Environmental / Resource Management

Court of Appeal claim alleging misstatement in Council LIM out of time

In a recent Court of Appeal decision, Westland District Council ("Council") v York and anor [2014] NZCA 59, a claim against the Council for a negligent misstatement was struck out as time barred under the Limitation Act 1960. This means that potential litigants cannot claim a negligent LIM caused them loss more than 6 years after they allegedly relied on the LIM.

Background

In 2005, York nominee, Alpine Glacier Motel Limited ("Alpine") settled the purchase of land and a motel business at Franz Josef in for $2,850.00, after having first obtained a Land Information (LIM) report from the Council. The LIM was allegedly negligent in that it omitted information known to the Council about the location of the Alpine Fault. In about 2003, the Government suggested local authorities should consider creating fault avoidance zones ("FAZ") along fault lines. This meant that no new buildings could be constructed within the known FAZ and the use of the land would be restricted to gardens and car parks. In November 2010 the Council mooted such a zone. In 2012 the proposed zone was formally notified.

After the notification in 2012, York sued the Council for economic loss through alleged diminution in the motel's value. It is alleged that by virtue of the FAZ nothing new could be built within the zone area and the value of the motel is dramatically affected.

The Council sought to have the claim struck out on the basis that it was time barred under the Limitation Act 1950. The Council argued the cause of action accrued when the motel was purchased at alleged over value in 2005. The High Court refused to strike out the claim. The High Court found it was arguable when the cause of action accrued. It found a trial was necessary to decide whether the cause of action accrued at the time of purchase or when the market became aware of the omitted earthquake information.

The Question considered

The only question before the Court of Appeal was whether the cause of action accrued at the time of purchase or later and therefore whether limitation barred the action.

The Court's Decision

Contingency or transaction

York and Alpine argued this case was one of contingency loss, being the discovery by the market of the omitted information.

The Council argued and the Court found that this was a transaction case. The material loss was suffered with the transaction when Alpine bought the motel at a price which allegedly exceeded its worth. This was so even though the loss may not have been known at the time, nor could immediately be quantifiable. While the Court accepted that until 2010 a contingent quality attached to the respondents' loss, it found that in a transaction case a contingency about loss does not ordinarily prevent time running.

The Council argued the case was materially indistinguishable to Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, where the Supreme Court held that the purchasers' loss from a negligently prepared LIM was suffered when they committed themselves to a price exceeding the property's actual worth.

The Court rejected York's argument that Altimarloch was not relevant as it was not a limitation case. While the Court agreed Altimarloch was not a limitation case, the Supreme Court in that case was still required to decide the issue of when the plaintiffs suffered loss so as to acquire a cause of action.

Reasonable discoverability

York and Alpine argued this case was one of latent defect. The Court disputed the proposition that the vendor suffered loss only when the land's special features were discovered. This lead, as the Court pointed out it did in Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC), to the doctrine of reasonable discoverability. The "law has long held that a cause of action accrues when the material facts occur, not when the plaintiff learns of them". The Court considered that the Supreme Court in Murray v Morel Co Ltd [2007] 3 NZLR 721 had declined to extend reasonably discoverability beyond the few classes of case which had already been recognised, one being latent defects in buildings.

Here, the damage was not latent and was discoverable. The damage did not stem, as it did in Hamlin, from physical defects that were covered up and undiscoverable. The omitted information about the fault zone was in the Council's records all along, was not unique to the property and may even have been a matter of public record all along.

Summary

The Court found York and Alpine must have suffered material loss when they bought the motel at a price which allegedly exceeded its worth. That loss was suffered, at the latest, on 30 September 2005. Therefore the claim was out of time (it had to be brought within 6 year of that date) and was struck out as having no prospect of success.

Download as PDF

Your key contacts

Public Sector, Environment & Resources

The contents of this publication are general in nature and are not intended to serve as a substitute for legal advice on a specific matter. In the absence of such advice no responsibility is accepted by Brookfields for reliance on any of the information provided in this publication.

 

Need Assistance?

Call

Auckland Office: +64 9 379 9350

Wellington Office: +64 4 499 9824

Email:

Contact us today
 

Signup Today!