Auckland Council v Weathertight Homes Tribunal

[2013] NZHC 3274

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-002857 [2013] NZHC 3274

UNDER  Part 1 of the Judicature Amendment Act

1972

IN THE MATTER             of the Weathertight Homes Resolution

Services Act 2006

BETWEEN  AUCKLAND COUNCIL Plaintiff

ANDWEATHERTIGHT HOMES TRIBUNAL First Defendant

ANDPAUL EWEN CALLAGHAN and MARIE-FRANCE JACQUELINE SUZANNE CALLAGHAN Second Defendants

Hearing:                   17 October 2013

Appearances:           D J Barr and K R Lydiard for Plaintiff

B P Rooney for Second Defendants

Judgment:                9 December 2013

JUDGMENT OF ELLIS J

This judgment was delivered by Justice Ellis on 9 December 2013 at 4.30 pm

pursuant to R 11.5 of the High Court Rules.

Registrar / Deputy Registrar

Date................................

AUCKLAND COUNCIL v WEATHERTIGHT HOMES TRIBUNAL & OR [2013] NZHC 3274 [9 December

2013]

[1]      This judgment relates to an application for judicial review by the Auckland Council of a decision of the Weathertight Homes Tribunal (WHT) not to remove the Council as a party to proceedings in the WHT involving the second defendants, Mr and Mrs Callaghan.  The application for removal was made on the grounds that there had been a want of prosecution on the Callaghans’ part.   The history of the matter in the WHT is therefore of some significance and I set it out first below.

Background

[2]      On 26 November 1993 a building consent for construction of a house at 36

Benbow Street was issued by the Council.  On 8 July 1994 the dwelling passed its final inspection, and on 22 July 1994 the code compliance certificate was issued.

[3]      On 26 August 1999, Mr and Mrs Callaghan became the registered proprietors of the property.

[4]      On 5 December 2003, the Callaghans applied under s 9 of the Weathertight Homes Resolution Services Act 2002 for an  assessor’s report in relation to the dwelling.   This had the effect of commencing proceedings for limitation purposes some nine-and-a-half years after the dwelling was constructed. The limitation period is ten years.

[5]      On 18 October 2004 the claim in respect of the dwelling was determined by the Department of Building and Housing to be eligible.  It was not, however, until

24 November 2011 that the Callaghans applied for adjudication of their claim in the WHT.1   The reasons for the delay are not particularly material because the WHT has found that it was both inordinate and inexcusable.   That finding has not been challenged by either party.

[6]      At the time the Callaghans applied for adjudication they named a Mr Peter

Tubberty as  a  respondent  in  the  proceeding.    Mr Tubberty was  the  director  of

Kenview Homes Limited, the company responsible for constructing the house.2    It

1      The adjudication is governed by the Weathertight Homes Resolution Services Act 2006.

2      Kenview Homes Limited was struck off the Companies Register in 2003.

was alleged that he was liable as the developer/project manager of the building project.

[7]      Mr Tubberty, however, applied for removal on the grounds that there was insufficient evidence to establish a claim against him, in part because relevant documents  had  been  destroyed  and  memories  had  faded  in  the  lengthy  period between the construction of the dwelling and the bringing of the claim against him. As a result, he was removed from the proceeding by an order made by the WHT on 2

April 2012.  The WHT held that the effluxion of time meant that there was unlikely to be sufficient credible or reliable evidence available in relation to the allegations against Mr Tubberty.

[8]      The Callaghans appealed to the District Court, but on 23 November 2012 that Court upheld the WHT’s decision.   The Court agreed with the Tribunal that the prospect of a successful claim against Mr Tubberty was negligible due to the time that had elapsed and associated difficulties relating to documentary and other evidence.

[9]      On 12  December 2012  the Callaghans  applied  to  join,  instead,  Mr John Hughes to the proceeding alleging that he was the builder of the house and that he had had responsibility for overseeing the site and the sub-contractors.

[10]    Mr Hughes opposed the joinder application on the basis that there was insufficient evidence to establish a claim against him, that he had been a labour-only carpenter, and that he was severely prejudiced by the claimants’ delay in prosecuting the claim.

[11]     On 13 March 2013 the WHT declined to join Mr Hughes to the proceeding. In doing so, they held inter alia that:

(a)      due to the passage of time (19 years) it would be extremely difficult to resolve the inevitably conflicting evidence as to the involvement and respective responsibility of Messrs Tubberty and Hughes in the construction of the dwelling;

(b)      there had been an inordinate and inexcusable delay between filing the

application for an assessor’s report and the bringing of the claim; and

(c)       the delay severely prejudiced Mr Hughes because his own records and those of his employer had been destroyed.

[12]     No appeal from that decision was lodged by the Callaghans.

[13]     On 28 March 2013 the Council applied to be removed from the proceedings on the basis that the delay by the Callaghans was inordinate and inexcusable and that it, too, had been severely prejudiced by it.  In terms of the particulars of the prejudice said to have been suffered by the Council, the application stated that:

Mr Hughes, from whom the Council would otherwise have been entitled to seek contribution, has been removed from the proceedings due to want of prosecution; and

The evidence of Mr Hughes in opposition to his joinder suggests that a tenable claim may have been made against Mr Tubberty had it proceeded in a timely fashion.

...

In other words, as a direct result of the claimants’ delay in applying for adjudication of their claim, the Council can no longer seek a contribution from co-respondents (or potential co-respondents).

The Tribunal’s decision

[14]     The  WHT  declined  the  Council’s  application  for  removal  by  way  of  a procedural order dated 24 April 2013.  As I have indicated, the WHT proceeded on the basis that the Callaghans’ delay had been both inordinate and inexcusable.  The critical part of the WHT’s decision can be found between [15] – [19] which reads as follows:

[15]     This is not a case where the Council is suggesting it has lost clear records, such as was the case with Mr Hughes, or that the Council is unable to adduce evidence about its general policies and practices at the time the house was built.  The Council is not arguing that it is unable to defend the claim against it due to the delay by the claimants.  The only prejudice the Council is claiming is that it has missed out on the ability to seek a contribution from Mr Hughes and possibly Mr Tubberty.

[16]      In  relation  to  the  argument  regarding  Mr  Hughes  the  claimants submit that in order for the Council to prove that they have been seriously prejudiced it would need to establish that it would have had an entitlement to contribution from Mr Hughes.  They say that there is not sufficient evidence for this determination to be made in the context of a removal application. Mr Rooney also notes that if Mr Hughes’ evidence is correct he was only a labour-only framing carpenter and was unlikely to have any significant liability for the defects which have caused leaks to the Callaghans’ home.  In addition he says there is no evidence that Mr Hughes has any financial ability to meet any obligation even if he had been joined and found liable.  In any event his contribution would have been significantly less than the 80 per cent suggested by the Council.

[17]      The claimants’ arguments have some merit.  I am not satisfied based on the information currently before the Tribunal that Mr Hughes, if he was only the labour only builder, would have had significant liability given the fact that the majority of the defects relate to the stucco cladding.  In addition the fact that one potential party is no longer available does not in my view constitute undue prejudice for the purposes of a removal application unless there is reasonable evidence that that party would have a substantial contribution to pay.   There is no such evidence.   There are a number of reasons  why  potential  respondents  are  unable  to  be  joined  such  as bankruptcy, death, unable to be located.  I further note that the Council was not the party who applied to join Mr Hughes nor did they make any attempt to join him when the claim was first filed with the Tribunal.

[18]      In addition I do not accept that Mr Hughes’ evidence in opposition to his joinder provides tenable evidence of a claim against Mr Tubberty.  The most Mr Hughes’ evidence does is refute Mr Tubberty’s evidence that Mr Hughes was the project manager.  It does not put Mr Tubberty on site and all it does is raise the possibility of an argument that Mr Tubberty, as director of the building company, personally owed a duty of care to ensure the building work was appropriately supervised and was negligent in failing to do so. The fact that Mr Hughes may not have been the project manager does not necessarily mean that there was no adequate project management.   In any event the reason why Mr Tubberty could not be rejoined was not because of the claimants’ delay but because he had already been removed and that decision was upheld on appeal.

[19]      Whilst I have some sympathy for the Council and accept that they are likely to suffer some prejudice because of the inexcusable delay I do not consider that they have established that they will be seriously prejudiced by the claimants’ delay in prosecuting the claim.  It is still possible at hearing to do justice between the parties.   The application for removal accordingly fails.

The application for judicial review

[15]     Because s 93 of the Weathertight Homes Resolution Services Act 2006 (the Act) confers a right of appeal only where a claim “has been determined by the tribunal” the Council has no right of appeal from the procedural order.  Instead, it filed an application for review of the decision, on the grounds that the refusal by the

WHT’s view that the Council had not been severely prejudiced by the delay and (consequently) its refusal to exercise its power to remove the Council as a party under s 112 of the Weathertight Homes Resolution Services Act 20063 was:

(a)       unreasonable; and

(b)inconsistent with its finding that Messrs Tubberty and Hughes had been severely prejudiced.

[16]     The inconsistency pleading more particularly alleges that:

(a)      there was no allegation that the Project Manager/Site Supervisor was someone other than Mr Tubberty or Mr Hughes;

(b)due to the absence of documentation the WHT and the Council are unable to determine which party undertook that role;

(c)      had such documentation existed and had memories been fresh, Messrs Tubberty and Hughes would likely be able to identify other potentially liable tradespeople; and

(d)if all relevant tradespeople could be identified and joined then the Council would likely be able to recover contributions of 80 to 85 per cent of the total judgment sum.4

Discussion

[17]     In  Snelling  v  Christchurch  City  Council,5   French  J  held  that  want  of prosecution could constitute grounds for removing a party under s 112.  She referred

3      Section 112 relevantly provides:

(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.

4      It is not in dispute that 15 – 20 per cent is the standard apportionment for local authorities under the Law Reform Act 1936, where (for example) the builder and other responsible tradespeople are parties to the proceedings.

5      Snelling v Christchurch City Council HC Christchurch, CIV-2010-4309-2344, 9 August 2011.

to the principles governing the discretion to strike out for want of prosecution in the

High Court, namely that an applicant must show that:6

(a)       The plaintiff has been guilty of inordinate delay. (b)    Such delay is inexcusable.

(c)      The delay has seriously prejudiced the defendant.

(d)The over-riding consideration is whether justice can be done despite the delay.

[18]     Then, the Judge said:

[44]      In my view, these principles neatly encapsulate what would be fair and  appropriate  in  all  the  circumstances.  If  the Tribunal  concluded  that justice could still be done notwithstanding delay, it would in my view be unthinkable that the Tribunal could nevertheless remove a party. Conversely, if it was satisfied justice could not be done, it would be a perverse result for it to withhold removal.

I agree.

[19]     As noted above, the WHT in this case had already determined (in the context of the removal applications by Messrs Tubberty and Hughes) that the delay by the Callaghans in prosecuting their claim was inordinate and inexcusable.   It did not seek to depart from that finding in the context of the Council’s application and the decision now under review cannot be (and has not been) attacked for unreasonableness or inconsistency in that regard.

[20]     Rather,  the  central  question  in  this  application  is  whether  the  WHT’s

assessment of the absence of serious prejudice arising from the delay can be impugned on the two grounds of review advanced by the Council.

6      At [42], rferring to Lovie v Medical Assurance Society New Zealand Ltd [1992] 2 NZLR 244 (HC).

[21]     The  Council  relied  on  two  decisions  of  this  Court  in  support  of  the proposition that an inordinate and inexcusable delay that resulted in a defendant’s inability to join third parties could constitute the relevant serious prejudice.

[22]     The first of these was Stewart v Grey River Gold Mining Ltd.7   In that case, Master Hansen (as he then was) had held that the loss of a defendant’s ability to pursue a third party could be taken into account in determining the existence of serious prejudice.   Notably, however, Stewart was not concerned with a tortious claim, and the issue of solidary liability, which I have found to be a powerful factor against the Council’s position in the present case,8 did not arise.

[23]     The  second  decision  relied  upon  was  Snelling,  to  which  I  have  already referred above.  There, the WHT had granted the Council's application and ordered that the Christchurch City Council be removed as a party on the grounds of want of prosecution. As the High Court recorded:9

... the Tribunal held:

(a)       The Snellings’ delay after obtaining the assessor’s report in August

2003 had been inordinate and inexcusable.

(b)      The fact the Council’s building consent officer was now dead did not constitute undue prejudice to the Council.

(c)       However, the delay had seriously prejudiced the Council in other ways because in the intervening years the claim had increased from

$20,864  to  $218,494.15  and  because  the  other  respondents  had

become  more  difficult  to  trace  and  the  chances  of  recovering contribution from them was slight.

(d)       It was unlikely justice could now be done.

[24]     At [71] of her decision French J footnoted the decision in Stewart, and said:

As for the loss of the right to seek contribution from a co-defendant or respondent, I accept that this too is a matter which has been held capable of amounting to undue or serious prejudice for the purposes of the strike out rule.

7      Stewart v Grey River Gold Mining Ltd HC Christchurch A517/78, 19 December 1991.

8 See [27] – [31] below.

9 At [20].

[25]     The outcome of the appeal in Snelling was that the High Court reinstated the Council as a party, essentially on factual grounds.  For present purposes it suffices to note that the Judge recorded that the Council had (by the time of the appeal) “... eschewed any reliance on the loss of the ability to seek contribution from other respondents as a ground of prejudice” because (it seemed) the evidence suggested that even back in 2003, other respondents were unable to be found.   French J’s comment at [71] was therefore obiter.

[26]     Turning now to the case at hand, I accept that the Callaghans’ delay has meant that (at least) two parties who were potential joint tortfeasors with the Council have been removed from the WHT proceedings.   I therefore also accept that the Council has been deprived of any chance of obtaining contribution from them.  Of course it is impossible to quantify or value that chance with any degree of precision and, indeed,  there remains the quite real  possibility that both Mr Tubberty and Mr Hughes would not have been found liable to the Callaghans at all.  This is the point made by the WHT at [17] and [18] of its Procedural Order.

[27]     But  even  putting  that  point  to  one  side,  it  seems  to  me  that  the  more fundamental stumbling block for the Council is the operation of in solidum liability. Solidary liability means that, as a matter of legal reality, the Council is potentially wholly liable for the Callaghans’ loss regardless of who else might be joined as parties and found to be jointly and severally liable for the same loss.  In other words, the extent of the Council’s liability to the Callaghans is unaffected by the presence or absence of other tortfeasors.

[28]     The point I have just attempted to articulate is perhaps better made by the New Zealand Law Commission in its report entitled Apportionment of Civil Liability.10   The Commission said at [6] and [7]:

[6]       On the basis that a defendant’s liability is for the whole of the loss caused by the defendant’s wrongdoing, then that liability is unaffected by the fact that the behaviour of some other party has caused the same loss.  Loss may be caused to a building owner by the manner in which the builder carries out the works and by a failure in supervision by the owner’s architect. Both builder and architect are liable for the full amount of the loss.   As between P and D1, it is simply irrelevant that P also has a claim against D2,

10     Law Commission Apportionment of Civil Liability (NZLC R47, 1998).

or that D1 may be entitled to claim contribution from D2.   The essential basis of the attack on solidary liability, while it can be (and in the literature and in the various submissions on the Commission’s working paper is) expressed in differing ways really boils down to the contention that it is unjust that a defendant’s liability should exceed that defendant’s share of responsibility for the loss.   The rejoinder to this proposition can be stated equally roundly.  The fallacy of the contention that it is unfair to D1 that D1 should be liable to compensate P for more than D1’s proportion of the loss is that such an argument introduces into an examination of D1’s liability to P the logically irrelevant issue of D2’s liability to P.   Fairness among defendants requires a consideration of degrees of responsibility, but any such  consideration  is  irrelevant  to  the  question  of  what  as  against  the plaintiff is required to ensure fairness to defendants.  Even if, as between D1 and D2, D1 may be only five percent to blame, as between P and D1, D1 is

100 percent to blame.

[7]       There is a complaint that the solidary rule imposes liability in excess of responsibility.   But the whole basis of the law of civil liability is that quantification is determined not by the degree of the defendant’s fault but by the extent of the injury to the plaintiff.   Trifling negligence, a momentary inattention for example, can cause horrific damage. Gross negligence can result in minor or no damage.  As between plaintiff and defendant it is not the fault but the loss that is measured, and there is no reason why this principle should cease to apply simply because there is more than one wrongdoer.  If there is injustice in substantial sums being recoverable from a professional firm whose error is very small  when measured  against the heinousness of the conduct of a now insolvent wrongdoer who has also caused the loss, the remedy for such injustice must lie either in an examination of the duty imposed by the law on the professional firm or in the rules of causation applied.  Either way such injustice is neither consequent on nor reason for changes to the rules as to contribution.  Contrary to the assertions of the opponents of joint and several liability, a defendant’s individual full responsibility for an injury that was an actual and proximate result of her tortious behaviour does not become partial or minimal, simply because other defendants’ tortious behaviour was much worse, individually or in the aggregate.   Otherwise, plaintiffs would be subject to a perverse “tortfest”, in which the more defendants there were, or the worse they behaved, the less individual responsibility each defendant would bear for the injury, even though her tortious behaviour remained constant and was an actual and proximate cause of the entire injury.

(citations omitted, emphasis added)

[29]     Although one instinctively has some sympathy for the Council’s position, it is not ultimately a compelling one.  In particular, the logical corollary of the Council’s stance is that, notwithstanding that the available evidence might unequivocally establish that the Council’s negligence was an operative cause of all of the Callaghans’ losses, it should escape liability all together, and the Callaghans should not be compensated at all.  On the Council’s analysis, it would not even be liable to contribute the 15 – 20 per cent that is standard in such cases.

[30]     And while I accept that there is, at least, contingent prejudice to the Council in its inability to join other respondents with whom it might ultimately be able to share the load, it is only a chance that has been lost; the prejudice is necessarily inchoate.   Importantly, the Council has not said that its ability to defend the claim against it by the Callaghans has been impeded by the delay.  There are, accordingly, no fair trial issues strictly so called.  It would in my view be wrong in principle for the Council to escape its liability entirely simply because the others who are also potentially liable for the same loss cannot now be held to account.

[31]     Because of the way in which solidary liability operates, it may be that a local authority’s inability, on account of delay, to seek contribution from joint tortfeasors in a leaky home case can never, without more, constitute the serious prejudice that is required for removal on want of prosecution grounds.  But it is neither necessary nor desirable to determine that point.  I merely note that the answer might conceivably be different if, for example, the Council could establish that there was some other person or entity who:

(a)      was  clearly  responsible  for  the  same  damage  and  from  whom contribution  as  a  joint  tortfeasor  could  therefore  ordinarily  be obtained; and

(b)existed  and  was  solvent  at  a  time  when  the  proceedings  could reasonably have been initiated and pursued; but

(c)      had later, but during the period of delay, ceased to exist or become insolvent.

[32]     Even, then, however, the position would not, in my view, be clear cut.  But in any event, that is not this case.

[33]     So, in short, the WHT’s decision not to remove the Council was not in my view unreasonable.   Nor was it inconsistent with its earlier decisions  removing Messrs Tubberty and Hughes.  Their positions were materially different from that of the Council.   The Council does not say that its ability to defend the Callaghans’

claim against it is impeded by the destruction  of documents or the vagaries of memory.  The fact that it may be unable to seek contribution from others who have been removed for that reason is beside the point.

[34]     The application for review is dismissed accordingly.   The Callaghans are entitled to their costs on a 2B basis, which I trust can be agreed.

Rebecca Ellis J