Body Corporate 188529 v North Shore City Council HC Auckland CIV 2004-404-3230

[2011] NZHC 1064

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2004-404-3230

BETWEEN  BODY CORPORATE 188529 AND ORS Plaintiffs

ANDNORTH SHORE CITY COUNCIL AND ORS

Defendants

Hearing:         1 September 2011

Counsel:         G D Shand and J Watkins for Blue Sky Holdings Ltd

D J Heaney SC and J Morrison for North Shore City Council

Judgment:      1 September 2011

(ORAL) JUDGMENT (NO. 8) OF HEATH J

Solicitors:

Grimshaws, PO Box 6646, Auckland

Heaney & Co, PO Box 105391, Auckland

BODY CORPORATE 188529 AND ORS V NORTH SHORE CITY COUNCIL AND ORS HC AK CIV 2004-

404-3230 1 September 2011

Introduction

[1]      This  proceeding  was  remitted  by the  Court  of Appeal[1]   for  rehearing  on questions of damages, consequent upon that Court’s decision to allow, in part, an appeal against my judgment of 30 April 2007.[2]    Subsequently, the case went to the Supreme Court[3]  but nothing said in that judgment affects the need to resolve those questions remitted by the Court of Appeal.

[1] North Shore City Council v Body Corporate 188529 [Sunset Terraces] [2010] 3 NZLR 486 (CA).

[2] North Shore City Council v Body Corporate 188529 [2008] 3 NZLR 479 (HC).

[3] North Shore City Council v Body Corporate 188529 [2011] 2 NZLR 289 (SC).

[2]      The remaining questions involve quantum, in respect of claims by Blue Sky Holdings Ltd (Blue Sky) that were rejected in my original judgment.  The Court of Appeal took the view, contrary to mine, that the North Shore City Council (the Council) did owe a duty to those for whom Blue Sky acted as a trustee.

[3]      A hearing took place today to ensure the remitted part of the proceeding was ready for trial in late February 2012.  Two interlocutory applications, both brought by the Council, were also heard. They were:

(a)      An  application  for  an  order  permitting  inspection  of  units  in  the Sunset Terraces complex that had previously been the subject of remedial work undertaken by Gunac South Auckland Ltd (Gunac).

(b)An application to join Mr Beran, as a third party to the proceeding, on the basis that he was responsible for supervising the work carried out by Gunac and may have done so in a negligent manner.

[4]      Blue Sky oppose the applications.   With regard to the application to join

Mr Beran, the primary point of concern was the possibility of losing the February

2012 fixture if joinder were permitted.  However, Mr Shand for Blue Sky made it clear that on the basis that timetabling orders could be made to safeguard the trial

date, its opposition was withdrawn.

Inspection application

[5]      I deal first with the inspection application.   The Council contends that it needs leave to inspect and to undertake invasive testing of all but two units that form the Blue Sky claims, namely, Units E, I, J, K, M, P, Q, R and S.  Blue Sky owns two other units within the complex, Units A and B, but they have not been the subject of remediation work.

[6]      Blue Sky says that the remediation carried out by way of targeted repairs by Gunac is defective and has not resulted in compliance with the relevant building code.  No building consent was obtained for the work.

[7]      The issue is relevant to mitigation.   It was raised before me at the trial at which I was asked to give a ruling in principle, on whether the claims in respect of the targeted repairs could still be made on the basis that it was failed mitigation.  I declined to answer that question and indicated that further evidence was required. My comments on that issue are set out in my judgment of 30 April 2007.[4]

[4] North Shore City Council v Body Corporate 188529 (unreported reference) at paras [588]–[599]. The relevant paragraphs have not been included in the reported version of the judgment.

[8]      The relevance of the testing goes to the fact that Blue Sky claims the full costs of recladding all units that it owned, including those relating to units on which work was done by Gunac.

[9]      I have read evidence from Mr Clinton Smith, a registered building surveyor, in support of the application.   He was instructed to undertake an assessment of whether or not  apartments  subject  to  the remedial  work  was  performing to  the standard required by E2 of the Building Code.  In short, the question is whether the external building envelope prevents ingress of moisture to the required extent.

[10]     I am satisfied from Mr Smith’s evidence, that further inspection of the units

in issue is desirable.  Jurisdiction to make such an order springs from r 9.34 of the

High Court Rules, which provides:

9.34     Order for inspection, etc

(1)      The court may, for the purpose of enabling the proper determination of any matter in question in a proceeding, make orders, on terms, for—

(a)      the inspection of any property:

(b)      the taking of samples of any property: (c)  the observation of any property:

(d)      the measuring, weighing, or photographing of any property: (e)     the conduct of an experiment on or with any property:

(f)       the observation of a process.

(2)      An order may authorise a person to enter any land or do anything else for the purpose of getting access to the property.

(3)      In this rule, property includes any land and any document or other chattel, whether in the control of a party or not.

[11]     Although Mr Shand, for Blue Sky, was critical of the time it has taken for the Council to make this application and was anxious to retain the February fixture, following discussion between counsel and myself it became clear that as long as the inspections could be timed to ensure the fixture was retained, it was in the interests of justice for an order to be made.  Mr Shand did not press his opposition, once that position was reached.

[12]     I am satisfied that the inspection of the units and the taking of samples from the units is required in order to enable the Council to prepare adequately for the quantum hearing in February.  In terms of r 9.34(1), I consider any order should be made on terms.

[13]     While virtually all of the present owners of the units have been served with the application, the time they have had to respond was limited.   In those circumstances, they should be given an opportunity to oppose before inspections are carried out.  Further, because there will be entry into premises occupied by tenants, it is important that the tenants be given notice in the same way.  Obviously it will be necessary for the Council to pay the costs of restoring the property to its current state

after the testing has been completed and to take steps to ensure the invasiveness of the testing is kept to the minimum extent possible.

[14]     On that basis, I make the following orders:

(a)      The Council is permitted to enter units E, I, J, K, M, P, Q, R and S of the Sunset Terraces complex to gain access to each unit to carry out an inspection and to undertake invasive testing for the purpose of determining whether remediation work undertaken by Gunac between

2004 and 2007 was compliant with Building Code requirements at the time the work was undertaken.

(b)The person authorised to undertake the inspection and to carry out the tests is Mr Clinton Smith, of Auckland, a registered building surveyor, with such assistance as he may require.   The tests shall not extend beyond those that Mr Smith has already carried out in respect of Unit O, to which reference is made in his affidavit in support of the application sworn on 9 August 2011.

[15]     The order is made on the following terms:

(a)      A sealed order shall be served on all owners of the relevant units and the tenants occupying those units, on or before 9 September 2011.

(b)At the same time the Council shall serve a written notice on each of the  owners  and  tenants  indicating  that  any  application  to  vary or rescind the orders made, must be made to this Court on notice to Blue Sky and counsel, on or before 16 September 2011.  If an application were made, the Registrar shall set it down for hearing before me at

9am one day during the week of 19 September 2011.

(c)      Inspections in respect of the Units for which service has been validly effected and no objection has been made, shall start no earlier than

10am on 27 September, to be concluded no later than 5pm on 28

September 2011.[5]

[5] Those dates have been brought forward to accommodate difficulties in the dates fixed at the hearing, as notified in Mr Heaney SC’s memorandum of 1 September 2011

[16]     In addition to Mr Smith, the experts for Blue Sky, Messrs Grigg and Jordan, may be present when the tests are undertaken.  Mr Beran is also to be served with the sealed order which shall identify that he too is entitled to be present.

[17]     Following completion of the inspection and testing, the Council shall pay for the restoration of the property to the condition in which it was in when inspections are undertaken.

[18]     Leave to apply is reserved if further directions are required.

Application for joinder

[19]     In relation to the application to join Mr Beran, I am satisfied that joinder can be  ordered  on  strict  terms  which  should  safeguard  the  hearing  scheduled  for February 2012.

[20]     The draft Statement of Claim against Mr Beran as a proposed third party alleges negligence in respect of the supervision and undertaking of the relevant remedial work.  Mr Beran has already given evidence, at least to some extent on this topic, at the hearing which led to my judgment of 30 April 2007.

[21]     I make the following orders on the application for joinder:

(a)       Leave is granted to the Council to issue a third party notice against Mr

Beran.

(b)The Third Party notice, a Statement of Claim and a sealed order shall be served on Mr Beran, on or before 6 September 2011.

(c)       Mr Beran shall file and serve a Statement of Defence, on or before 30

September 2011.

[22]     The Registrar shall convene a conference in Court for chambers before me at

9am one day during the week of 17 October 2011, when I can consider if any further directions are required.  That date has been fixed by reference to the new date by which the Council is required to serve signed witness statements in respect of the quantum hearing, namely 14 October 2011.

[23]     At that conference, I will consider whether the grounds of defence advanced by Mr Beran will readily enable the hearing to be completed in the time allocated.  I shall make further directions in relation to the third party claim at that time, by way of any witness statements that require to be exchanged and any issues of discovery that might arise.  The orders I have made should enable the proceeding to be heard without difficulty during the time allocated from 27 February 2012.

[24]     The  additional  information  that  will  be  gathered  through  the  inspection should also allow sensible discussions to take place as to settlement as between the parties and Mr Beran.  That is a secondary advantage of the orders I have made.  I am confident the parties will take advantage of that opportunity should there be a real prospect that this long outstanding proceeding can be settled.

[25]     All questions of costs are reserved.

P R Heath J