Auckland Council v Abraham
[2015] NZHC 415
•10 March 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-2685 [2015] NZHC 415
UNDER the Weathertight Homes Resolution
Services Act 2006
IN THE MATTER
of an appeal from a decision of the
Weathertight Homes TribunalBETWEEN
AUCKLAND COUNCIL Appellant
AND
WILLIAM FRANCIS ABRAHAM and
SHARRON MARY ABRAHAM First Respondent
NOEL JAMES ABRAHAM Second Respondent
GINO BIANCA Third Respondent
MAJOLIKA LTD Fourth Respondent
ALBANY STONEMASONS LTD Fifth Respondent
GUY ABRAHAM Sixth Respondent
Hearing: 19 February 2015 Counsel:
D J Barr for Appellant
K A Young for Fifth RespondentJudgment:
10 March 2015
JUDGMENT OF BREWER J
AUCKLAND COUNCIL v ALBANY STONEMASONS [2015] NZHC 415 [10 March 2015]
This judgment was delivered by me on 10 March 2015 at 3:00 pm pursuant to Rule 11.5 High Court Rules.
Registrar/Deputy Registrar
Introduction
[1] Auckland Council (“the Council”) is defending a leaky home claim before the Weathertight Homes Tribunal (“the Tribunal”). On 18 September 2014, the Tribunal granted the fifth respondent’s (“Albany Stonemasons”) application to be removed as a respondent in the proceedings.1 The Council appeals that decision. It wants Albany Stonemasons to stay in the case to preserve the possibility of sharing with Albany Stonemasons any liability which might accrue to the Council.
The Tribunal’s decision
[2] The Tribunal removed Albany Stonemasons from the proceedings pursuant to s 112 of the Weathertight Homes Resolution Services Act 2006 (“the Act”):
112 Removal of party from proceedings
(1) The tribunal may, on the application of any party or on its own initiative, order that a person be struck out as a party to adjudication proceedings if the tribunal considers it fair and appropriate in all the circumstances to do so.
(2) This section is subject to section 57(2).2
[3] The Tribunal found it was fair and appropriate in all the circumstances to remove Albany Stonemasons because:
(a) Albany Stonemasons can be liable only if it is responsible for the failure to fix a sill flashing to joinery installed to a schist wall.
(b) Albany Stonemasons denies responsibility for the installation of the
flashing and “this dispute cannot be resolved on the information currently before me”.
1 Procedural Order 8.
2 Section 57(2) provides: “In managing adjudication proceedings, the tribunal must comply with the principles of natural justice”.
(c) The Council’s expert’s view is that the cost of remedying the defect is
$10,000 to $15,000. This represents, at most, one to one and a half percent of the repair cost.
(d)It would appear that any liability Albany Stonemasons has for this defect is likely to be shared with other parties such as the Council and the joinery installer.
(e) The majority of Albany Stonemason’s work was completed prior to
26 November 2002, which is the cut off date for limitation purposes. It is uncertain whether the sill flashing defect was created before or after 26 November 2002, and this would need to be determined at a hearing. But since the majority of the work was completed before
26 November, the sill flashing defect may be found to be limitation barred.
(f) The liability of Albany Stonemasons, if any, is minimal in the context of the case.
(g)The liability of Albany Stonemasons is not proportional to the legal costs that will be incurred if it remains in the claim. Pursuant to s 91 of the Act, costs lie where they fall with exceptions in situations of
bad faith or the pursuit of matters that have no substantial merit.
Issues
[4] The Council submits that the Tribunal went beyond its jurisdiction in ordering the removal of Albany Stonemasons. Albany Stonemasons simply supports the Tribunal’s decision. To decide this appeal, I have to be clear on the nature of the appeal and the scope of the s 112 jurisdiction. Once those matters are resolved, I can consider the merits of the appeal. Accordingly, the issues I have to decide are:
(a) What is the nature of the appeal?
(b) What is the scope of the Tribunal’s jurisdiction under s 112?
(c) Was the removal of Albany Stonemasons from the proceedings a proper exercise of the s 112 jurisdiction?
What is the nature of the appeal?
[5] Mr Barr for the Council, in his written submissions, argued that an appeal from a Tribunal decision is a general appeal and that this appeal does not concern any elements made in the exercise of the Tribunal’s discretion. Therefore, the well- established approach to general appeals in Austin, Nichols & Co Inc v Stichting Lodestar3 applies and I have the responsibility of arriving at my own assessment of the merits of the case. I disagree.
[6] The Supreme Court in Kacem v Bashir identifies that “the distinction between a general appeal and an appeal from a discretion is not altogether easy to describe in the abstract”.4 The Court does not attempt to clarify what the distinction is apart from identifying that the fact that a decision requires the making of a value judgment is not enough on its own to render the decision discretionary.5
[7] In Roberts v A Professional Conduct Committee of the Nursing Council of New Zealand,6 Collins J provides helpful guidance in identifying a discretion. In that decision the New Zealand Health Practitioners Disciplinary Tribunal (“NZHPDT”) suspended the appellant’s registration as a nurse for three years. The appellant appealed the penalty imposed by the NZHPDT. One of the issues on appeal was whether the assessment of the penalty imposed involved the exercise of a discretion. Collins J concluded that it did. His Honour said:7
I have reached this conclusion because, when deciding what penalty to impose the Tribunal evaluated a wide range of factors, including the penalty options that were available. The process of evaluating penalty options and deciding what penalty to impose involved an exercise of discretion by the Tribunal in the same way that a decision about bail or name suppression also involves the exercise of discretion by judicial officers. All involve the careful evaluation of options and the choosing of the most suitable option available. In this respect, the Tribunal’s penalty decision can be
3 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
4 Kacem v Bashir [2010] NZSC 112; [2011] 2 NZLR 1 at [32].
5 At [32].
6 Roberts v A Professional Conduct Committee of the Nursing Council of New Zealand [2012] NZHC 3354.
7 At [43].
distinguished from its role when interpreting the law, deciding facts and/or applying the law to established facts when determining if a practitioner committed a disciplinary offence. That aspect of the Tribunal’s role does not involve the exercise of discretion.
[8] In my view, on the clear wording of s 112, a discretion is conferred. The use of the word “may” and the nature of the evaluation, “fair and appropriate in all the circumstances”, do not establish a requirement to reach a particular decision following an objective assessment of decided facts against a defined test. Rather s 112 requires, as Collins J puts it, “the careful evaluation of options”. Therefore, I have to examine the Tribunal’s decision to see whether it made an error of law or principle, took account of irrelevant considerations, failed to take account of a
relevant consideration, or reached a decision that is plainly wrong.8
[9] My conclusion is consistent with the approach taken by White J in Coughlan v Abernethy.9 His Honour identified that the approach to general appeals in Austin, Nichols & Co Inc v Stichting Lodestar usually applies to appeals of a determination of the Tribunal. However, if the Tribunal reached the impugned decision through the exercise of a discretionary power conferred upon it under the Act, then a successful appeal of that decision requires the satisfaction of the stricter criteria in Kacem v Bashir.10
What is the scope of the Tribunal’s jurisdiction under s 112?
[10] No judicial discretion is unfettered. It must be exercised on a principled basis and in accordance with applicable law. There are two lines of authority in this Court. One line is to the effect that s 112 confers on the Tribunal a jurisdiction either limited to or very close to the jurisdiction of the High Court to strike out a pleading.11 The
other (and shorter) line is that the jurisdiction is wider than that.12
8 Kacem v Bashir, above n 4, at [32].
9 Coughlan v Abernethy HC Auckland CIV 2009-004-3374, 20 October 2010.
10 At [27] and [89].
11 Burns v Argon Construction Ltd & Ors HC Auckland CIV 2008-404-7316, 18 May 2009 at [17];
Auckland City Council v The Unit Owners in Stonemason Apartment & Ors HC Auckland CIV 2009-404-3118, 11 December 2009 at [23]; Fenton v Building Code Consultants Ltd HC Auckland CIV 2009-404-6348, 15 March 2010 at [51]; Wong v Weathertight Homes Tribunal & Ors [2001] NZCCLR 5 at [15]; Thomson v Christchurch City Council HC Christchurch CIV 2010 409-2298, 28 March 2011 at [27].
12 Yun & Phon v Waitakere City Council HC Auckland CIV-2010-404-5944 15 February 2011;
Saffioti v Jim Stephenson Architect Ltd [2012] NZHC 2519.
[11] In this case, if the jurisdiction is indistinguishable from that of the High Court on a strike out application then the Council must succeed. That is because the Court’s jurisdiction does not permit it to strike out a pleading unless, assuming pleaded facts to be true, the pleading is clearly untenable.13 The jurisdiction is to be exercised sparingly, and only in clear cases.
[12] Here, it seems the Tribunal based its view on the likelihood of liability being time-barred, the likelihood that liability could be shared, the low level of any liability that might be proved and the disproportionality of any such liability to the irrecoverable cost to Albany Stonemasons of defending the claim. None of that would cross the threshold necessary for strike out in this Court.
[13] Having considered s 112 in the context of the purpose of the Act, the procedures it establishes, and the powers it confers on the Tribunal, I have concluded that the s 112 jurisdiction is not limited to the High Court strike out jurisdiction. I respectfully agree with the analysis of Ellis J in Yun & Phon v Waitakere City Council. I will not repeat her Honour’s analysis but emphasise the following:
(a) Section 112, on its face, gives a broad discretion. The ambit of that discretion must be determined by reference to the jurisdiction conferred on the Tribunal by the Act.
(b)The Tribunal has an inquisitorial jurisdiction, although substantial elements of the adversarial system remain. Within the purpose of the Act (in this case, “to provide owners of dwelling houses that are leaky buildings with access to speedy, flexible and cost-effective procedures for the assessment and resolution of claims relating to those
buildings”),14 and subject to the requirements of natural justice, the
Tribunal may “conduct the proceedings in any manner it thinks fit, including adopting processes that enable it to perform an investigative
role”.15
13 High Court Rules, r 15.1, as interpreted by the Court of Appeal in Attorney-General v Prince
[1998] 1 NZLR 262.
14 Weathertight Homes Resolution Services Act 2006, s 3.
15 Section 73(1)(a).
(c) The processes established by the Act and adopted in supplementation by the Chair of the Tribunal pursuant to s 114 are different to the civil procedures of the High Court. Prior to the adjudication hearing the Tribunal is likely to have far more evidential material than a Court might have before a defended witness action.
(d)Due to its largely inquisitorial nature, the Tribunal is empowered to seek material relevant to its task. It can require the parties to provide information or to justify their positions before an adjudication hearing takes place. It does not have the same emphasis on pleadings – and s 112 refers to parties and not to pleadings accordingly.
[14] I conclude that s 112 empowers the Tribunal to remove a party from a proceeding, having regard to its overall jurisdiction to fulfil the purpose of the Act and in conformity with the principles of natural justice. The principal inquiry must go to the strength of the case against the position of the party for which removal is in issue. Unlike the High Court jurisdiction, the Tribunal may consider the evidential material it has before it and does not have to assume that factual allegations made adverse to the parties’ interests can be proved.
[15] However, the principle of access to justice, which underpins the constraints on strike out in the High Court, must also constrain the Tribunal. If a party to a claim before the Tribunal alleges that another party is liable to it in damages, either directly or contingently, then it is entitled to have the Tribunal decide its case unless it is fair and appropriate in all the circumstances that the other party be removed from the proceeding. That threshold will be crossed if the strike out prerequisites in the High Court Rules are made out:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
[16] Given the scope of the Tribunal’s jurisdiction, it may be that a situation will arise where although the r 15.1 factors do not strictly apply, other factors make it fair and appropriate in all the circumstances that a party be removed from a proceeding. As I will come to, I have the view that such a situation will occur rarely where there is an evidential base for allegations of liability. But, putting that aside for a moment, where a Tribunal makes an assessment of the strength of the evidence against a party seeking removal, it must, as a matter of fairness, be satisfied that it has obtained all the evidence material to the assessment. If it does not, it will either be making the assessment prematurely or speculatively.
Was the removal of Albany Stonemasons from the proceedings a proper exercise of the s 112 jurisdiction?
[17] In this case, Albany Stonemasons was joined to the proceedings on 2 July
2014 upon the Council’s application. On 22 July 2014, Albany Stonemasons sent an email to the Tribunal disputing, in indignant terms, the particulars of negligence advanced against it. The Tribunal treated this email as an application for removal.16
Albany Stonemasons was not legally represented and what followed was a series of formal responses from the Council, letters in reply from Albany Stonemasons and interspersed directions from the Tribunal.
[18] So, the Council opposed the application, giving reasons.17 In its response,18
Albany Stonemasons raised the issue of the claim being time-barred. The Council replied that the time bar would not apply to work done after 26 November 2002.19
[19] The Tribunal had, therefore, to decide whether to remove a party who, without the benefit of legal representation, had put forward unsworn accounts of the work it did and the reasons why it should not be held liable. Clearly, the Tribunal considered it needed a greater foundation than that upon which to make a decision
and so on 22 August 2014 it issued Procedural Order 7 (“PO7”).20 In PO7, the
16 Common bundle of documents, vol 2, at 509.
17 At 513.
18 At 521.
19 At 527.
20 At 529.
Tribunal sets out its position to this point. In Procedural Order 8 it says that PO7 is to be read with it.
[20] In PO7, the Tribunal:
(a) Notes Albany Stonemasons’s advice that it has not retained any documents relating to the stone masonry work on the claimant’s house.
(b) States that claims relating to work carried out prior to 26 November
2002 are time-barred.
(c) Refers to four documents supplied by the claimant originating from
Albany Stonemasons:
· a delivery note dated 19 August 2002;
· a detailed invoice dated 26 September 2002;
· a detailed invoice dated 8 November 2002;
· a request for part-payment dated 24 December 2002.
(d) Notes that the work included in the two invoices is time-barred,
Albany Stonemasons’s assertion that work was completed on
7 December 2002 is not supported by documents and there is no record of what, if any, work was carried out after 26 November 2002.
(e) Summarises the situation:21
It is clear from the documentation that the majority of Albany Stonemasons’ work is time-barred. There is no evidence before me as to what work, if any, was carried out between 26 November 2002 and the invoice date of
24 December 2002. There is no evidence before me concerning any defects created during this period.
21 Procedural Order 7, at [5].
(f) Expresses the view:22
The Tribunal has an inquisitorial role and must provide claimants with speedy, flexible and cost-effective procedures for the assessment and resolution of leaky building claims. Retaining respondents in a claim in the absence of a tenable case against them does not promote the cost-effectiveness or the speediness of a claim’s resolution.
(g) Addresses the Council’s submissions, and makes a further direction:
[9] The Council is correct that the onus to establish an affirmative defence is on the person seeking to raise it. At this stage, the onus is on the respondent to establish that there is not a tenable claim against it and for the parties opposing removal to counter that by pointing to the basis of a tenable claim. As it appears that there are no documents that establish what relevant work was carried out within time, I consider it appropriate to give the Council another opportunity to point to the basis of a tenable claim, particularly in light of the alleged comments made by Mr Turner.
[10] The application to join Albany Stonemasons was based on the assessor’s report which attributed a number of defects to the Stonemason work. When Albany Stonemasons was joined as a party it was not apparent that most if not all of this work was time barred. Neither was it clear that during remediation the majority of the stone masonry was left intact because it was not considered to be defective.
[11] The case against Albany Stonemasons is only tenable if relevant work was done within time and defects and damage attributable to that work can be identified. In the circumstances, I direct the Council to identify what, if any, work was carried out by Albany Stonemasons that was not time-barred, what defects this work is likely to have given to, and what quantum is attributable to these defects. This information is required on or before 4 September 2014.
[21] The Council’s response is to the effect that the Tribunal is asking the wrong
party:23
In the present circumstances the Tribunal has exercised its inquisitorial powers by inviting Albany Stonemasons to provide evidence supporting its claim that the work was time-barred. Albany Stonemasons has refused to provide this evidence. In fact, Albany Stonemasons has not provided any
22 At [8].
23 Memorandum of counsel for the first respondent in response to Procedural Order 7, dated
4 September 2014, at [25].
statement, whether admissible or not, that the work was completed more than ten years before the application for an assessor’s report was made. The statement that Albany Stonemasons has made is that the work was completed in December 2002 ie Albany Stonem asons’ own case i s t hat t he work was undertaken within ten years of the application being made.
[22] Albany Stonemasons wrote to the Tribunal in response by letter dated
5 September 2014:24
Council lawyers claim the onus is on us to provide proof of longstop. After
12 years all we have are the invoices that were provided by the Claimants and I notice a page attached to the invoice with cash payments that were paid
to the other stonemasons involved in this job. The contract with
Mr Abraham was with himself and Deirdre from Schist Happens who quoted the job, won the contract and sub contracted the work out. Paul from Able Stonemasonary did most of the work in August as per his signature signing for the cash portions of the job. You can clearly see someone has signed Stage 1 completed. The second portion was done between September to early December most of which was completed pre November 26. The final balance owed in December was $4500 + GST which at our labour rate of
$210 per meter equals 21 meters (and I don’t know what portion of that 21 meters was done between 26 November and 7 December). I don’t recall
which part was done last of all on the job. The onus was put onto David
Barr to prove this and he has failed to do so instead he uses stand over tactics and is trying to tell the Tribunal how they should rule. The point still remains that the only stonework pulled down was the small wall (which one expert says was window flashing) so I guess it will have to come down to the two experts left to fight it out as to why that wall leaked as there seems to be a difference of opinion.
[23] This prompted a further response from the Council in a memorandum of
5 September 2014 in which the Council suggested:25
Accordingly, for the reasons stated below, the Council respectfully seeks a direction that Albany Stonemasons be given an opportunity to address the following issues:
(a) Whether all Albany Stonemasons’ work was completed prior to
26 November 2002; and
(b) Whether any of Albany Stonemasons’ work (including its
intersection with other elements) has:
(i) Directly resulted in leaks and/or damage; or
(ii) Covered in a defective substrate; or
(iii) Relied upon a defective substrate; or
24 Common bundle of documents, vol 2, at 552.
25 Memorandum of counsel for the first respondent in response to fifth respondent’s letter of
5 September 2014, dated 5 September 2014, at [4].
(iv) Been constructed in a manner where it could not be effectively waterproofed.
[24] It submitted that this was necessary because:26
In order for Albany Stonemasons to establish a complete limitation defence, it must show that all work was completed prior to 26 November 2002.
[25] The Tribunal issued its Procedural Order 8 removing Albany Stonemasons on
18 September 2014.
[26] In my view, the Tribunal was entitled to conclude that Albany Stonemasons’s liability, if any, would have to arise from work done after 26 November 2002. However, it was premature for the Tribunal to conclude that any liability must relate to the sill flashing and to take into account the uncertainty that this work is time- barred.
[27] Pursuant to s 73 of the Act, the Tribunal has the power to request Albany Stonemasons to address the points raised by the Council in [23] above. A party must comply with any request or direction of the Tribunal.27 If it does not, the Tribunal is entitled to draw any reasonable inferences it thinks fit from the failure to comply.28
[28] I find that the Tribunal made the following errors:
(a) The Tribunal’s assessment of the weight of the evidence was flawed because it did not gather all the evidence it could: it reached its decisions on the weight of the evidence without requiring Albany Stonemasons to address the points raised by the Council. Those points go directly to the Council’s liability to the claimant and, on the cross-claim filed by the Council, to Albany Stonemasons’s liability.
(b)The Tribunal’s conclusion as to uncertainty should have weighed in the Council’s favour, not Albany Stonemasons’s. The finding that
responsibility for the installation of flashings “cannot be resolved on
26 At [11].
27 Weathertight Homes Resolution Services Act 2006, s 73(2).
28 Section 75.
the information currently before me” required the Tribunal to seek
specifically further information.
(c) The time bar factor should not have been used as a factor against the Council’s position when Albany Stonemasons had not supplied direct evidence relating to the work done after 26 November 2002. The finding that “it is uncertain whether the sill flashing defect was created before or after 26 November 2002 which is the cut-off date for limitation purposes” and that “this would be a matter for determination at the hearing”, plus the conclusion that “as the majority of the work was completed prior to 26 November 2002, the sill flashing defect may well be found to be limitation-barred”, all point to a need to either gather all available information possible before deciding the removal issue or that such uncertainty means that the claim should be adjudicated.
(d)The Tribunal’s reliance on the $10,000 to $15,000 estimate failed to take into account consequential damages. It misses the point that there is also a claim against the Council for consequential loss or damages. That is the point of the Council’s cross-claim and questions at [23] above relating to work other than the sill flashing.
(e) In any event, even if the potential liability of Albany Stonemasons is at a maximum of $10,000 to $15,000, that is not a de minimis amount. The Act establishes a lower-value claims process for claims whose repair costs are $20,000 or below. Given the uncertainties in the evidential position, it is not fair to the Council, nor appropriate considering the Tribunal’s jurisdiction, to deprive the Council of the opportunity to seek contribution or indemnity from Albany Stonemasons even in the liability range identified simply on the basis that its potential liability is one to one-and-a-half percent of the repair
cost.29 Disproportionality is not a factor that should be taken into account unless the potential liability is de minimis.
(f) The Tribunal also took into account the fact that, unlike in the High Court, costs in the Tribunal lie where they fall. The Tribunal felt that it would be unfair for Albany Stonemasons to stay in the proceedings because the legal costs that it would incur would not be proportionate to its liability. The equation as to the proportionality of potential costs to potential liability considered in the light of assessment of risk of liability is reliable only if the component parts are reliable. Here, the Tribunal did not consider cost mitigation measures, did not have a reliable estimate of potential liability and had not, through its inquisitorial processes, gathered all the evidential material relevant to the issue. The Tribunal should have looked at cost mitigation measures: for example, the issue of the sill flashing could be isolated and dealt with in a single phase of the adjudication hearing with Albany Stonemasons being excused from participation in the rest of the proceeding. Another option would be for Albany Stonemasons to abide the decision of the Tribunal. The allegations would still have to be proved on the balance of probabilities and on the Tribunal’s analysis it would be better off financially even if it were to lose.
Decision
[29] The Council is entitled to seek to share any liability it might have to the claimant with Albany Stonemasons if it is fair and appropriate in all the circumstances. This is not a case where the evidence picture is so clear that it can be concluded that the claim against Albany Stonemasons is untenable. Therefore, to deprive the Council of its right to proceed against Albany Stonemasons requires significant factors going to fairness and appropriateness.
[30] For the reasons discussed in [28], I find that the Tribunal erred in taking into account certain matters and failing to take into account other matters. It should not,
29 Procedural Order 8, at [9].
therefore, have concluded it was fair and appropriate in all the circumstances to remove Albany Stonemasons as a party. I allow the appeal and quash the order for removal. Albany Stonemasons will continue, at least for the time being, as a party to the proceedings.
[31] It might be that once the Tribunal has before it a complete evidential picture it might wish to revisit the matter, but that is for the Tribunal and the parties.
Costs
[32] Unlike the situation in the Tribunal, in the High Court costs generally follow the event. I award costs to the Council on a 2B basis. If the parties cannot agree,
they are to be calculated by the Registrar.
Brewer J
Solicitors: Simpson Grierson (Auckland) for Appellant
Young & Caulfield (Auckland) for Fifth Respondent
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