Aldridge v Holloway
[2021] NZHC 1382
•14 June 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2019-409-659
[2021] NZHC 1382
BETWEEN TIMOTHY JAMES ALDRIDGE, MICHELLE PATRICIA ALDRIDGE and ALDRIDGE TRUSTEE SERVICES
LIMITED as trustees of the ALDRIDGE FAMILY TRUSTPlaintiffs
AND
JAMES ROBERT HOLLOWAY
First Defendant
AND
MBSS LIMITED trading as MAXRAFT Second Defendant
Hearing: 25 May 2021 Appearances:
T J Mackenzie for Plaintiffs
No appearance for Second Defendant
N P Gillies and V Bortsova for Second DefendantJudgment:
14 June 2021
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 14 June 2021 at 3 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar 14 June 2021
ALDRIDGE v HOLLOWAY [2021] NZHC 1382 [14 June 2021]
[1] The second defendant in this proceeding, MBSS Limited, which trades as MAXRaft (MAXRaft), has applied to strike out the only cause of action brought against it by the plaintiffs, the trustees of the Aldridge Family Trust, or for summary judgment as a defendant.
Summary of claim
[2] In late 2016, the plaintiffs were planning on building a holiday house at Castle Hill, which is about halfway between Christchurch and Arthur’s Pass. The Aldridges engaged an architect to design the house.
[3] MAXRaft is a specialist flooring contractor. It provides insulated concrete slab floors for both residential and commercial use. A MAXRaft floor is made up of interlocking polystyrene blocks over which concrete is poured to form an insulated slab.
[4] In this case, the plaintiffs intended that the floor would also have underfloor heating. The underfloor heating would sit on top of the polystyrene slabs by way of a hose or pipe laid across the surface of the polystyrene slabs through which hot water is pumped. Concrete is then poured on top of the polystyrene slab, encasing the heating element.
[5] The plaintiffs’ primary complaint is that the concrete slab was poured without the underfloor heating being installed. The building company engaged to construct the house, Holloway Builders Ltd (Holloway Builders), is in liquidation. The first defendant, Mr James Holloway, was the sole director of that company and he took no part in the hearing of the second defendant’s applications.
[6] MAXRaft was a sub-contractor to Holloway Builders. There is a written contract between the plaintiffs and Holloway Builders and a written sub-contract between Holloway Builders and MAXRaft.
[7] As there is no contract between the plaintiffs and MAXRaft, the plaintiffs’ only cause of action against MAXRaft is in negligence. The only issue for determination in this application is whether there is a reasonably arguable case that MAXRaft owed
a duty of care to the plaintiffs. If it is not reasonably arguable that a duty was owed, then the application to strike out should be granted.
[8] When it was discovered that the underfloor heating had not been installed, Holloway Builders added a topping slab to the existing slab. The underfloor heating was contained in the new topping slab. Unfortunately, the topping slab has cracked and, with the home having polished concrete floors, the plaintiffs claim they have suffered a loss as a result.
Essence of application
[9] MAXRaft says the claim pleaded against it involves an allegation of a sub-contractor owing a duty of care to an owner and, in the absence of there being some additional factor, the authorities are against such a duty of care being owed.
Factual disputes and their place in the narrative
[10] It is common ground that project management, including the co-ordination of sub-trades, was the responsibility of Holloway Builders. One of the key factual disputes is summed up in an email sent by Holloway Builders to MAXRaft when the error with the underfloor heating was discovered. In that email dated 28 November 2017, signed off by Mr Holloway, he said:
There was clear correspondence between Robbie Jones, Holloway Builders Project Manager, and Chris Lea, MAXRaft Foreman, that Chris contact HPAC, the in-slab heating contractor, and book in the install for this, as he did with the in-slab plumbing, and engineer and Council inspections. Chris requested the contact details for HPAC from Robbie, and these were provided to him, therefore Chris and MAXRaft were left responsible to book this in.
[11]As an aside, the “clear correspondence” referred to has not been produced.
[12] Accordingly, it is the plaintiffs’ case that MAXRaft accepted this aspect of the management of the project.
[13]This issue is reflected in the plaintiffs’ pleading set out below:
20.Prior to the site dig-out, [Holloway Builders] via its employee Robbie Jones advised the second defendant via its employee and foreman
Chris Lea that it would be the second defendant’s responsibility to arrange for HPAC to attend and install the pipe work.
21.The second defendant via Chris Lea confirmed that it was aware that it was responsible for arranging HPAC to install the pipe work.
22.In the conversation in 21 and 22 above Mr Jones advised Mr Lea that a further copy of all consented plans and sub-contractor details were on site.
Failure to install in-slab heating
23.The second defendant failed to contact HPAC to arrange the pipe work installation.
24.In or about October or November 2017 the second defendant poured and constructed the concrete foundation slab without the in-slab heating having been installed by HPAC.
[14]The cause of action against the second defendant follows further in the claim:
First cause of action against second defendant – negligence
30.The second defendant owed a duty of care to the plaintiffs to take reasonable skill and care in performing the work they had been contracted by [Holloway Builders] to do.
31.Particulars of duty:
i.To follow directions of [Holloway Builders] to liaise with sub-contractors including HPAC.
ii.Whether directed or not by [Holloway Builders], to check the house plans for any details such as the laying of heating pipe-work.
iii.Whether directed or not by [Holloway Builders], to ensure that plans for the laying of the heating pipe-work had been followed prior to pouring the slab.
[15] MAXRaft denies any such delegation occurred. Recognising this factual issue could not be resolved in this context, the submission developed by Mr Gillies, counsel for MAXRaft, was even if there was a factual finding in favour of the plaintiffs on this issue, it made no difference to MAXRaft’s primary argument as to the duty of care. Mr Gillies says this is because the claimed delegation of authority was in any event a variation to the sub-contract between Holloway Builders and MAXRaft. As will be expanded on below, an important part of MAXRaft’s case is that there is no duty of care to perform contractual tasks.
[16] Mr Gillies submits the pleaded duty referred to at para [30] of the statement of claim (set out in [14] above), which says MAXRaft owed a duty of care to the plaintiffs to take reasonable care in performing the work it had contracted to do, falls fowl of the principle that there is no duty of care to perform contractual tasks.
[17] Accordingly, Mr Gillies submits that a variation to MAXRaft’s contractual obligations is irrelevant to the existence of the pleaded duty. On Mr Gillies’ argument, whether MAXRaft’s obligations arose at the time of its original sub-contract or in a subsequent variation, makes no difference.
[18] Mr Mackenzie, counsel for the plaintiffs, recognised an amendment to para [30], with its reference to what MAXRaft was contracted to do, may be required. However, he submitted the statement of claim does not in fact refer to the delegation of the project management of the underfloor heating in contractual terms. Mr Mackenzie argued the “Particulars of duty” set out at para [31] of the statement of claim outlined at [14] above) used the language of a direction from Holloway Builders to MAXRaft, and not that of a contractual variation.
[19] Given the language at para [30] of the statement of claim, I can understand why MAXRaft has treated the allegation in contractual terms. There is reference in the contemporary emails and in Mr Holloway’s statement of defence to MAXRaft being instructed to book the in-slab heating contractor. Mr Gillies’ submission was that the contemporary use of the term instructed indicated the alleged arrangement in respect of organising the underfloor heating was a variation.
[20] Ultimately, this is not an issue that can be resolved in a summary judgment context. A term of MAXRaft’s sub-contract provides: “Waiver or variance of these terms by us will only be effective if given in writing by an authorised person.” There was nothing in writing here, or at least nothing has been produced, notwithstanding the reference to “clear correspondence” in the 28 November 2017 email.
[21] An argument is available that the variation was not intended to have contractual effect. The arrangement alleged was between site foremen rather than managers or directors of the respective companies. This may be a case where expert evidence is
required as to how such on-site arrangements are viewed, that is, whether they are seen as being contractual in nature or informal onsite arrangements. However, I have my doubts that a builder can deprive a sub-contractor of protections in the sub-contractor’s contract through seeking to frame an onsite instruction as a direction rather than as a variation. Given I cannot decide in this context the status of the alleged arrangement in respect of organising the underfloor heating, the effect of the direction arrangement on whether a duty of care might exist has to be considered.
[22] The second factual issue is what MAXRaft did or should have known in relation to the installation of underfloor heating.
[23] MAXRaft’s position is it was unaware underfloor heating was to be fitted. It appears that MAXRaft uses a number of installers to whom it sub-contracts the actual installation of the flooring system. In evidence is a checklist dated 13 September 2017 which appears to be MAXRaft’s checklist to its installer, albeit the installer’s name is given as “MAX Install (Christchurch)”, suggesting some connection to the second defendant. The relationship (if any) of MAX Install (Christchurch) to the second defendant is not explained.
[24] In any event, this checklist has a heading “Underfloor Heating” next to which is written “N/A”. The checklist records that the pre-pour inspection and the Council inspection is to be booked by the installer.
[25] How the checklist came to have underfloor heating recorded as “N/A” is not explained.
[26] MAXRaft had the approved building consent plans, one of which is labelled “In-slab heating control box location” in the centre of the drawing. At the bottom of the plan under the heading “Issues/Revisions” item (c) is “In-slab heating control box location “shown” with the date of “24 July 2017” given.
[27] Mr Gillies described these references to underfloor heating in the consent drawings as “oblique”. There is no expert evidence as to how such plans would be understood.
[28] Accordingly, this application has to be considered against the backdrop of MAXRaft knowing there was to be underfloor heating and that it was directed to liaise with the installer of the underfloor heating.
Strike out and summary judgment principles
[29] The strike-out and summary judgment principles are well established and not in dispute. Under r 15.1(1) of the High Court Rules 2016 the Court may strike out all or part of a pleading if it discloses no reasonably arguable cause of action. Pleaded facts, whether or not admitted, are assumed to be true. The test is whether each cause of action is so clearly untenable that it cannot succeed. Jurisdiction is to be exercised sparingly and only in clear cases but is not excluded by the need to decide difficult questions of law.1
[30] Summary judgment may be given in favour of a defendant if the Court is satisfied that none of the causes of action pleaded can succeed. The Court must be left without any real doubt or certainty. The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents but:2
… it need not accept uncritical evidence that is inherently lacking credibility, as, for example, where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable …
[31] As with the strike out jurisdiction, if questions of law arise then there is no reason why the Court should not resolve those in a summary judgment application.
MAXRaft says no duty of care arises
[32] MAXRaft submits the question whether a duty of care arose in this case is an issue suitable for summary determination. Mr Gillies refers to a number of cases where the Courts have been prepared to strike out or grant summary judgment for the lack of a duty of care owed by a sub-contractor.3
1 Andrew Beck and others (eds) McGechan on Procedure (online ed, Thomson Reuters) at [HR15.1.02(1)], citing Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
2 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
3 For example: Body Corporate 114424 v Glossop Chan Partnership Architect Ltd HC Auckland CP612/93, 22 September 1997 (striking out a claim alleging a duty of care by a sub-contractor to subsequent owners of an apartment building); and Northern Clinic Medical & Surgical
[33] Mr Gillies was alert to the Court’s warning in Westpac Banking Corp v MM Kembla New Zealand Ltd, that caution is required as “novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective”.4 However, counsel submits that in respect of whether a sub-contractor owes a duty of care to a principal for economic loss, as Keane J observed in Northern Clinic: “The ground has already been well marked out.”5
[34] Mr Gillies went as far as to submit that the preponderance of cases was so against the existence of a duty there was a presumption against the finding of a duty. Mr Gillies submitted further the plaintiffs had not referred to any authorities rebutting that presumption and the circumstances in this case did not displace the presumption. Indeed he submitted all indicators told against the existence of a duty.
[35] Mr Mackenzie strongly opposed the characterisation of the law in this area as meaning giving rise to a presumption against a duty. He did recognise that numerically there were more cases against a duty being owed by a sub-contractor but submitted that ultimately each case had to be resolved on its own facts and that here the issue was such that a trial was needed.
[36] As is often the case, the true position lies in the middle ground. Given the number of cases referred to by Mr Gillies where a duty has been held not to exist, which I will refer to below, some new factor would need to be shown to swim against that tide of authority.
The authorities on the duty of care
[37] Mr Gillies referred to the leading New Zealand decision of Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd.6 The Court of Appeal confirmed a two-step process was involved in determining whether a sub-contractor owes a duty of care to a principal. The Court first enquires into the degree of proximity or relationship between the parties and secondly, whether there are wider policy
Centre Ltd v Kingston HC Auckland CIV-2006-404-968, 31 December 2008 (granting summary judgment dismissing claims by the owner of a medical centre building against a sub-contractor).
4 Westpac Banking Corp v MM Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [62].
5 Northern Clinic, above n 3, at [14].
6 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA).
considerations that tend to negative or support the existence of a duty in the particular class of case.7
[38] There is not a brightline between the factors and the ultimate question is whether in all the circumstances of the case it is just and reasonable that a duty should be imposed.8
[39]Factors to be taken into account include:
(a)how close a nexus there is between the defendants and the plaintiffs;
(b)the extent to which the plaintiffs are vulnerable, which Mr Gillies said meant the extent to which the plaintiffs were able to protect themselves through contractual terms;
(c)whether the plaintiffs has or could have had other remedies;
(d)the nature of the loss – with pure economic loss militating against the imposition of a duty of care; and
(e)the statutory and contractual background – with the court reluctant to impose a duty of care that cuts across contractual obligations.
[40] Mr Gillies in his submissions confronted Junior Books Ltd v Veitchi Co Ltd, an authority which at face value appeared to support the plaintiffs.9 In Junior Books, the House of Lords was prepared to find that a nominated specialist sub-contractor who laid flooring in a factory owed the factory owner a duty of care and was liable for remedying the defects in the floor, even though those defects had caused no physical harm.
7 At [58].
8 At [58].
9 Junior Books Ltd v Veitchi Co Ltd [1983] 1 AC 520 (HL).
[41] Mr Gillies’ submission was that as the Court of Appeal in Rolls-Royce confirmed that Junior Books was not part of New Zealand law;10 there was high authority against the duty pleaded in this case.
[42] Mr Gillies noted that five years on from Junior Books, the English Court of Appeal in Simaan General Contracting Co v Pilkington Glass Ltd (No 2) held that a nominated sub-contractor who manufactured and supplied glass did not owe a duty of care to the main contractor for colour defects in the glass.11 The common contractual chain chosen by the parties and the absence of physical damage were key factors in the Court reaching this conclusion. The Court noted that the same result would have been reached had the principal been the plaintiff.12
[43] In Body Corporate 11442 v Glossop Chan Partnership Architect Ltd, Potter J found a sub-contractor did not owe a duty of care to the subsequent owners of an apartment building that was suffering leaking windows and doors.13 The sub-contractor had supplied and installed the windows and doors and both the developer and head contractor were in liquidation.
[44] One of the key authorities relied on by MAXRaft is R M Turton & Co Ltd (in liq) v Kerslake & Partners.14 In R M Turton, a majority of the Court of Appeal found that engineers sub-contracted by the principal’s architects did not owe a duty to the main contractor in preparing the mechanical services specification. The main contractor claimed that it had under-priced the work as a result of an alleged error made by the engineer in the specification. The Court considered that the claimed duty “would cut across and be inconsistent with the overall contractual structure which defines the relationships” of the various parties to this work.15
[45] In respect of this issue, Mr Gillies referred to the terms of MAXRaft’s sub-contract which contains a number of limitations of liability, in particular, that MAXRaft’s liability under the contract is limited to the value of the contract. One of
10 Rolls-Royce, above n 6, at [127].
11 Simaan General Contracting Co v Pilkington Glass Ltd (No 2) [1988] QB 758 (CA).
12 At 782.
13 Body Corporate 114424, above n 3.
14 R M Turton & Co Ltd (in liq) v Kerslake & Partners [2000] 3 NZLR 406 (CA).
15 At [32].
Mr Gillies’ key submissions was that if a duty of care was found then the plaintiffs would be in a stronger position in relation to MAXRaft than would Holloway Builders as the plaintiffs would not be subject to the contractual limitations under which MAXRaft agreed to undertake the work for Holloway Builders. In Mr Gillies’ submissions, the agreement to allocate their risk by way of contract should not be cut across by a duty of care in tort.
[46] In this regard, one aspect of the history is also relevant. When Mr Tim Aldridge was undertaking initial planning work for the house at the end of 2016, he entered into a contract directly with MAXRaft. The architect for the project was also involved in the correspondence leading to MAXRaft being engaged. MAXRaft provided a quote with two options. The first option was “slab design completed by appointed MAXRaft engineer” and to provide a producer statement as part of the building consent process. The second option was described as a “Complete Install”. Mr Aldridge elected to proceed with the engineering design only and he signed the MAXRaft quote dated 24 January 2017. That quote is in the same form as the document representing the sub-contract between Holloway and MAXRaft with each document incorporating MAXRaft’s terms and conditions.
[47] Accordingly, at the planning stage of the project MAXRaft were engaged directly by Mr Aldridge to undertake engineering design work to assist the plaintiffs in obtaining a building consent.
[48] There does not seem to have been any communication of relevance after the provision of the engineering drawings by MAXRaft for building consent purposes until Mr Aldridge got in touch with MAXRaft by email dated 29 April 2017. The email advised MAXRaft that the architect had completed the drawings for the build and the drawings had been submitted for consent. The email then advised:
At this stage we have asked two builders to price, Holloways and Matterhorn Developments. I have passed your pricing and contact details onto Thomas from Matterhorn and he may be in touch if he has any questions. The chosen builder will oversee the entire project from start to finish, as such they will be your customer and point of contact.
(emphasis added)
[49] Mr Gillies noted that in relation to the build contract Mr Aldridge elected to contract directly with one trade being the electrician who was his brother. Thus, Mr Gillies submitted that Mr Aldridge, through the contracts described above, was aware of the significance of the difference between a supplier being a sub-contractor of the builder and contracting directly with a subtrade.
[50] Mr Gillies also relied on Keane J’s decision in Northern Clinic, where his Honour granted summary judgment on the grounds that the defendant’s sub-contractor did not owe the owners of a new medical centre a duty of care regarding defects in their work. He submitted the court there determined the statutory content was neutral and the same conclusion might hold in this case.
An assumption of responsibility?
[51] Paragraph [30] of the statement of claim and the particulars pleaded at para [31] set out at [14] above, show that the plaintiffs rely firstly on the direction/delegation of responsibility for co-ordinating with the underfloor heating contractor being part of the duty pleaded. In addition, the duty is said to arise even if the pleaded “direction” is not established. Accordingly, it is necessary to consider this application on the basis that it is open to the plaintiffs to advance their case on those alternative grounds.
[52] The significance of the concept of assumption of responsibility is discussed in detail in Rolls-Royce. It is not suggested here that MAXRaft assumed responsibility directly to the plaintiffs. Accordingly, this is not a situation “where the defendants have undertaken to exercise reasonable care in circumstances which are analogous to, but short of, contract, and it is foreseeable that the plaintiffs will rely on that undertaking.”16 Such may have been true in relation to a duty between MAXRaft and Holloway Builders but not in respect of the plaintiffs. It is worth reproducing the Court of Appeal’s observations in Rolls-Royce on this point in full:17
[99] Assumption of responsibility for a statement or a task does not usually entail a voluntary assumption of legal responsibility to a plaintiff, except in cases where the defendant is found to have undertaken to exercise reasonable
16 Rolls-Royce above n 6, at [99].
17 Above n 6.
care in circumstances which are analogous to, but short of, contract, and it is foreseeable that the plaintiff will rely on that undertaking. If that is the case then, subject to any countervailing policy factors, a duty of care will arise. In other cases, the law will deem the defendant to have assumed responsibility where it is fair, just and reasonable to do so … Whether it is fair, just and reasonable to deem an assumption of responsibility and then a duty of care will depend on a combination of factors, including the assumption of responsibility for the task, any vulnerability of the plaintiff, any special skill of the defendant, the need for deterrence and promotion of professional standards, lack of alternative means of protection and so on … Wider policy factors will also need to be taken into account.
[100] Finally, we note that assumption of responsibility for the task cannot be sufficient in itself, at least insofar as the negligent construction cases are concerned. If it were, then the result in Simaan (which has been so widely approved) could not be justified, as the subcontractor in that case had clearly assumed responsibility for the task of supplying glass that accorded with the contractual specifications. The question in Simaan was whether the subcontractor had assumed responsibility to the plaintiffs and the answer given in the case, although not expressed in that manner, was that it had not. Any assumption of responsibility was only to the direct contracting party.
(footnote omitted, emphasis added)
[53] As is evident from the discussion in Rolls-Royce above, the imposition of a duty of care will depend on a combination of factors, including whether there has been an assumption of responsibility for the task, any vulnerability of the plaintiff, any special skill of the defendant, the need for deterrence and promotion of professional standards, lack of alternative means of protection and so on.
[54] However, para [100] of Rolls-Royce, which is binding on me, presents a barrier to the plaintiffs here relying on assumption of responsibility as a relevant factor. There was no contract between the plaintiffs and MAXRaft between the email at [48] and the error with the underfloor heating being discussed.
[55] As the plaintiffs cannot rely on assumption of responsibility as being sufficient in itself to establish a duty, it is necessary to consider whether MAXRaft nonetheless arguably owed a duty of care to the plaintiffs.
Proximity
[56] In Rolls-Royce, the Court said the strongest factor pointing towards a finding of proximity was foreseeability.18
[57] Here, assuming MAXRaft either knew or ought to have known that the underfloor heating was to be installed and in particular if it is held to have agreed to organise the same, then it was foreseeable that if it did not do so the plaintiffs would suffer loss, albeit economic loss.
[58] In Rolls-Royce, another factor favouring liability was the high degree of direct contact between Carter Holt and Rolls-Royce before the entry into the contract. Mr Mackenzie in particular relies on this and submits the plaintiffs had a pre-existing relationship with MAXRaft given the plaintiffs had engaged MAXRaft to undertake engineering design at the building consent stage.
[59] Mr Mackenzie also submits that MAXRaft was a nominated contractor by the plaintiffs. The evidence as to this is unclear but again, in the context of this application I proceed on the basis that it was the plaintiffs who nominated MAXRaft. On this issue, Mr Mackenzie relied on the following passage from Gunston v Lawley:19
Furthermore, it is not helpful to consider the existence of a duty of care in a vacuum: it will depend upon the relationship between the parties with respect to the negligent activity in question and with respect to the loss which the proprietor has suffered as a consequence. This may arise from the fact that the sub-contractor is nominated by the proprietor or that its work was otherwise the consequence of direct dealings between them.
[60] While it is true there was some direct contact between the plaintiffs and MAXRaft , to some extent that is offset by the fact such contact was at the design stage and resulted in a self-contained contract directly between the plaintiffs and the second defendant. In Mr Aldridge’s email of 29 April 2017, referred to at [48] above, he advised MAXRaft they would be sub-contractor to the builder who was awarded the contract.
18 Rolls-Royce, above n 6, at [101].
19 Gunston v Lawley [2008] VSC 97, (2008) 20 VR 33 at [27].
[61] As to factors against proximity, the strongest factor in Rolls-Royce pointing away from proximity was the contractual structure.
[62] Mr Mackenzie sought to minimise the significance of the contractual relationships in this case and in particular the relevance of Rolls-Royce, given that case involved sophisticated commercial parties capable of looking after their own interests and the Court had no need to interfere in bargains they had freely arrived at.
[63] I do not accept the significance of there being written contracts between principal and head-contractor, and head-contractor and sub-contractor is diminished because the build is residential rather than commercial. Certainly, in R M Turton and in Rolls-Royce, the projects were significant ones. However, the value afforded by certainty of contract does not depend on the size of the project. That the duty alleged cuts across and is inconsistent with the overall contractual structure is just as significant in this case as it was in the cases involving major construction projects.
[64]Mr Mackenzie submits the significance of the contractual structure was that:
… it is usually in cases of large corporations, experienced in construction contracting, and dealing with sophisticated contracts, where the Courts will be slow to impose duties beyond them. But even then, a Court can still impose a duty.
[65] In response to Mr Gillies’ reliance on the contractual chain, Mr Mackenzie says this position “comes simply from Mr Aldridge’s momentary direction that his builder deal with [the second defendant] directly.”
[66] Mr Mackenzie then refers to Mr Aldridge’s reason for wanting to have the project under the contract of the builder. Whatever Mr Aldridge’s subjective reasons for having his chosen builder “oversee the entire project from start to finish”, whether a duty will be found in part turns on whether that duty cuts across obligations freely accepted in the contracts, not the subjective reasons of the parties for putting in place the contracts in the first place.
Vulnerability
[67] In describing Mr Aldridge, who undertook all of the negotiations, Mr Mackenzie says this was the first time that Mr Aldridge and his wife had built a house. As such, Mr Aldridge considers he is in no different position to any other layman building a house.
[68] Conversely, Mr Gillies sought to describe Mr Aldridge as an experienced and successful businessman. In Mr Aldridge’s original emails to MAXRaft, Mr Aldridge is described as director of a company called HireKING. At the foot of Mr Aldridge’s emails is a signature banner referring to HireKING being a finalist in a business competition.
[69] Todd on Torts discusses what vulnerability means in this context.20 One aspect of vulnerability is whether a person has a reasonably available means of protecting themselves. There is nothing in the communications between Mr Aldridge and MAXRaft that would have led an objective observer to consider Mr Aldridge was not capable of protecting himself. I have already referred to the email of 29 April 2017 where Mr Aldridge advised MAXRaft how the contractual structure for the build would work. There was no communication between Mr Aldridge and MAXRaft until after the absence of the underfloor heating was discovered. Mr Aldridge also had an architect involved in the project and so was not without the ability to obtain advice in respect of the build. Todd on Torts emphasises that:21
A vulnerability principle requires that the kind of claim being asserted should be categorised as one likely to involve a vulnerable plaintiff. A principle looking to an individual plaintiff’s vulnerability on the facts of any particular case would be unworkable and impossible to administer.
[70] The position of a residential homeowner is expressly discussed in Todd on Torts with reference to Carter Holt Harvey. Vulnerability is looked at not in relation to the plaintiff in the case at hand, but in relation to likely plaintiffs as a class.22
20 Stephen Todd (ed) Todd on Torts (8th ed, Thomson Reuters, Wellington, 2019) at [5.403].
21 Todd, above n 20, at [5.403] refers to Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [207] 1 NZLR 78 at [52]. At [53] of that case the Supreme Court noted that this was an important qualification.
22 Todd, above n 20, at Carter Holt Harvey, above n 21, at [54].
[71] Accordingly, focus on either Mr Aldridge’s alleged business expertise or his “vulnerability” as a first time home builder is not the appropriate approach to this issue. Residential homeowners are not assumed to be vulnerable. This is not a factor that favours finding a duty existed.
Economic loss
[72] It is common ground that where the loss suffered is economic loss, the Courts are less willing to impose a duty of care.23 Mr Mackenzie correctly notes that this factor is not of itself determinative but one of many factors to be considered. The concrete slab poured by MAXRaft of itself is not defective in any way. MAXRaft was not involved in laying the topping slab that has cracked. The plaintiffs’ loss is economic, being pleaded as a loss of value. This is not a factor that favours the existence of a duty.
Conclusion
[73] While it was foreseeable that failing to arrange the installation of the underfloor heating would cause loss, I do not consider that factor enough to warrant approaching the question of whether a duty arose as if the parties had not deliberately organised their responsibilities for the project in the respective contracts. What has left the plaintiffs here with limited recovery options is that after the issue with the underfloor heating was discovered, MAXRaft issued a statutory demand to Holloway Builders for the slab. I am told a settlement was reached between the parties (I assume on a full and final basis). It is that settlement, presumably reached before the cracking with the concrete slab was discovered, which prevents the plaintiffs’ claim being pursued down the contractual chain. Even the liquidation of Holloway Builders would not prevent the chain of contracts being sued on. Had that state of affairs not existed, the idea that the plaintiffs could sue MAXRaft directly would immediately be seen as inconsistent with the contractual relationships.
[74] At the end of the day, the plaintiffs freely chose to contract with the head builder. In doing so, that is where they chose their remedy would lie if there was
23 Rolls-Royce, above n 6, at [63].
a defect with the work as a result of the sub-contractors’ error. It is not for tort to cut across that agreed contractual structuring of the allocation of liability and risk.
[75]I find no duty of care was owed in tort by MAXRaft to the plaintiffs.
[76]Accordingly, the plaintiffs’ claim against MAXRaft is struck out.
[77] Submissions as to costs may be made but if no submissions are made within 10 working days of the date of this judgment then the costs order shall be that MAXRaft is awarded costs on a 2B basis for this application and the proceeding to date along with disbursements as fixed by the Registrar.
Associate Judge Lester
Solicitors:
Trollope & Associates, Christchurch Hesketh Henry, Auckland
White Fox & Jones, Christchurch
Copy to counsel:
T J Mackenzie, Barrister, Canterbury Chambers, Christchurch
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