less expenditure in 1996/1997). [69] I therefore consider that if the claim were to be amended to plead loss of a recoverable kind the claim is likely to be statute barred. I do not, however, strike out the claim or grant summary judgment to the Council on this basis given that this discussion relates to loss which is not pleaded.Result[70] An order is made striking out the amended statement of claim. It is made on26 Todd at [26.5.05]; Andrew McGee Limitation Periods (5th ed, Sweet & Maxwell, London, 2006) at [5.007].27 Todd at [26.5.05].the basis that it does not disclose a cause of action because it does not plead loss of a kind that is recoverable for the claim that is made. The claim appears to me to face other difficulties, which I have discussed but have not found it necessary to determine the present application on.Costs[71] The council seeks category 3 costs whereas Mr Hunt's counsel says category 2 is appropriate. I consider that category 3 is appropriate. The case has significance requiring counsel of special skill and experience because of the test nature of this proceeding (in that it will determine the other similar claims made against the Council). It is a common ground between the parties that Band B should apply to this application. The Council is therefore entitled to costs on a category 3B basis. Mallon JSolicitors: D King, DKL Law, New Plymouth, email:david@denniskinglaw.com J Shackleton, Simpson Grierson, Wellington, email: john.shackleton@simpsongrierson.com