IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE	
CIV-2017-441-70
[2019] NZHC 2643	

BETWEEN	NAPIER CITY COUNCIL
Plaintiff	
AND	LOCAL GOVERNMENT MUTUAL FUNDS TRUSTEE LIMITED
Defendant	

Hearing:	10 October 2019
Written submissions filed 10, 14 and 15 October 2019	
Appearances:	D H McLellan QC for Plaintiff M Ring QC for Defendant	
Judgment:	16 October 2019	

JUDGMENT 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 on 11 November 2019 in the Napier High Court. The defendant, Local Government Mutual 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 delivery of 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 the reasons for its refusal to allow the appeal against the High Court decision to strikeout

NAPIER CITY COUNCIL v LOCAL GOVERNMENT MUTUAL FUNDS TRUSTEE LIMITED [2019] NZHC
2643 [16 October 2019]

the proceedings.1 The result of the appeal had been conveyed to the parties on 3 September 2019 after the hearing on that date.2

[4]	A summary of the background is set out in the Court of Appeal reasons decision as follows:3

[6]	In 2013 the body corporate and individual freehold and leasehold interest holders in the Waterfront Apartment complex in Humber Street, Napier issued proceedings against the Council and a number of other defendants. The latter included the developer, principal contractor, architect and various subcontractors involved in the development of the complex.

[7]	The Waterfront plaintiffs’ claim against the Council was cast in relatively simple terms: that the Council owed each of the plaintiffs a duty to exercise reasonable skill and care in performing certain functions under the Building Act 2004 — issuing building consents, inspecting the building work, and issuing code compliance certificates. The claim then alleged that, in breach of those duties, the Council: (1) issued consents where there were not reasonable grounds to be satisfied that the proposed work would comply with the building code; (2) failed to ensure a sufficient inspection regime was undertaken; and (3) issued code compliance certificates when it did not have reasonable grounds to be satisfied that the building work complied with the building code. It was claimed that these breaches caused or contributed to a number of scheduled defects. These are set out in a schedule to the statement of claim. The defects alleged number 22 in all. Defects 1 to 14 concern water ingress. Defects 15 to 21 concern fire protection. Defect 22 concerns an alleged structural defect in a wall. In consequence the Waterfront plaintiffs claimed costs for remediation, consequential losses, and an additional sum by way of general damages.

[8]	In February 2019 the Waterfront proceedings were settled by agreement. The Council seeks indemnity for its contribution and costs from Riskpool.

[5]	The strikeout application turned on an interpretation of an exclusion clause in the insurance contract. On Riskpool’s interpretation of the exclusion clause in the insurance contract the Council would have been prevented from pursuing its substantive claim

[6]	The proceedings were issued in June 2017 in the High Court at Auckland but transferred to the Napier Registry to be heard at the same time as the proceedings

1	Napier City Council v Local Government Mutual Funds Trustee Ltd [2018] NZHC 2269. The matter 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 had been commenced in the Napier registry. The Waterfront proceedings were settled on terms recorded in a settlement agreement in February 2019. The time allocated for the hearing was shortened as a result.

[7]	Timetable directions in this matter were made in November 2018. It is common ground that neither party has complied with them. A brief case management minute4 in March 2019 records that both counsel had agreed that the fixture commencing 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 memorandum advising there was no opposition to the leave application).5

Principles

[8]	The principles applying to an application for adjournment are well known. The application is made under r 10.2 which provides:

10.2	Adjournment of trial

The court may, before or at the trial, if it is in the interests of justice, postpone or adjourn the trial for any time, to any place, and upon any terms it thinks just.

[9]	The interests of justice are the overriding considerations.6 That includes justice to both parties as well as other litigants. It also involves consideration of the ability of the 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 October 2019, although that possibility was referred to in Riskpool’s memorandum responding to Napier City Council’s application for directions and a telephone conference of    26 September 2019. The memoranda filed by the respective parties indicates they do not 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; Minute of 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 on at short notice.7

[12]	In summary, the grounds put forward in support of the adjournment by Riskpool are:

(a)	Neither party has complied with the timetable directions. The reason for this appears to be that the parties were awaiting the outcome of the Court of Appeal decision on the appeal from the High Court refusal to strike out the proceedings.

(b)	The pleadings need revisiting and in addition the issues should be determined before trial. Pleadings have not closed.

(c)	In order to ensure an efficient hearing, not only do the issues need to be clarified, but a determination of who bears the onus on particular matters is required. In addition, discovery has not been completed. This is likely to be extensive due to the need to deal with the background or the relevant wording in the policy. This was highlighted in the Court of Appeal judgment.

(d)	It would be unfair if because of time constraints if it was not able to be ready for trial because of a severely truncated pre-trial timetable.

(e)	It challenges the admissibility of the parts of a brief of evidence of Wayne Jack (Napier City Council’s CEO) served on it on 1 October 2019. The brief should have been served according to the timetable in May 2019. Riskpool has given the appropriate notice of that challenge. The admissibility issues, it says, have not been resolved and are unlikely 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  and  Mr Heaney QC (Riskpool’s former legal advisor) is also overseas and not due back until late October. His availability to give evidence is not yet known. Two of the witnesses are to be called to cover the background to the wording referred to by the Court of Appeal in its decision of 20 September 2019. No affidavits were filed in relation to the witness availability. However, the issues and circumstances were covered in Council’s memorandum and Mr Ring QC spoke to those. In view of the shortness of time I am prepared to accept counsels’ assurances in the memorandum as to the difficulties faced in making those witnesses available for the trial. To require affidavits to be filed would further prolong matters and would add to the uncertainties surrounding whether the trial will proceed with the fixture looming.

[13]	Riskpool points to the importance of the issues in the proceedings both as to the sum in issue (in excess of $12 million) and the importance of the interpretation of the exclusion clause which is apparently used in a number of insurance documents providing cover for not  only  Napier  City  Council  but  other  councils  across  New Zealand.

[14]	Napier   City   Council   opposes    the    application    for    adjournment.    Mr McLellan QC agreed that the parties had expressed some uncertainty at the last case management teleconference in March 2019 about whether the matter would be ready 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 hearing that 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 the proposed issues and steps to trial sought by Riskpool were not necessary.

[15]	Nevertheless, it is common ground that due to a number of reasons, including counsel unavailability, the hearing in the Court of Appeal was held much later than had been anticipated by counsel. Counsel for Riskpool submitted that if counsel and the Judge had been aware that the appeal would not be heard until September 2019 it is 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 trial are matters that can either be dealt with at trial or issues which are not necessary to explore at the present time.

[17]	Napier City Council also submits that Riskpool’s failure to prepare is not a good ground for it to be granted an adjournment. In response there was some suggestion the delay in getting the appeal ready was partially due to unavailability on Napier City Council’s part. It is not necessary to resolve that issue. In my view the delays in resolving the strike out application were unforeseen by either party. It is also obvious the timetable has not been met by either party and there are further issues including the completion of discovery which have become apparent as a result of the Court of Appeal decision.

[18]	Napier City Council points to the comments of Justice Venning NZ Iron Sands Holding 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 to litigation before the Court (generally) but also relevant is the credibility of the Court’s processes.9

[19]	In that case an application for adjournment of a five week fixture in the commercial list was refused. The basis for the adjournment sought the unavailability of a witness (an alternative expert). The Judge concluded that the fixture length allocated was appropriate, it having been originally allocated for a four week trial and extended with assurances from counsel that it would be possible to be heard within the extended time. In addition, the Judge was not satisfied that an alternative expert could not be obtained by the applicant. The exchange of a substantial number of briefs had taken place, the interlocutories had apparently been completed and the matter was due to 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 recently that the Court of Appeal has dealt with the application for strike out. It seems both parties 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, which perhaps should have been obvious throughout, but have only come into sharp relief after the decision of the Court of Appeal. It would be more efficient to deal with those issues and to timetable further steps to deal with any further interlocutories before the matter goes to hearing.

[21]	I also note the unavailability of Riskpool’s witnesses. While Riskpool should have ensured they were available, it is apparent that it would be in a very difficult position if the matter does proceed without those witnesses, as at least two of them may be key in relation to the background of the policy wording. While Napier City Council argue their evidence could be taken from a distance, that requires further arrangements and uncertainty with the trial dates looming.

[22]	As an alternative option Napier City Council submitted it would be appropriate to deal with the substantive issue (the interpretation of the exclusion clause) on the dates 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 giving evidence as to the substantive issues, not just on quantum. In addition, the difficulties it saw with the timetable and failure to identify the issues for trial were relevant to the substantive issue.

[23]	In my view, it is unlikely to be efficient nor save much time by separating the trial into two parts at this late stage. It is not clear exactly what would be covered in each part. The same witnesses are likely to be required for each part. In my view without some precision over what would be dealt with and more clarity as to how they could be dealt with effectively it would be counterproductive at this late stage to split the trial.

[24]	In relation to the prejudice to the Council attendant on delay, I note its claim includes an interest component which will go some way to compensating it for delay

if it is successful. No particular prejudice other than that resulting generally from delay is apparent.

[25]	Accordingly, having considered the competing issues I am of the view that the interests of justice require this matter be adjourned. The timetable has not been complied with. There are outstanding matters including the refinement of the issues and the resolution pre-trial of matters raised in particular by Riskpool which should be dealt with or at least properly considered before the hearing both for the Court’s benefit and to ensure the trial time is used efficiently. I also take into account that the decision of the Court of Appeal may have raised issues which were not properly considered by the parties before the delivery of the Court of Appeal decision less than a month before the application for adjournment was made. The amount involved is substantial and the issues involved have implications for a number of other local authorities as well as the present plaintiff. I also note the pleadings may require amendment. Mindful of Napier City Council’s position however the trial should be rescheduled as soon as possible.

Next steps

[26]	Counsel indicated that they may prefer the matter to be transferred back to Auckland. The file was transferred to Napier from Auckland because of the now settled Waterfront proceedings. Therefore, the reason for the transfer to Napier no longer 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 matter to be heard over two weeks commencing 29 June.

[27]	Riskpool has suggested two days of the fixture time be set for a case management/issues conference. As the two week fixture is to be vacated, 12 and 13 November 2019 are available for a case management/issues conference to be heard in Wellington (rather than Napier).

[28]	However, I seek submissions from counsel on the setting of the case management conference/issues conference, the place of the hearing and/or whether the dates indicated for trial dates should be allocated.

[29]	Counsel should file memoranda, or preferably a joint memorandum, as to how they wish to progress this. The fixture dates in Wellington are being held pending consideration by counsel. Counsel will need to confer. Memoranda should be filed on or before 21 October 2019.

[30]	If the matter were to proceed to a case management/issues conference on the two days suggested in Wellington counsel should file a joint memorandum as to the issues, proposed timetable and directions and any other outstanding matters which need to be dealt with on or before 7 November 2019.

Conclusion

[31]	The fixture set for two weeks commencing 11 November 2020 in the Napier High Court is vacated. The 12 and 13 November (to be heard in Wellington) are allocated for a case management/issues conference (to be confirmed by counsel).

[32]	Napier City Council seeks costs on the adjournment application. It appears appropriate that costs be awarded in its favour in view of the late application for the adjournment. However, if counsel are unable to agree on the position in relation to costs the plaintiff should file an application and a memorandum in relation to costs on or before three days from the date of this judgment. The defendant should file any response within a further three days.

Grice J

Solicitors:
Wilson Harle, Auckland
Young Hunter Lawyers, Christchurch