Body Corporate 191608 v North Shore City Council HC Auckland CIV 2008-404-2358

[2010] NZHC 881

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2008-404-2358

BETWEEN  BODY CORPORATE 191608

First Plaintiff

ANDJONTASHYA INVESTMENTS LTD & ORS

Second Plaintiffs

ANDNORTH SHORE CITY COUNCIL First Defendant

ANDPATRIK ROKOS & MILAN HOVORKA Second Defendant

ANDPAUL CHRISTIAN BAYER (DISCONTINUED)

Third Defendant

ANDPAUL WARWICK HARPER (DISCONTINUED)`

Fourth Defendant

...../continued

Hearing:         3 June 2010

Appearances: B L Martelli for First Defendant

No appearance by or on behalf of the First, Fifth and Sixth Third
Parties

Judgment:      9 June 2010

RESERVED JUDGMENT OF ELLIS J

This judgment was delivered by me on 9 June 2010 at 4 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors:           Heaney & Co, PO Box 105391, Auckland 1143

Copy To:           N P Simmons, 18 Mountbatten Avenue, Hillcrest, Auckland 0627

M P Hodder, 37 Scarlet Oak Drive, Albany 0632

Simmons Inspection Ltd, 18 Mountbatten Avenue, Hillcrest, Auckland 0627

BODY CORPORATE 191608 AND ANOR V NORTH SHORE CITY COUNCIL AND ORS HC AK CIV

2008-404-2358  9 June 2010

ANDTAYLOR FASCIA (AUCKLAND) LIMITED

Fifth Defendant

ANDNICHOLAS PETER SIMMONS First Third Party

ANDRALPH POWER Second Third Party

ANDBAYS HOUSE INSPECTION SERVICES LIMITED

Third Third Party

ANDROBERT JOSEPH BARNES Fourth Third Party

ANDMARTYN PAUL HODDER Fifth Third Party

ANDSIMMONS INSPECTION LIMITED Sixth Third Party

ANDNICHOLAS PETER SIMMONS First Third Party

ANDRALPH POWER Second Third Party

ANDBAYS HOUSE INSPECTION SERVICES LIMITED

Third Third Party

ANDROBERT JOSEPH BARNES Fourth Third Party

ANDMARTYN PAUL HODDER Fifth Third Party

ANDSIMMONS INSPECTION LIMITED Sixth Third Party

[1]      This proceeding concerns a claim by the Body Corporate and the owners of

14 of 15 units within a development located at 7-15 John Jennings Drive, Albany. The proceeding is what is known informally as a “leaky building” case.

[2]      The first and second plaintiffs issued proceedings on 29 April 2008 against:

a)        North Shore City Council (“Council”);

b)        Patrik Rokos and Milan Hovorka (“Developers”);

c)        Paul Bayer (“window installer/supplier”);

d)       Paul Harper (“roofer”); and

e)        Taylor Facia (Auckland) Limited (“roofer”).

[3]      In those proceedings the plaintiffs sought to recover from the defendants the costs of repairs, general damages and consequential losses. These were subsequently

quantified by the plaintiffs’ QS expert as follows:

a)	Actual/estimated repair costs	$1,904,939
b)	General damages	$   330,000
c) d)	Interest Consequential losses	$     49,783 $     60,518
Total	$2,345,240

[4]      The  plaintiffs  later  entered  judgment  by  default  against  Mr  Rokos  and Mr Walker in the sum of approximately $2 million and discontinued their claims against Mr Bayer and Mr Harper.

[5]      The Council joined as third parties to the proceeding some six companies or individuals who had provided advice to some of the second plaintiffs on the physical state of certain of the units before they bought their units several years after completion.  The council alleged that the reports provided (which did not identify the relevant defects) were in breach of duties of care owed by the third parties to the relevant plaintiffs   The statement of claim sought contribution by each of the third

parties to the Council to “the sum, or part of the sum, in respect of which the council attracts liability to the plaintiffs” pursuant to s 17(1)(c) of the Law Reform Act 1936.

[6]      On 27 October 2009 (at a judicial settlement conference) a settlement was reached between the plaintiffs, the Council and Mr Power (being the third third party).  That settlement relevantly involved:

a)        No admission of liability on the part of the Council;

b)        Payment $825,000 to the plaintiffs by the Council; and

c)        Preservation of the Council’s rights in relation to the already joined third parties.

[7]      Notwithstanding proper service having been effected on them, no steps have ever  been  taken  in  the  proceeding  by  the  first,  fifth  and  sixth  third  parties (Nicholas Simmons, Martyn Hodder and Simmons Inspection Limited respectively). The claims against those parties relate to reports prepared for the purchasers of Unit G (first third party), Unit C (first and sixth third parties) and Unit A (fifth third party).

[8]      On 3 June there was a hearing before me by way of formal proof in relation to those claims.

[9]      Mr Martelli accepted before me that no contribution could be claimed under s 17(1)(c) of the Law Reform Act 1936 by the Council unless the Council conceded that it was itself liable to the plaintiffs (i.e. notwithstanding the express disclaimer to the contrary in the settlement agreement).  Accordingly he necessarily conceded that the Council was so liable and on that basis I also accept that the Council and the first, fifth and sixth third parties are joint tortfeasors in terms of s 17(1)(c).

[10]     Rule 15.10 provides that where (as here) the relief claimed is payment of an unliquidated demand and no timeous statement of defence has been filed, the proceeding must be tried to assess damages.  In turn, r 15.11 provides that in such a

case the plaintiff (here, the first defendant) may adduce evidence of the plaintiffs’

damages by affidavit unless the proceeding is required to be tried with a jury.

[11]     The Council proceeded on the basis that the quantum of damages for which the third parties were liable to contribute was to be measured by the cost of the repairs necessary to remediate the affected units.  Affidavit evidence was filed by the Council on that issue.  The affidavit of Mr Ewen (a QS expert) set out his estimate of repair costs in relation to Units A, C and G as follows:

a)        $165,215 to repair Unit A; b)    $90,957 to repair Unit C; c) $117,640 to repair Unit G.

[12]     These figures appear to be broadly consistent with the global repair cost in relation to all 14 units recorded above, although I note that Mr Ewen’s view was that the  repair  costs  estimated  by  the  plaintiffs’  expert  were  overstated  by  some

$250,000.  I accept Mr Ewen’s expertise and am prepared to proceed on that basis.

[13]     At the hearing before me the Council sought contributions from the first, fifth and sixth third party respectively of the total amounts set out above.   Mr Martelli justified this approach  by saying that the negligent pre-purchase reports were a complete intervening cause of the relevant second plaintiffs’ loss in the sense that those plaintiffs would not have purchased the units at all were it not for those reports.

[14]     In  the  alternative  Mr  Martelli  submitted  that  a  determination  of  the appropriate respective contributions should be based on the fact that Council liability in similar cases has been held to fall between 15% and 25%.   That this is the appropriate range can be seen from the survey conducted by Venning J Body Corporate No 189855 v North Shore City Council HC Auckland CIV-2005-404-

5561, 25 July 2008 at [301]:

The issue between the various defendants responsible for the original defects is the extent of the apportionment in this case. In Todd on Torts the author notes the generally accepted allocation of responsibility between builder and

Council as 80 percent/20 percent. In Mt Albert Borough Council v Johnson, the apportionment was 80 percent/20 percent. In Morton v Douglas Homes the apportionment was 85 percent to the development company and 15 percent to the Council in some instances and in respect of others 90 percent and 10 percent respectively. In Dick v Hobson Swan Construction Limited the Court apportioned responsibility 80 percent/20 percent. In BC160361 & Ors v Auckland City Council & Ors HC AK CIV 2003- 404-006306 25 June

2007  Harrison  J,  the  Court  apportioned  responsibility  to  the  building company and Council at 80 percent and 20 percent. In the recent decision of Heath J in Body Corporate 188529 & Ors v North Shore City Council HC AK CIV 2004-404-3230 30 April 2008 the Court apportioned responsibility at 85 percent to the builder and 15 percent to the Council.

[15]     Mr Martelli said that because of the existence of the “intervening cause” issue the Council’s liability should fall at the lower end of the 15% - 25% range in the present case.

[16]     I do not accept that the pre-purchase inspection reports prepared by the first, fifth and sixth third parties were so completely causative of the relevant second plaintiffs’  losses  that  they  could  properly  be  said  to  justify  ordering  them  to contribute the full cost of repairs here.  The plaintiffs’ fourth amended statement of claim specifically alleged that, when purchasing the properties, the relevant second plaintiffs relied on Code Compliance Certificates issued by Council.  The Council’s expert witness, Mr Rankine, also deposed that the defects alleged in the fourth amended statement of claim would have been identifiable by the Council during construction.   In terms of s 17(2) justice and equity requires that the Council still bears some liability for such defects as arose out of its negligent inspection of the development during its construction, and as I have explained above, the Council has in any event accepted that it was liable to the plaintiffs for the purposes of this proceeding.

[17]     Accordingly, the first defendant is entitled to judgment against the first, fifth and sixth third parties for contributions under s 17(1)(c) of the Law Reform Act

1936, with those contributions to be apportioned as follows:

a)        The first third party is liable to contribute to the Council 80% of the estimated cost of repairing Unit G ($117,640 x 80% = $94,112);

b)The fifth third party is liable to contribute to the Council 80% of the estimated cost of repairing Unit A ($165,215 x 80% = $132,172);

c)        The first and sixth third parties are liable to contribute to the Council

80% of the estimated cost of repairing Unit C ($90,957 x 80% =

$72,765.60).

[18]     The Council claims, and is entitled to, interest on these amounts from the date of its payment to the plaintiffs of the settlement sum and to costs and disbursements on a 2B basis.

[19]     Because it seems there is no specific time allocation in Schedule 3 of the High Court Rules for a quantum hearing I allocate (pursuant to Item 11 of that Schedule) 0.3 days in that respect.

[20]     Claimable disbursements are to include the costs of Mr Rankine.

Rebecca Ellis J