S.T.L. LINEHAUL LTD V AB EQUIPMENT LTD HC AK CIV 2006-404-007292

S.T.L. LINEHAUL LTD V AB EQUIPMENT LTD HC AK CIV 2006-404-007292 8 June 2007IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2006-404-007292UNDER the Carriage of Goods Act 1979 BETWEEN S.T.L. LINEHAUL LIMITED Appellant AND AB EQUIPMENT LIMITED Respondent Hearing: 26 April 2007 Appearances: R J Hart for the Appellant V F Patterson for the Respondent Judgment: 8 June 2007 at 4:00pm(RESERVED) JUDGMENT OF ANDREWS JThis judgment was delivered by Justice Andrews on8 June 2007 at 4.00pmpursuant to r 540(4) of the High Court Rules. Registrar/Deputy Registrar Date: Solicitors: Jones Fee, PO Box 1801 Auckland (for the Appellant)Kennedys, PO Box 3158 Auckland (for the Respondent)Introduction[1] The respondent, AB Equipment Limited ("AB") is the owner of two forklifts, that were transported by the appellant, S.T.L. Linehaul Limited ("S.T.L") from Auckland to Wellington on 21 January 2004. The forklifts were damaged during the journey, when water penetrated the electrical circuit boards of each of them. AB claimed the cost of repair ($21,741.80) from S.T.L. S.T.L. disputed liability. [2] Under s 19(1) of the Carriage of Goods Act 1979 ("the Act") AB, if it wished to pursue the claim, was required to issue court proceedings within one year of the date of carriage. AB failed to issue proceedings within that time, then sought leave to do so under s 19(4). In a ruling given on 1 November 2006 in the District Court at Auckland, Judge P F Barber granted leave. The issue in this appeal is whether he was correct in granting leave.Background[3] On 5 October 1999 AB and S.T.L. entered into a written "Carrier Contract" under which all carriage of AB's equipment by S.T.L. would be at "declared risk value". AB and S.T.L. also agreed that S.T.L. would be liable to AB for any loss or damage to AB's equipment up to the sum of $50,000 per unit of equipment. This meant that S.T.L. could not rely on the $1,500 per unit maximum under s 15 of the Act. Further, S.T.L. undertook to maintain adequate insurance to cover any claims made by AB. [4] The contract included provision for a personal guarantee. This provision was not completed or signed. S.T.L.'s Managing Director, Mr Pearson, (who signed the contract on behalf of S.T.L.) printed and initialled the following words:My past performance in carrying your goods speaks for itself. You have my company guarantee.[5] It is clear from the affidavit evidence before the District Court Judge that AB and S.T.L. dispute the terms of any agreement between them as to preparation offorklifts for carriage. S.T.L.'s evidence was that it had been agreed between them that plastic shrink-wrapping would be used to protect any water-sensitive components. [6] AB's evidence was that it was its practice to shrink-wrap cameras attached to the forklifts, but not other components. Its evidence was that it would be virtually impossible to shrink-wrap all water-sensitive components. The Chief Executive of AB, Mr Antunovich, said in evidence that it was S.T.L.'s practice to carry the forklifts on a "curtain-sider" truck, or under a heavy-duty tarpaulin. [7] The cameras were shrink-wrapped, but other components were not. The forklifts were carried on a flatbed truck, covered with lightweight tarpaulins. There was torrential rain and flooding in the lower North Island at the time of carriage. When the forklifts arrived in Wellington the tarpaulins had come loose and water had penetrated and, as noted earlier, damaged the electric circuit boards. [8] AB claimed the costs of repair from S.T.L., who referred the claim to its insurers. The insurers declined the claim in June 2004, but AB was not advised of this at the time. AB wrote to S.T.L. in November 2004 (but to the wrong address) and again in December 2004 (to the correct address) asking why its claim had not been met. [9] On 8 February 2005 S.T.L. advised AB that its insurers had declined the claim. This advice was, of course, some 17 days after the one-year time limit to issue proceedings had expired. There was then correspondence between AB and S.T.L.'s insurers, discussions between AB and S.T.L., and further correspondence with the insurers. The insurers continued to decline liability on the grounds that AB had not properly packed the forklifts. The final event was a meeting between AB and S.T.L. in early January 2006. [10] AB issued its proceedings on 25 July 2006. As S.T.L. refused to consent to the proceeding being brought out of time, AB also made an interlocutory application for leave. The grounds for leave were said to be that:a) The delay in bringing the action was occasioned by mistake of fact and mistake of law; and b) It would be just and reasonable to allow AB leave to bring an action. [11] The mistake relied on by AB was its understanding that the contract between AB and S.T.L. included a guarantee from S.T.L. to pay for the damage, pursuant to the contract. [12] In his Ruling, at [34], Judge Barber held that:In my view, the delay in the issue of proceedings by [AB] was caused by mistakes of fact and law. The mistake of fact was that [AB] thought [S.T.L.] would pay for the damage pursuant to the written contract between the parties and that it had some sort of guarantee from the carrier to that effect no matter what. That seems to also be a mistake of law. Also, a mistake of law was [AB's] misapprehension that the claim would be governed solely by that contract and that the Act did not affect the loss due to the existence of the contract.The Judge held further, at [35], that:I think that [AB's] conduct at all material times has been reasonable even if a little naïve.Statutory provisions[13] The application for leave was brought pursuant to s 19(4) of the Act. Section 19(5) sets out the Court's jurisdiction to grant leave. Sections 19(4) and (5) are as follows:19 Limitation of actions (4) Where the carrier does not consent, application may be made to the Court, after notice to the carrier, for leave to bring the action at any time within 6 years after the relevant date referred to in subsection (1) or subsection (2) of this section. (5) On an application under subsection (4) of this section, the Court may, if it thinks it just to do so, grant leave accordingly, subject to such conditions (if any) as it thinks just to impose, where it considers that the delay in bringing the action was occasioned by mistake of fact or by mistake of any matter of law (other than the provisions of this section) or by any otherreasonable cause, and that the intended defendant was not materially prejudiced in his defence or otherwise by the delay.Appeal principles[14] Under s 19(5), the Court has discretion whether to grant leave to appeal. The appellant's appeal is therefore against the exercise of a discretion. To succeed, the appellant must establish that the Judge made an error of law, took into account irrelevant matters, failed to take into account relevant matters, or was plainly wrong. 1A Court on appeal will not interfere if it is simply a matter of giving different weight to the factors considered. 2Exercise of the Court's discretion to grant leave to file out of time[15] It became clear at the hearing that there was an issue between the parties as to the manner in which the Court's discretion was to be exercised. Counsel were not able to refer me to any High Court or Court of Appeal authority on s 19 of the Act. I was referred to two decisions from the District Court. [16] New Zealand Railways Corporation v Child Freighters Limited 3 is a judgment given by Judge P J Toomey in the District Court at Palmerston North. The learned Judge referred to the judgment of North J in Tett v Attorney-General 4, in relation to applications brought under the Limitation Act 1950. Judge Toomey held that the principles set out by North J applied (with a slight modification as a result of slightly different wording) to s 19(5) of the Carriage of Goods Act. [17] North J stated in Tett v Attorney-General, at 1067:An overriding requirement is that the Court is required to exercise a discretion and should not grant leave unless it thinks it is "just" to do so. It does not necessarily follow that an order will be made granting leave once the applicant has established one or other of the conditions to the exercise of the discretion.1 May v May (1982) 1 NZFLR 165, 169 (CA)2 AlexHarvey Industries Limited v CIR (2001) 15 PRNZ 361 (CA)3 New Zealand Railways Corporation v Child Freighters Limited (1985) 3 DCR 1194 Tett v Attorney-General [1957] NZLR 1063[18] In his judgment in Peter Baker Transport Limited v Pacifica Shipping (1985) Limited5 Judge C J Doherty stated, at [8]:It can be seen from s 19(5) that the plaintiff has a threshold in that it must satisfy the Court that the delay in bringing the action was occasioned by a mistake of fact or by a mistake of law or by any other reasonable cause and that the intended defendant was not materially prejudiced (emphasis as in original)[19] At [9], the learned Judge held:I find the threshold passed which leaves consideration of an exercise of discretion in favour of the plaintiff. The overriding consideration is whether or not the Court thinks it is just to grant leave.[20] In my view, the correct approach to an application under s 19(5) is that the applicant must first satisfy the Court as to the two "threshold" requirements: that is, as to mistake or other reasonable cause, and as to the absence of prejudice. If the threshold is met, the Court then considers whether it is just to grant leave. The Court has an overriding discretion whether to grant leave, but s 19(5) requires the two threshold requirements to be met first. [21] At [3] of his decision in respect of the application by AB, Judge Barber set out what he had to decide as being whether:• It would be just for this Court to grant leave; and• The delay in commencing the proceedings was occasioned by mistake of fact or law or any other reasonable cause; and• [S.T.L.] would bot be materially prejudiced in its defence or otherwise by the delay.[22] At [4] the Judge observed that:There is no dispute between the parties that the Court should only exercise its discretion if it is satisfied that both the second and third points above have been met by the applicant. It seems to me that all three points must be met.[23] At [31] the Judge said:5 Peter Baker Transport Limited v Pacifica Shipping (1985) Limited DC Christchurch MP3125/98, 18 May 1999I accept that the onus is on [AB] to show, on the balance of probabilities, that the delay was occasioned either by mistake of fact or law or by any other reasonable cause, and that [S.T.L.] is not materially prejudiced in its defence or otherwise by the delay. I also accept that an overriding requirement is that the Court must exercise discretion and should not grant leave unless it thinks it is just to do so. It does not necessarily follow that an order should be made granting leave once the applicant/customer has established the conditions to the exercise of the discretion.[24] I cannot discern from the paragraphs that I have quoted any error of law as to the Judge's understanding as to the manner in which he was required to exercise the discretion to grant leave.Mistake of fact or law or other reasonable causeMistakes relied on by AB[25] Mr Hart, on behalf of S.T.L., submitted that the Judge had erred in categorising the matters relied on by AB as mistakes of fact and law. He submitted that AB was effectively arguing that it had contracted out of the Act which, he submitted, was prevented by s 7 of the Act. [26] Section 7 is as follows:7 Contracting outThe parties to a contract of carriage are free to make their own terms in respect of any matter to which any of sections 10, and 18 to 27 of this Act apply; and, where they do so, the relevant section or sections shall, in relation to that matter, have effect subject to those express terms[27] I note that s 19 is one of the sections specified in s 7 as to which the parties to a contract of carriage are free to make their own terms. I do not accept, therefore, that even if AB's argument in the District Court was in effect one of "contracting out", that would have been fatal to its application for leave. [28] Mr Hart further submitted that AB's belief that its claim would be governed solely by the contract could only be characterised as a mistake as to the application of s 19. Such mistake is expressly excluded, by s 19(5), from being a mistake of lawupon which the Court may (if the other threshold condition is met) go on to consider whether it is just to grant leave. [29] It is clear from the Judge's Ruling that he accepted that there was a mistake of fact in that AB thought that S.T.L. would pay for the damage to the forklift pursuant to the contract. He further accepted that there was a mistake of law in AB's thinking that it had a guarantee from S.T.L. to that effect. I do not accept the appellant's submission that those mistakes could only be characterised as mistakes as to the application of s 19. I accept Ms Patterson's submission on behalf of AB, that AB was mistaken as to the effect (both as a matter of fact, and in law) of the words printed onto the contract and signed by the Chief Executive of S.T.L., and that this was not a mistake as to the effect of s 19.Reasonableness[30] Mr Harte then submitted that s 19(5) required that the mistake of fact or law be "objectively reasonable" and that AB's belief in respect of the "guarantee" was not objectively reasonable. He cited as particularly relevant the circumstances of insurers being involved and AB obtaining (or having the ability to obtain) its own legal advice. [31] Both counsel filed supplementary submissions on this point. Mr Hart pointed to the wording of s 19(5) and submitted that the words "mistake of fact" and "mistake of any matter of law" must be read ejusdem generis with the words "any other reasonable cause". That is, the mistakes must be "reasonable". [32] There being no relevant authority in respect of s 19(5) Mr Hart referred to authorities as to the meaning of "mistake" in similarly worded provisions of the Limitation Act 1950. [33] In Caldow v Wall & Anor 6 Woodhouse J was considering an application made under s 4(7) of the Limitation Act for leave to bring an action for damages for6 Caldow v Wall & Anor [1964] NZLR 65personal injuries after the expiry of the two-year time limit. Section 4(7) first sets out the two-year limit then continues (as relevant):4 Limitation of actions of contract and tort, and certain other actions (7) Provided that application may be made to the Court, for leave to bring such an action and the Court may, if it thinks it is just to do so, grant leave accordingly, where it considers that the delay in bringing the action was occasioned by mistake of fact or mistake of any matter of law other than the provisions of this subsection or by any other reasonable cause or that the intended defendant was not materially prejudiced in his defence or otherwise by the delay.]The similarity to s 19(5) is obvious. [34] In the course of his judgment, Woodhouse J considered the meaning of the word "mistake". At page 67 His Honour said:"Mistake" as a concept does not carry any precise definition. Its operation is extended or restricted by its context.[35] Having found decisions under the Workers Compensation Act (that had been considered to give some guidance to the interpretation of "mistake" in the context of injuries) to be "less helpful" in the context of the Limitation Act, His Honour went on to say, at page 68:There would seem less reason for adopting a narrow view of the effect of s 4(7) of the Limitation Act which includes this additional overriding discretion in the Court to refuse the application. In addition, the context in which the word appears gives it a degree of qualification which would seem to provide ample safeguards. The word appears in the expression "mistake or any other reasonable cause", and clearly the explicit need for the reasonableness of "any other reasonable cause" reflects what is implicit in the concept of "mistake". In this regard, moreover, I think the mistake must not only appear to be reasonably based, but in itself provide a reasonable explanation for what has followed. Mistake in this sense cannot be equated with forgetfulness or ignorance. It must necessarily involve an erroneous conclusion following advertence to the subject matter; but if such a mistake appears to have some reasonable foundation, and also provides what in all the circumstances is sufficient explanation for the default which it is desired to excuse, I am unable to find anything in the section which should qualify its operation. As I have already mentioned, there is always the additional safeguard provided by the discretion to refuse the application if it has not been shown that it would be just to permit the application to proceed.[36] The reasoning of Woodhouse J is equally applicable to an application for a grant of leave under s 19(5). The claimed mistake must appear to be reasonably based, and it must in itself provide a reasonable explanation for what has followed. Mistake must necessarily involve an erroneous conclusion following advertence to the subject matter. However, if the mistake appears to have some reasonable foundation, and provides sufficient explanation for the failure to bring proceedings, no further qualification is required. [37] The test is no more than that there is "some reasonable foundation" and it provides "sufficient explanation" for the failure. If the appellant was submitting that the Court in this case was required to enquire further into the "reasonableness" of the mistake, then I do not accept that submission. As pointed out in Caldow v Wall there is the additional, overriding, requirement that the Court must be satisfied that it is just to grant leave. [38] In the present case, the Judge was satisfied that there was "some reasonable foundation" for AB's mistaken belief, albeit it was "a little naïve". In light of Mr Antunovich's evidence as to his reliance on the "guarantee" the Judge was, in my view, entitled to reach the view that AB had "adverted" to the guarantee, and reached an erroneous conclusion. There was, therefore, both a reasonable foundation for the mistake, and that mistake provided sufficient explanation for what followed.Any other reasonable cause[39] Both counsel made submissions as to whether there was "any other reasonable cause" for AB's delay in issuing proceedings. [40] It is not necessary to consider those submissions. The elements of this part of s 19(5) are disjunctive. As I have found that there as a reasonable foundation for AB's mistake, and that is provided sufficient explanation for what followed, I do not need to consider whether there was "any other reasonable cause".Prejudice to S.T.L.[41] S.T.L. argued in the District Court that it would be difficult for it to find witnesses – in particular a former employee of AB who was said to be aware of an agreement to shrink-wrap all components. S.T.L. had taken no steps to protect its position earlier, as it had not known that the claim was being pursued. [42] For its part, AB referred to the evidence of "long-standing" staff of there being no agreement to shrink-wrap all components, and argued that S.T.L. was aware from the outset that AB intended to pursue its claim. [43] The Judge did not accept as credible that S.T.L. or its insurer were in any way prejudiced by AB's failure to issue proceedings in time. Further, he held that if S.T.L. had failed to protect its position by not maintaining contact with witnesses, that could not be because it was unaware of AB's continued intention to pursue the claim. [44] On appeal, Mr Hart argued that S.T.L. was entitled to assume, from 21 January 2005, that a claim by AB was time-barred, and to act accordingly. He further argued that an awareness that AB was continuing to attempt to obtain compensation after 21 January 2005 was not relevant to the question of prejudice. [45] I have concluded that Mr Hart's submission is not sustainable and that, to the contrary, it is only during the period after expiry of the time limit that awareness of a potential claim is relevant to the question of prejudice. [46] In my view that is the proper construction of s 19 when it is seen in its context in the Act. It follows s 18, which provides that written notice of a claim must be given within 30 days of the carrier ceasing to have responsibility for the goods. There is no issue in the present case as to such notice being given. [47] Section 18(6) provides that if notice had not been given, an application may be made to the Court for leave to bring proceedings, notwithstanding the absence ofnotice. Section 18(7) is in almost identical terms to s 19(5) and requires that the Court be satisfied that: the intended defendant was not materially prejudiced in his defence or otherwise by the failure to give notice.[48] Further, if notice has been given, the claimant has the right to issue proceedings, at any time up to the expiry of the one-year time bar. As the claimant has the right to issue proceedings within that period it cannot, in my view, be said that a claimant has "delayed" if proceedings are issued (for example) in the final month rather than in the first month of the period. [49] It therefore follows that the "delay" to be considered by the Court pursuant to s 19(5) can only refer to the delay after the expiry of the time period. It is that delay that the Court must be satisfied has not materially prejudiced the defendant in his defence or otherwise. [50] I am supported in my conclusion by the judgment of the Court of Appeal inWilliam Cable Limited v Trainor7. The substantive issue on appeal was the construction of the word "delay" in s 4(7) of the Limitation Act. Section 4(7) has been set out at [33], above. [51] The appeal arose out of an application for leave to bring a personal injury claim after the expiry of the two-year limitation period. [52] On appeal, the opposing arguments were: a) That it referred to the entire period from accrual of the plaintiff's cause of action up to the date application was made for leave; and b) That it referred only to the period that had elapsed since the expiry of the limitation period. [53] The Court said, at page 346:7 William Cable Limited v Trainor [1957] NZLR 337 we think that the words in the proviso to subs (7) "the delay in bringing the action", read as they must be along with the whole subsection or in their full collocation, prima facie connote the period which has elapsed since the expiration of the time when the writ could have been issued as of right, or, in other words, should have been issued. In allowing the period of two years within which the action may be brought as of right, the Legislature indicates an intention that prejudice to the defendant which arises during that period through the loss of contact with a material witness or any other cause is not to be available to the defendant as a defence to the claim or a ground of relief from liability. In our view, the meaning which connotes the time which has elapsed since the limitation period expired is the meaning which best accords with the intention of the Legislature.[54] Accordingly, I am not persuaded that the Judge was in error in taking into account the continuing course of conduct between the parties, after the expiry of the one-year limitation period, in concluding that there would be no prejudice to S.T.L. if leave were granted.Overriding consideration: was it just to grant leave?[55] The final, and overriding, consideration was whether it was just to grant leave for AB to issue proceedings. The Judge held that it was in the interests of justice to override the statutory time limit and allow AB to issue proceedings. His conclusion, at [54] and [55] was as follows:[54] This is a situation where parties having had amicable business dealings for some years were relying on their insurers; and they were confident that the insurers would meet [AB's] claim at a reasonable quantum. There was continuing communication between the parties to a satisfactory degree in all the circumstances. [55] Overall, I consider that it is in the interests of justice to override the statutory time-bar and allow [AB] to issue proceedings. I consider [AB] had reasonable justification for the delay even though it was rather imprudent not to protect its position by issuing proceedings within time. [S.T.L.] and/or its insurers have contributed to this situation by not efficiently facing up to this claim in response to the reasonably frequent communications from [AB].[56] S.T.L. did not submit that the Judge erred in concluding that it was just to grant leave – its submissions were that he had erred in determining that the pre- conditions to the exercise of his discretion were met. As I have found that the Judgewas not in error with respect to the pre-conditions, it is not necessary to address the Judge's conclusion as to the overriding issue as to whether it was just to grant leave.Result[57] I conclude that in the exercise of his discretion, the Judge: a) Did not make any error of law; b) Took into account relevant considerations; c) Did not take into account irrelevant considerations; and d) Was not plainly wrong. [58] Accordingly, S.T.L.'s appeal is dismissed. [59] As noted in the Minute of Winkelmann J dated 5 December 2006, the parties are agreed that the appeal is category 2B for the purposes of costs. AB is therefore entitled to costs on a 2B basis, together with disbursements as fixed by the Registrar. _____________________________ Andrews J