Body Corporate 188529 v North Shore City Council HC Auckland CIV 2004-404-3230
[2008] NZHC 2300
•30 April 2008
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2004-404-3230
BETWEEN BODY CORPORATE 188529 AND ORS Plaintiffs
ANDNORTH SHORE CITY COUNCIL First Defendant
ANDROBERT HENRY GRAHAM BARTON AND KAY BARTON
Second Defendants
ANDR F COUGHLAN & ASSOCIATES Third Defendant
Hearing: 1, 8, 9, 10, 11, 12, 15, 16, 17, 23, 24, 25, 26, 29, 30, 31 October, 1, 5,
6, 19, 20, 21, 22, 23, 27, 28, 29 November, 3 and 5 December 2007
Counsel: M Josephson, J McTavish Butler and H K Harkess (on 3 December
2007) for Plaintiffs
D J Heaney, G R Grant, C J C McLean (on 17 November 2007) and
F L McGregor (on 19, 20, 21 December 2007) for First DefendantG Bogiatto for Second Defendants (leave to withdraw granted) A Maclean for Third Defendant
Judgment: 30 April 2008
JUDGMENT OF HEATH J
This judgment was delivered by me on 30 April 2008 at 2.15pm pursuant to Rule 540(4) of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Grimshaw & Co, Auckland Heaney & Co, Auckland George Boggiato, Auckland
Kidd Tattersfield Maclean, Auckland
BODY CORPORATE 188529 AND ORS V NORTH SHORE CITY COUNCIL AND ORS HC AK CIV 2004-
404-3230 30 April 2008
Contents
1. A “leaky home” case ...................................................................................... [1]
2. The proceedings in outline ............................................................................ [6]
3. The nature of the claims .............................................................................. [11]
4. What has caused the damage to the dwellings?
(a) The direct evidence of defects and damage ............................................... [27] (b) Expert evidence on defects and damage.................................................... [49] (c) The causes of water ingress ....................................................................... [58] (d) Inadequate waterproofing of the decks ..................................................... [64] (e) Inadequate waterproofing of the wing and parapet walls ........................ [68] (f) Lower level ingress...................................................................................... [73]
5. Can the Body Corporate sue?
(a) The Body Corporate’s claim ...................................................................... [81] (b) The scheme of the Unit Titles Act 1972..................................................... [83] (c) The body corporate rules .......................................................................... [103] (d) Analysis..................................................................................................... [117]
6. Does the Council owe a duty of care in tort?
(a) Development of a duty to “homeowners” ............................................... [125] (b) The duty to “homeowners” ...................................................................... [148] (c) Does the “homeowners” duty continue to apply?................................... [151] (d) Adapting the Council’s duty to contemporary circumstances ............... [178] (e) The effect on the duty of manifested damage.......................................... [223]
7. Causation principles
(a) How is causation established? ................................................................. [232] (b) Mitigation and intervening acts ............................................................... [239] (c) Economic loss claims ............................................................................... [248]
8. The nature of the Council’s functions
(a) Issue of the building consent ................................................................... [252] (b) The inspection process .............................................................................. [254] (c) Code compliance certification................................................................... [260] (d) Proportionality in compliance with regulatory obligations ..................... [266] (e) The individual claims
(i) Introductory comments................................................................ [268]
(ii) Mr and Mrs Sangha ................................................................... [276]
(iii) Mr Devlin ...................................................................................... [290] (iv) Michelle and Lisa Turner .............................................................. [305] (v) Mr Halford...................................................................................... [317] (vi) Mr and Mrs Parkinson ................................................................... [324]
9. The Blue Sky claims
(a) Background .............................................................................................. [336] (b) The residential/commercial divide........................................................... [344] (c) Does the Council owe a duty to a lessee? ................................................ [346] (d) Does the Council owe a duty to an assignee? .......................................... [363]
10. Analysis of individual proprietors’ claims against Council
(a) The successful claimants .......................................................................... [378] (b) Building consent issues ............................................................................. [379] (c) The inspection process .............................................................................. [408] (d) Code compliance certification .................................................................. [451]
11. Blue Sky’s misrepresentation claims against the Council.................... [466]
12. Claims in negligence against the developers.......................................... [473]
13. Claims in negligence against the designer
(a) The legal basis for the claims .................................................................. [487] (b) The factual background to the claim against the designer .................... [509] (c) Analysis: plans and specifications .......................................................... [539] (d) Analysis: Certificate of practical completion .......................................... [548]
14. Contributory negligence issues
(a) Legal principles .......................................................................................... [555] (b) The allegations of contributory negligence............................................... [568] (c) Inadequate inquiries and/or inspections ................................................... [569] (d) Pre purchase inspections ........................................................................... [576] (e) The Blue Sky units ..................................................................................... [579] (f) Failure to obtain a building consent for targeted repairs ........................ [580] (g) Contributory negligence issues: conclusions............................................ [581]
15. Contribution issues
(a) Introductory comments ............................................................................. [582] (b) Council and developers.............................................................................. [585] (c) Designer and developer/Council ............................................................... [587]
16. Targeted repairs: Is this failed mitigation? ........................................... [588]
17. Costs .......................................................................................................... [600]
18. Remaining issues ...................................................................................... [602]
19. A summary of determined claims........................................................... [606]
1. A “leaky home” case
[1] “Sunset Terraces” is a residential complex, situated in Sunset Road, Mairangi Bay. It is a linear unit title development comprising 21 townhouses, each of two storeys. The dwellings were built in 1997 and 1998, using untreated timber framing and monolithic cladding. “Harditex” was the product used to clad the buildings. The proprietors of the townhouses have strata titles. A body corporate was established on deposit of the unit plan.
[2] When completed, the units were not watertight. Moisture ingress has occurred. The wooden framing of individual units has rotted. In many cases, the decay has been severe. The body corporate and a number of individual unit owners sue the developer, the designer and the territorial authority to recover damages.
[3] The total losses claimed comprise the cost of driveway repairs (estimated at
$366,300, including GST), repairs to the exteriors of the units (approximately
$1,900,587, including GST), together with professional and other fees (yet to be quantified). The repair costs for the exterior of the building are premised on the need for the buildings to be re-clad, with a ventilated cavity, to comply with current building code requirements.
[4] Remediation work has been undertaken on a number of units at a cost of over
$800,000. That repair work is alleged to be defective. No claim has yet been brought against those who carried out this work; though, proceedings have been threatened. In this proceeding the plaintiffs claim those costs from the defendants, on the basis that the remedial work was a failed attempt to mitigate loss.
[5] Can the plaintiffs recover these losses from any or all of the three defendants?
2. The proceedings in outline
[6] Mr and Mrs Barton (the developers) conceived the townhouse development and were responsible for supervising the construction work that was undertaken through two companies which they controlled.
[7] The developers commissioned R F Coughlan and Associates (the designer) to prepare plans and specifications to obtain a building consent. Mr Coughlan (a sole practitioner) undertook the work. He submitted an application for a building consent to the North Shore City Council (the Council) in June 1997. The application was accompanied by plans and specifications. The application indicated that the development was likely to cost something in the order of $2.2 million to construct. The Council issued a building consent on 11 August 1997, after receiving some additional information it had requested.
[8] The construction phase began in late 1997 and continued into 1998. The Council undertook inspections of the development work during that period. The evidence is not entirely clear about how many inspections were carried out, but it was somewhere between 77 and 120. In any event, the Council charged the developers for only 77 inspections.
[9] Once construction work had been completed, a certificate of compliance with the New Zealand Building Code1 (the Code) was required. Either a private sector entity or a territorial authority could certify compliance.2 In this case, no private certifier was engaged. The Council (as territorial authority) issued an interim code compliance certificate for ten of the units on 29 May 1998. It issued a final code
compliance certificate on 11 September 1998. The second certificate related to all units, covering both the work certified in May 1998 and that undertaken subsequently.
1 This Code was made under Part 6 of the Building Act 1991; see Schedule 1 to the Building
Regulations 1992 (SR 1992/150)
2 See s 43(1) and (2) Building Act 1991
[10] Body Corporate 188529 (the Body Corporate) and a number of individual registered proprietors, lessees or assignees seek damages against the developers, the Council and the designer. No contractual obligations exist. All claims are brought for breach of tortious duties said to be owed by particular defendants to the plaintiffs. The claims are based, directly or indirectly, on weathertightness defects.
3. The nature of the claims
[11] The Body Corporate sues to recover for all losses suffered as a result of the defects that have led to damage to the development as a whole. One of the issues for determination is whether, and if so to what extent, a body corporate can sue for all damage to a unit title development caused by the negligence of someone involved in the construction project.
[12] Some of the individual owners also sue. They are:
a) Mr and Mrs Sangha, who own Unit D. They live in Australia and rent the property to a third party.
b)Mr Devlin, who was the former proprietor of Unit F. That unit is now owned by his company, Devlin Properties Ltd. That company leases the unit to an unrelated third party. Notwithstanding corporate ownership, the claim is brought in Mr Devlin’s name only.
c) Two sisters, Michelle and Lisa Turner, who are registered proprietors of Unit G. They live in the unit.
d)Mr and Mrs Parkinson, who presently live in the United Kingdom, are registered proprietors of Unit L. They lease their property to a third party.
e) Mr Halford, who is the registered proprietor of Unit N. He has, in the past, lived in the unit but it is presently rented to a third party.
I refer to these plaintiffs, collectively, as the individual proprietors.
[13] Mr Halford bought his unit in 1999. The remaining owners acquired their units after March 2000, a date by which all parties agree that structural damage had manifested itself.
[14] After completion of the units, a company called Porchester Ltd acquired title to Units A, B, E, I, J, K, M, N, O, P, Q, R and S. Porchester sold the units to individuals or companies. Those entities subsequently entered into a lease with Blue Sky Holdings Ltd (Blue Sky) as trustee for the Auckland Residential Property Trust (ARPT). Blue Sky subleased the properties to tenants and paid a fixed amount each week to each owner as rent. Blue Sky also entered into a management agreement with each owner for a fee. In effect, Blue Sky assumed responsibility for managing a rental property on behalf of each owner.
[15] Both Porchester Ltd and Blue Sky were part of the Blue Chip group. The duration of each lease was 182 weeks, with an ability to extend that lease for a period of up to one year, by mutual agreement. Following completion of that term, Blue Sky would continue to lease the units under a tenancy at will. After this proceeding was initiated, the registered proprietors assigned their respective rights of action to Blue Sky in an endeavour to foreclose the possibility that Blue Sky might not have standing to sue as lessee.
[16] The owners of Units C, H and L have elected not to participate in the present proceedings.
[17] The developers are sued for negligence. They are alleged to owe a “non- delegable” duty of care to the Body Corporate, individual proprietors and Blue Sky (as both lessee and assignee of the causes of action) to ensure that the construction work was carried out with proper skill and care.3 This duty is put on the basis of the developers’ role as construction supervisors and project managers.
3 These claims are based on Mt Albert Borough Council v Johnson [1979] 2 NZLR 234 (CA) at 240-
241 per Cooke J (for himself and Somers J), with whom Richardson J, at 242, concurred on this point.
[18] The developers are alleged to have been negligent in two respects. The first is that they failed to exercise proper skill and care in the construction of Sunset Terraces development; in particular that they failed to ensure that the building work complied with the Code. The second is that they were negligent in their capacities as project managers in supervising the construction work.
[19] At the conclusion of the hearing on 5 December 2007, I was satisfied that the developers had been negligent in both respects. However, because both the Council and the designer argued that no tortious duty of care was owed to any unit owner who acquired after March 2000, I did not enter judgment against the developers in favour of any unit owner who acquired after that date, for fear of compromising defences on which I had not ruled. For that reason, I entered judgment against the developers on liability in favour of Mr Halford only, together with costs and disbursements to be fixed by the Registrar on a 3C basis. Mr Halford was the only individual proprietor who had acquired a unit before 2000. I give brief reasons for that decision and the remaining claims against the developers later in this judgment.
[20] The Body Corporate, the individual proprietors and Blue Sky sue the Council, in negligence, for failing to exercise reasonable skill and care in performing three functions cast upon it by the Act.4 They allege that the Council was negligent in:
a) Issuing a building consent
b) Inspecting the work carried out under the consent
c) Issuing code compliance certificates in respect of the work undertaken.
[21] Blue Sky also sues the Council for negligent mis-statement. Land Information Memoranda were issued on 1 October 2002. The allegation is that the Memoranda falsely stated that a code compliance certificate had been issued for all
4 Relying upon Invercargill City Council v Hamlin [1993] 1 NZLR 374 (HC), [1994] 3 NZLR 513 (CA), [1996] 1 NZLR 513 (PC) and Dicks v Hobson Swan Construction Ltd (2006) 7 NZCPR 881 (HC)
units in the development. These plaintiffs contend that the statement was false because the Council (as certifier) knew it had no reasonable grounds to believe that the work complied with the Code.5
[22] The Body Corporate, the individual proprietors and Blue Sky sue the designer for negligent preparation of plans and specifications for the purpose of obtaining a building consent and for failing to exercise due care and attention in certifying practical completion of the construction work.6
[23] Both the Council and the designer deny any duty of care was owed by them to the body corporate, the individual proprietors or Blue Sky. If a duty were found, they contend that they were not negligent. If negligence were established, they submit that no loss was caused by any act or omission on their part.
[24] The Council and the designer also plead contributory negligence. Failure to mitigate loss is also raised.
[25] Early in the hearing it became clear, for two reasons, that it would be both impractical and undesirable to go beyond liability issues. First, there was not time for me to hear all quantum evidence; the hearing on liability itself lasted for 29 sitting days. Second, the basis on which any damages might be assessed would depend on particular findings of fact. It was preferable for quantum evidence to be directed to facts as found.
[26] One quantum issue I agreed to address concerns the so-called “targeted repairs”. The plaintiffs contend that those costs are claimable from the present defendants, as failed mitigation. The opposing view is that the remedial work constitutes a break in the chain of causation and that the plaintiffs are entitled only to sue those responsible for that work, assuming they were able to prove the work was defective.
5 “Reasonable grounds” was the test for issuing a certificate: see s 43(3) of the Building Act 1991
6 These claims are based on Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 394 (CA) at
406 (Richmond P) and 422 (Cooke J)
4. What has caused the damage to the dwellings?
(a) The direct evidence of defects and damage
[27] There is little, if any, direct evidence of the precise state of the dwellings at the time they were constructed. The developers did not give evidence. There was no contemporary photographic evidence. Only one tradesperson (Mr Joo) was called. The senior Council inspector (Mr Blanc) has, sadly, died. Other inspectors (understandably, given the passage of time) cannot recall their inspections of the development with any particularity.
[28] What is clear is that water ingress problems had been identified by early
2000, at the latest. Expression of those concerns led the Body Corporate to instruct Mr Sean O’Sullivan, a building surveyor contracted to Prendos Ltd, to inspect the development and report on apparent defects.
[29] Mr O’Sullivan was shown around the residential complex by Mrs Barker, one of the owners of Unit C. His inspection took place on 1 March 2000 and he provided a written report to the Body Corporate Secretary two days later. In his report of 3 March 2000, Mr O’Sullivan listed the following problems:
(a) Severe efflorescence showing as white marks on the cladding; (b) Cracks to the jointing of the fibrecement sheets;
(c) Inappropriately positioned joints in the fibrecement sheets; (d) Crumbling paint surface;
(e) Bubbling and blistering of the paint surfaces where they had been over painted.
(f) Incorrectly fitted head flashing for the garage doors as they are sealed to the surface of the cladding;
(g) Inadequate finishing to the roof which has caused water ingress into Unit C and also other units.
[30] Mr O’Sullivan advised that “efflorescence was caused by water ingress into and subsequent evaporation out of the jointing compound, bringing salts with it. He thought that the jointing compound had “free lime which [had] been washed through to the surface”. That meant that water was entering beyond the paint coating and the “stopping compound” was producing efflorescence.
[31] Mr O’Sullivan also reported cracking to the fibrecement sheets, movement between the window joinery and fibrecement sheets and problems arising from a leaking roofs. So far as the roof leak was concerned, he said:
There appears to be ongoing roof leak problems to a number of the units and in particular to Unit C where flooding of the interior has occurred. There is a large gap where the upper roof meets the top of the monoslope roof above the entries was apparent. The lead flashing is laid down nearly level with a large opening so that in wind driven conditions rain and water would be directed through this opening. It is understood from Mrs Barker that the leak problem has lessened considerably when a downpipe from a higher roof was directed away from this position, although water is still leaking out of a light fittings following heavy rain. This tends to confirm the situation of the leak. The same detail is repeated on all Units. This area must be addressed because it will be allowing considerable moisture into the roof structure which again will result in fungal decay if left unrepaired.
[32] Mr O’Sullivan emphasised that his report was preliminary in nature and that samples of paint and the jointing compound ought to be tested to analyse what was actually happening. Significantly, he concluded:
These matters are more than cosmetic and, if left unrepaired, will affect the structural integrity of the units.
[33] Problems with the driveway were also identified. Between June and November 2000, the Body Corporate Secretary corresponded with the developers to seek contribution to the cost of repairing the driveway. Remedial work was, subsequently, undertaken. Nevertheless, the damage reoccurred. Those repair costs are the subject of a claim against the developers only.
[34] Notwithstanding the defects which were, after 3 March 2000, known (at least) to the Body Corporate Secretary and those owners who attended Body Corporate meetings, it was not until 17 October 2002 (at an Extraordinary General
Meeting of the Body Corporate) that Prendos Ltd was instructed to provide a further report and to undertake some testing to determine the causes of water ingress.
[35] Mr O’Sullivan reported again on 21 January 2003. That report followed extensive inspections of the complex between 6 and 11 December 2002. Mr O’Sullivan inspected Units C, H, J, L, M, N and S for weathertightness issues.
[36] Mr O’Sullivan’s conclusions were that ingress had occurred as a result of the following “consistent faults”:
a) Roof leaks in and around the front entry to the dwellings, b) Leaks from the barge/roof junctions,
c) Faults to the exterior cladding, particularly to the end walls of the units,
d)A leak to the wing walls; further investigation was recommended to determine whether there was a fault at the junction of the wing wall and the roof above,
e) Balcony leaks; Mr O’Sullivan opined that there appeared to have been a failure “of the waterproofing membrane beneath the balcony tiles”, with the consequence that those balconies that had plywood substrates were found to have decayed,
f) The junction between the balcony and the exterior wall, g) Leaks adjacent to the joinery.
[37] Mr O’Sullivan recommended that steps be taken to establish whether decay had occurred to the exterior framing. He expressed concern that the “exterior wall framing may be untreated timber”. He added that, if it were, it “will decay rapidly with water entry”.
[38] Mr O’Sullivan emphasised the problem of the balcony leak:
The balconies are of grave concern. I expect to find areas of decay to the plywood substrate which has been used on some balconies. It is likely that at least some of the balconies will need to be lifted to make repairs to both the waterproofing membrane and substrate below.
The “balconies” were also referred to as the “decks” in evidence. I use the terms inter-changeably.
[39] Mr O’Sullivan indicated that “final repair recommendations” were likely “to include removal of most, if not all, exterior cladding and installation of a drained and ventilated cavity behind the new cladding”. That, he said, had the benefit of enhancing “drying while draining any incidental leaks safely to the outside”.
[40] By November 2004, another company (Gunac) had been instructed to undertake “targeted repairs” on some units in the complex. Phase one of those works began in November 2004, with work on Unit C. These are the repairs which the plaintiffs now assert were defective.
[41] Evidence about those repairs was given by Mr Sheppard (a shareholder and quantity estimator for Gunac), Mr Blaiklock (a self-employed builder whose company was sub-contracted by Gunac to carry out some of the repairs) and Mr Beran (an independent person engaged to supervise the remedial work). Mr Blaiklock took a number of photographs on site in an endeavour to identify specific problems. He explained those photographs in evidence. I have found that photographic evidence to be a major source of reliable information about the nature and extent of the defects and the damage suffered.
[42] Mr Blaiklock took the view that the damage that he saw was caused by three contributing factors, the first of which was most significant:
a) Damage caused by construction of the balconies.
b) Failure to waterproof adequately the tops of the wing walls.
c) Failure to waterproof block walls. This aspect is, generally, referable to lower level ingress to which I refer later.
[43] In his signed witness statement, Mr Blaiklock said:
30.From the defects that I saw and the repairs that I carried out to the Units at Sunset, the bulk of the damage was caused by the decks. Water entered through the tiles and soaked straight into the compressed sheets and the plywood underneath the tiles. There was no drip edge to any of the decks and insufficient water proofing (refer photo nos 91-94). If Butynol [the product specified by the designer] or a similar product had been used to water proof the decks it would have been visible but there was none. In some units a light membrane appeared to have been applied but it had not stopped the decks from rotting.
31.The leaking through the decks caused damage to the framing underneath the decks and to the external walls of the units. Water was wicking up into the wing walls from the deck/wing wall junctions and it was running down into the timber framing underneath the decks. Many of the bottom plates had to be replaced because of the timber decay from this cause (refer photos 28 29 30
42 60 100 252 and 265)
32.The lack of water proofing to the top of the wing walls was another significant cause of damage. The water soaked through the top of the wing walls and into the timber framing causing the framing to rot and resulting in the top plates of the wing walls having to be replaced (refer photo nos 55 and 56) untreated timber and/or plywood. The entire complex lacked any form of adequate water proofing to the decks, the block walls and the wing walls. All of these defects would have been visible during the range of inspections carried out in the original building process.
33.The lack of water proofing to the block walls was another cause of damage at the units as was the back fill used beside the block walls which caused the drainage to fail and resulted in cracks to the sewer pipes in some of the units. The water seeping in through the block walls caused damage to the timber framing, the interiors of some of the lounges of the units and the bottom plates. This defect was a significant cause of rotting timber and decay in these areas. (my emphasis)
[44] The photographs depict severely damaged timber. That timber was cut away and removed by those carrying out the repairs. The damaged timber came, primarily, from the framing in the area of the wing walls. The timber was cut back to wood that had not been damaged through water ingress.
[45] The Council made an attempt, through Dr Hedley (a senior scientist with extensive experience in timber microbiology) to suggest that some of the timber ought not to have been removed. Dr Hedley had inspected the timber on 19
September 2007, just days before the hearing began.
[46] Dr Hedley’s opinion was that only a small amount of timber required removal and that the balance could have been treated satisfactorily with a product known as “frame saver”. Use of that product would, in Dr Hedley’s opinion, have met the durability requirements of clause B(2) of the Code.
[47] However, it became clear that Dr Hedley, when inspecting unit I, had not seen timber damage to the deck area and wing walls identified in Mr Blaiklock’s photographs. Dr Hedley saw only the side of one wall and the front of the garage area. When shown photographs of the deck, the wing wall areas and the steel beam for Unit I, Dr Hedley agreed that it was right to remove such timber because it was too badly decayed to salvage.
[48] I accept the evidence of Messrs Sheppard, Blaiklock and Beran as to the state of the dwellings on which they worked at the time of the targeted repairs. Their evidence, particularly as to the leakages from the decks and wing walls, supports the observations made by Mr O’Sullivan in his reports of March 2000 and January 2003, is confirmed by photographic evidence and is consistent with the expert evidence to which I refer shortly. Subject to some specific findings I make later, that evidence also satisfies me that defects identified in individual units were common to units of a similar type.
(b) Expert evidence on defects and damage
[49] The expert evidence was given through use of a panel system. The experts giving evidence on particular topics were heard as a panel, each being able to comment on evidence of others on the issue under consideration. This mode of giving evidence proved to be most helpful in refining areas of dispute among the experts.
[50] Expert evidence was given by Mr Grigg, Mr Bayley and Mr Smith on issues involving alleged defects. Mr Grigg was called by the plaintiffs, Mr Bayley, by the Council and Mr Smith, by the designer. All were well qualified to give expert evidence.
[51] Mr Grigg, Mr Jordan (also called by the plaintiffs), Mr Bayley and Mr Pratt (called by the designer) gave evidence on issues of designer responsibility, both in relation to the standard of the plans and specifications required to obtain a building consent and the issue of practical completion certificate. This evidence also dealt with the question whether the plans and specifications were adequate for the Council to grant a building consent. Both Mr Jordan and Mr Pratt were well qualified to express opinions.
[52] Expert evidence on the quality of the Council inspections and the issue of code compliance certificates was given by Mr Jordan and Mr Bayley respectively.
[53] I accept that all expert witnesses gave evidence honestly and on the basis of factual premises they believed could be proved. However, what became clear to me during the course of the hearing was that the intensive involvement that the experts have had in problems arising out of so called “leaky home syndrome” has tended to harden opinions on specific issues. That had two consequences. The first was that, often (it seemed to me) the opposing experts took intransigent positions on issues that seemed susceptible of expert resolution. Second, I perceived that (occasionally) personal views tended to over-ride a more objective assessment of a situation.
[54] An additional problem arises out of the standards expected by various witnesses and the way in which glosses were placed on the responsibility of various participants involved in the design and the construction processes. Some of this evidence was explainable by the different work experience of each expert and the particular perspective he brought to the issues. But, the causes ran deeper than that.
[55] Mr Grigg and Mr Jordan are men of high standards who expect others to carry out their work in a manner that meets the standards they observe. I must take care to ensure that, when assessing the standard of care expected from (in particular)
the Council and the designer, I do not set the bar too high. On the other hand, Mr Bayley seemed anxious to emphasise, perhaps too much, the dangers inherent in exercising judicial judgment with the benefit of hindsight.
[56] I am troubled by some of Mr Bayley’s evidence. He tended not to answer difficult questions directly but, rather, to skew his answer to deflect the questioner and to avoid the need to accept valid criticisms of the Council’s actions. In that regard, Mr Bayley sometimes strayed into the arena of the advocate. What that means is that I take care when weighing his evidence against that given by other experts.
[57] I found Mr Smith and Mr Pratt to be straightforward witnesses, prepared when necessary to make appropriate concessions. On wider issues, I found both to be balanced in what they said. Their evidence represents a helpful means of weighing the high standards expected by Mr Grigg and Mr Jordan against my concern about the apparent lack of objectivity in Mr Bayley’s evidence.
(c) The causes of water ingress
[58] In determining what defects occurred during the construction phase and what, if any, damage they caused, I am obliged to draw inferences from proved primary facts or to act on opinion evidence supported by such facts. In drawing inferences, I apply the maxim that all evidence must be weighed according to the proof which it was within the power of one side to have produced and in the power of the other to have contradicted.7
[59] Of the 19 defects identified by the plaintiffs, Mr Grigg, Mr Bayley and Mr Smith all agreed that the two primary causes of water ingress were the failure to waterproof adequately:
a) the balconies (decks) on the upper levels of each dwelling and
7 Blatch v Archer (1774) 1 Cowp 63 at 65, Snell v Farrell (1990) 2 SCR 311 (SCC) at 328 and
Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 (HL) at 46, para 13.
b) the wing walls between the roof and parapet.
Those opinions were consistent with the evidence of Mr O’Sullivan, Mr Sheppard, Mr Blaiklock and Mr Beran.
[60] Generally, the experts accepted that decay had been accelerated by water ingress from below. The more water that enters the timber framing, whether from above or below, the faster decay occurs. Mr Bayley expressed some doubts about the extent of lower level ingress as a source of damage but, in my view, his evidence on this topic was coloured by his desire to persuade me that Council inspectors could not have seen the nature or extent of agreed defects whilst inspecting the property.
[61] It is possible only to make broad assessments of the causes of the damage to the units. My assessment is that:
a) About 75% of the damage caused by water ingress occurred through the failure to waterproof adequately the balconies/decks.
b)About 20% of the water ingress damage can be attributed directly to the lack of weathertightness at the top of the parapet wing walls.
c) The balance of 5% can be attributed to lower level ingress (primarily at the front of the dwellings) arising through problems with the edge/barge detail, inadequate drainage at pavement level at the front of the units, inadequate waterproofing of the junctions between a concrete masonry wall and the clad timber framing and inadequate drainage of surplus water from the roof to the ground.
[62] It is unnecessary to go further into the alleged defects, given the level of agreement among the experts on the major causes of the damage. I regard any remaining defects as de minimis in nature. I emphasise that, at this stage, I am not deciding whether any acts or omissions of the Council or the designer caused loss to the Body Corporate or the individual owners. Those issues are discussed later.
[63] What follows is a general discussion of the problems identified. I am satisfied that there has been a consistent pattern of defects across all of the units.
(d) Inadequate waterproofing of the decks
[64] Both Mr O’Sullivan and Mr Blaiklock referred specifically to the inadequate waterproofing of the deck area as a major contributor to subsequent moisture damage caused to the timber framing. Their evidence was confirmed by Mr Grigg, Mr Bayley and Mr Smith.
[65] In his drawings, the designer had specified that a trade-name product, “Butynol”, should be used to waterproof the decks. That trade name (like “Hoover” or “Xerox”) also has a more generic meaning. Butynol (or a similar product) was not used. Instead, a liquid applied membrane was chosen. Had that membrane been
properly applied it would probably have worked.8 But, the experts agreed, contrary
to evidence given by the tiler (Mr Joo) who allegedly applied the waterproofing membrane, that any membrane applied was installed only as a “edge bandage” incapable of performing the weathertightness function.
[66] As a result of the inadequate waterproofing of the deck area, a small gap was left around the edge and the wind was able to blow pooled water into and under the ranchslider sills. The photographic evidence supports the unanimous conclusion of the expert witnesses that water has seeped from the deck area into the timber framing and has been the major contributor to decay of the timber framing.
[67] Mr Grigg, Mr Bayley and Mr Smith placed different emphases on the percentage contribution of this defect to the damage manifested. My assessment, having compared their evidence with that of Mr O’Sullivan, Mr Blaiklock and Mr Beran, is that about 75% of the damage arose from this source.
8 A similar issue, relating to the failure to use the Butynol product on decks was discussed in Riddell v
Porteous [1999] 1 NZLR 1 (CA).
(e) Inadequate waterproofing of the wing and parapet walls
[68] All experts agreed that water ingress from the wing walls, to the rear of all units and to the front of one of the blocks, was a major cause of damage to the timber framing. In particular, the failure to waterproof adequately at the top of the parapet wing walls led to the influx of rain water in sufficient quantities to decay both the timber framing and the cladding. While the rear wing walls were severely decayed at a level below the decks, Mr Grigg acknowledged that the predominant cause of that damage was inadequate weatherproofing of the decks themselves.
[69] The three experts were in general agreement that the walls dividing the units, above and below the decks on the northern face of each unit, were not built in accordance with the Harditex manufacturers’ literature. In addition, there was no detail on the designer’s plans to identify the way in which the wing walls were to be constructed. No capillary gap was left. The wing walls failed because they allowed water to enter the timber framing. In turn, that caused rotting and cracking, as well as contributing to decay of timber near the deck.
[70] The manufacturer’s specifications (1996 technical information published by James Hardie Pty Ltd) was not followed. That information required the application of some waterproofing agent to prevent water entering at the roof junction and decaying timber framing below.
[71] A separate head of claim involved the use of untreated timber framing in the wing and inter-tenancy walls. The use of untreated timber, on today’s standards, was a grave mistake. The use of untreated timber with a monolithic cladding, such as Harditex, was not known to be fraught with danger in 1997/1998. For present purposes, the relevance of the use of untreated timber is a factor that goes to the speed with which decay occurred as a result of the failure to render this part of the building envelope weathertight.
[72] Mr Grigg, Mr Bayley and Mr Smith all accepted that this failure to waterproof was the second most serious cause of the damage. I assess that it represented about 20%, of the cause of the damage that occurred.
(f) Lower level ingress
[73] The third and more minor contributing factor to the defects, is the water ingress from below.
[74] There have been a number of contributing factors which have led to water ingress from below. Without the particular combination of events, it is unlikely that the damage would have been significant from this particular source. Its effect was secondary to the two major causes, in the sense that it operated to accelerate decay of the timber framing rather than to act as a substantial cause of damage in its own right.
[75] There is some evidence of moisture being recorded in an area below an edge/barge tile installation which permitted ingress across the apron to the roof framing and under the apron to the wall framing. Mr Grigg, Mr Bayley and Mr Smith agreed that gaps existed at the ends of the joinery head flashings. Those gaps allowed moisture to enter the timber frame, due to the absence of any sealant. That moisture, having entered through the external building envelope, caused damage to the timber framing. The damage was, generally, to be found around both sides of the garage doors and along the side of the garage, a location to which water was also falling from the lower roof area, due to the inadequate waterproofing of the wing wall/parapet area.
[76] Mr Grigg was of opinion that the finished pavement levels and slopes around the garage and front door entries did not allow for adequate drainage of surface water. In his view, that caused standing water which, in conjunction with other water congregating at ground level, led to moisture seeping through the garage retaining walls.
[77] Mr Bayley and Mr Smith disagreed with that assessment on the basis that there was adequate water drainage through cesspits and silt traps. Mr Bayley, considered that excess water appeared to have been caused to some extent through blocked gutters above the front entry areas, arising from lack of maintenance.
[78] All three experts agreed that there were inadequately waterproofed junctions between the concrete masonry walls and the timber framing clad with Harditex. In particular, the absence of a “z flashing” seems to have exacerbated this problem. While Mr Bayley considered no damage was apparent from this defect, I prefer the evidence of Mr Grigg and Mr Smith which is indicative of this being a contributing factor to lower level water penetration.
[79] While there may be issues of responsibility flowing from (primarily) Mr Bayley’s evidence, I am satisfied that water was pooling in the manner indicated by Mr Grigg and that, in combination with other aspects to which I have already referred, additional moisture ingress from below occurred.
[80] I assess these combined defects as causative of 5% of the damage that has resulted from moisture ingress. Because these causes represent a combination of defects, I do not regard it as desirable to analyse whether the Council or the designer was negligent in relation to any particular component part. The causative effect of each is too minor to justify that approach and the causal potency is not sufficient to be regarded as substantial and material cause of any loss suffered.9 The lower level ingress causes do, however, have relevance to the information available to the Council when it made its decision to issue its code compliance certificate.
5. Can the Body Corporate sue?
(a) The Body Corporate’s claim
[81] The first issue is to determine whether the Body Corporate has standing to sue the Council, the developers and the designer in respect of their alleged negligent
9 See Johnson v Watson [2003] 1 NZLR 626 (CA) at [18] and the discussion at [233] below
acts or omissions. This is a discrete issue from whether a duty of care is owed to it by any of the defendants. It involves the right to sue in respect of the individual units and common property comprised in the unit title development. The issue falls to be determined in light of the separation of responsibilities between individual proprietors and the Body Corporate, set out in the Unit Titles Act 1972.
[82] The Body Corporate sues to recover all losses suffered as a result of damage to various parts of the residential complex. Counsel for the Body Corporate contends that a duty of care in negligence is owed by all three defendants on the same basis as if the claim was that of an individual homeowner. The only difference, in respect of the damages claimed, is that general damages claimed by individual plaintiffs are not sought by the Body Corporate. The only claim in respect of common property relates to the driveway, but that claim is pursued only against the developer.
(b) The scheme of the Unit Titles Act 1972
[83] A body corporate is a creature of statute. It is constituted under the Unit Titles Act 1972. A general discussion of the scheme of that Act can be found in World Vision of New Zealand Trust Board v Seal.10
[84] The 1972 Act has been described as a “statutory moulding” of the Torrens system of land registration to provide for the ownership of flats and business premises.11 Three purposes can be gleaned from the Long Title to the Act: namely, to facilitate the subdivision of land into (a) units that are to be owned by individual proprietors, (b) common property that is to be owned by all the unit proprietors as tenants in common and (c) to provide for the use and management of the units and
common property.
10 [2004] 1 NZLR 673 (HC) at [21]-[52]. See also, for background to the 1972 Act and a discussion of likely problems arising from it, the Law Commission’s discussion paper and final report: Shared Ownership of Land (NZLC, PP 35, January 1999) and (NZLC, R 59, November 1999)
11 Hinde, McMorland & Sim, Land Law in New Zealand (LexisNexis 2005) Vol 1, 14.022
[85] Subdivision of land is effected by the deposit of a plan specifying the units in relation to a building or buildings already erected on the land.12 The deposit of a unit plan creates a stratum estate in freehold or in leasehold.13 An indefeasible title, under the Land Transfer Act 1952, is created on deposit of the unit plan.14
[86] Body Corporate 188529 came into being on 29 April 1998 when the unit plan (Deposited Plan 188529) for the Sunset Terraces subdivision was deposited with the District Land Registrar. A body corporate has perpetual succession and a common seal.15 It can sue and be sued.16 Initially, a body corporate is comprised of the registered proprietor of the land to which the unit plan relates17 but, later, it comprises all proprietors, for the time being, of the individual units.18
[87] A body corporate may sue and be sued, in the same way as any other corporation.19 While a body corporate is authorised expressly to “sue for and in respect of damage or injury to the common property caused by any person, whether that person is a unit proprietor or not”,20 that particular power does not limit the generality of its ability to engage in litigation.21
[88] While the ability to sue is not limited, the fact that the statute expressly provides for the body corporate to sue in respect of damage “from in and to common property” suggests that the body corporate cannot reach beyond the common property. That view was taken in Body Corporate DS67995 v Hammington22 by Master Faire, who held that a body corporate for a terraced motel containing 40 units did not have standing to sue on a lease to which it was not a party. The Master said:
12 Unit Titles Act 1972, s 4(1)
13 ibid, s 4(2)
14 Disher v Farnworth [1993] 3 NZLR 390 (CA) at 400-401
15 Unit Titles Act 1972, s 12(4)
16 ibid, s 13(1)
17 ibid, s 12(1). Usually the developer or its nominee. This can have consequences for purchasers of individual units as the developer will have the ability to change the body corporate rules: cf [172] and [173]
18 ibid, s 12(2). See also Taupö Ika Nui Body Corporate v Commissioner of Inland Revenue (1997) 18
NZTC 13-147 and Body Corporate DS67995 v Hammington (High Court Hamilton, CP10/01, 13
August 2001, Master Faire)
19 ibid s 13(1)
20 ibid s 13(2)
21 ibid
22 (High Court Hamilton, CP10/01, 13 August 2001)
[28] … [Section 13(2) of the Unit Titles Act 1972] makes the body corporate capable of suing and being sued in its corporate name. Subsection (2) provides that [the body corporate] may sue for, and in respect of, damage or injury to the common property caused by any person whether that person is a unit proprietor or not. That, however, provides no assistance to the specific position which is before me. Neither section creates a right in the body corporate to sue specifically on behalf of each individual unit registered proprietor in respect of a lease which they may enforce by the operation of s
112 of the Property Law Act 1952. (my emphasis)
Master Faire’s view is consistent with the duty of the body corporate to keep common property in a state of good repair.23 I agree, with respect, with his analysis.
[89] Section 14 of the Unit Titles Act also specifies the way in which proceedings in tort should be brought against an owner or occupier of particular land or premises, notwithstanding any rule of law to the contrary. The statute makes it clear that, for the purpose of any such proceedings, “the common property and each of the units
shall be separate premises”.24 Where tortious proceedings are brought in respect of
common property, the body corporate is deemed to be the owner and occupier of that property, with the consequence that any judgment must be entered against the body corporate itself.25
[90] If sued in respect of common property, a body corporate may join any one or more of the proprietors or former proprietors whose “negligence or unauthorised act or omission” may have given rise to the cause of action against the body corporate.26
[91] Subject to the provisions of the Unit Titles Act, a body corporate is empowered to carry out any duties imposed upon it by its rules.27 However, if the default rules set out in Schedules 2 and 3 to the 1972 Act are changed, they must, to be valid, be intra vires the power to amend set out in s 37(5) of the 1972 Act.28
23 Unit Titles Act 1972 s 15(1)(f). See also Body Corporate 173457 v Dunn (High Court Auckland, CIV 2007-404-26645, 17 August 2007, Courtney J) at [3], in which the Judge held that s 15 did not confer any power to levy in respect of work done to individual units.
24 ibid, s 14(2)(a)
25 ibid, s 14(2)(b). See also Body Corporate DS677955 v Hammington (High Court Hamilton, CP10/01, 13 August 2001, Master Faire) and Body Corporate 173457 v Dunn (High Court Auckland, CIV 2007-404-26645, 17 August 2007, Courtney J)
26 ibid, s 2(b), proviso
27 ibid, s 15(1)(a)
28 Generally, see Velich v Body Corporate No 164980 (CA116/04, 19 May 2005) and Fifer Residential Ltd v Gieseg (High Court, Auckland, CIV 2004-404-2189, 15 June 12005, Rodney Hansen J)
[92] The body corporate is obliged to insure and keep insured all buildings and other improvements on the land to their replacement value.29 A distinction is drawn between insurance of the building and its contents, the latter being the responsibility of the individual proprietor.
[93] Subject to the terms of the 1972 Act, the body corporate must “control, manage, and administer the common property and do all things reasonably necessary for the enforcement of the rules”.30 One of those obligations is to keep “common
property” in a state of good repair.31
[94] In order to raise finance to deal with management of the common property and to meet outgoings (including insurance premiums, rent and repairs), the body corporate is empowered to establish and maintain a fund for such administrative purposes and to determine, from time to time, the amounts to be raised for that
purpose.32
[95] A body corporate is prohibited from involving itself in trading activities but, otherwise, is granted all powers reasonably necessary to carry out the duties imposed upon it by the Act and its rules.33 Any instrument affecting common property must be executed by the body corporate, provided it has been approved by unanimous resolution.34
[96] Common property is held by the proprietors of all units as tenants in common in shares proportional to their unit entitlement.35 Proprietors of all units are empowered to sell or lease part of the common property or grant an easement over all or any part of it.36 The emphasis is on the “proprietors” acting together as a common group, as opposed to the unruly situation that could develop were each registered proprietor entitled to deal with “common property” individually.
29 Unit Titles Act 1972, s 15(1)(b)-(e) and (j)
30 ibid, s 15(1)(h)
31 ibid, s 15(1)(f). See also r 2 of the default rules of a body corporate set out in Schedule 2 to the
1972 Act
32 ibid, s 15(2)
33 ibid, s 16
34 ibid, s 17(1). See also ss 18 and 19 of the Unit Titles Act, dealing with registration of transfers of and additions to common property
35 ibid, s 9(1)
36 ibid, s 9(3).
[97] The fundamental theme of the statute is the distinction between the individual units (for which each registered proprietor takes responsibility) and common property (the domain of the body corporate). The distinction is logical. Individual registered proprietors can deal only with individual property whereas “common property” is owned by all proprietors and must be managed by the body corporate for the common good of all.
[98] The body corporate is the corporate vehicle through which efficient management of common property is undertaken. The body corporate is administered by a committee, with assistance from a secretary.37 Sometimes, depending on the size or complexity of the development, a commercial company will provide secretarial services for reward.
[99] Two further issues require particular emphasis. First, it is the body corporate has the duty to provide a certificate of any proprietor’s liability, if requested to do so.38 The second concerns the ability of the proprietors, or a purchaser or mortgagee of a unit, to amend the default rules set out in Schedule 2 to the 1972 Act by unanimous resolution.39
[100] Any prudent person intending to buy a dwelling within a unit development will seek a certificate under s 36 of the 1972 Act from the body corporate. The purpose of a s 36 certificate is to advise a purchaser or a mortgagee of any outstanding obligations or risks relating to the acquisition of a unit or securing borrowing against it. The certificate must identify contributions required of a proprietor to the body corporate, the manner and time of payment of that contribution and the extent to which any contribution has been paid by the existing
proprietor.40 The body corporate is also required to identify any amount payable by
the existing proprietor to the body corporate.41
37 ibid, s 2, definition of “committee”. See also the default rules set out in Schedule 2, cl 4-13
38 ibid, s 36
39 ibid, s 3740 ibid, s 36(a)-(c)
41 ibid, s 36(d). That amount is calculated by reference to ss 14(3), 15(2) and 32 of the Unit Titles Act
1972
[101] The certificate must state whether the body corporate has performed or entered into any contract to perform any repair, work or act in respect of which the existing proprietor is likely to incur a liability42 and the rate at which interest is
accruing in respect of any amount owing to the body corporate by the proprietor.43
Section 36 states expressly that the certificate shall be conclusive evidence, “in favour of any person dealing with that proprietor” of the matters certified in it.
[102] The body corporate is also required to certify whether it has “received notice that any proceedings are pending against the body corporate”.44 Although that suggests a contingent liability, the required disclosure does not go so far as the identification of any damage to the unit development that might have manifested itself prior to the purchaser or mortgagee seeking a certificate.
(c) The body corporate rules
[103] The body corporate must have rules by which its proprietors are bound.45
Default rules are set out in Schedules 2 and 3 of the Unit Titles Act.46 Schedule 2 provides rules which may only be amended by unanimous resolution.47 The rules in Schedule 3 (relating to the use of individual units) can be changed by resolution of a general meeting of the body corporate.48
[104] The powers and duties of a body corporate are set out rr 2 and 3 of
Schedule 1 as follows:
Powers and duties of body corporate
2. The body corporate shall –
(a) repair and maintain all chattels, fixtures, and fittings (including stairs, lifts, elevators, and fire escapes) used, or intended, adapted, or designed for use, in connection with the common property or the enjoyment thereof;
42 ibid, s 36(e). Such liabilities are referable to ss 33 or 34 of the Act. The general nature of the repair, work or act should be stated.
43 ibid, s 36(ea)
44 ibid, s 36(f)
45 ibid, s 37(1)
46 ibid, s 37(2)
47 ibid, s 37(3) and (5)
48 ibid, s 37(4)
(b) repair and maintain all pipes, wires, cables, ducts, and all other apparatus and equipment of whatsoever kind and wheresoever situate which may be reasonably necessary for the enjoyment of an incidental right which may from time to time exist by virtue of section 11 of the Unit Titles Act 1972:
(c) on request, produce to any unit proprietor, or a registered mortgagee of any unit, or any person authorised in writing by any unit proprietor or registered mortgagee of any unit, all policies of insurance effected by the body corporate under the provisions of section 15 of the Unit Titles Act 1972 and the receipt for the last premiums paid in respect thereof.
3. The body corporate may –
(a) borrow any money necessary to enable it adequately to perform its duties or exercise its powers:
(b) invest any money for the time being held by it (whether in a fund established under section 15 of the Unit Titles Act 1972 or otherwise) in any of the modes of investment for the time being authorised by law for the investment of trust funds;
(c) establish a current account at a bank, and nominate for the purposes of this paragraph 3 persons (including the secretary) of whom any 2 may operate the account:
(d) enter into any agreement with a proprietor or an occupier of any unit for the provision of amenities or services by it to the unit or to the proprietor or occupier;
(e) grant to a proprietor of a unit or to anyone claiming through him any special privilege (not being a lease) in respect of the enjoyment of part or parts of the common property:
provided that any such grant shall be determinable by special resolution.
[105] Section 37(5) of the 1972 Act provides:
(5) Any amendment of or addition to any rule shall relate to the control, management, administration, use, or enjoyment of the units or the common property, or to the regulation of the body corporate, or to the powers and duties of the body corporate (other than those conferred or imposed by this Act):
Provided that no powers or duties may be conferred or imposed by the rules on the body corporate which are not incidental to the performance of the duties or powers imposed on it by this Act or which would enable the body corporate to acquire or hold any interest in land or any chattel real or to carry on business for profit.
[106] In my view, s 37(5) makes it clear that only powers or duties incidental to the performance of duties or powers imposed on it by the 1972 Act may be amended. Section 37(5) has the effect of forbidding any change to the rules that creates a responsibility for the body corporate going beyond common property, or anything incidental to it.
[107] In this case, the Body Corporate purported to amend rr 2 and 3 of Schedule 1. The amendment was effected at a time (30 April 1998) when the developers owned all units within the unit title development. Accordingly, the democratic process by which individual owners were intended to determine their rules was not available to any of those who purchased units from the developers.
[108] For the purpose of this proceeding, the amendments to r 2 assume some significance. The amended rule stated:
The body corporate shall (in addition to any other duties imposed on it by the Act):
…
(b)Keep clean and in a state of good repair and from time to time when the condition so requires paint the exterior and roof of the building of which the Units form part excluding the exterior of the windows of each Unit.
…. (my emphasis)49
[109] The 1972 Act makes it clear that a Certificate of Title for an individual unit must be in the name of the “registered proprietor” and “not the body corporate”.50 A Deposited Plan must define the boundaries of the individual units, so that the District Land Registrar is able to issue a Certificate of Title to the unit in favour of a purchaser.51 In this case, the plan defines that boundary “to the external face of exterior walls and glass adjoining, common property and accessory units and to the centre line of walls between adjoining units”. So, the outside face of an exterior wall is part of an individual unit.
49 Compare with the default rule set out in para [104] above
50 Unit Titles Act 1972, s 8(1)(a)
51 ibid, s 8(1). See also the definition of “unit” in s 2
[110] In my view, the provisions of the Unit Titles Act contemplate corporate responsibility for the maintenance or repair of common property only. Applying the Court of Appeal decision in Velich v Body Corporate No 164980,52 the amendment to r 2(b) of the default rules was ultra vires because it purported to confer an obligation on the body corporate inconsistent with the powers and duties conferred by the Act. Thus, the amendment was outside of the powers to vary the rules
authorised by the Unit Titles Act.
[111] The issue of vires was also considered by Rodney Hansen J in Fifer Residential Ltd v Gieseg.53 In that case, the Judge considered the extent of the proviso to s 37(5) and the meaning of the phrase “not incidental to the performance of the duties or powers imposed” on the body corporate by the 1972 Act. At [43] and [44], Rodney Hansen J said:
[43] The duties imposed by the Act on a body corporate are found in s 15 of the Act and in r 2 of the Second Schedule. They are conveniently summarised in the judgment of Paterson J in Chambers v Strata Title Administration Limited (2004) 5 NZ ConvC 193,864 at [41]:
“The duties specified in the Act relate to insuring the buildings and other improvements on the land, paying the premium on the insurance policies, keeping the common property in a state of good repair, complying with notices issued by local authority or public body requiring repair work, the control, management and administration of the common property, the enforcement of any lease or licence under which the land is held, the enforcement of any contract of insurance, the establishment of a maintenance fund for administrative and other expenses, and the levying of the proprietors to maintain this fund. The statutory rules contain a provision headed
‘Powers and Duties of Body Corporate’. The duties relate to the repair and maintenance of chattels, fixtures and fittings, the repair
and maintenance of essential services, and the production on request by certain people or insurance policies.”
As Paterson J concluded, the duties imposed by the Act are relatively limited.
[44] I accept [counsel’s] submission that r 2.2(g) [of the particular body corporate’s rules] is not incidental to any of the duties imposed on the Body Corporate by the Act. It is not incidental in the sense of being naturally attached to, or arising from, or naturally appertaining to any of the duties - the meaning ascribed to “incidental” by Paterson J in Chambers at [44] and subsequently adopted by Ronald Young J in Body Corporate 199883 v Clarke Family Associates Limited (2005) 5 NZ ConvC 194,087 at [39].
52 Velich v Body Corporate No. 164980 (CA116/04, 19 May 2005)
53 (High Court Auckland, CIV 2004-404-2189, 15 June 2005)
Rule 2.2(g) purports to create an entirely independent duty which requires the Body Corporate to agree to the development of the seventh floor. I accept the respondents’ submission that whether r 2.2(g) is interpreted narrowly, as they contended, or broadly, as argued for the plaintiff, the duty it imposes is not incidental to the performance of any duty imposed by the Act and is therefore ultra vires.
[112] I have also considered whether the terms of either the Weathertight Homes
Resolution Services Act 2002 or the Weathertight Homes Resolution Services Act
2006 apply to provide standing to a body corporate where none existed before. I
hold they do not.
[113] The 2002 and 2006 Acts expressly permit a body corporate to sue for losses caused to units (in the nature of a dwellinghouse)54 comprised in a multi-unit development. Not only is the body corporate given standing to sue under those statutes, but the individual proprietors are expressly barred from suing in their own names.55 In effect, for the purposes of providing a relatively simple and efficient regime to deal with non-complex cases, Parliament has provided a means by which the body corporate can act as a statutory agent of the owners, in a manner akin to that of trustee and beneficiary.
[114] The Weathertight Homes Resolution Services Act 2006 replaced its 2002 counterpart “to provide owners of dwellinghouses that are leaky buildings with access to speedy, flexible, and cost-effective procedures for assessment and resolution of claims relating to those buildings”.56 The 2006 Act recognises the systemic nature of weathertightness problems arising as a result of the implementation of the Building Act 1991, the Building Code and the construction
methods used in that period. Claims can be brought before the Weathertight Homes Tribunal if water had penetrated a building or complex “because of some aspect of its design, construction, or alteration, or of materials used in its construction or alteration” and damage had resulted from that penetration.57
54 Weathertight Homes Resolution Services Act 2002, s 5 and Weathertight Homes Resolution
Services Act 2006, s 8, definition of “dwellinghouse”
55 For example, see ss 8, 16 and 17 of the Weathertight Homes Resolution Services Act 2006
56 Weathertight Homes Resolution Services Act 2006, s 3
57 For example, see Weathertight Homes Resolution Services Act 2006, s 16(b) and (c) in the context of multi-unit complex claims
[115] Reporting on the multi-unit claims’ provisions of the 2006 Act, the Select
Committee said:58
The main purposes of the multi-unit amendments are to ensure that as far as possible a ‘whole of complex’ approach can be taken to these leaky buildings, and to enable bodies corporate and other groups to bring claims to the [Weathertight Homes Resolution Service]. With a few exceptions, single residential unit owners will not be able to bring separate claims. Instead, a representative will bring a claim for all weathertightness damage to common areas and residential units in a multi-unit complex. The representative will be able to bring a claim only where the owners in the complex agree to it. For those decisions, if a representative's body corporate rules, constitution, or lease require more than 80 percent of owners to agree, the bill allows that no more than 80 percent of owners entitled to vote will need to agree. In bringing a claim, the representative will need to provide a statutory declaration that at least 75 percent of residential unit owners in the complex have authorised the representative to bring and resolve claims in respect of their dwellinghouses. Both provisions are a balance between a ‘whole of complex’ approach and allowing some leeway for the possibility that some owners may ‘hold out’, and not agree to a claim being brought.
[116] The purpose for which the body corporate was given exclusive standing to sue under the 2002 and 2006 Acts was to simplify an approach to common problems faced by individual owners. Action through the body corporate had to be authorised by the individuals who make up that entity in the usual way. There was no intention to interfere in the right of individual claimants to bring claims not supported by other owners in respect of damage to individual units. The “representative action” approach must be viewed in that light. The procedures adopted under the 2002 and
2006 Acts cannot affect the question of standing to sue in this Court. That issue must be determined on the basis of the functions of the body corporate cast upon it by the 1972 Act.
(d) Analysis
[117] Exclusive jurisdiction to deal with water ingress claims was not conferred on the Tribunal. Both a right of appeal59 or an ability for the Tribunal to refer questions of law to the High Court60 were included within the statutory regime. What the
58 Social Services Select Committee, Weathertight Homes Resolution Services Amendment Bill
(75/2) 29 November 2006 at commentary 4
59 Weathertight Homes Resolution Services Act 2006 s 93
60 ibid, s 113
statute did not do, however, was to provide a right to sue in other jurisdictions
(including the High Court) if, otherwise, the body corporate had no standing to sue.
[118] In my view, the terms of the 1972 Act do not authorise a body corporate to sue for damage to individual units. There is no room to engraft upon the Act the notion of a statutory agency or quasi-trusteeship akin to that adopted for claims under the weathertight homes legislation. A similar conclusion was reached in
Owners-Strata Plan No. 43551 v Walter Construction Group Ltd,61 a decision of the
Court of Appeal of New South Wales.
[119] Practical considerations also militate against the introduction of such a gloss. An individual owner might not be entitled to obtain a judgment because of some break in the chain of causation or contributory negligence in respect of the particular loss suffered. Yet, if a body corporate were entitled to bring what is, in effect, a class action, there would be a real risk that the body corporate might pursue claims in a manner that results in a windfall to or double recovery by a particular proprietor.
[120] Whether the Body Corporate or the individual owners bring a claim, it is necessary to consider separately and discretely the position in respect of each unit. In my view, it would be wrong in principle to attach liability to a defendant even though there was a break in the chain of causation in respect of losses suffered by individual proprietors. There is no reason in principle to justify circumventing the conventional rules relating to causation.62
[121] My conclusion is inconsistent with Singaporean authorities to which Mr Josephson referred me. In particular, he referred me to a decision of the Court of Appeal of Singapore that he contended supported the proposition that a body corporate could sue for breach of a tortious duty by a person responsible for building defects: RSP Architects Planners & Engineers (Raglan Squire and Partners) PE v MCST Plan No 1075.63 I was also referred to Australian decisions,64 to the same
61 (2004) 62 NSWLR 169 (CA) at 178-179 per Spiegelman CJ, with whom Ipp and McColl JJA
agreed
62 See Part 7 of this judgment
63 [1999] 2 SLR 446 (CA)
effect. However, I hold that they turn on the particular provisions of the statute under which the body corporate (or its equivalent) was constituted and have no application within the New Zealand environment.
[122] Simons v Body Corporate Strata Plan No. 518165 provides an illustration of a case in which a body corporate’s capacity to sue in respect of common property was interpreted in a manner that enabled boundaries to an exterior wall of a particular unit to come within the ambit of any claim. In that particular case, the causes of damage had been identified as beginning with the penetration of the outer wall, a cavity brick wall, by water. The difficulties that can emerge from the way in which the draftsman’s pen identifies boundaries to the units were discussed in Simons. In that case, while an external wall was common property, only one unit owner could obtain the benefit of any repairs. That situation can be contrasted with the present case, in which the outer face of the exterior wall falls within the ambit of common property.
[123] Acknowledging that New South Wales authority suggesting a body corporate had a right to sue in respect of external walls which were part of the common boundary of the unit and common property,66 Lush J preferred to put his approach on
a more narrow basis:67
I am concerned with making good defects in the original construction of the main structure of units built in a block. I would not take the same view of the question of benefit if, for instance, the defect was defect occurring, in an area of common property, in fittings or equipment supplying a service to one unit only, for instance a blocked or leaking pipe.
In my view, for present purposes, Simons can be distinguished on its facts. It may or may not be necessary to consider the point specifically in another case.
64 Hansen Yuncken Pty Ltd v TS Services Pty Ltd [2003] VCAT 2020, The Owners Strata Plan No.
43551 v Walter Construction Group Ltd [2004] NSWCA 426 and Proprietors Units Plan v JiniessPty Ltd [2000] TSC 89
65 [1980] VR 103 (SC)
66 Allen v Proprietors of Strata Plan No. 2110 [1970] 3 NSWR 339 (SC)
67 Simons v Body Corporate Strata Plan No. 5181 at 108
[124] On the analysis I have adopted, I am satisfied that the body corporate has standing to sue for losses caused to common property but has no right to sue in respect of damage done to individual units.
6. Does the Council owe a duty of care in tort?
(a) Development of a duty to “homeowners”
[125] Since Bowen v Paramount Builders (Hamilton) Ltd, was decided in 1976, it has been settled law in New Zealand that a builder owes a duty of care to any person whose property they should reasonably expect to be affected by their work. The builder’s duty is to take care to prevent damage to the property. The duty was expressed as one owed by the builder to any person whom he or she might reasonably foresee to be likely to suffer loss (either personal injury or injury to property) arising out of the negligent creation of a hidden defect which is a source of
danger.68
[126] In Johnson v Mount Albert Borough Council,69 Mahon J, on the authority of Bowen and Dutton v Bognor Regis Urban District Council,70 held that a local authority which, knowing a house to be built on filled ground, had issued a building permit without requiring foundations that would have been adequate or had failed to
ensure, by inspection, that adequate foundations were used, was liable to the owner if damage was caused by subsidence.71 Mahon J said:
… [the] borough was negligent in failing to exercise reasonable care in the issue of a building permit and in failing by its authorised officer to observe the inadequacy of the foundations upon inspection, having regard to the knowledge of the council of the unstable ground upon which the building was to be constructed. ….
[127] That duty of care was, implicitly, upheld on appeal.72 The Council did not challenge Mahon J’s holding that a duty of care was owed. Rather, its grounds of appeal were that the action was statute-barred or that an apportionment of liability
68 [1977] 1 NZLR 394 (CA) at 405-406 (Richmond P), 416-419 (Woodhouse J) and 423-424 (Cooke J)
69 [1977] 2 NZLR 530 (SC)
70 [1972] 1 QB 373 (CA)
71 Johnson v Mount Albert Borough Council [1977] 2 NZLR 530 (SC) at 533
72 Mount Albert Borough Council v Johnson [1979] 2 NZLR 234 (CA)
between the Council and the developer was wrong.73 The duty found by Mahon J was set out in the joint judgment of Cooke and Somers JJ, without criticism.74 The third member of the Court, Richardson J, agreed with the joint judgment but added some additional observations on the limitation issue.
[128] Mount Albert City Council v New Zealand Municipalities Co-Operative Insurance Co Ltd75 was a sequel to the Johnson case. That litigation was a contest between the Council and its insurer as to whether the Council was entitled to recover for negligence of the type upheld by the Court of Appeal in Mount Albert Borough Council v Johnson.76 In the insurance appeal, Cooke J explained those authorities
imposing a duty of care in tort on a Council as based on “control”. Cooke J said77:
The line of cases establishing that a local authority may be liable in tort to a purchaser for negligently allowing inadequate foundations derive the liability from control. The local authority's control of building in its district has been held to carry a duty to take reasonable care in performing the statutory functions. In the sweep of his judgment in Dutton v Bognor Regis Urban District Council [1972] 1 QB 373, 394-395, Lord Denning MR included some references to advice by professional men. As I read those passages, however, Lord Denning saw the liability of a Council's engineer or inspector as stemming from the fact that he knows or ought to know that, if he does his work of inspecting and passing the structure badly, persons such as the plaintiffs may be injured. It is not at all clear that Lord Denning would have described the injury as caused by negligent advice. And there is no reference to advice in the judgments of the majority of the Court of Appeal in that case, Sachs and Stamp LJJ. (my emphasis)
[551] The only evidence of receipt of a copy of a certificate of practical completion by any of the owners whom I have held can sue is Mr Devlin. He deposes that on 19
May 1998, his solicitor received a facsimile, from the developers’ solicitors enclosing a copy of the certificate. Mr Devlin’s solicitor took issue with the certificate because some common facilities were not completed. On 26 May 1998
Mr Devlin was invited, by the solicitors representing the developer, to undertake a pre-settlement inspection of the unit. He appears to have received a copy of the May
1998 certificate.
[552] Mr Devlin does not say, in explicit terms, that he relied upon the practical completion certificate to complete his acquisition of the unit. I hold that the
proximity between Mr Devlin and the designer was insufficient to give rise to a duty and, in any event, that any loss suffered would be too remote to be claimable.
[553] Unlike the Council’s obligations to inspect and to certify code compliance, there can be no community expectation on a designer to certify practical completion. Thus, it is necessary to prove actual reliance in order to establish that any loss has been suffered as a result of negligence of the designer in these circumstances.
[554] Accordingly, the claims against the designer based on negligent preparation of certificates of practical completion fail. It is unnecessary for me to determine whether the certificates were or were not prepared and signed negligently.
14. Contributory negligence issues
(a) Legal principles
[555] In the event that the Council or the designer were held liable in negligence to all or any of the plaintiffs, each seeks a determination of relative liability based on allegations of contributory negligence. As I have held that no claims succeed against the designer, the issue of contribution is one to be determined as between successful plaintiffs and the Council.
[556] The Contributory Negligence Act 1947 was enacted because, before that time, the common law would not permit a claim in negligence if a plaintiff were responsible in part for any loss. Section 3 provides:
3 Apportionment of liability in case of contributory negligence
(1) Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the Court thinks just and equitable having regard to the claimant's share in the responsibility for the damage:
Provided that—
(a) This subsection shall not operate to defeat any defence arising under a contract:
(b) Where any contract or enactment providing for the limitation of liability is applicable to the claim, the amount of damages recoverable by the claimant by virtue of this subsection shall not exceed the maximum limit so applicable.
(2) Where damages are recoverable by any person by virtue of the last preceding subsection subject to such reduction as is therein mentioned, the Court shall find and record the total damages which would have been recoverable if the claimant had not been at fault.
(3) Section 17 of the Law Reform Act 1936 (which relates to proceedings against, and contribution between, joint and several tortfeasors) shall apply in any case where 2 or more persons are liable or would, if they had all been sued, be liable by virtue of subsection (1) of this section in respect of the damage suffered by any person.
….
[557] The dual concepts to which s 3(1) refer are “fault” and relative “responsibility”. Generally speaking, any assessment of comparative responsibility for loss suffered by a plaintiff will turn on both “relative blameworthiness” and “causal potency”.308
[558] In Gilbert v Shanahan309 Tipping J, delivering the judgment of the Court of
Appeal, said:
Before determining whether a plaintiff has been guilty of contributory negligence, it is necessary to identify the respect or respects in which the defendant has been negligent. In this case, the solicitor’s negligence was in failing to identify and advise Mr Gilbert that he was not legally bound to sign the guarantee. There was no causative negligence in Ms de Bernardo failing to give any, or any satisfactory, explanation of the guarantee. The failure of Tudor and Mr Gilbert to bring the preliminary agreement to Ms de Bernardo’s attention was, as we noted earlier, of no great moment, because it is apparent from the evidence that had she perused it she was still unlikely to have given Mr Gilbert the missing advice, being of the view that he was obliged to sign the guarantee as a customary concomitant of the lease.
When contributory negligence is alleged, two aspects have to be considered: causal potency and relative blameworthiness. The causative negligence of Ms de Bernardo was in not advising Mr Gilbert he had no legal obligation to sign the guarantee. The only logical basis on which Mr Gilbert could have contributed causally to that failure by any negligence of his own, was in his failing to bring the preliminary agreement to Ms de Bernardo’s attention and
308 See generally Bank of New Zealand v New Zealand Guardian Trust Co Ltd [1999] 1 NZLR 213 (HC) at 242
309 [1998] 3 NZLR 528 (CA) at 534
to inquire of her whether, in the absence of any reference therein to a guarantee, he was obliged to sign one. All the other matters upon which the Judge relied were, with respect, unrelated to the operative negligence of Ms de Bernardo. They had no causal potency in the circumstances.
[559] The term “fault” was considered in Helson v McKenzies (Cuba Street) Ltd.310
In that case a woman left her handbag, containing a significant amount of money, at a department store, McKenzies. When she returned to the store, she was told that it had been handed by a floor walker to another woman who had claimed it as her own property. The true owner was unable to recover either her handbag or its contents. She sued the department store alleging negligence as a bailee and conversion. A jury found that McKenzies’ employee was negligent in giving the handbag to another person, but not grossly negligent. An issue arose as to whether McKenzies was entitled to any contribution from the true owner in respect of any judgment entered against it.
[560] A majority of the Court of Appeal (Northcroft and Gresson JJ) held that the owner’s negligence in leaving her handbag with its valuable contents on the store counter was the first step in causation of her loss. The second stage was the wrongful act of the floor-walker in delivering the bag to the person who made off with it. They were prepared to reduce the true owner’s damages by 75% to recognise her contributory negligence. Finlay J took a different view, holding that the Contributory Negligence Act did not apply because the negligence of the true owner did not amount to “fault” for the purposes of s 3.
[561] In reaching his conclusion, Finlay J referred to the definition of “fault” in s 2 of the 1947 Act:
Fault means negligence, breach of statutory duty, or other act or omission which gives rise to a liability in tort or would, apart from this Act, give rise to the defence of contributory negligence.
[562] Discussing the concept of “fault”, Finlay J said:311
“Fault”, as defined in the Act, has two branches. The first has relation to causes which are active, in the sense that they provide a basis for action in tort; the second, to circumstances which are merely defensive, in that they
310 [1950] NZLR 878 (SC and CA)
311 ibid, at 908-909
would, apart from the Act, give rise to the defence of contributory negligence. The need for this segregation of contributory negligence in a separate category is point out by Clerk v Lindsell, 10th Ed. 409, where it is commented that it was of necessity so segregated. It may well be, as Clerk and Lindsell, 10th Ed. 409, say, that the term “fault” applies to all kinds of fault on the part of the plaintiff which would give rise to an action in tort, provided the damage complained of is suffered partly as a result of such fault.
There is, however, no need to consider that question, or, indeed, any possible application of the first branch of the definition, in this case, for the negligence of the appellant in losing her bag would not give rise to any action or liability in tort. If, therefore, anything done or omitted by the appellant constitutes a fault in terms of the definition, it can be only because such act or omission would, apart from the Act, have given rise to the defence of contributory negligence.
[563] At first instance, Hutchison J had held that the Contributory Negligence Act applied.312 His Honour, after referring to Davies v Swan Motor Co (Swansea) Ltd313 held that the negligence on the part of the owner had not ceased to be a factor when her handbag was given to the person who wrongfully claimed it. McKenzies did not know that the bag contained a large sum of money and, therefore, did not know of the danger created by the plaintiff’s negligence. For those reasons, Hutchison J was
prepared to hold that there was, to use modern parlance, sufficient causal potency to justify a reduction in damages as a result of the fault of the plaintiff. Both Northcroft and Gresson JJ agreed with Hutchison J’s reasoning.314
[564] Adopting observations made by Denning LJ in Davies v Swan Motor Co (Swansea) Ltd315 Gresson J considered that the practical effect of the 1947 Act was wider than its legal effect. In Davies, Denning LJ had said:
Previously, to mitigate the harshness of the doctrine of contributory negligence, the courts in practice sought to select, from a number of competing causes, which was the cause–the effective or predominant cause– of the damage and to reject the rest. Now the courts have regard to all the causes and apportion the damages accordingly. This is not a change in the law as to what constitutes contributory negligence–the search, in theory, was always for all the causes–but it is a change in the practical application of it.
312 ibid, at 894
313 [1949] All ER 620 (CA)
314 Helson v McKenzies (Cuba Street) Ltd [1950] 1 NZLR 878 (SC and CA) at 904 (Northcroft J) and
920-921 (Gresson J)
315 [1949] All ER 620 (CA) at 630
[565] Gresson J, in holding that the contribution of one-third assessed by Hutchison J was inadequate, cited further observations from Denning LJ’s judgment in Davies:316
While causation is the decisive factor in determining whether there should be a reduced amount payable to the plaintiff, nevertheless the amount of the reduction does not depend solely on the degree of causation. The amount of the reduction is such an amount as may be found by the court to be “just and equitable,” having regard to the claimant’s “share in the responsibility” for the damage. This involves a consideration, not only of the causative potency of a particular factor, but also of its blameworthiness.
[566] Ms Grant submitted that any apportionment of damages must turn on a factual assessment of the relative blameworthiness of the conduct of the parties. She submitted that there was significant fault on the part of all plaintiffs and damages ought to be reduced considerably as a result. Ms Grant relied on Brown v Heathcote County Council,317 as an example of the way in which contributions had been assessed in cases of this type.
[567] For the plaintiffs, Mr Josephson submitted neither the Council nor the designer had discharged the onus of establishing negligence on the part of any of the plaintiffs. The effect of his submission was that the alleged contributory negligence lacked “causal potency” of the type described in Gilbert v Shanahan. Mr Josephson accepted that questions of contributory negligence are ones of fact for me to determine.
(b) The allegations of contributory negligence
[568] The Council pleads that various individual proprietors were negligent and, at least, partly caused their own loss. The particulars of contributory negligence pleaded are:
(a)Failing to make adequate enquiries and/or inspections as to the physical state of the units and common property prior to committing themselves to the purchase of their individual units; and
316 ibid at 632
317 [1982] 2 NZLR 584 (HC), [1986] 1 NZLR 76 (CA) and [1987] 1 NZLR 720 (PC)
(b)Failing to have any, or any adequate, pre-purchase inspections carried out by a building consultant or appropriately qualified expert prior to their respective purchases of their units; and
(c) The owners of units A, B, D, E, F, G, I, J, K, L, M, O, P, Q, R AND S (i.e. all units except unit N) in Sunset Terraces, all failed to make adequate or reasonable enquiries to determine the condition of the units prior to purchasing them, or transferring shares in them, on the dates set out in schedules 1 and 2 attached to the claim, in circumstances where such enquiries, if made at that time, would have revealed the defects/problems which the plaintiffs allege exist in the units; and
(d) ARPT and/or Blue Sky Holdings Limited and/or the registered owners of units A, B, E, I, J, K, M, O, P, Q, R and S failed to protect their own commercial interests by:
(i) entering into appropriate contractual arrangements in connection with the purchase and/or lease of each of the units, including obtaining appropriate warranties from the vendors/lessors; and
(ii) retaining appropriate expert advisers, including building surveyors, and obtaining advice and assistance from those expert advisers,
when agreeing to purchase and/or lease the units, in circumstances where defects in the exterior cladding and weathertightness issues were, or should reasonably have been, apparent; and
(e)Failing to obtain a building consent for the repair work undertaken to date; and
(f)In all of the circumstances, the second plaintiffs failed to exercise reasonable care to protect their interests when purchasing their units or obtaining their interest in them, and subsequently.
(c) Inadequate inquiries and/or inspections
[569] Particular (a) is directed to the plaintiffs’ failure to make adequate inquiries before committing themselves to the purchase of individual units. Understandably, inquiries of the Council were left, in the main, to solicitors acting for a particular purchaser. However, a number of those inquiries were undertaken after the purchaser was committed to the contract.
[570] Mr Devlin and his wife agreed to buy Unit F on 14 June 1997, at the time construction was to begin. The agreement was subject to solicitors’ approval. The interim code compliance certificate which covered Unit F was signed on 29 May
1998. The agreement was declared unconditional before a copy of the certificate was received. Therefore, there was no express reliance on the code compliance certificate to enter into the agreement or to declare the agreement unconditional. Mr and Mrs Devlin’s reliance can be seen as purely based on community expectations. Nevertheless, the Devlins were people to whom the Council owed a duty. The Council would have been in no better position had the Devlins obtained the certificate before declaring the agreement unconditional. The only difference would have been a specific reliance rather than a community expectation reliance. For that reason, even if Mr and Mrs Devlin could be regarded as blameworthy in part, their failure to obtain the certificate before the agreement was declared unconditional cannot be seen as causally potent in any real sense. Therefore, I find that the Council has not proved contributory negligence in respect of Mr Devlin’s claim.
[571] Michelle and Lisa Turner acquired Unit G in May 2002. By the time they settled, a code compliance certificate had been obtained. But a s 36 certificate from the Body Corporate was not obtained until 1 May 2002, five days before settlement. The issue, so far as the Turner sisters are concerned, is whether they were negligent in failing to make further inquiry about possible defects in the building at which the Body Corporate certificate hinted. I am not satisfied that receipt of the s 36 certificate, after the agreement became unconditional, could have contributed to the Turners’ loss. At that stage they were committed to buying the property, having received a copy of the code compliance certificate, and were not (at the time the agreement became unconditional) on notice of any defect. No contributory negligence claim lies against the Turners.
[572] To the extent that the Council argues that the Turner sisters ought to have obtained a copy of the s 36 certificate earlier, I find that, even if that amounted to blameworthy conduct justifying application of the Contributory Negligence Act, there was no causal potency between that inaction and the loss they suffered, given their state of knowledge of the defects at that particular time.
[573] Mr Halford acquired Unit N in October 1999, before damage manifested itself. He obtained a s 36 certificate which did not suggest problems with
construction. I accept Mr Halford’s evidence that his first knowledge of water ingress and cracking problems came in 2002 or 2003, by word of mouth from his tenant. There is no basis for a claim of contributory negligence against Mr Halford.
[574] Mr and Mrs Parkinson’s solicitors received a copy of the code compliance certificate well before their agreement for sale and purchase of Unit L was declared unconditional in September 2001. A s 36 certificate was received by their solicitors contemporaneously with a settlement statement forwarded after the agreement had been declared unconditional. Until that time they were not on notice of any potential defect with the building. Even so, there was limited information in the certificate
received as to the nature of any defects. For reasons I have given already318 Mr and
Mrs Parkinson could not be regarded as contributorily negligent as inquiries conducted after receipt of the s 36 certificate could not have contributed to the loss they suffered.
[575] The additional suggestion made by the Council is that the Parkinsons were negligent in failing to obtain a copy of the s 36 certificate earlier. Even if that were so, the failure had no causal potency. It could not be regarded as a material or significant cause of Mr and Mrs Parkinson’s loss.
(d) Pre purchase inspections
[576] The Council alleges that the individual proprietors failed to arrange pre- purchase inspections to be carried out by a building consultant or other qualified expert before their respective purchases of their unit.
[577] To my knowledge, there has never been an expectation in New Zealand (contrary to the English position) of a potential homeowner commissioning a report from an expert to establish that the dwelling is soundly constructed. Indeed, it is a lack of a practice to that effect which has led Courts in this country to hold that a duty of care must be taken by the Council in fulfilling their statutory duties. Both
318 See para [331] above
Hamlin319 and the Building Industry Commission report320 run counter to Ms Grant’s argument on this point.
[578] I find that there was no duty to that effect on the purchasers, so the allegation of contributory negligence cannot be made out. The same reasoning applies to the issues raised in Particulars (c) and (f) of the claims.
(e) The Blue Sky units
[579] I have held that no duty of care attaches to the Council in respect of the Blue Sky claims. In those circumstances, the claim for contributory negligence is rendered moot.
(f) Failure to obtain a building consent for targeted repairs
[580] The issue whether a building consent was required for the targeted repairs has not yet been determined. This allegation of contributory negligence is deferred for further consideration at the intended quantum hearing.
(g) Contributory negligence issues: conclusions
[581] In my view, neither negligence on the part of any individual proprietor entitled to claim nor causal potency (assuming breach of some duty of care) has been proved and the claims for contributory negligence fail. The contributory negligence claim relating to the targeted repairs is reserved for further consideration. Further, I have not dealt with claims against individual proprietors based on alleged lack of maintenance. Those claims will be addressed when I consider evidence on quantum, in the context of the mitigation issues.
319 [1994] 3 NZLR 513 (CA) at 525 (per Richardson J); affirmed [1996] 1 NZLR 513 (PC)
320 Report of the Building Industry Commission to the Minister of Internal Affairs “Reform of
Building Controls” (1990) at para 2.10
15. Contribution issues
(a) Introductory comments
[582] The issue of liability as between joint tortfeasors is governed by s 17 of the
Law Reform Act 1936. Section 17 provides:
17 Proceedings against, and contribution between, joint and several tortfeasors
(1) Where damage is suffered by any person as a result of a tort (whether a crime or not)—
(a) Judgment recovered against any tortfeasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tortfeasor in respect of the same damage:
(b) If more than one action is brought in respect of that damage by or on behalf of the person by whom it was suffered, or for the benefit of the estate, or of the wife, husband, [civil union partner, de facto partner,] parent, or child of that person, against tortfeasors liable in respect of the damage (whether as joint tortfeasors or otherwise), the sums recoverable under the judgments given in those actions by way of damages shall not in the aggregate exceed the amount of the damages awarded by the judgment first given; and in any of those actions, other than that in which judgment is first given, the plaintiff shall not be entitled to costs unless the Court is of opinion that there was reasonable ground for bringing the action:
(c) Any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued [in time] have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.
…
(2) In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the Court to be just and equitable having regard to the extent of that person's responsibility for the damage; and the Court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.
….
See also Brooks v New Zealand Guardian Trust Co Ltd321
[583] Both the Council and the designer sought 100 percent contribution from the developer. The Council seeks contribution from the designer and vice versa.
[584] Both Ms Grant and Mr Maclean rely on cases such as Morton v Douglas Homes Ltd,322 Young v Tomlinson323 and Mount Albert Borough Council v Johnson as indicative of the type of contribution that might be ordered.
(b) Council and developers
[585] I have no doubt that the primary cause of the successful plaintiffs’ loss was bad building. Mr and Mrs Barton, as the persons who owed a non-delegable duty to ensure the construction work was carried out adequately, are primarily to blame. The Council, unfortunately, is likely to be left with the sole liability for the loss due to the apparent insolvency of the developer.
[586] The Council should be entitled to a significant contribution from the developer. I apportion responsibility 85% to the developer and 15% to the Council.
(c) Designer and developer/Council
[587] As the designer has been successful in defending the claims, no order as to contribution is required, whether against the developer or the Council.
16. Targeted repairs: Is this failed mitigation?
[588] In an endeavour to minimise their losses, some of the plaintiffs contracted with third parties to remediate damage caused to particular units. The plaintiffs allege that the remedial work has been undertaken in a defective manner. In short, it is contended that the work ought to have been (but was not) carried out under a
321 [1994] 2 NZLR 134 (CA)
322 [1984] 2 NZLR 548 (HC)
building consent issued under the Building Act 2004. The amount paid to the third party contractors and alleged to be wasted expenditure is in excess of $800,000.
[589] Had a building consent been sought, the plaintiffs allege that a complete re- cladding of each unit would have been required, together with the installation of a ventilated cavity. Such a cavity is required under the present building code. I have not yet heard argument or evidence on whether a building consent was required for the targeted repairs.
[590] Shortly before the present trial was due to begin, the plaintiffs sought an adjournment to enable those allegedly responsible for defective repairs to be joined as defendants. I refused that application. I said:324
[13] Having considered the affidavits in support of the application and submissions by counsel made today, I rule in favour of the defendants and dismiss the application for the following reasons:
a) First, there is no reasonable prospect that the claim against the proposed defendants can be readied for trial by 8 October 2007. There is uncertainty as to whether a fixture could be allocated next year to deal with the current proceeding. The circumstances in which the July fixture was adjourned also strongly militates against joinder.
b) Second, the plaintiffs will not be prejudiced. They are entitled, within the scope of the present proceeding, to lead evidence of the likely cost of completing the remedial works, on the basis that it were completed to a reasonable standard. That protects its position so far as its claim is concerned. To the extent the plaintiffs have claims for wasted expenditure for inadequate remedial work undertaken, they can be made in parallel proceedings. It would be open to the plaintiffs to seek orders that I be asked to manage that separate process and requiring it to be heard before me later, given my familiarity with the issues through the current proceeding.
[591] Mr Josephson accepted that a plaintiff must take reasonable steps to mitigate loss. He submitted that the other side of that coin is that he or she can recover for loss incurred in attempting to mitigate, even though the attempt fails and the resulting damage might be greater than the loss he or she could have proved had mitigating steps not been taken. That additional loss, he submitted, was claimable against original tortfeasors. The ultimate test was whether the plaintiffs’ act or
323 [1979] 2 NZLR 441 (SC)
324 Body Corporate 188529 v North Shore City Council (High Court Auckland, CIV 2004-404-3230,
28 August 2007)
omission, in mitigation, was a reasonable step for the plaintiff to take: see Wilson v
United Counties Bank Ltd325 I discussed that authority earlier.326
[592] On the assumptions that the targeted repairs are defective, the question is whether the work carried out in this case falls on the failed mitigation or intervening act side of the line discussed by Tipping J in Johnson v Watson.327
[593] If it were established that the targeted repair work had been carried out on expert advice as a reasonable means of stemming further damage and preventing reoccurrence,328 any failure of the mitigating steps would, on Tipping J’s analysis329 remain a substantial and material cause of the damage resulting from the Council’s or the designer’s negligence. As Tipping J observed, “it is not the law that because the further damage could not have occurred without (but for) the original faulty workmanship, such workmanship must be regarded as the sole cause of that damage”.330
[594] A more difficult question may arise if I were to find that, to remedy the damage caused by the original negligent act or omission, the original tortfeasor would have to pay no more than it would if the defective work had not been performed. In that situation, is the price paid to those who did the faulty repair work claimable as well as failed mitigation?
[595] Although I indicated to counsel that I would endeavour to provide an answer in principle on the failed mitigation/intervening cause issue, I find (on reflection) that I must determine first whether a building consent was, in fact, required for the remedial works and, if it was, whether the work undertaken was reasonable in the circumstances to mitigate loss.
[596] I propose a solution for the parties’ consideration. Although, initially, I
declined leave for the plaintiffs to join companies allegedly responsible for defective
325 [1920] AC 102 (HL)
326 See para [240] above
327 [2003] 1 NZLR 629 (CA) at [19]. See also paras [244]-[247] above
328 For example, see Gardner v The King [1933] NZLR 730 (SC)
329 Johnson v Watson [2003] 1 NZLR 626 (CA)
330 ibid, at [19]
targeted repairs, it is distinctly arguable that leave ought now to be granted so that, when targeted repair issues are considered at the next hearing those companies have an opportunity to be heard, as to liability, on that issue.
[597] If the plaintiffs did not wish to join those companies as additional defendants, it may be open for the Council to be given leave to seek contribution or indemnity against them, through third party proceedings.
[598] As the question whether remedial work was undertaken properly will require resolution before the failed mitigation point can be determined, it makes sense for those parties alleged to have been at fault to be heard. That should also obviate the possibility of an issue arising about whether the Council could sue those allegedly responsible for the defective work, if it were ordered to meet the costs of re-cladding the dwellings. It would also avoid the messy possibility of different findings in two proceedings, in one of which the contractors were heard and in the other not.
[599] I will hear further from counsel on this issue at the conference to be convened after they have had an opportunity to consider this judgment further.
17. Costs
[600] Costs were awarded against the developer on a 3C basis, together with reasonable disbursements, when judgment was entered for liability against Mr and Mrs Barton on 5 December 2007.
[601] All other questions of costs are reserved.
18. Remaining issues
[602] I do not propose, at this stage, to enter judgment in favour of the designer against the plaintiffs. I will hear from counsel on whether it is appropriate to enter judgment at this stage at the next conference. I defer entry of judgment so that, if possible, appeal times can all run together. I will hear also from Mr Maclean on issues of costs at the case management conference.
[603] The Registrar is directed to allocate a case management conference before me on the first available date after 1 June 2008. At least two hours should be allocated for the conference, which will be convened in Court for chambers.
[604] Counsel should exchange memoranda as to orders sought at that conference, whether timetabling or otherwise. Those memoranda shall be filed and served no later than five working days before the allocated conference date.
[605] The successful plaintiffs and the Council will need to consider whether to seek leave to join those allegedly responsible for defective targeted repairs, either as additional defendants or as third parties.
19. A summary of determined claims
[606] I summarise below the outcome of this judgment:
a) The Council is liable for any losses caused by its negligence that can be established by the Turners, Mr Halford, Mr Devlin (up to a maximum of $40,000) and Mr and Mrs Parkinson. The claims against the Council made by Mr and Mrs Sangha and Blue Sky, fail.
b)The developers are liable to pay damages to all of the second plaintiffs for their negligence in failing to supervise the project adequately.
c) The developers are liable to pay damages to the Body Corporate for any loss suffered by it in relation to their failure to supervise adequately construction of the driveway.
d) The designer is not liable for any losses claimed against him.
e) As between the developers and the Council contribution is fixed at
85% (for the developers) and 15% (for the Council).
f) The Registrar is directed to arrange a case management conference to address remaining issues: see paras [603]-[605] above.
[607] For the same reasons given in respect of the claim against the designer, I decline to enter judgment at this stage, in favour of any successful plaintiff, as to liability.
[608] I wish to express my appreciation to all counsel for their considerable assistance in what has been proved to be a difficult and challenging proceeding.
P R Heath J
Delivered at 2.15pm on 30 April 2008
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