Body Corporate 325261 v McDonough

[2014] NZHC 331

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2011-404-008000 [2014] NZHC 331

IN THE MATTER OF       known as C-Vu Apartments

BETWEEN  BODY CORPORATE 325261

First Plaintiff

R W COOKE AND OTHERS Second Plaintiffs

ANDJ MCDONOUGH First Defendant

Continued over/...

Hearing:                   4 February 2014 and 26 February 2014

Appearances:           S Mills QC and B O'Callahan for the Sixth and Seventh

Defendants/Applicants
G J Kohler QC and D Fotiades for the Plaintiffs/Respondents

Judgment:                3 March 2014

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

03.03.14 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

BODY CORPORATE 325261 & ORS v R W COOKE AND ORS [2014] NZHC 331 [3 March 2014]

ANDMAUNGA REI NZ LIMITED Second Defendant

ANDAUCKLAND COUNCIL Third Defendant

ANDGARY BICKERTON Fourth Defendant

ANDRACHEL VENABLES Fifth Defendant

ANDSTEPHEN MITCHELL ENGINEERS LIMITED

Sixth Defendant

ANDSTEPHEN ROBERT MITCHELL Seventh Defendant

ANDMACDONALD BARNETT PARTNERS LIMITED

Eighth Defendant

ANDMICHAEL SIMPSON Ninth Defendant

Background

[1]      The claim of the plaintiffs is brought by the body corporate and by owners of a unit title development comprising 130 units situated on the corner of Hopetoun and Day Streets, Auckland and known as the C-Vu Apartments (C-Vu).

[2]      The proceeding was initiated as a leaky building claim.  The plaintiffs have sued nine defendants. As well six third parties have been joined to the proceeding.

[3]      This proceeding has a 10 week trial scheduled beginning 14 July 2014.  The plaintiffs have delivered their evidence, some of which, from the plaintiff/respondents, is referred to and relied upon by the applicants on their strike out applications.

[4]      This judgment concerns the applications of the sixth and seventh defendants to strike out part of the plaintiffs’ ninth amended statement of claim (9ASOC).  The sixth defendant (SML) was engaged for the preparation of structural design, calculations, drawings and specifications for the construction of C-Vu; and as well to observe  site  construction  and  was  also  to  confirm  through  the  signing  of  the Producer Statement – construction review and otherwise that the construction of C- Vu was compliant with the building code.

[5]      It was by the plaintiffs’ third amended statement of claim (3ASOC) filed on or about 7 May 2012 that SML and Mr Mitchell (a principal and director of SML) were joined as defendants to the plaintiffs’ proceeding.

[6]      In paragraph 27 of the 3ASOC the plaintiffs detail defects in the design and/or construction of C-Vu.   Most of those defects identified indicated some connection between construction factors and weather tightness issues it is said were causative of damage and loss.   In two relevant respects for the purpose of this proceeding defects were identified which have no connection with weather tightness issues.  In particular those were detailed as follows:

(oo)     The stair flights have no allowance for lateral movement between floors, contrary to the requirement of the loadings code NZS4203:1992.

(pp)     There is insufficient confinement reinforcement in the columns.

[7]      As against SML and Mr Mitchell it is pleaded their duties of care were breached because of a failure to:

(a)       provide designs, calculations, drawings and specifications to ensure that C-Vu would not be built with the defects;

(b)      ensure that the designs,  calculations, drawings  and specifications met the requirements of the Building Code; and

(c)       ensure that the construction of C-Vu met the requirements of the

Building Code and that C-Vu was not built with structural defects.

[8]      In respect of those defects which had no connection to weather tightness issues, it was pleaded that SML and Mr Mitchell:

(oo)     failed to ensure that the stair flights had an allowance for lateral movement between floors, contrary to NZS4203:1992.

(pp)     failed to ensure that there was sufficient confinement reinforcement in the columns.

[9]      On or about 30 August 2013 the plaintiffs filed an eighth amended statement of claim (8ASOC).  A ninth amended statement of claim (9ASOC) was filed on 8

November 2013.  There are a number of additional second plaintiffs added to those pleadings who had not before then been listed as registered proprietors, because it seems they had not until then recently become registered proprietors.

[10]     Central to the position taken by SML and Mr Mitchell upon their strike out applications concerns the manner in which they say, for the first time by the 8ASOC and 9ASOC, the plaintiffs’ description of defects has been pleaded.  In addition to the previously identified pleading about the lack of lateral movement of the stair flights, or insufficient confinement reinforcement in the columns (now identified as (nn) and (oo) in the 8ASOC and as 38 and 39 in the 9ASOC), there is the following list of defects which have not been earlier identified in previous amended statements of claim:

(pp)     The spacing of the column transverse reinforcement, on columns at all levels, exceeds the maximum allowed by NZS3101:1995:...

(qq)     Columns   between   levels   9   and   roof   level   have   insufficient longitudinal reinforcement under seismic loads:...

(rr)      Most of the beam/column joints have insufficient horizontal shear reinforcement under seismic loads and some joints under gravity loads, to meet the requirements of NZS3101, 1995:...

(ss)     Most of the beam/column joints have insufficient confinement reinforcement to meet the requirements of NZS3101:1995:...

(tt)       The shear wall on grid X, between levels 3 and 4, has insufficient horizontal shear reinforcement under seismic loads:..

(uu)     The spacing of the horizontal reinforcement in the shear walls on grids 4 and 6 exceeds the maximum allowed by NZS3101:1995:...

[11]     Although with some additions of similar kind these defects are listed as 40 –

46 and 48 in the 9ASOC.

[12]     The plaintiffs plead SML and Mr Mitchell were engaged to ensure that C-Vu was built without structural defects. They claim both breached those obligations.

Chronology

Pre 12 June 2002      SML and Mr Mitchell were engaged to submit design drawings with a Producer Statement – Design to the Council for the purpose of obtaining a building consent (the consent drawings); and as well were engaged in ongoing   design   and   specification   and   to   prepare ongoing construction plans; and were engaged in construction observation and supervision; and to certify completion of construction in accordance with the approved plans and specifications in accordance with the Building Code.

12 June 2002             SML  submitted   drawings   to   the   council   with   a

Producer Statement – Design.

26 June 2002             Principal building consent granted.

4 September 2003     SML  provides  Producer  Statement  –  Construction

(Construction Drawings) to the Council.

26 September 2003    Practical Completion certificate issued.

6 November 2003      Interim Code Compliance Certificate (CCC) issued.

9 June 2004               CCC issued.

28 March 2012          Court  order  joining  SML  and  Mr  Mitchell  to  the proceeding.

7 May 2012               Third amended statement of claim filed in which for the first time SML and Mr Mitchell were named as defendants.

7August 2012           Thirty additional second plaintiffs joined by order of the Court.

13 December 2012     Four additional second plaintiffs were joined by order of the Court.

30August 2013         Eighth amended statement of claim filed by which the defendants claim new defects of a different kind were added, and which the plaintiffs say were particularisation only of claims previously identified.

November 2013        Ninth  amended  statement  of  claim  filed  in  which defendants say further new defects added.

The applications of SML and Mr Mitchell for partial strike out

[13]     There are three parts to the application:

(a)      An application that all the plaintiffs’ claims against  SML and Mr Mitchell insofar as they relate to structural engineering design issues, be struck out.

(b)      Alternatively:

(i)An  application  that  the  claims  of  the  second  plaintiff  unit owners who were joined as plaintiffs by order of the Court after June 2012 be struck out insofar as they relate to structural engineer design issues; and

(ii)An  application  that  all  of  the  plaintiffs’ claims  relating  to certain design elements added by the 8ASOC and 9ASOC be struck out.

[14]     In essence the defendants claim, in varying ways, that the proceedings have been brought out of time i.e. too late.

Limitation considerations

[15]     On behalf of the defendants it is claimed that the design related causes of action accrued on or about the date the defective structural design was incorporated into  the  building,  being  no  later  than  the  date  on  which  the  code  compliance certificate (CCC) was issued on 9 June 2004.

[16]     It is claimed that by virtue of s 4(1)(a) of the Limitation Act 1950, as applies by virtue of s 59 of the Limitation Act 2010, that the plaintiffs are barred from bringing such claims after 9 June 2010.  The claims against SML and Mr Mitchell were not made before 7 May 2012.

[17]     In the alternative and concerning the claims made on behalf of the second plaintiff unit owners the defendants say such are time barred against them because s

393(2) of the Building Act 2004 provides that no relief may be granted in respect of any act or omission made 10 years or more prior to the date on which the proceedings were brought; that the alleged acts or omissions in question in respect of structural design occurred no later than 12 June 2002 being the date of the Producer Statement – Design (the consent drawings) and that the claims by those second plaintiffs were brought after 12 June 2012 and are therefore time barred. Likewise in relation to the claims of all plaintiffs in respect of certain identified defects in the ninth amended statement of claim, it is claimed the alleged acts or omissions were more than 10 years old prior to the plaintiffs’ proceeding being brought.

[18]     It is apparent the limitation arguments concern two distinct dates.  That under s 4(1)(a) of the Limitation Act 1950 concerns a six year limitation period.  When the time for that limitation period begins depends on whether or not C-Vu’s alleged structural design defects were latent defects.  It is the case for Mr Mitchell and SML that they were not latent defects as they are quite clearly and more commonly in cases involving leaky home issues.   In a leaky home case they are latent because

they are hidden following the completion of construction and emerge when damage is noticed from which time, it is routinely claimed, loss occurred.

[19]     In this case, the defendants say that the plaintiffs own evidence confirms that almost all of the structural defects that the plaintiffs allege were indeed readily apparent from the structural drawings lodged with the Council.  In that event those drawings would have provided the basis for an immediate claim for remedying the deficiencies.  The defendants’ position is that the damage occurred at the latest by that date when the allegedly defective structural design was incorporated into the building on 9 June 2004, the date upon which the CCC issued.

[20]     The defendants say the Limitation Act six year period accrued from the date of the issue of the CCCs because at that point the building was built with the identifiable defects in it.   Therefore there was an immediate loss, because those defects were not latent and therefore a plaintiff (a developer perhaps) could have sued immediately because a building with those defects provided  an immediate claim for loss.

[21]     It is for this reason the defendants seek an order for strike out of all of the

plaintiffs’ claims relating to structural engineering design issues.

[22]     The second of the strike out orders sought is sought in the alternative if the first strike out application fails.  The defendants position is that the first order will only be refused if the Court adopted the view the plaintiffs loss only occurred from that time when the market became aware of the defect and the value of the building was affected i.e. that until the defect became reasonably discoverable no loss occurred.

[23] The defendants’ second strike out application concerns different limitation considerations. The second application relies on ss 393(2) of the Building Act 2004. Unlike s 4 of the Limitation Act 1950 where time runs from the accrual of the cause of action, s 393(2) runs time from the date of the act or omission on which the proceeding is based. In this case the defendants say the act or omission being sued on is the structural design work. If the claims of the second plaintiffs joined to be

proceeding after 12 June 2012 are based on an act or omission which occurred more than 10 years prior to the claims being made then they will be time barred under s

393(2).

[24]     The defendants say that the acts or omissions claimed to be defects in the structural engineering design all occurred at the latest on 12 June 2002 – that the allegedly negligent  work was the structural design drawings submitted  with the Producer  Statement-Design,  the  structural  design  having  not  been  contained anywhere else.

[25]     The defendants say that while subsequent construction drawings included further detail and clarification, none of those departed from the design submitted on

12 June 2002.

[26]     By orders of the Court made after 12 June 2012 some 34 additional people have been joined as additional second plaintiffs to the claims.  It is the defendants’ position that the claims of those added plaintiffs are clearly statute barred and should be struck out.

[27]     The third strike out order sought by the defendants concerns the defects particularised at paragraph 27(41) to (48) of the ninth amended statement of claim insofar  as  they  relate  to  structural  engineering  design  issues.    The  defendants’ position is that the defects therein identified are in fact about fresh causes of action and are therefore time barred because by virtue of Rule 7.77 of the High Court Rules an amended pleading may only introduce relief in respect of a “fresh cause of action” if it is not statute barred.

[28]     Of significance to the Court’s consideration of the second and third limbs of the defendants’ strike out application is the contention that the 10 year long stop provision of the Building Act began in this case at the latest on 12 June 2002 when the structural design drawings were submitted to the Council.   That date is to be compared  with  the date  of 9  June 2004  when  the CCC  issued.   The  drawings identified for consent purposes are referred to as consent drawings.   It is the defendants’ position that there is no difference between those drawings described as

consent drawings and the construction drawings considered for the purpose of the issue of the CCC about two years later.

[29]     The defendants’ strike-out position is that the case against them has altered significantly and fundamentally by the pleadings in the 8ASOC and 9ASCO; they say those have added new pleadings i.e. new causes of action which are time barred. Their witness Mr Jacobs, a structural consulting engineer reports on how the case pleaded in the 8ASOC differed from that pleaded earlier.  He said the new items (qq) to (uu) “extend the claim beyond the confinement issue in the columns... these new allegations require much more extensive analysis, time and work”.  He said it was apparent the designer may have departed from the concrete code.  He also said the allegations about the beam/column joints have required him “to look to specialised research experts in the seismic response of concrete structures to investigate the designers proposed defence”.

[30]     In this context it should not be overlooked that SML and Mr Mitchell filed defences denying that their drawings were defective.

[31]     Mr Mitchell deposes that the drawings which  provided the basis for the pleading of “additional structural [as distinct from weather tightness] defects are the very  same  ones  that  had  been  available  throughout,  indeed  from  that  time construction consent was sought.  The defendants argue it is quite clear the plaintiffs witness Mr Pont had available to him those drawings which were submitted for construction consent, and those which provided the basis for which the Council consent was granted. The defendants say Mr Pont refers to measurements which link relevant drawings back to those initially prepared.  This evidence the defendants say, confirms their position that if there are structural engineering defects then such were always evident from the time the drawings were submitted on 12 June 2002 for building consent.

[32]     Also offered for consideration upon the defendants strike out application is a copy of the brief of evidence of the plaintiffs witness Dr Brooke, also a structural engineer.   He deposed that many of the defects in the drawing should have been noticed from a cursory examination.   He concluded that as drawn they could not

possibly comply.  Counsel for the defendant acknowledges that the evidence of both Mr Pont and Dr Brooke is somewhat equivocal so far it does not comment upon whether all defects pleaded were able to be seen.  Perhaps ironically it is a further affidavit  by  Mr  Mitchell  which  is  offered  for  the  purpose  of  limiting  any equivocation  perceived  in  the evidence of  the  experts.    Mr Mitchell’s  evidence invites the Court to accept that any defects in the consent drawings including those pleaded by the 8 and 9ASOC for the first time, the defendants say, were apparent from 12 June 2002.

Summary of defendants’ position

When did loss occur?

[33]     The key point for consideration of the defendants’ claims is about when the loss occurred.  In negligence claims no cause of action arises until damage occurs. When loss first occurs there is damage, the tort of negligence applies and time begins to run.  Routinely in leaky building cases, the damage is discovered many years after the building is completed and the CCC issued.   The defendants claim that what routinely applies is different here because the damage was discoverable immediately, and not much later which usually is the case.

[34]     If however the Court disagrees then the defendants say it is only with the 8 and 9 ASOCs that we have in this proceeding a pleading of almost all of the defects in issue.  Before then the non weather tightness claims against the defendants were confined to the stairs  and column confinement  – as  referred to in the  3ASOC. Further they say that because both the 8 and 9 ASOCs were filed more than 10 years from what the defendants say is the act/omission date, the claims are outside the 10 year longstop – unless that is the plaintiffs can persuade the Court that what is pleaded in the 8 and 9 ASOCs are particulars and not new causes of action.

[35]     The defendants’ position is that if the relevant time bar is the Building Act 10 year longstop provision then the defendants submit the 3ASOC was filed just within the 10 year longstop period.  This however then focuses the Court upon the fate of plaintiffs joined (by order of the Court) to the proceeding after 12 June 2012.  In this

frame  of  things  the  decision  of  the  Supreme  Court  in  Sunset  1    may  need consideration.   In essence by that decision time runs anew from the date the new purchaser acquires the property.   Mr Mills for the defendants submits that Sunset does not affect the defendants’ limitation defence because Sunset was concerned with latent defects.  Mr Mills submits this case is not concerned with latent defects.

[36]     The defendants’ position is that the six year period runs from the issue of the CCC.   They submit the evidence brief of Dr Brooke is, in effect, that the defects (giving rise to the immediacy of a claim) were contained in the drawings.  Therefore, the act or omission on which the proceedings are based can be sourced back to the drawings from which the building constructed therefrom received consent for use.

[37]     The defendants’ say the  case is  not  about  defects  allegedly arising  from defective construction.  Rather, they say it is about the defects which, based on the evidence of others, were apparent from those very original drawings from which consent was applied for and eventually obtained.  It follows, the defendants say, that all the defects in question were time barred, subject only to the Sunset type claims for an extension.

[38]     The defendants reject suggestions that the defects identified by the 8 and 9

ASOCs are really nothing more than a refinement of the causes of action pleaded by the third ASOC.

[39]     Mr Mills submits that even if the Court considers the defects which are the subject of the plaintiffs claims are latent and therefore that time does not run from June 2004, then even under the Building Act the longstop time bar will catch all defects except those identified by the third ASOC (reiterated as defects 38 and 39 in

9ASOC) unless the Court says they are not new causes of action.  Fundamental to

the defendants’ position is that save for defects 38 and 39 (as contained in the

3ASOC) the defendants submit all other pleaded causes of action in the 9ASOC are new and therefore are time bared.  Counsel submits there can be no other conclusion

but they are new pleaded causes of action because only with respect to the stairs and

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

column confinement matters has anything been pleaded by way of defect which is not of a leaky building (and therefore latent defect type) claim.

[40]     It  is  clear,  submits  Mr  Mills  that  the  third  amended  statement  of  claim focussed on weather tightness issues.  He submits the case started life as a weather tightness case and over time structural issues came to light.  What is in issue, for the present purposes of the strike out application are those defects which have been added.   Mr Mills submits the claims are focussed now upon every structural component in the building and thereby there has been a significant change of emphasis and pleading; that the defendants are now some distance from the initial claim against them and that the factual focus has changed entirely.   The focus of recent pleadings has not been upon column strength or floor diagrams.  Rather, it is now upon shear wall connections and their capacity to transfer earthquake forces.

[41]     Regarding that evidence which has focussed upon ‘construction’ drawings (provided for CCC purposes in 2004) and that which is focussed upon ‘consent’ drawings (provided in June 2002), it is argued for the defendants that in effect there is no significant difference in those, because a careful analysis shows that in effect, for all relevant purposes, they are the same.

[42]     The defendants focus upon defective drawings as essentially giving rise to claims for damage from the time of their receipt or endorsement provides a foundation for arguments that considerations of latent damage do not apply because latent damage is that which does not reveal until it does and until then there is no loss.   The defendants say the plaintiffs’ loss, if any, is patent and not latent and therefore any claims are out of time for consideration.

[43]     The defendants case is that here loss occurs from the outset because the design contained the defects and those were built into the building and therefore a claim for damages relates to what ought to have been designed as opposed to what was and therefore loss arose from that moment those defects were incorporated into the building as designed.  The defendants say a quantifiable claim could immediately have issued from that moment.

[44]     That approach does not, Mr Mills submits, contradict Hamlin2 which was that no loss occurred until a hidden defect revealed itself. The defendants’ position is that that defect was revealed by the design drawings.

[45]     Mr Mills submits this approach is consistent with the judgments of the Courts in Davys Burton3  and Morel4  because in those the Courts were concerned with a “flawed asset”.  He submits that that is what we have here because it was not latent. It was flawed because it does not contain what was required to be provided. Therefore, time begins immediately from the time of the provision of the flawed asset.  The Davys Burton case was about a flaw not known to the plaintiffs but which was identified from the beginning and it is from then that time ran.  Also the legal firm’s  client  knew,  or  was  considered  to  have  known  of  the  defect  from  the

beginning.

[46]     Likewise in Morel the Court considered it was irrelevant that the plaintiffs did not know of non compliance issues.  Instead the Court considered that a claim of identifiable loss occurred immediately.

New causes of action

[47]     The defendants’ position is that there is evidence of significant change from the former 3ASOC pleading and that there is no real challenge to this.

[48]     Defendants counsel submits it is not open to the plaintiff to plead defects concerning leaks and two issues of column confinement and stair flight allowances and  to  develop  this  to  say  the  later  significant  additions  were  simply  about particulars, and that these can be pleaded at any time.  The defendants point to Mr Jacob’s evidence about wholesale changes.   Here, Mr Mill submits we have new

causes of action being pleaded and not simply particulars of old causes.

2 Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC).

3 Thom v Davys Burton [2009] 437 (SC).

4 Murray v Morel & Co Ltd [2007] 3 NZLR 721 (SC).

Considerations

[49]     It is the plaintiffs’ position that the only change to the form of the 8ASOC and 9ASOC related to the provision of particulars; that otherwise the causes of action against the defendants has been consistent from the 3ASOC through to the

9ASOC.  The causes of action in paragraph 73 – 74 of the 3ASOC are exactly the same as in paras 90 – 91 of the 9ASOC.

[50]     In this proceeding the plaintiffs’ claims are in the tort of negligence and the limitation period for a tort action runs from the date upon which the cause of action accrues.

[51]     A cause of action accrues when every fact exists which would be necessary for a plaintiff to prove to succeed.   Complaints concerning building defects have caused a development requiring a plaintiff to know of the facts necessary to prove a case.  From that time the limitation period runs.5

[52]     And further in Todd at para 26.5.06:

However, in certain recent decisions where the complaint is of a building defect or where the damage is by way of physical or mental injury, the courts have developed rules which require that the plaintiff knows or ought to know of the facts necessary to establish their cause of action. As will be explained, the building cases can be justified on the application of ordinary principle.

...

In cases involving loss of or physical damage to property, the limitation period  starts  around  from  the  time  when  that  loss  or  damage  actually happens.

[53]     In this case it is argued on behalf of the defendants that the causes of action of the design defects accrued, for limitation purposes, when the design was incorporated into the building. As Mr Kohler submits it is a novel proposition and is not consistent with standard authorities as in Hamlin or in Body Corporate 169791.6

[54]     In Hamlin their Lordships stated at p. 526:

5 Todd et al Law of Torts in New Zealand 6th Edition, para 26.05.05

6 Body Corporate No. 169791 v Auckland City Council, High Court, Auckland, CIV 2004-404-5225,

19/5/09, Cooper J.

Once it is appreciated that the loss in respect of which the plaintiff in the present case is suing is loss to his pocket, and not for physical damage to the house or foundations, then most, if not all of the difficulties surrounding the limitation question fall away.   The plaintiff’s loss occurs when the market value of the house is depreciated by reason of the defective foundations, and not  before.    If  he  resells  the  house  at  full  value  before  the  defect  is discovered,  he  has  suffered  no  loss.    Thus  in  the  common  case  the occurrence of loss and the discovery of loss will coincide.

[55]     As noted earlier at para 4 in this judgment the defendants’ involvement was significant and involved much more than the preparation of plans for the purpose of obtaining a building consent.   Ongoing construction plans were required as was observation and supervision.   As well as signing the relevant producer statements certifying building code compliant design in June 2002 Mr Mitchell in September

2003 certified completion of construction in accordance with the approved plans and specifications and in accordance with the building code.  It appears uncontested that the building consent  would  not  have been  granted as  would  not  the  engineer’s producer statement redesign and code compliance, without the engineer’s producer statement for construction.

[56]     It appears to be argued on behalf of the defendants that their attendance in certain  respects  can  be  separated  and  distinguished  from  attendances  in  other respects.

[57]     On behalf of the defendants Mr Mills asserts that the well known authorities including Hamlin only apply where damage is latent.  In this case it is suggested that a right of claim lay from the time the drawings were incorporated into the building because it is said from that time any defect or damage was clear.

[58]     In support of the defendants’ argument, reliance is placed on Murray and Davys Burton.  The first was a case involving participatory securities.  The second, a solicitor’s  negligence  case.    It  is  clear that  neither had  relevance to  a  standard building case.   What is consistent with those two cases and the standard building case is that negligence arises only when loss is suffered by reason of the breach of a duty of care.

[59]     In this case the plaintiffs’ position is that the damage and loss and did not incur until much later than 12 June 2002 for at that time there was no damage or loss either in the sense of physical damage to the building elements themselves, or in the sense of financial loss to the owners.  For the plaintiffs it is submitted that damage occurred  when  cracks  appeared,  water entered  and  timber rotted  etc,  and  when capital value was affected.

[60]     The Court agrees that when specific items of damage occurred, will be a trial issue.   Usually it is a factual examination about when cracks appeared, when was damage discoverable, and when was the capital value effected?

[61]     It is the case for the defendants that all the defects were readily apparent from the beginning.  This, notwithstanding that by their statements of defence they deny the plans were defective.  Yet it is their case upon their strikeout application that not only were their plans defective but so obviously defective that anyone could have seen those defects.

[62]     The defendants’ position is that the defects were not latent.  Yet there was no observable defect or damage in the sense of any cracking or water damage for that had yet to occur.  Nor do the defendants suggest that anyone other than an expert could have formed an opinion as to the adequacy of the engineer’s drawings.  As the defendants’ expert Dr Brooke noted, some of the deficiencies should have been noticed by a reasonable and prudent structural engineer engaged in reviewing the plans.  However, and as Mr Kohler submits, Dr Boorke’s opinion is:

(a)       Unspecific as to which deficiency;

(b)May or may not be accepted by the Judge as it is not admitted by the defendants and one can anticipate it will be challenged;

(c)       Does not need to be accepted for the plaintiffs to succeed against the defendants;

(d)May be more relevant to claims against the Council who accepted the drawings–defects and all, if any;

(e)       Does not bind the plaintiffs in any legal sense.

[63]     At the forefront of the defendants’ claims is that all acts or omissions said to be  negligent  occurred  at  the  latest  on  12  June 2002  –  the  date  of  the  consent drawings.   Mr Kohler argues that it is beyond any possible argument that the defendant’s design role continued well beyond 12 June 2002 for in most instances the design dates on the plans go well beyond that date and are within the relevant 10 year limitation date.

[64]     The Court heard extensive submissions from Mr Mills encouraging the Court to consider that in essence the defective drawings were completed by 12 June 2002 and beyond that date all plans were in all material respects little or nothing more than copies of the originals.   Much of the evidence in support of this proposition on behalf of the defendants was given by Mr Mitchell himself.

[65]     Mr Kohler submits that self evidently the ongoing redrafts and revisions in the plans added to or changed the design in some fashion.   He submits that to determine what the change was and what affect that had will require a detailed plan by plan examination beyond that attempted by counsel in their submissions upon the strikeout applications.

[66]     There is the fact, raised also by Mr Kohler’s objection to Mr Mitchell’s affidavit that Mr Mitchell’s affidavit was a reply affidavit and that by his effort to fully trace through a single design defect, he has exceeded the purpose for which a right of reply was provided.  Regardless, what he has deposed to is controversial and it is his self opinion.  And as Mr Kohler submits, it is inconsistent with his pleaded defence which denies that any of his drawings were defective.

[67]     As part of their case upon the strikeout applications the defendants seek to strikeout the particulars provided in paragraphs 41 – 48 of the 9ASOC.   The defendants’ case is that those particulars indeed plead new causes of action.

[68]     The plaintiffs’ position is that that part of the defendants’ strikeout application overlooks paragraphs 93 and 101 of the 9ASOC which pleads if a particular part of the claim is statute barred the defect identified will need to be addressed if and when the plaintiffs seek a building consent for the remedial work required by the other defects.   In that case the Council will require that such defects be attended to.   It follows that in respect of the alternative claim for capital loss that those other costs will  feature  as  part  and  parcel  of  the  calculation  a  purchaser  will  make  in determining what price to offer by the building.   Therefore it is submitted for the plaintiffs that regardless of what shall follow, given the presence of paras 93 and 101 there is nothing in the statement of claim that should be struck out.  The plaintiffs’ position is that claims the particulars go beyond a cause of action should be argued at trial.

[69]     The defendants’ objection to the particulars introduced by the 8SOC is that they are so different from what had previously been identified that they should be considered fresh causes of action rather than particulars.

[70]     As the authorities advise, issues like these concern matters of degree and materiality.  The defendants rely on Mr Jacob’s evidence to support their proposition that the added particulars are really new causes of action.

[71]     In this case the defendants have sought to distinguish aspects of loss by distinguishing structural design elements not associated with weather tightness outcomes.

[72]     In this case it is argued for the defendants that the correct way to analyse the plaintiffs claim is as several distinct claims for loss, each arising out of an alleged defect.   What is not clear from the evidence is to what extent some of the real particulars provided by the 8 and 9 ASOCs are distinct from those which were previously pleaded.

[73]     The  defendants’  witness,  Mr  Jacobs  asserted  that  new  particulars  were provided to extend the claim beyond confinement issues in the columns.   He said they now  alleged  deficiencies  in  the  columns  and  joints.    He  asserted  that  the

allegations about the beam/column joints required him to consider the matter further. He concludes that before the 8ASOC the allegations against the defendants were limited to allegations relative to columns and their confinement and did not extend to allegations of the inadequacy of the beam/column joints.

[74]     For the plaintiffs this conclusion is challenged.   They say the pleading is clearly wider than contended for using Mr Jacobs’s analysis, as an inspection of the earlier pleading does demonstrate.   Mr Kohler submits that other particulars are pleaded with sufficient width to capture the column and beam joints.

Summary

[75]     The  Court  has  endeavoured  to  comprehensively  review  the  defendants’ position on their strike out applications.  Their position is that at the latest the six year limitation period began on 9 June 2004 with the issue of the CCC. This because the defects complained of were not latent defects i.e. susceptible to discovery in time, but  patent  defects  i.e. clear  from  the beginning,  when  the drawings  were submitted for consent on 12 June 2002.

[76]     There is nothing that should preclude a building weather tightness/structural design  claim  being  defended  on  the  basis  that  the  defects  complained  of  were obvious even before the building was built if expert evidence proclaims certain structural features were clearly non compliant.

[77]     In this case much emphasis has been placed upon trying to prove that the original 12 June 2002 drawings were not altered in any material way by drawings submitted for subsequent purposes i.e. the issue of a practical completion certificate or the issue of a CCC.

[78]     There appears to be a measure of accord that the relevant drawings were non- compliant in significant respects.   But this is not conceded by the defendants themselves for they have pleaded otherwise.

[79]     Mr Mills argues that the judgments in Morel and Tom v Davys Burton and in Hamlin are about an application of general principles.  The Court is not so certain about that analysis.  Building construction claims have adopted a character of their own.  It is not until this case it seems it has been claimed that the very documents presented for approval of building consent provides the means for an immediate negligence claim.   In this case we have the expert opinions of others suggesting those drawings were from the beginning defective.   Those opinions have been provided more than 11 years after the event they criticize.  The defendants plead the drawings did not contain those defects.   Their argument upon the strike out application is that those defects should have been discovered by the Council at the time the drawings were submitted for approval and consent.

[80]     Mr Mills submitted there can be no doubt but that the defendant’s plans were defective.  Considerable effort was provided by counsel and with the assistance of Mr Mitchell to show that in all material respects there was no change of the drawings between that time they were submitted for consent in June 2002 and when ultimately they were approved for the issue of a CCC in 2004.

[81]     Those efforts notwithstanding, the Court has a sense of uneasiness about submitting to the conclusion that Mr Mills invites.   It does not seem to the Court upon a close examination of Mr Jacob’s affidavit that his evidence reaches that conclusion.   As he acknowledged he was originally briefed to comment upon the column joints issue. As he concluded his subsequent brief was much wider than that and for which he agreed there was a need to look at specialist research experts to complete investigations.

[82]     The claims to exclude certain latterly joined plaintiffs rely upon the Court accepting  a  patent  defect  date  of  12  June  2002.    At  this  time  and  upon  this application the Court cannot accept the defect was not latent.   This  is not just because the Court has issues with the defendants’ claims of certainty of proof that the defects were obvious on 12 June 2002.  It is also because of the approach taken by Courts, in particular in Hamlin regarding building defect claims.

[83]     In those, invariably the accrual of a cause of action remains an occurrence- based, not a knowledge-based, concept.   Certainly the Supreme Court majority in Morel rejected the proposition that, in general, the cause of action accrues on “reasonable discoverability” of events as opposed to the occurrence of them.  In that case Tipping J stated:

The reasoning of the Privy Council means that cases of the Hamlin kind do not involve any departure from the conventional approach to when a cause of action accrues.  The element of knowledge or discoverability affects when the loss occurs.   Only through that issue does it affect when the cause of action accrues.  The focus remains upon occurrence of loss rather than on discoverability of a loss which has already occurred...

But Hamlin recognised that in these types of cases, loss only occurs when the market value of the building is impacted (which is when the defect becomes discoverable to the market).

[84]     Here the defendants argue that Hamlin is not applicable because the defects were not “latent”. They were “contained in and apparent from the drawings”.

[85]     In this Court’s view the defendants’ arguments are not sustainable and are inconsistent with the Hamlin line of authorities. A latent defect is one that is “hidden from a normally observant person not of a specialist charged with examining a matter”.   In this case there was no observable damage until physical cracking occurred.   Furthermore a lay person purchaser looking at the drawings would not have been able to observe the design defects.

[86]     By analogy to the Court’s decision in Davys Burton the defendants argued the drawings they provided were “flawed assets”; that the defects existed from the outset and are not hidden but apparent on their face.

[87]     In Bayliss v Central Hawkes Bay District Council7  Andrews J rejected a similar argument on a strike out application. The plaintiffs alleged that the defendant Council breached a mandatory statutory duty by failing to include in the LIM report information relating to subsidence, in particular, by failing to disclose a previous

report and settlement deed concerning subsidence that had occurred.

7 (2011) 11 NZCPR 843 (HC).

[88]     The parties agreed that the claim was not of a latent defect in the property; and that the alleged breach was the provision of the LIM report.   However, the plaintiffs submitted and Andrews J agreed that Hamlin was applicable by analogy.

[89]     Andrews J held that it was arguable that the plaintiffs did not suffer any loss immediately on receiving the LIM report and relying on it to settle the purchase. Like Mr Hamlin, the plaintiffs could have on-sold without loss.   The loss being claimed by the plaintiffs was effectively identical to that in Hamlin; a permanent fall in market value and  costs of repair now that the plaintiffs  and the market had discovered the defect.

[90]     As  in  that  case  so  too  in  this  it  seems  to  the  Court  the  issues  are distinguishable from Davys Burton.  Until the market discovered the defects in the building, the plaintiff has suffered no loss.

Conclusions

Limitation

[91]     The  Court  is  dealing  with  strike  out  applications  involving  pleadings  of

negligence and “counterclaims” of limitation.

[92]     By Rule 15.1 a Court can strike out all or part of a pleading if no reasonably arguable cause of action is disclosed.

[93]     Relevant applicable principles are well known. They include:

(a)       Pleaded facts whether or not admitted are assumed to be true.

(b)A claim should not be struck out unless the Court is certain it cannot succeed.

(c)       The strikeout jurisdiction is to be exercised sparingly.

(d)Although the strikeout jurisdiction is not excluded by the need to decide difficult questions of law, the Court should be particularly slow to strikeout a claim in a developing area.

(e)      Developments in negligence need to be based on proved rather than hypothetical facts.

(f)      Courts will not usually attempt to resolve generally disputed issues of fact.

[94]     There is a degree of novelty about this application for it contends for the existence of a patent defect and not a latent defect as it affects the accrual of the cause of action.  There is novelty also in relying upon evidence provided some 11 years after the event as conclusive of claims the defect was patent and not latent.

New pleadings claims

[95]     Regarding the defendants objections concerning the nature of additions to the pleadings claimed of the 8 and 9 ASOC it is in the Court’s view that considerations about whether the provision of additional even significantly different particulars of defects and whether they amount to new causes of action are better left for consideration at trial.  There is in this case no question but that the third amended statement  of  claim  did  also  plead  particulars which were not  strictly related  to weather tightness issues.

[96]     In  this  case  the  Court  is  not  prepared  to  accept  there  is  unanswerable evidence to preclude claims of a latent defect which extended the time for claims beyond that date when design plans were submitted for consent or which provided the basis for the issue of the CCC.

[97]     Certainly new facts can lead to a new cause of action.  Likewise a change of facts  can  give  rise  to  a  new  cause  of  action.    This  is  a  case  where  further investigation may be required because it could be relevant to whether or not a new cause of action arises.

[98]     In that round of things the Court is hesitant to use the robust jurisdiction of a strike out application to preclude a potential inquiry into issues which are shortly to be the subject of a lengthy trial.   Also, there is nothing to stop the defendants advancing the same strike out arguments in their defence before the Judge who has the opportunity of hearing all of the relevant evidence.

Judgment

[99]     The applications for strike out are dismissed.

[100]   A single award of costs to the plaintiffs is fixed on a 2B basis together with disbursements as approved by the Court.

Associate Judge Christiansen