Body Corporate 208191 v Joyce Building Limited HC Auckland CIV 2006-404-005373
[2011] NZHC 2099
•16 December 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2006-404-005373
BETWEEN BODY CORPORATE 208191
First Plaintiff
ANDDAVID ANTHONY HOLL & ORS Second Plaintiffs
ANDJOYCE BUILDING LIMITED First Defendant
AND GJ JOYCE
First Named Third Defendant
AND GJ JOYCE
Second Named Third Defendant
Hearing: 1 and 3 August 2011
Appearances: G Shand and J E Collins for the Plaintiffs
R Ferguson for First and Third Defendants
Judgment: 16 December 2011
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Friday, 16 December 2011 at 11:30 am pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
Grimshaw & Co, DX CX10174, Auckland for Plaintiffs
Ferguson Law, PO Box 106-866, Auckland 1143 for First and Third Defendants
BODY CORPORATE 208191 & ORS V JOYCE BUILDING LIMITED & ORS HC AK CIV 2006-404-005373 [16 December 2011]
Introduction
[1] The 18 unit complex at 42-44 Aitken Terrace, Kingsland, was built in 2000-
2001. Because of failings in design and construction, it suffered extensive water damage. It had to be re-clad at a cost of $1,249,760.72.
[2] The unit owners and the body corporate allege tortious negligence on the part of the developer, Joyce Building Limited, and its sole director, Geoffrey Joyce. They seek to recover the cost of repairs, their consequential losses and a sum for general damages. One of the unit owners, Gayl Humphrey, also claims for breach of contract against Mr Joyce in his personal capacity and as trustee and executor of his wife’s estate. Mr and Mrs Joyce sold unit 1B to Ms Humphrey. Ms Humphrey relies on a vendor warranty in the agreement for sale and purchase.
[3] The unit owners and the body corporate originally issued proceedings against a range of other parties as well. The architects settled the claim against them for a substantial sum. Claims against all other defendants have been discontinued.
[4] There is no issue as to quantum. The agreed quantum is $1,717,922.04 comprising repair costs of $1,249,760.72, consequential losses of $68,161.32 and general damages of $400,000.00.
[5] At the outset of the hearing, the first defendant, Joyce Building Limited, consented to entry of judgment against it for the sum of $1,717,922.04 broken down in the amounts allocated to each of the plaintiffs in the consent memorandum relating to quantum dated 26 July 2011. However, Joyce Building Limited has not traded for some years. The plaintiffs continued their claim against Mr Joyce and seek judgment against him personally.
Chronology
[6] A chronology, largely adopted from the plaintiffs’ submissions, is as follows.
[7] On 19 May 1994, Mr and Mrs Joyce acquired the properties at 42 and 44
Aitken Terrace, Kingsland. They transferred the properties to Joyce Building
Limited on 1 September 2000.
[8] On 12 October 2000, Joyce Building Limited, by its agent Mr Joyce, lodged written applications for building consent to clear the sites at 42 and 44 Aitken Terrace, Kingsland, which were granted by Auckland City Council the following day.
[9] On 8 December 2000, Joyce Building Limited by its agent, DJ Johnson, lodged a written application for building consent to construct 14 new apartments, which the Council granted on 14 December 2000.
[10] On 23 April 2001, Joyce Building Limited, by its agent GJ Joyce, lodged a written application for resource consent to sub-divide the property into 18 principal units and 47 accessory units under the Unit Titles Act 1972, which again the Council granted.
[11] 42 and 44 Aitken Terrace, Kingsland, were combined into one parcel of land on 16 May 2001. Compass Building Certification Limited (since struck off) issued an interim code compliance certificate on 27 July 2001 and issued a final code compliance certificate for the building on 22 April 2003.
[12] Mr and Mrs Joyce purchased Unit 1B from Joyce Building Limited on
20 December 2001. They sold it to Ms Humphrey on 18 September 2005, well after construction of the complex had been completed.
Evidence
[13] The plaintiffs filed and served witness statements from 21 second plaintiffs and the body corporate secretary. By a memorandum dated 11 July 2011 the parties agreed that these could be admitted as evidence by consent.
[14] The plaintiffs also relied on reports by a Weathertight Homes Resolution Service assessor, Douglas McKenzie Bourne. Mr Bourne died 18 months ago. His evidence is admissible under ss 16 and 18 of the Evidence Act 2006. The plaintiffs also adduced as evidence answers given by Mr Joyce to interrogatories served on him by the plaintiffs.
[15] The plaintiffs called only two witnesses. Daniel St Claire Pool answered to a witness summons issued to him. He was employed by Joyce Building Limited as a builder in the Aitken Terrace development. He was originally a defendant but the claim had been discontinued against him. The plaintiffs relied on a statement of evidence completed by him with the assistance of counsel when he was still a defendant.
[16] The second witness called by the plaintiffs was Phillip Wynne Grigg, a registered architect and consultant for Babbage Consultants Limited, a multi- disciplinary architectural and engineering consultancy in Auckland. Babbage investigated the weathertightness issues, provided recommendations to the Body Corporate, prepared plans, conducted a tender process for the remedial works and acted as the supervising architects for the remedial works. Mr Grigg gave evidence as an expert. His expertise was not challenged.
[17] The third defendants, being Mr Joyce in his personal capacity and also as executor and trustee of his wife’s estate, called only one witness, and that was Mr Joyce himself.
[18] These events significantly truncated the scope of the issues and the evidence for determination at trial. The dispute now focuses on the tortious liability of Mr Joyce personally as a director of the developer. A secondary issue relates to the interpretation of a vendor warranty in the agreement for sale and purchase of unit 1B signed by Mr and Mrs Joyce.
The law
[19] A development company that acquires land and then builds an apartment complex on it for individual sale to members of the general public owes a duty to see that proper care and skill is exercised in the building of the complex, which cannot be avoided by delegation to an independent contractor.1
[20] A director of a development company may also owe a duty of care if he or she assumed personal responsibility for, or exercised particular control over, the building of the complex.2 The director’s acts or omissions must, however, be directly linked to the nature of the defects and damage. It is not enough to find individual control of the company or the development in a general sense.3 Nor is the adoption of a job title such as “project manager” sufficient. Rather, the focus is on the functions performed, and expected to be performed, by the person said to owe a duty of care.4
[21] The assumption of personal responsibility or the exercise of particular control does not necessarily mean that physical work needs to have been undertaken by the director – that is just one potential manifestation of actual control over the building process.5 Moreover, if a director is also acting as an employee of the company carrying out a task that would have been undertaken by another person employed for the task, if not by the director, then there is no reason at all why that director should not be personally liable if he or she is negligent in carrying out that task.6
[22] In Body Corporate No 188273 v Leuschke Group Architects Ltd, Harrison J found that a director of a development company who had no involvement whatsoever in the actual building process and who never attended on site during the
development did not personally owe a duty of care to unit holders.7
1 Mount Albert Borough Council v Johnson [1979] 2 NZLR 234 (CA) at 240-241.
2 Body Corporate No 188273 v Leuschke Group Architects Ltd HC Auckland CIV-2004-404-2003,
28 September 2007, Harrison J at [55].
3 Ibid, at [58].
4 Auckland City Council v Grgicevich HC Auckland CIV-2007-404-6712, 17 December 2010, Brewer J at [72]-[75].
5 Hartley v Balemi HC Auckland CIV-2006-404-2589, 29 March 2007, Stevens J at [92].
6 Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17.
7 Body Corporate No 188273 v Leuschke Group Architects Ltd at [68]-[71].
[23] By contrast, in Body Corporate No 199348 v Nielsen8 the evidence disclosed that Mr Nielsen was the director of the development company with primary responsibility for supervising the construction work. That responsibility extended to ensuring that the work of various trades was properly co-ordinated and that the work was carried out in accordance with the approved plans and specifications. He would attend on site for at least one to two hours per day and provide instructions for that day’s work to the site foreman. If a significant problem arose on site, Mr Neilsen would either attend on site or speak by telephone to those responsible for undertaking the work to provide direction on what should be done. Heath J found Mr Neilsen personally liable.
[24] In Body Corporate No 185960 v North Shore City Council,9 Duffy J found that a developer of a residential complex was also liable in his capacity as the paid project manager. As project manager, he arranged for building consent, organised the various trades people, arranged for materials to be supplied and visited the site three or four times a week to make sure the building was progressing smoothly. That he did so in a manner that failed to meet the standard of care expected of someone with this task was a cause of a defective workmanship characteristic of the complex.
The extent of Mr Joyce’s duty of care
Role of Mr Joyce
[25] The role that Mr Joyce played in the development is crucial to an assessment of his personal liability as a director of Joyce Building Limited.
[26] Mr Joyce graduated as a civil engineer from the University of Auckland in
1975 and has been in the construction industry for over 35 years. He has spent most of that time running his own building company. As sole director of Joyce Building Limited he was directly and solely responsible for the general administration and
day-to-day running of the company. This involved pricing materials and labour
8 Body Corporate No 199348 v Nielsen HC Auckland CIV-2004-404-3989, 3 December 2008, Heath J.
9 Body Corporate No 185960 v North Shore City Council HC Auckland CIV-2006-004-003535,
22 December 2008, Duffy J.
supply, the awarding of contracts, organising funding and draw-down documentation and organising the payment of staff, merchants and sub-contractors.
[27] In later years Joyce Building Limited also operated as a developer. Mr Joyce was then responsible for making strategic decisions on future projects and organised maintenance on past projects as well as dealing with banks for funding and agents to produce sales. One of those projects was the construction of the apartment complex at 42-44 Aitken Terrace, Kingsland.
[28] Mr Joyce acknowledges that as managing director of Joyce Building Limited he had the ultimate responsibility to ensure that the project was satisfactorily completed. He says that he did take that role seriously but discharged any duties he had in that regard in a number of different ways. He says that because most of his time tended to be occupied in running the business, he relied on his foreman, Mr Pool, and an appropriately qualified staff of subcontractors to supervise such trades as carpentry, fixing cladding and textured coating applicators.
[29] Mr Pool was on site at all times and Mr Joyce relied on him to keep an eye on carpentry and general building contractors within his area of experience. He felt that Mr Pool had superior industry knowledge and experience to him in those areas and was therefore better able to supervise the work for him.
[30] In addition, the carpentry subcontractor, Gary Sykes, had previously been employed by Mr Joyce on a large multi-unit development on the North Shore involving a similar cladding system. This had been inspected as building progressed by the manufacturer’s representative and passed as compliant by the North Shore City Council. Mr Joyce therefore had confidence in his ability to do the job properly.
[31] In addition, to ensure that the cladding manufacturer’s instructions were being followed, Mr Joyce organised for the manufacturer’s representative to visit the project on two separate occasions. On both occasions the manufacturer’s representative was apparently happy with the system being used and the work being done.
[32] Similarly, the textured coating applicator had also worked for Joyce Building Limited previously and had undertaken his work in a professional and tradesman- like manner. He was also on the list of approved applicators by the manufacturer of the system being used by Joyce Building Limited.
[33] Mr Joyce says that, in general, work was done according to what was standard trade practice at the time. The fact that, with hindsight, the practice of directly fixing monolithic claddings to untreated timber in unventilated space with little or no eave protection in a humid rainy climate like New Zealand was an unmitigated disaster, cannot now be translated back in time to gauge what was normal trade practice at the time, particularly when Joyce Building Limited installed the system as shown in the approved plans.
[34] Mr Joyce does not deny that the complex at 42-44 Aitken Terrace leaked and suffered serious decay problems but contends that the reason the building needed to be reclad was because it was built to a system that had proved to be insufficiently robust to stand the test of time and no amount of supervision could have changed that fact.
[35] The plaintiffs, on the other hand, point to the fact that Mr Joyce was employed by Joyce Building Limited as project manager to supervise the construction of the apartment complex. He was paid a salary as project manager. He also received other significant financial benefits from the development and was ultimately in control of the project. He had the authority to change methods of construction and was said to be the human face of the development.
[36] In particular, Mr Joyce was responsible for supervising most aspects of the construction process. He selected and contracted all of the contractors. He instructed all of the professionals or consultants who worked on the project. He also organised the sub-trades and generally project managed the job over the whole duration of the project.
[37] Mr Joyce was on site usually every day from 7:00 am to 4:00 pm. Each
morning he would set the day’s agenda and tell workers what the day’s programme
was. He attended site on numerous occasions during the construction to meet with agents and subcontractors to enable development and building of the project. Mr Joyce conceived the idea of installing cedar/copper ‘eyebrows’ on the building and arranged for the copper flashing to be constructed and delivered. He also ordered the joinery and flashings.
Decision
[38] Having reviewed the evidence, it is clear to me that Mr Joyce did assume the role and functions of a project manager. He owed a duty of care commensurate with that position. In the end, there was no real dispute about the role Mr Joyce played for Joyce Building Limited. In particular:
(a) Mr Joyce was in charge of the construction of the apartment complex;
(b)He was paid a salary to act as the project manager and he received other significant financial benefits;
(c) He had authority to change methods of construction;
(d)He conceived the idea of adding cedar/copper eyebrows to the building and subsequently arranged for the copper covers to be constructed and delivered on site for installation;
(e) He selected and contracted with the contractors on behalf of Joyce Building Limited. He also instructed all professionals and consultants who worked on the project;
(f) His foreman, Mr Pool, qualified as a builder on 1 June 2000 and was being paid on a labour only basis at an hourly rate of between $20 and
$25;
(g) He was generally on site each date from 7.00 am until 4.00 pm;
(h) Each morning he would set the day’s agenda and brief staff on the
day’s programme;
(i)He had a supervisory role in relation to the building work but cannot recall the specific work he did or did not check;
(j)He arranged all inspections and personally dealt with the building certifiers.
[39] Reference was made by Mr Joyce to inspections made by the building certifiers, Compass Building Certification Limited, who he said were also charged with ensuring the project was built according to the approved design and plans. The building certifiers may have been equally negligent but they have now been struck off and are unable to be sued by the plaintiffs.
[40] The issue is whether Mr Joyce’s role was such that he must be taken to have assumed a duty of care in relation to the project management. In my view, there was no one individual with a higher degree of personal responsibility for the building work. He was the human face of the development. Mr Joyce claims that Mr Pool and the principals or foremen of the subcontractors also had supervisory roles. However, Mr Pool denied he was engaged to supervise the quality of the building work. Although the subcontractors had responsibility for the work within their own areas of expertise in terms of their contractual arrangements, Mr Joyce had overall responsibility to ensure that their work was undertaken in a manner that complied with the Building Code.
Breach
Nature of defects and damage
[41] In determining whether there was a breach of the duty of care owed by Mr Joyce, the central question is whether Mr Joyce’s acts or omissions can be directly linked to the defects and damage.
[42] The first defect identified by Mr Grigg is inadequate weatherproofing to the junction between the wall cladding and the cedar/copper eyebrows. The cedar eaves projection was covered with a copper cover and secured to the main structure by means of a timber batten along its length. The timber batten was not flashed and was reliant on a silicone sealant at its abutment with the wall which was weathered and had failed in some areas. A textured waterproof coating was also not applied to the cladding board behind the batten which allowed water to penetrate the building. The cedar/copper eyebrows were conceived by Mr Joyce and installed on his instructions. Mr Joyce therefore had an obligation to ensure that his design was sufficiently robust to ensure that it met the general weathertightness requirement of the Building Code.
[43] Mr Grigg identifies ten other substantial defects. In many cases, he refers to a publication entitled “Harditex Technical Information” published by James Hardie Building Products in June 1998 as setting out the manufacturer’s specifications or recommendations on the use of its fibre cement sheets, Harditex, as a cladding. Mr Grigg notes that the following specifications or recommendations were not complied with:
(a) Page 8 – General requirements. All Harditex sheet edges must be fully supported by the framing. Framing must be rigid and not rely on the Harditex for stability.
(b) Fig 14/15 – Standard window or door head detail/head flashing detail.
Depicts a separation between the Harditex sheets and the head flashing. When the weather sheet is brought hard down on the flashing the bottom edge of the sheet must be back sealed. A continuous 6 mm x 10 mm Inseal 31089 strip must also be used to seal the back of the sheet.
(c) Fig 16 – Side flashing detail (Inseal or sealant seal). The sides of the window must be sealed with Inseal 3109 6 mm x 10 mm strips or a paintable silicone.
(d)Fig 17 – Sill flashing detail. When aluminium joinery is used sill flashings give good long term protection. The sill flashings need the end turned up to be effective.
(e) Fig 19 – Harditex overhang detail to concrete or blockwork face. A
50 mm maximum overhang is specified with a gap of 6 mm minimum between the Harditex sheet and the concrete base.
(f) Fig 25/26 – Horizontal flashing control joint/Horizontal reveal control joint. A 6 mm gap is shown between the bottom of the upper Harditex sheet and the level middle part of a UPVC “h” moulding and a further
3 mm gap below the middle part of the UPVC “h” moulding and the
top of the lower Harditex sheet.
(g)Fig 67 – Soffit drip-edge detail. A 20 mm drip edge is shown at the bottom of Harditex sheets at soffits.
(h)Fig 68 – Parapet detail. A 1 in 10 min fall is specified. The parapet area is to be covered with AGA Superflex 1 membrane or similar. Two coats are to be used and fibreglass matting is to be embedded across the top and 200 mm down each side.
[44] Mr Grigg was cross-examined about his reference to the Harditex technical information. A distinction was sought to be drawn between the use of mandatory language and options. Mr Grigg agreed that mandatory language was not used in relation to sill flashings and that you could therefore leave off sill flashings. The publication does state however that “When aluminium joinery is used sill flashings give long term protection”. Aluminium joinery was indeed used on the building. In my view, if an alternative to sill flashings was used, it needed to give equal or better protection than sill flashings. In the present case, it did not.
[45] It was also suggested that it was not common practice to use sill flashings at the time:10
10 Notes of Evidence, pg 23 lines 13-19.
Q. It’s also a very rare thing that there were sill flashings at that time,
correct?
A. Not so rare but it wasn’t, it wasn’t common, you would have more chance of seeing sill flashings than jam flashings.
Q. And the reasons for that I take it is the visual aspect, a lack of jam flashings in particular would create, you get more of that smooth monolithic look, don’t you?
A. And it is cheaper too.
[46] The fact that Mr Joyce may have followed a common practice in omitting sill flashings may explain, but does not excuse, the failure to make the windows weatherproof, particularly when the Harditex technical information recommended otherwise.
[47] Further, it was suggested that it was impossible to check whether sealant had been properly applied to the sides of a window once the window was installed:11
Q. Is it possible, once the window is installed, for a person to work out whether if any of the silicone sealant has been properly applied in terms of the Hard[ie]’s suggestions in their brochures?
A. You, once it’s installed you can tell where they’re, it has been applied but not whether it’s been properly applied.
Q. While the silicone bead I think they are talking about, if you look at figure 16, the bead itself appears to be hidden behind the facing of the window, right?
A. That’s correct.
Q. So you wouldn’t be able to see the detailing of that unless you were
there at the actual installation of the window, correct?
A. You wouldn’t be able to see it but you’d be able to feel it with a
feeler gauge which is what we do in our testing.
Q. It wouldn’t have been common trade practice to go round feeling
windows with a feeler gauge back in 2001, would it? A. Not for a builder, no.
[48] In my view, if it is not possible to check whether a window has been installed
in accordance with a manufacturer’s specifications or recommendations and in
accordance with good building practice after it has been installed, a person in
11 Notes of Evidence, pg 23 line 22 – pg 24 line 3.
Mr Joyce’s position should have had systems in place to ensure that it had been installed properly. As a minimum, Mr Joyce should have overseen the installation of the first window to ensure it was installed properly and given specific instructions to the installers about how the remaining windows were to be installed. It was insufficient just to leave it up to the sub-contractors. Mr Joyce says he relied on his foreman to keep an eye on carpentry and general building contractors within his area of experience. Although his foreman, Mr Pool, had worked for him for a number of years, he was only 9 months out of his apprenticeship. Mr Pool gave evidence that he observed the installation of one window because the sub-contractor was having trouble fitting it; but there is no evidence that Mr Joyce gave him any specific instructions regarding the installation of the windows.
[49] As to the parapets on the building, the Harditex technical information shows a 1 in 10 minimum fall with a waterproof membrane over the cladding reinforced by
2 coats of embedded fibreglass matting 200 mm wide at the corners. The parapets in the present case were, however, constructed with flat horizontal surfaces. Mr Grigg said that this, combined with the lack of textured waterproof coating to the cladding board behind the battens, made the parapets vulnerable to water penetration.
[50] Again, as project manager, Mr Joyce should have had systems in place to ensure that the subcontractors who he selected and contracted with on behalf of Joyce Building Limited complied with the manufacturer’s specifications or recommendations. The lack of a 1 in 10 minimum fall would have been obvious both during and after construction was completed.
[51] Mr Joyce impliedly suggested that two visits to the site by the James Hardie representative were sufficient to excuse the failure to follow the manufacturer’s specifications or recommendations. The manufacturer’s representative did not give evidence. No evidence was led about the extent of his inspection or exactly what he said to Mr Joyce. Mr Joyce stated only:12
Additionally, to ensure that cladding manufacturer’s instructions were being followed I organised for the James Hardie representative Dave Smith to call in. This was done on 2 separate occasions, the first in early March when the
12 Statement of Evidence, para 17.
cladding installation was started and then again two weeks later when substantial progress had been made. He was happy with the system being used and the work being done on both occasions.
[52] Unfortunately, without more, I can only accord minimal weight to that evidence. On the other hand, there is clear and unequivocal evidence from Mr Grigg that a number of specifications and recommendations from the Harditex manual were not complied with.
[53] Mr Grigg also referred to a number of defects which did not relate to the use of the Harditex cladding such as building paper which was lapped behind (instead of over) head flashings, inadequate falls to the deck areas and inadequate weatherproofing to the concrete slab and block walls. Some of these Mr Joyce acknowledged, such as the failure to lap the building paper on top of the window flashings in some windows. He admitted it was clearly negligent on the part of the subcontractor for which Joyce Building Limited as developer, but not him personally, must be responsible.
[54] Mr Joyce refers to two particular defects identified by Mr Grigg which did not relate to the use of the Harditex cladding where he submits the plaintiffs’ evidence falls short of proof that he or Joyce Building Limited was negligent. Firstly, Mr Grigg identified pooling of water and lack of reasonable falls on decks as a fault. Mr Grigg did observe one deck when tiles were removed during the remediation process and noted that a fall had been screeded in by the original tiling contractor. The screeded fall was insufficient, but Mr Grigg was unable to say whether it would have been sufficient at the time of installation of the tiles or whether the problem occurred over time with sag and creep of the hibond concrete surface. Mr Joyce therefore submits that “there is no evidence there was a problem for [him] to observe”.
[55] I am, however, of the view that if sag and creep of the hibond concrete surface could be expected over time, then a reasonable and prudent project manager overseeing the construction of the building would ensure that any screeded fall put in place by the tiling contractor would make allowance for possible settling of the concrete. The tiling contractor would not necessarily have the expertise or
experience in the installation of a hibond concrete surface and may not know of the expected sag and creep of the concrete over time.
[56] Secondly, Mr Grigg identified inadequate weatherproofing to the concrete slab in the car park. However, he accepted that it was not unreasonable for Joyce Building Limited to use an additive called Xypex in the concrete when it was poured, as happened in the present case, and that there was a gradual deterioration of the slab over time. There was no water pooling when construction was complete and Mr Joyce therefore submits that he “could not have observed a problem that did not exist when the slab was constructed”.
[57] The concrete slab had, however, deteriorated relatively quickly and, before proceedings were even issued, Joyce Building Limited had arranged for shrinkage cracks to be routed out, primed, fitted with a backing slip surface and filled with a flexible sealant. Mr Joyce was told that the problem was solved but further water came in over time. Mr Joyce said he was prepared to go back and sort out further cracks that had appeared subsequently but was held up by bad weather and eventually the legal process overtook the maintenance process.
[58] Mr Joyce is to be commended for “attending to maintenance issues”, as he put it, but, in my view, such deterioration in a relatively short period of time is not maintenance but evidence of insufficient protection of the concrete. It is well known that concrete does shrink over time and some sort of waterproof membrane was obviously required to be applied on top of the slab to prevent the deterioration which occurred relatively quickly.
[59] While issue may be taken with particular faults identified by Mr Grigg, there is no doubt, and Mr Joyce rightly concedes, that clear negligence on the part of Joyce Building Limited has been established. Mr Joyce identifies as examples of such negligence, as noted above, the failure to lap the building paper on top of the window flashings in some windows, as well as poor detailing of the flashings on the upstand between deck and floor of the apartments, failure to apply sealant correctly and inadequate flashing detail by the roofing contractor. Mr Joyce says that all are
examples of clearly negligent work by the sub-contractors for which Joyce Building
Limited as developer must be responsible.
[60] Mr Joyce is reluctant to admit to negligence in areas where common building practice has been found ineffective or insufficient with the benefit of hindsight. In this category are allegations concerning the deck levels with reference to interior floor levels. Up-stands were installed between deck and interior, which Mr Joyce maintains was a legitimate method of separating interior floor from deck. Another example is the absence of texture coating behind battens and flashings. Mr Joyce says that this is neither negligent nor causative of loss when the sheets were sealed with a clear waterproofing coat prior to application of a texture coat. Such sealant was protected from exposure to the sun by the battens.
[61] It is, however, impossible for this Court to make any assessment of the damage caused by the admittedly negligent actions compared with the damage caused by the actions which are said to have been consistent with the manufacturer’s instructions and common building practice at the time and which are not conceded to be negligent.
[62] For example, there is no doubt that extensive damage was caused by water entering the building through the window frames. It is conceded that the failure to lap the building paper on top of the window flashings in some windows was negligent, as was the failure to apply sealant correctly. However, sill and jamb flashings were also not fitted to windows. The failure to do so was not conceded to be negligent but it is impossible to say what damage was caused by water entering the building through the failure to lap the building paper on top of the window flashings or through incorrectly applied sealant compared to damage caused by water entering the building through failure to fit sill and jamb flashings to the windows.
[63] In some cases, the moisture content percentage reading at a window head level was higher than at the window sill level. In other cases it was the reverse. Water can travel in any direction by capillary action but the force of gravity would also mean that water which entered the building at a window head level would generally travel downwards.
[64] Mr Joyce accepts that the cladding system for the building as a whole was seriously faulty and that no amount of maintenance work would solve the inherent problems in the cladding system and that, like almost every other building built as monolithic cladding directly fixed to untreated framing over unventilated space, it needed to be re-clad.
Conclusion
[65] I take the view on the evidence that the admitted negligence of Joyce Building Limited was a substantial and operating cause of the need for the complex to be re-clad. There may have been other causes but it is impossible to quantify the exact or approximate contributions of each of the causes. I am, however, of the view on the balance of probabilities that maintenance work and/or a partial re-clad would not have been sufficient in itself to address the admittedly negligent actions of the builder, Joyce Building Limited.
[66] I find that Mr Joyce is personally liable for the admitted negligence of Joyce Building Limited. His acts or omissions can be directly linked to the nature of the defects and damage. I do not accept that the duty of care owed by Mr Joyce was satisfied by the use of Mr Pool as his eyes and ears or by the careful selection of trusted contractors. Mr Joyce needed to have systems in place to ensure, in particular, that the manufacturer’s specifications and recommendations in relation to the installation of the Harditex cladding were complied with and that the general weathertightness requirement in the Building Code was met.
[67] The first plaintiff’s claim succeeds.
Breach of warranty in Unit 1B sale and purchase agreement
[68] Mr Joyce is also sued in his personal capacity and as trustee and executor of his wife’s estate as the vendor of Unit 1B. Mr and Mrs Joyce bought Unit 1B from Joyce Building Limited in December 2001 when it remained unsold after the apartments had been offered for sale to members of the public on completion of the complex.
[69] Mr and Mrs Joyce subsequently sold Unit 1B to Gayl Patricia Humphrey by agreement for sale and purchase dated 16 September 2005. That agreement included the condition contained in clause 6.2(5) which read:
6.2The vendor warrants and undertakes that at the giving and taking of possession: ...
(5) Where the vendor has done or caused or permitted to be done on the property any works for which a permit or building consent was required by law: ...
(b) The works were completed in compliance with that permit or consent; and ...
(d) All obligations imposed under the Building Act 1991 and/or the Building Act 2004 (together “the Building Act”) were fully complied with.
[70] Clause 1.3(1) also provided that:
If there is more than one purchaser or vendor, the liability of the purchasers or of the vendors, as the case may be, is joint and several.
[71] Ms Humphrey settled the purchase of Unit 1B on 7 October 2005. As at that date, it is alleged that Mr and Mrs Joyce were in breach of the agreement because Unit 1B was not constructed and finished substantially in accordance with the plans and specifications in a proper and workmanlike manner; the works were not completed in compliance with the building consent and all obligations imposed under the Building Act were not fully complied with. It is submitted that Mr Joyce as project manager employed by Joyce Building Limited, personally did, caused or permitted work to be done to Unit 1B that did not comply with clause 6.2(5)(b) and (d). It is also submitted that work done by the vendors is not restricted to work done while they were the legal owners as there is no explicit or implied temporal requirement imposed by the wording in clause 6.2(5).
[72] Mr Joyce, on the other hand, says that he and his wife did not own the apartment until December 2001, after the project had been completed, and therefore did not direct or allow the work which breached the Building Code. They were vendors under the agreement in their personal capacities; Joyce Building Limited was at the time contractually responsible for the construction of Unit 1B.
[73] The issue to be determined here is the proper interpretation of clause 6.2(5). I have been referred to one case on point, Scott v Ellison.13 In early 1988, the appellant and her partner purchased a residential property in Tauranga. They carried out building work on the property. A building permit was not obtained. Neither was a code compliance certificate issued. Ownership was then transferred to the appellant alone. Later still, the property was transferred to the appellant and JSB
Trustees Limited as trustees of a trust formed by the appellant. The respondent bought the property in 2004 from the appellant and JSB Trustees Limited. She later discovered defects in the building work and the absence of a permit. The respondent issued proceedings to recover the cost of repairs.
[74] The appellant obtained summary judgment in the District Court but on appeal in the High Court, summary judgment was set aside. The appeal to the Court of Appeal turned on the meaning of the vendor’s warranty in the agreement for sale and purchase that works done by the vendor were permitted and code compliant. Clause 6.2(5) of the standard form agreement used in Scott v Ellison was in the same form as the present case. The issue for the Court of Appeal was: “who was the vendor?”
[75] The Court of Appeal referred with approval to the commentary in A Handbook on agreements for sale and purchase of land14 that clause 6.2(5) covers only works done by or for the vendor or with the permission of the vendor; it does not cover work done by a predecessor in title. The Court of Appeal considered that the appellant’s argument necessitated finding that her legal status had changed from the time the work was completed (when she was the owner personally) until the property was sold to the respondent (when she was the vendor in her capacity as a trustee). The Court agreed with the High Court that it had not. Summary judgment
was not appropriate and the appeal against refusal of summary judgment was
accordingly dismissed.
13 Scott v Ellison [2011] NZCA 302.
14 P Blanchard A Handbook on agreements for sale and purchase of land (4th ed, Handbook Press, Auckland, 1988) at [718].
Determination
[76] The warranty in clause 6.2(5) is a personal guarantee of the vendors that any works on the property done or caused or permitted to be done by them complied with the relevant permits, building consents and obligations under the Building Act. It does not bind the vendors on any actions outside of their control.
[77] The cause of action lies in the breach of the warranty by a vendor, rather than the carrying out of the faulty work. A person who carried out faulty work on the property but was not named as a vendor cannot be held liable under clause 6.2(5) — they are not party to the contract; they did not give the warranty.
[78] The fact that faulty works were carried out while the vendors were not the legal owners of the property may indicate that they did not cause or permit the faulty works to be done on the property. But that is not determinative. The question begged by clause 6.2(5) is not who owned the property, but whether the person who gave the warranty did, caused or permitted faulty works to be done on the property. I do not accept that vendors can tiptoe around a personal warranty such as clause
6.2(5) by the mere use of a company as a vehicle for undertaking works on the property.
[79] In this case, the vendors were Mr and Mrs Joyce. Their liability is joint and several. At the relevant time, Joyce Building Limited held the title. Clearly, Mrs Joyce did not cause or permit the faulty work to be done to Unit 1B. She did not own the apartment; she had no involvement in its construction and had no influence over Joyce Building Limited or its operations. Mr Joyce, on the other hand, was the controlling force behind Joyce Building Limited. In that position, as I have already held, he did cause and permit works on Unit 1B (as well as the other units) that failed to comply with the building consents and Building Act requirements.
[80] The fact that he was not the legal owner at the time does not detract from this conclusion. The effect of a change in legal ownership is that Mr Joyce could not be sued in contract for the failures of Joyce Building Limited unless he gave a personal
guarantee. The clause 6.2(5) warranty is such a guarantee, and I find sub-clauses (b)
and (d) have been breached.
[81] Ms Humphrey’s claim accordingly succeeds.
Result/orders
[82] By consent, judgment is given against Joyce Building Limited in favour of the plaintiffs in the sum of $1,717,922.04 exclusive of interest and costs broken down in the amounts allocated to each of the plaintiffs in the consent memorandum relating to quantum dated 26 July 2011.
[83] Judgment is also given against Geoffrey Joyce on a joint and several basis with Joyce Building Limited in favour of the plaintiffs in the sum of $1,717,922.04 exclusive of interest and costs broken down in the amounts allocated to each of the plaintiffs in the consent memorandum relating to quantum dated 26 July 2011.
[84] Judgment is also given against Geoffrey Joyce in favour of Gayl Patricia
Humphrey in the sum of $97,630.13 exclusive of interest and costs.
[85] The plaintiffs are entitled to interest at the Judicature Act rate from the date of judgment and costs. If the parties are unable to agree on interest and costs, I will receive memoranda.
[86] However, the plaintiffs cannot recover more than their loss and any settlement sums received are to be taken into account at the enforcement stage of this judgment.
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Woolford J
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