Body Corporate 314302 v Auckland Council
[2018] NZHC 2377
•11 September 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2012-404-002433
[2018] NZHC 2377
BETWEEN BODY CORPORATE 314302
Plaintiff
AND
GEORGIANA DIGBY NEWTON & ORS
including ELIZABETH MARY CULLINANE
Second PlaintiffsAND
AUCKLAND COUNCIL
First Defendant
Continued over/…
Hearing: 4 September 2018 Appearances:
Ms Leadbetter for the Plaintiff, Ms Cullinane
S A Collinson, self-represented together with Mr Trichon, for the Third and Fourth Defendants
Judgment:
11 September 2018
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by me on
11.09.18 at 3:30pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Grimshaw & Co, Auckland
BODY CORPORATE 314302 v GEORGIANA DIGBY NEWTON & ORS including ELIZABETH MARY CULLINANE [2018] NZHC 2377 [11 September 2018]
MAUNGA REI NZ LIMITED
Second Defendant
STEPHEN ANTHONY COLLINSON
Third Defendant
PERFECTION HOME INSPECTIONS 2014 LIMITED
Fourth Defendant
RODNEY GRAHAM PRATT
Fifth Defendant
PROPERTY SOLUTIONS SURVEYS LIMITED
Sixth Defendant
Introduction
[1] This is leaky home litigation involving the residential unit title complex, The Oaks, in Parnell, Auckland.
[2] One of the unit owners, Ms Elizabeth Cullinane, the second plaintiff, pleads the following causes of action against the pre-purchase inspector and his company (i.e. Mr Collinson and Perfection Home Inspections 2014 Ltd (PHI), the third and fourth defendants):
(a)Breach of s 9 of the Fair Trading Act 1986 on the basis that the report prepared by Mr Collinson is allegedly misleading and deceptive;
(b)Breach of s 9 of the Fair Trading Act 1986 (misleading and deceptive conduct) by PHI for the same report;
(c)Negligent misstatement against PHI; and
(d)Breach of contract against PHI.
[3] Mr Collinson and PHI have sought summary judgment against the plaintiff on the grounds that these causes of action cannot succeed. It is claimed that it was not within the mandate of Mr Collinson or PHI to contradict the Auckland Council’s code of compliance, that the Fair Trading Act 1986 claims are limitation barred and that Mr Stephenson and PHI were in no way responsible for Ms Cullinane’s losses.
[4] The issue for determination is whether Mr Collinson and PHI have satisfied the Court that Ms Cullinane’s claims cannot succeed. Do they have a complete defence to all of Ms Cullinane’s claims?
Relevant legal principles
[5] Rule 12.2 of the High Court Rules 2016 provides that the Court may give judgment against the plaintiff if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed. The following
principles, as stated by the Court of Appeal in Westpac Banking Corp v M M Kembla New Zealand Ltd, apply where a defendant is seeking summary judgment:1
(a)The defendant bears the onus of satisfying the Court that none of the plaintiff’s claims can succeed. It is not enough for the defendant to merely show there are weaknesses in the plaintiff’s case.
(b)Summary judgment will be inappropriate where there are disputed issues of material fact, or material facts need to be ascertained by the Court and cannot confidently be concluded from the affidavit evidence.
(c)Summary judgment will generally only be entered against a plaintiff where there is a complete defence to the plaintiff’s claim, or a clear answer to the claim which cannot be contradicted.
(d)It may be inappropriate to award summary judgment where ultimate determination of the case turns on a judgment that is only able to be properly arrived at after a full hearing of the evidence.
(e)It will generally be inappropriate to assess the sufficiency of the proof of the plaintiff’s claim at a summary judgment. Otherwise a defendant, particularly one more in possession of the facts than the plaintiff, could force on the plaintiff’s case prematurely, before discovery and before the plaintiff’s evidence can reasonably be assembled.
(f)Although a legal point may be decided in a summary judgment if it is sufficiently clear, novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.
1 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [60]-[64]; see also Ferrer-Aza v NZONE Race Management Ltd [2016] NZHC 885 at [10].
Factual background
[6] The Oaks was constructed in 2002 and 2003. The cladding on the complex was solid plaster (stucco). A code compliance certificate (CCC) was issued by the Auckland Council on 30 July 2003.
[7] In 2004, the owner of Unit 1 commissioned a report on weathertight issues associated with that unit.
[8] On 29 May 2006 Mr Collinson and PHI issued a pre-inspection report for Ms Cullinane in relation to a property in Brighton Road, Parnell. Under the General Comments section, the report concluded: “a lovely home unfortunately the amount of moisture found will make invasive testing mandatory, only then can one make an informed valuation”.
[9] Following receipt of that report, Ms Cullinane terminated a conditional agreement for sale and purchase of the Brighton Road property.
[10] In June 2006 Ms Cullinane commissioned Mr Collinson and PHI to carry out a pre-purchase inspection and to prepare a report for Unit 4 in The Oaks. Mr Collinson and PHI issued the report on 21 June 2006, following what would have been at least a 6-hour inspection of the property, including moisture testing.
[11] Under the heading “General Comments” the report concluded: “this is a very nice home that if it wasn’t for the cracking on the exterior plaster it would be very hard overall to fault. The fact that it has a cavity type system is a real plus”.
[12] Attached to the report are Mr Collinson’s standard terms of trade and conditions. They included:
1.Purpose of Inspection
This inspection report has been prepared for the client following an above-ground visual inspection of the building and its services to provide general comments on the condition of the building and services at the time of inspection.
2.Visual Inspection
While all care to record any irregularities or defects in the building services and chattels which are apparent from PHI’s Inspection, it is important to note that this is a report following a visual inspection only. PHI is not responsible if access to any part of the building services, interior linings or property is not reasonably available to carry out a visual inspection/moisture test.
…
4. Not a Structural Survey
This inspection report is not a structural survey. PHI does not open up, uncover, dismantle or undertake any internal inspections of the building, services, chattels or property. PHI does not make any representation as to the soundness of the structure of the building services or chattels or unless otherwise stated, the existence of or absence of any rot, borer or other pest infestation or any other hidden defects.
…
9.Responsibility
PHI’s responsibility in connection with this inspection report is limited to the client to whom it is addressed and is limited in liability of the full cost of the report. PHI disclaims all responsibility and accepts no liability to any other party. Acceptance of this report is deemed as acceptance of these enclosed conditions.
10.General
Nothing contained in this statement of policies shall be deemed to exclude or restrict any rights or remedies the client may have under the Fair Trading Act 1986 or the Consumer Guarantees Act 1983. If any provision in this statement of policies is illegal, invalid or unenforceable, the validity and enforceability of the remaining provisions will not be affected.
12.Term of the Inspection Report
This inspection has been prepared on the basis of a visual inspection carried out on the date recorded on the first page of this report. Due to the fact that building materials can deteriorate over time, the term that this report is valid is for three months from the date this inspection was carried out.
13.Term of Moisture Test
PHI cannot be held responsible for detecting new leaks starting, subsequent to moisture testing. PHI cannot be held responsible for detecting existing leaks that are not yet detectable in and around the interior gib linings of the perimeter walls as at the time of inspection. As previously stated, all moisture test readings are ‘as at the time of inspection’ only.
[13] At the bottom of the General Comments section, the report contains the following clause:
For any type of Plaster Systems:
We recommend that houses clad with plaster systems should be moisture tested at least annually in the early years (first 5 years) and every 18 months
thereafter. In general, readings of 20% or more require FURTHER
INVESTIGATION to confirm the extent of the moisture problem. We further recommend you obtain quotes from reputable/qualified tradesmen who will guarantee their work for an appropriate period e.g. 10 years.
[14] The same standard terms and conditions were also attached to the pre-purchase report that had been issued to Ms Cullinane in relation to the Brighton Road property.
[15] Mr Collinson says that he advised Ms Cullinane to obtain the “property bag” from the Auckland Council and speak to the Body Corporate about any weathertight issues, so that he and his company could make a final evaluation. This did not happen.
[16] Ms Cullinane became the registered proprietor of Unit 4 in August 2006, having signed the agreement of sale and purchase on 5 July 2006.
[17] In May 2012, the Body Corporate made application to the Weathertight Homes Resolution Service (WHRS) for an assessor’s report. At the same time, proceedings were filed in this Court.
[18] Between 2006 and 2012, Mr Collinson claims, Ms Cullinane carried out no maintenance on Unit 4. Mr Collinson further says that the only leak discovered during that time was a small leak on the deck
[19] In June 2014, a second amended statement of claim was filed and served, which included claims against Mr Collinson and PHI.
[20] The estimated repair costs are said to be approximately $8m. Mr Collinson says that he has only very recently received advice from the plaintiffs’ solicitors that there is now a demolition order for The Oaks complex.
[21] In the plaintiffs’ third amended statement of claim dated 10 August 2018, Ms Cullinane seeks damages against Mr Collinson and PHI for “her share of the repair costs of about $8,000,000.00” together with consequential losses to be quantified prior to trial.
The case for Mr Collinson and PHI
[22] Mr Collinson and PHI say that there is no basis for any of the claims against them. They cannot succeed and should be summarily dismissed without further unnecessary costs being incurred. In summary, they say:
(a)Mr Collinson’s inspection and report was a limited one, an above ground visual inspection only, to provide general comments on the condition of the building and services at the time of inspection. The report expressly stated that it did not make any representation as to the soundness of the structure of the building, including any hidden defects and was valid only for three months from the date of inspection.
(b)There was no misleading or deceptive conduct or any negligence for which Mr Collinson or PHI can be responsible. In 2006, Unit 4 was new and it was not the role of Mr Collinson to contradict the recently issued CCC, provided by Auckland Council. The unit was not constructed with direct fixed cladding but had a cavity. As a result of weathertight issues and problems generally, the Auckland Council had, prior to the inspection in 2006, introduced requirements for cavities. This properly gave Mr Collinson some comfort in making the conclusions in his report.
(c)The plaintiff, Ms Cullinane, cannot overcome the exclusion clause in the standard terms and conditions. This limits any potential liability of PHI and Mr Collinson to $800 plus GST, being the price of the inspection and report (clause 9 of the standard terms of trade). In addition, Ms Cullinane failed, as recommended, to obtain the property bag from the Auckland Council and/or to make contact with the Body Corporate to make enquiries about weathertight issues, prior to agreeing to buy the unit. Had she done so and then advised Mr Collinson of weathertight issues with Unit 1 in 2004, Mr Collinson’s advice may well have been different.
(d)Ms Cullinane failed to carry out any maintenance on the unit over the crucial six-year period 2006 to 2012 and, contrary to the recommendation of PHI and Mr Collinson, did not carry out moisture testing on an annual basis. Mr Collinson says that Ms Cullinane effectively fell in love with the property and failed to heed his advice.
(e)The claims under the Fair Trading Act 1986 are limitation barred. There was a report on Unit 1 in 2004 which should have alerted the Body Corporate to the fact that there were, already at that time, problems with weathertight issues. The three-year limitation period in the Fair Trading Act 1986 had expired prior to the filing of the claim with the WHRS.
[23] Mr Cullinane is now 68 years old, retired, and his company PHI, is no longer trading. He was a builder for 36 years and then worked as an inspector for a further 12 years. This is the first and only time he has faced legal proceedings alleging negligence against him.
Analysis and decision
[24] The threshold for summary judgment is a high one. It is not sufficient for Mr Collinson and PHI to demonstrate that the plaintiff’s claim has weaknesses. It has been said that the test for summary judgment is an exacting one since it is a serious thing to stop a plaintiff bringing his or her claim to trial unless it is clearly hopeless.2
[25] It is equally clear that an application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits.3
[26] In support of her opposition to the application for summary judgment, Ms Cullinane has filed an affidavit from Mr Andrew Gray, a registered and experienced
2 Jones v Attorney-General [2004] 1 NZLR 433 at [10].
3 Westpac Banking Corporation v MM Kembla New Zealand Ltd, above n 1, at [62].
building surveyor. Mr Gray is critical of the pre-purchase inspection report of Mr Collinson and PHI and contends that it falls below the standard of that of a reasonable and prudent pre-purchase inspector carrying out inspections and preparing reports in 2006.
[27] Mr Gray claims that the report is not written in accordance with or with reference to New Zealand Standard (NZS) 4306:2005 Residential Property Inspection. Mr Gray says that at the very least the report should have reflected the standard and level of inspection and reporting as set out in NZS 4306:2005.
[28]Mr Gray further claims:
(a)The report is what is commonly referred to as a “tick the box report”. There are no photos attached to the report as is commonly used to assist the reader.
(b)Under the “roof” section of the report under “Flashings”, Mr Collinson has put a “?” under the Poor column, and comments: “as a precaution all gables or wherever top plaster does not have a flashing-reflash”. Un-flashed/waterproofed plaster tops have a history of failure, which is commonly known in the construction industry. This fact should have been relayed to the client as well as advising of the potential risks and recommended further investigation.
(c)Under the “Windows and Door’s” section for joinery, Mr Collinson ticked the box for “Good” and provides no comment. However, on inspection of the joinery, Mr Gray discovered that the sill flashings are imbedded in the plaster and terminate behind the plaster. This is a defect because without a capillary break between the cladding and the sill flashing and/or provision to discharge water to the outside face of the cladding, external water can track back to the timber frame behind causing damage. This is a significant defect and the report ought to have recommended further investigation.
(d)The report failed to tick a box to correctly indicate the cladding type used. Nowhere in the report does the writer identify the cladding type currently or advise the reader of any risks associated with the cladding type.
(e)Mr Collinson failed to identify that the cavity is not installed correctly as the bottom of the cavity was closed off and could not drain or vent as it should in numerous locations around the building. That is crucial to the performance and advantage of a cavity over a direct fixed system.
(f)While Mr Collinson correctly identified cracking, he incorrectly says that there are no expansion joints and appears to suggest that the cavity will compensate and provide a means of protection against the cracking.
(g)In relation to the General Comments section of the report the seriousness and the significance of the cracking are understated and explained away by the speculative view that there were no expansion joints and that a simple solution would be to retro fit these joints.
[29] Mr Collinson takes issue with the opinions expressed by Mr Gray. He says he was entitled to rely on the recently issued CCC by the Auckland Council, and the recent change in Council requirements, namely the requirement to have a cavity. The Standard, NZS 4306:2005 is not mandatory and there is evidence that the sill flashings being embedded in the plaster was specifically approved by the Auckland Council.
[30] There may well be considerable merit to the arguments and defence of Mr Collinson and PHI. However, I find that they have not met the high threshold of establishing that all of the plaintiff’s causes of action are unsustainable and cannot succeed. Based on the evidence of Mr Gray, the building surveyor, all of the causes of action are clearly arguable. I cannot at this summary stage determine these disputed matters of fact and opinion. There is no basis for me to completely disregard the evidence of Mr Gray. Summary judgment must be declined.
[31] It will be necessary for all of the defences raised by Mr Collinson and PHI to be tested at trial. It is not tenable to conclude at this stage that Ms Cullinane will not succeed in establishing that the report was misleading, in breach of the relevant standard of care or otherwise in breach of contract. I accept that the limited scope and nature of the report, the fact that the unit had a cavity and the fact that the Council had issued the CCC in 2004 will all be relevant to a determination of whether there was in fact negligence or that the report was misleading. However, those factors do not of themselves provide a complete defence to Ms Cullinane’s claims. The contrary evidence of Mr Gray will need to be tested. Similarly, I cannot conclude that Ms Cullinane will be unable to establish at trial that the alleged misconduct, negligence, or breach of contract, was causative of her loss.
[32] Breaches of s 9 of the Fair Trading Act 1986 involve assessing whether the statement (i.e. the report) was reasonably based on the information available to the expert at the time. Any obviously erroneous statement of facts qualifies “as misleading”, as will a poorly based opinion as to quality.4 There is contradictory evidence that cannot be dismissed at this stage as wholly lacking in credibility or that I could otherwise simply ignore.
[33] I acknowledge that the alleged failure by Ms Cullinane to access the Body Corporate minutes and the property bag at the Auckland Council, as Mr Collinson recommended, may be relevant to the issue of causation and the broadly equivalent test under s 43 of the Fair Trading Act 1986. Similarly, the alleged failure by Ms Cullinane to carry out maintenance and/or to have regular, annual moisture testing of her unit might be relevant to issues such as contributory negligence and quantum of damages. These, are, however, all issues that I cannot determine at this stage.
[34] It will likewise be necessary for the scope and relevance of the exclusion clause in Mr Cullinane’s standard terms of trade to be tested at trial. Express and clear words are required to negate liability for negligence and the prohibition on engaging in misleading and deceptive conduct (s 9 of the Fair Trading Act 1986) cannot be the subject of contracting out.5
4 Mok v Bolderson & Ors (2011) 13 TCLR 209 at [64].
5 Fair Trading Act 1986, s 5C, Smythe v Bayleys Real Estate Ltd (1993) 5 TCLR 454.
[35] It may be the case that Mr Collinson will be able at trial to establish that his standard terms of trade were accepted by Ms Cullinane and formed part of the contract with PHI. She was after all provided with the same standard terms of trade in relation to the previous Brighton Road inspection. However, I again cannot reach any determination of these issues and in any event, that issue, namely whether the exclusion clause was part of the contract, is not determinative of whether such clause provides a complete defence to the claims of Ms Cullinane.
[36] Mr Collinson’s limitation defences may have some merit. However, he has not established at this stage that none of the claims could succeed because they are limitation barred. The three-year statutory limitation provision in s 43A of the Fair Trading Act 1986 is expressly subject to the reasonable discoverability principle and the limitation period here is to be calculated by a reference to the date when the Body Corporate made application for an assessor’s report under the Weathertight Homes Resolution Services Act 2006.6
[37] Ms Cullinane says that it was not until 2012 that the defects were reasonably discoverable and that none of the claims, including those under the Fair Trading Act 1986, are limitation barred. All of these issues will also have to be tested at trial. This includes the claim by Mr Collinson that the Body Corporate, because of the weathertight problems with Unit 1 in 2004, was well aware of weathertight issues at a much earlier stage than 2012.
[38] In its application for summary judgment PHI claimed that proceedings against a limited liability company that no longer exists would be a “gross waste of the court’s time”. Mr Collinson did not address this issue in his oral submissions and I find that he acted prudently in not doing so. The company changed its name in 2014 and has recently been restored to the Register. As the plaintiff submitted, the company does exist and the name change in 2014 does not alter any rights or obligations of PHI. There is no merit to the claim that PHI does not exist.
6 Weathertight Homes Resolution Services Act 2006, s 37(1) and Lee v Whangarei District Council
[2017] 1 NZLR 401 (SC).
Result
[39]The application by Mr Collinson and PHI for summary judgment is dismissed.
[40] The parties are to file memoranda addressing the question of costs on this application. The plaintiff, Ms Cullinane is to file and serve submissions by 21 September 2018. Mr Collinson will have until 3 October 2018 to file any submissions in response.
Associate Judge P J Andrew
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