Body Corporate 328392 v Auckland Council
[2021] NZHC 1473
•22 June 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV2017-404-2754
[2021] NZHC 1473
IN THE MATTER OF 148 Arthur Street, Onehunga, Auckland BETWEEN
BODY CORPORATE 328392
First Plaintiff
INSOO KIM and YOUNG SOOK WE AND OTHERS
Second to Fourteenth Plaintiffs
AND
AUCKLAND COUNCIL
First DefendantFAÇADE DESIGN SERVICES LIMITED
Second Defendant
RONALD CHARLES HANLEY
Third Defendant/Continuing over the page …
Hearing: 15 June 2021 Appearances:
Nic Scampion for Second and Third Third Parties (Applicants) D J Barr for First Defendant Auckland Council (Respondent)
Judgment:
22 June 2021
INTERIM JUDGMENT OF ASSOCIATE JUDGE R M BELL
This interim judgment was delivered by me on 22 June 2021 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
BODY CORPORATE 328392 v AUCKLAND COUNCIL [2021] NZHC 1473 [22 June 2021]
AND HUGHES CONSTRUCTION LIMITED
First Third Party
BRIAN JONES ENGINEERING LIMITED
Second Third PartyBRIAN ALLAN JONES
Third Third Party
INTERIM JUDGMENT OF ASSOCIATE JUDGE R M BELL
[1] In this building defects case, the second and third third parties, a structural engineering consultancy, Brian Jones Engineering Ltd, and its director, Mr Brian Jones, apply to be removed,1 but they are opposed by the Auckland Council, the first defendant, which joined them.
[2] Except for one aspect, a producer statement of 12 November 2006, the council’s allegations against the engineer cannot succeed. As for the producer statement, there is a limitation question, on which I wish to hear from the parties. This is therefore an interim decision to be followed by another one on limitation.
Background
[3] The plaintiffs are the body corporate and residential owners of a unit title complex in Arthur Street, Onehunga. The lower level is a retail outlet, the upper levels are residential apartments. According to the current statement of claim, the building was constructed between October 2000 and 2003. The Auckland City Council did not, however, issue a code compliance certificate under the Building Act 1991 at that stage. Between October 2006 and April 2007, the building was re-clad. The Auckland City
1 I will treat Mr Jones and his company as one and the same. For this decision, neither side suggested that they should be treated separately.
Council issued a code compliance certificate for the re-cladding work on 30 July 2007. It issued a code compliance certificate for the original building work on 16 June 2008.
[4] On 2 June 2016, the body corporate applied for an assessor's report under s 32(l) of the Weathertight Resolution Services Act 2006. It was an eligible claim. An assessor’s report in February 2017 found that the building suffers defects and requires a full re-clad. The plaintiffs claim costs of repairs estimated at $4.6 million plus other damages. A schedule to the statement of claim gives particulars of these defects: flashings, cladding, waterproof membranes, insulation, timber frame defects, balcony balustrades, bathroom ventilation, structure, bathroom waterproofing and fire safety defects. Some of the defects do not have anything to do with weathertightness.
[5] The plaintiffs began this proceeding in November 2017. They sue the Auckland Council, as successor to the Auckland City Council, for negligence in inspecting building work and issuing code compliance certificates. They sue the other defendants, Façade Design Services Ltd and its director, Mr Hanley, for negligence in designing the cladding system and issuing a producer statement. They are sued for only some of the defects, even though the plaintiffs claim the same damages against them as against the council. The defects pleaded in the original statement of claim are not as extensive as the current pleading.
[6] In July 2018 the construction company and Mr Jones were joined as third parties. In its current statement of claim the Auckland Council says that Mr Jones was responsible for preparing and approving the structural design of the re-cladding of the complex, and for issuing a producer statement on 12 November 2006. He inspected concrete blockwork in the basement on 20 May 2008 and advised that cracks to the concrete blockwork did not indicate any structural problems and could be addressed to prevent moisture ingress. The Auckland Council sues Mr Jones and his company in negligent misstatement and claims damages. The council says that when it issued the code compliance certificates, it relied on Mr Jones' advice in the producer statement and on the inspection of the blockwork. The council also seeks contribution under s 17 of the Law Reform Act 1936. Mr Jones is alleged to have breached a duty of care to the plaintiffs. The council pleads the same acts and omissions by Mr Jones for the contribution claim as for the negligent misstatement claim.
Principles on Mr Jones’ application to set aside the third party notice
[7] In his application of December 2018 Mr Jones applied to set aside the third party notices relying on rr 4.4, 4.16 and 15.1 of the High Court Rules 2016. He amended his application to also seek summary judgment under r 12.2 of the High Court Rules. There is no issue about the timing of the application. In a defendant's application for summary judgment, the court decides the case on the substantive merits. It gives the defendant judgment only if it is satisfied that none of the causes of action against the defendant can succeed. The court applies the principles laid down by the Court of Appeal in M M Kembla New Zealand Ltd v Westpac Banking Corporation.2 Under r 4.7(2), a third party has the same rights of defence as a defendant. A third party is therefore entitled to apply for summary judgment.
[8] Under r 15.1, the court may strike out all or part of a pleading. If a court strikes out all of a statement of claim, it may also dismiss the proceeding. Strike-out may be ordered for both substantive and procedural reasons. There will be substantive strike-out if the matters pleaded do not show a recognised cause of action, if the plaintiff cannot hope to succeed on the pleaded facts or if a cause of action cannot succeed because of an unanswerable affirmative defence, such as limitation. A proceeding may be dismissed for procedural reasons, even if the case may be substantively sound. For example, where the pleading rules have not been followed, or where the claim is an abuse of process, as in a collateral attack on another decision. Where a case is procedurally defective, there is greater opportunity for the plaintiff to amend and put their case in order.3 Again, because a third party has the same rights as a defendant, a third party may apply under r 15.1 to strike out the statement of claim against it.
[9]Rule 4.16 of the High Court Rules says:
4.16 Setting aside third party notice
(1)A third party may apply to the court to have a third party notice issued and served with the leave of the court set aside.
2 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).
3 Marshall Futures Ltd (in liq) v Marshall [1992] 1 NZLR 316 (HC), where Tipping J distinguished between a pleading which is a total write-off and one which is deficient but capable of effective repair.
(2)A party to a proceeding served with a third party notice issued and served without leave of the court may apply to the court to have the notice set aside.
(3)In either case, the court may—
(a)set the third party notice aside and dismiss the defendant's statement of claim against the third party—
(i)on the merits; or
(ii)without prejudice to the right of the defendant to pursue that claim against the third party in an independent proceeding; or
(b)give other directions.
[10] For Mr Jones, it was submitted that this rule allows wider grounds for setting aside a third party notice than those for dismissing a claim against a defendant. Mr Scampion cited TSB Bank Ltd v Burgess.4
It is sometimes observed that orders setting aside third party notices are granted on the same principles as applications to strike out pleadings under r 15.1 of the High Court Rules. That observation is correct in relation to a significant proportion of orders setting aside third party notices. But the statement is incomplete in that it does not recognise the broader considerations, such as convenience and overall justice, which may separately justify an order setting aside a third party notice.
The court is said to have a wide discretion to set aside third party notices.5
[11] Citing Turner v First Fifteen Holdings Ltd, Mr Scampion submitted that where a defendant's claim against a third party is weak and the third party's involvement in the events leading to the proceeding is insignificant, the court may set aside the third party notice. Turner v First Fifteen Holdings Ltd was a building defects case. The owners sued the builders, architects and the local authority. The claims against the architects were for negligence in design and in supervising the builders. The architects joined as a third party the engineering consultancy who had been engaged by the owners directly and were not under contract to the architects. The architects alleged negligence in design by the engineers and claimed contribution. Under the law as it was then, professionals such as architects and engineers might be liable in contract to
4 TSB Bank Ltd v Burgess [2013] NZHC 1228 at [37].
5 Bank of New Zealand v Equiticorp Industries Group Ltd (in stat man) [1994] 3 NZLR 548 (CA) at 552; Turner v First Fifteen Holdings Ltd (1991) 3 PRNZ 145 (HC) at 149.
their clients, but the clients could not sue them in tort.6 (That is no longer the law). Barker J set aside the third party notice, holding that the architects did not have a contribution claim against the engineers because neither were tortfeasors. He added this obiter comment:7
… the engineer's involvement is somewhat peripheral to the main allegations against the architects. It is not sufficient for the architects to assert that breaches alleged against them are really the responsibility of the engineer, for the architects cannot be held liable in the substantive trial for breaches not their own.
Thus, the architects could only ever look to the engineer as a third party to the extent that the plaintiffs allege against them a failure to supervise the engineer. Yet an examination of the pleadings reveals that at no point do the plaintiffs specifically allege against the architects a failure to supervise the engineer. Most of the numerous claims against the architects involve direct allegations of faulty design work by them or else a failure to supervise the builders. Of the 17 claims against the architects, only three at the most are sufficiently broadly worded to possibly encompass a failure to supervise the engineer.
[12] That does not establish a new principle that those with peripheral involvement in building defects claims must be released from the case if they are sued only as a third, fourth or more remote party. In this obiter part of his decision, Barker J held that the engineer should not be sued by the architects, because the plaintiffs had not clearly pleaded that the architects were negligent in their supervision of the engineers.
[13] Moreover, if Barker J meant something more than that, I respectfully decline to follow him. Under r 4.7(2), a third party has the same rights of defence as a defendant, not greater rights. If the plaintiffs had sued Mr Jones as defendant, he could not have applied to be removed from the proceeding on the ground of only peripheral involvement. He also cannot as a third party.
[14] Rule 4.16(3) distinguishes between setting aside a third party notice on the merits and other grounds. When a court sets aside on the merits, it decides the substantive merits of the case, as on a defendant's application for summary judgment and on a strike-out application based on substantive grounds. The rule recognises, however, that even if the defendant's claim against the third party cannot be summarily
6 Karori Properties Ltd v Jelicich [1969] NZLR 698 (SC); McLaren Maycroft & Co v Fletcher Development Co Ltd [1973] 2 NZLR 100 (CA).
7 At 149–150.
dismissed on substantive grounds, other considerations may count against using the third party procedure. Those other considerations are procedural.
[15] Associate Judge Osborne outlined those considerations in TSB Bank Ltd v Burgess.8 These procedural considerations may be wider than those considered on a strike-out application under r 15.1. They may involve the conduct of the proceeding as a whole, for example, the effect of delay on the plaintiff's claim. They may require balancing the advantages of a third party claim identified by Scrutton LJ in Barclays Bank Ltd v Tom with difficulties arising in the particular case.9
[16] Mr Jones does not rely on procedural matters to set aside the third party claim. He says the claim against him in this proceeding should be brought to an end because he ought not to be sued at all. As he relies on substantive matters, his application has to be decided under the principles for a defendant's summary judgment application or under r 15.1 where there is a challenge to the substantive merits.
[17] Mr Jones does not seriously challenge the proceeding as not disclosing a reasonably arguable cause of action under r 15.l (l )(a).10 As to affirmative defences, a limitation question was not argued. I deal with that later. Instead, Mr Jones says that on the evidence the claims against him are ill-founded. His case should therefore be considered under his summary judgment application.
[18] Some caution is required in considering the evidence. Mr Jones has not made discovery yet. While the council and other parties have disclosed documents, the council does not necessarily have access to all relevant documents in Mr Jones’ control.
[19] The events happened more than 12 years ago. The normal failings of memory apply. Where there are not contemporary documents, witnesses’ recollection of events between 2006 and 2008 must be treated with caution. It would be wrong to assume that their memories are infallible.
8 TSB Bank Ltd v Burgess [2013] NZHC 1228 at [38].
9 Barclays Bank Ltd v Tom [1923] 1 KB 221 (CA) at 224.
10 See the test in Attorney-General v Prince [1998] 1 NZLR 262 (CA) and Couch v Attorney-General
[2008] NZSC 45, [2008] 3 NZLR 725 at [33].
[20] Mr Jones ran his peripheral argument because he says that he had little involvement in the project. His invoices in evidence are for about $1,300. For his summary judgment application, he says that the council cannot succeed on its allegations against him. There are four matters:
(a)cladding design;
(b)his producer statement of November 2006;
(c)his report of January 2008 on testing by Opus; and
(d)his viewing cracked blockwork in May 2008.
Cladding design
[21] The council has pleaded that Mr Jones was responsible for preparing and approving the structural design for the recladding.11 Mr Jones’ evidence is that his consultancy was not involved in designing the re-clad. He only became involved in November 2006 and that was in connection with the producer statement. The building consent drawings are dated 13 September 2006. The re-clad work started in October 2006. The plaintiffs plead that Façade Design Services Ltd designed the re-cladding system.12 Façade and its directors have admitted some design responsibility.13 They have also admitted giving the producer statement for construction review.14 These documents discovered by the council show that Façade designed the re-cladding:
(a)a design producer statement of 1 October 2005;
(b)building consent drawings approved on 13 September 2006 which refer to the second and third defendants, but not to Mr Jones;
11 The council’s third amended statement of claim against second and third third parties at paragraphs 10(a), 21(a) and 43(a).
12 Plaintiffs’ statement of claim of 1 April 2021, paragraphs [25]–[28].
13 Second and third defendants’ statement of defence of 27 April 2021, paragraph [17].
14 Second and third defendants’ statement of defence, paragraph [19].
(c)a construction review producer statement of 3 July 2007 given by Façade Design Services Ltd for remedial cladding work.
[22] The cladding work required a building consent. Plans have to be submitted to the council before it can issue a consent. The designer will give a producer statement. The designer can be identified from documents, plans and producer statements, submitted to the council. If Mr Jones had done any design work on the cladding system, it would have shown in documents submitted to the council for the building consent. The council would have records of any design work by Mr Jones. It has not said that it has any.
[23] The council has offered no evidence to refute Mr Jones’ evidence that he was not involved in the design, when it could be expected to have evidence of his involvement in its own records. It did not argue strongly that he did the re-clad design. The caution for fading memory does not apply here. On something as significant as design for a re-cladding project, Mr Jones can be expected to know whether his practice did or did not do the design work. His evidence is corroborated by contemporary documents. Under the summary judgment test, Mr Jones has established that his practice did not design the re-cladding work but someone else did, and he therefore cannot be sued for defects in the design.
The producer statement of 12 November 2006
[24] This allegation needs to be understood in light of the defects pleaded in the plaintiffs’ statement of claim. Under the list of timber frame defects is “Holes in boundary joists” with these particulars:
There are 100mm holes cut in the boundary joists above each apartment entry, where the boundary joist forms a beam over the entrance porch. There is no strengthening or support to the beam.
The damage is said to be the possibility of structural damage. The relevant parts of the building code are B1 (structure) and B2 (durability). The moisture parts of the building code (E2 – external moisture, E3 – internal moisture) are not in issue. The council’s case is that Mr Jones is responsible for a producer statement that these holes
did not present any stability issue. He was brought in following a council building inspector’s site report of 8 November 2006, which included:
Engineer to check penetrations through beams on west elevation.
The council says that those penetrations are the holes in the plaintiffs’ schedule of defects. It can be noted that the holes are on an exterior wall: “boundary joists above each apartment entry” and “penetrations through beams on west elevation”.
[25] Mr Jones says that Mr Bill Ritchie, project manager on the job, instructed him to inspect holes to check whether they required strengthening. The holes he checked were in floor joists, not on the exterior of the building, and accommodated plumbing pipes inside the building. He signed a producer statement which says in part:
Structural design 120 mm diameter holes through 250 x 50 floor joists.
Strengthening of the joists is not required if all of the following conditions are met:
[and a number of conditions are specified]
Mr Jones’ calculations accompanying the producer statement refer to “floor joist penetrations”. Mr Jones’ email accompanying the producer statement says:
Attached are producer statements and calculations for holes through the joists.
Remedial work is not required; subject to the conditions listed on the producer statement being met (joist span/hole size and hole location)…
In a late affidavit, filed on the eve of the hearing, Mr Jones says that when he went to Arthur Street in November 2006 the site manager showed him the holes in the internal floor joists and asked him to report on them. The site manager did not tell him to look at any other holes in any other part of the building. Mr Jones says that was consistent with Mr Ritchie’s instructions. Mr Jones charged $701.32 for this work.
[26] His case is that he was not asked to inspect the holes in the beams in the west elevation over doorways. He distinguishes between joists (to hold support flooring) and beams (which support heavier loads). The holes he inspected in the interior were to accommodate plumbing services, as opposed to smaller, 100 mm holes to the exterior to accommodate a ventilation duct. Someone else made a mistake telling him
to inspect holes in floor joists instead of holes in beams on the western elevation. If the council wrongly relied on his producer statement as satisfying the building inspector’s requisition, that was not his fault for checking the wrong holes.
[27] In response, the council made these points: the building inspector’s requisition was clear that an engineer was required to check penetrations through beams on the west elevation and did not require internal penetrations to be checked. There was little in the difference between 100 mm and 120 mm holes. Mr Jones’s producer statement makes it clear that he was aware that this was a re-cladding job. There is an inconsistency in the documentation in that in some parts its centres are referred to as “600 centimetres” and in other parts “490 centimetres”.
[28] The matter is not as clear cut as Mr Jones would like it to be. It is common in building cases for professionals (architects and engineers) and contractors to deflect responsibility by blaming the other. The contractor says that they did no more than what the plans showed and any fault is with the designer; whereas the professional says that the contractor did not follow the plans. Working out who is right requires a careful examination of the facts. It is not safe to decide without hearing from both sides. This case is comparable. Mr Jones says that he is not to blame because the site foreman did not tell him correctly which holes to look at. He blames others for his checking the wrong holes. Until all the evidence is heard and Mr Jones is cross- examined, it would not be safe to hold on a summary judgment application that he is not liable. The facts can only be fully established at trial.
Checking Opus report
[29] Under “structural defects”, the defects schedule of the plaintiffs’ statement of claim alleges inadequate reinforcing, apparently in basement walls. In his affidavit of 1 June 2019, Mr Jones says that in January 2008, Mr Ritchie asked him to comment on a report by Opus Consulting on the size of the steel reinforcing bars in the basement blockwork masonry walls part of the original construction. Mr Ritchie wanted him to compare the size of the steel reinforcing bars in the report with the size of the bars in the structural drawings for the property. Opus had checked the size of the steel reinforcing bars by x-ray.
[30]On 30 January 2008, Mr Jones made his written report:
We studied the construction issue drawings for this project and advised you that the required vertical reinforcing steel in the walls is D16 bars. As a result, Opus Consultants have re-analysed their test results. They have now confirmed, in an amended report, that the vertical bar size is actually D16. We therefore conclude that the amended Opus report indicates that the wall reinforcing complies with the design requirements.
[31] The council has not specifically relied on this in its claim against Mr Jones. Mr Barr accepted that if this were the only matter, the council would not pursue it. Nevertheless, he submitted that in the report, Mr Jones warranted that the D16 size reinforcing was appropriate for the basement walls. That is, Mr Jones had not only checked that the installed reinforcing matched the specification, but he was also certifying that the original specification was correct. On Mr Jones’ case he only had to check the specification with the Opus findings. On the council’s case he ought to have redone the original design analysis and calculations. The council said that “complies with the design requirements” meant vouching for the integrity of the original design. That is stretching matters. Mr Jones’ letter makes it clear that by “design requirements” he meant that the construction issue drawings had specified the D16 bars, and that the Opus report showed that. He was saying nothing more than that. The council have not alleged that there was any error in that report. On a summary judgment basis, Mr Jones has shown that there is not a reasonably arguable complaint against him.
The visit on 20 May 2008
[32] The assessor’s report under the Weathertight Homes Resolution Services Act refers to this defect:
Concrete block wall – defect D
Cracking to the block wall could be seen both above ground from the outside (e.g. visual inspection, photos 18, 19), and below ground from the inside of the garage (photos 28, 29).
A lack of adequate waterproofing of the subterranean area in combination with cracking in the blockwork is the likely cause for this.
Although the leaking into the garage area is not a severe problem in the immediate sense, it creates a loss of amenity, appearance, and a long-term acceleration of material degradation and should there for be remediated.
[33] The plaintiffs included this defect in the schedule of defects in the original statement of claim. For this application, it was assumed that that defect was part of the structural defects in the schedule to the current statement of claim but I am not sure exactly which one.
[34] Mr Jones’ involvement comes with a site visit in May 2008. The council was considering whether to issue a code compliance certificate for the original construction work. On 15 May 2008, a council building inspector, Mr Woodger, had written to Mr Gilbertson, a representative of the developer, that the council’s engineer would need to inspect and indicating that issues may come out of that inspection.
[35] Mr Ritchie, the project manager, was advised of the meeting. He was now living in Queensland. He emailed Mr Jones:
… there is a meeting at 11:00am tomorrow at 148 Arthur Street, Onehunga, with Rob Woodger, Lance, and a council engineer could you please make a point of attending this meeting.
Meeting to do with the council sign-off of the building …
[36] On 20 May 2008 there was a meeting on site with Mr Woodger and Mr Bill Vautier (the council’s structural engineer), Mr Jones (representing Mr Ritchie) and Mr Gilbertson (representing the developers). Among other matters Mr Vautier dealt with cracking seen in the block walls of the basement. Under the council’s case, Mr Jones said that the cracks to the concrete blockwork did not indicate any structural problems and could be addressed to prevent moisture ingress.15 Mr Jones has an account of what happened on that visit, but, subject to one matter, I put that to one side, as his evidence is based on recollections which may be faulty. He accepts that when Mr Vautier looked at the block walls, Mr Jones was with him. After the visit, he emailed Mr Ritchie:
The issue is the council is now concerned that the footings were not inspected. Went over the building with the council engineer (Bill Vautier) and he seemed
15 The council’s third amended statement of claim against the second and third third parties, paragraph 12.
satisfied by what he saw, however he’s now gone away to study the drawings, so who knows what he may come up with. I’ve asked him to contact me directly if he has any queries, in which case I’ll let you know.
Mr Jones charged $288.20 (exclusive of GST) for two hours on site. He did not charge for any other work in connection with the visit in May 2008.
[37]On 9 June 2008, Mr Woodger wrote to Mr Ritchie:
On 20 May 2008 both Lance Gilbertson and I were present on site while Bill Vautier council’s structural engineer and Brian Jones representing yourselves undertook an inspection on site of the concrete blockwork, in and around the basement carparking area.
Bills conclusion was the cracks observed were not unusual and did not indicate any structural problems. However council strongly recommend these cracks be filled and the walls recoated to prevent moisture ingress. Council considered this work was maintenance and as such does not require input from council; however, it is strongly recommended this work be undertaken as soon as possible.
[38] None of this information so far suggests that Mr Jones made any statement about the blockwork. Mr Jones denies doing so. The council relies on an affidavit by Mr Vautier, who has now retired. He recalls attending the site but says that it was over 10 years ago and his recollection is not complete. He does not specifically recall discussing the cracks with Mr Jones, but considers that it was likely that he did as they inspected the blockwork together. He does not recall that they had any differences of opinion about the cracks in the blockwork, and considers that if Mr Jones had offered an alternative view, he would likely remember that. He thinks that before Mr Woodger’s letter of 9 June 2008, Mr Vautier called Mr Jones to ask for his feedback. If Mr Vautier’s memory is correct about this, Mr Jones had no issue at the time with the recommendation that the cracks be filled and the walls recoated to prevent moisture ingress.
[39] Not everything discussed on a site visit with council officers is written down or otherwise recorded. But if it is not, the parties have to rely on the recollections of witnesses, in this case, of events 13 years ago. Putting to one side Mr Jones’ denials, in his affidavit Mr Vautier tries to reconstruct what may have happened without being able to say that it actually did happen and without any documents to support his assertions. The council’s claim is speculative at best that Mr Jones said something
along the lines that the cracks in the blockwork were not of concern. There is no reason to think that the council’s case that Mr Jones said something about the blockwork will get any better. In Westpac Banking Corp v M M Kembla New Zealand Ltd, the Court of Appeal cautioned against deciding by summary procedure whether the plaintiff has enough evidence to prove its case.16 The council does not suggest that it has or will have more evidence to prove that Mr Jones spoke about the blockwork. For example, it does not suggest that the inspector, Mr Woodger, knows anything about this issue. Mr Jones denies saying anything. If he gives evidence, he may be cross- examined and his account of the visit may not seem as reliable as his affidavit evidence. But that will only show the weakness of his memory, not that he did speak about the blockwork. The documents are consistent with Mr Vautier not calling Mr Jones to ask for his feedback. If Mr Vautier had called, Mr Jones would have recorded it in his invoice and charged for it. Mr Woodger could also have referred to it in his letter. The council’s case that Mr Jones made the alleged statement is speculative in light of the 13 years since the visit, the absence of documents made at the time recording any such statement and the frailty of human memory. Mr Jones has shown that it cannot succeed.
[40] For this part of the case, the council is not relying on Hedley Byrne liability for negligent misstatement.17 It accepted that Mr Jones did not have specialist knowledge or expertise not shared by the council. It had its own structural engineer, Mr Vautier. In fact, Mr Jones says that he deferred to Mr Vautier as an older structural engineer whom he respected. The council did not rely on Mr Jones’ expertise. Instead the council relies on its contribution claim under s 17 of the Law Reform Act 1936. It says that Mr Jones breached his duty of care to the plaintiffs. If the council was at fault in issuing a code compliance certificate because there were cracks in the blockwork, Mr Jones was likewise liable.
[41] As a back-up, in case the court found that the council could not succeed in alleging that Mr Jones spoke about the blockwork, the council submitted that Mr Jones
16 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [63].
17 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 (HL).
had a duty to speak, and, if he did not speak, that was also negligent. That may be compared with Lord Reid’s dictum in Hedley Byrne:18
A reasonable man, knowing that he was being trusted or that his skill and judgment were being relied on, would, I think, have three courses open to him. He could keep silent or decline to give the information or advice sought: or he could give an answer with a clear qualification that he accepted no responsibility for it or that it was given without that reflection or inquiry which a careful answer would require: or he could simply answer without any such qualification. If he chooses to adopt the last course he must, I think, be held to have accepted some responsibility for his answer having been given carefully, or to have accepted a relationship with the inquirer which requires him to exercise such care as the circumstances require.
Under the council’s case, Mr Jones did not get the first option.
[42] Mr Barr referred to the Supreme Court’s decision in Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council for his submission that a claim in negligence, rather than negligent misstatement, was available.19 That was a decision on council liability, not on liability of professionals. The negligent issue of a code compliance certificate could make a council liable for breach of duty of care, even if a claim for negligent misstatement could not be proved. The Supreme Court affirmed its earlier decisions in Sunset Terraces20 and Spencer on Byron,21 that in its regulatory functions under the Building Act 2004 a council owes a duty of care to owners and future owners. These decisions may be useful for one limb in a contribution claim under the Law Reform Act 1936, namely, that the council owes the plaintiffs a duty of care, but the issue here is another limb, whether Mr Jones, a professional, owed the plaintiffs a duty to speak when he came on site in May 2008.
[43] Mr Barr also cited Weaver v HML Nominees Ltd,22 which did involve a claim against a professional, and is therefore closer to the mark. The Auckland City Council had issued a building consent for remedial cladding work. The Auckland Council as defendant issued third party notices against a building surveyor and its director,
18 At 486.
19 Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council [2017] NZSC 190, [2018] 1 NZLR 278 at [60]–[63].
20 North Shore City Council v Body Corporate 188529 [2010] NZSC 158, [2011] 2 NZLR 289 [Sunset Terraces].
21 Body Corporate 207624 v North Shore City Council [2012] NZSC 83, [2013] 2 NZLR 297 [Spencer on Byron].
22 Weaver v HML Nominees Ltd [2014] NZHC 2073.
pleading the same causes of action as in this case, negligent misstatement to the council and a contribution claim for breach of duty of care to the owners. In that case the third parties had given a written opinion, which the council said it had relied on in giving the building consent. The case is an example that, when a professional in the position of Mr Jones gives a statement on which a council relies when giving a building consent or a code compliance certificate, the professional owes a duty of care to the owners and future owners of the building. But it is not authority that a professional owes a duty of care to those owners, even if the professional says nothing.
[44] The general rule is that a person must take care not to inflict damage on someone else but does not have to take care affirmatively to prevent injury or to confer a benefit on another. That is subject to qualifications. One is that if you assume responsibility for a task, you may be held liable for not doing the task as well as for doing it badly. So the question is to work out what responsibilities Mr Jones assumed when he went to Arthur Street in May 2008.
[45] On the council’s case he went because Mr Ritchie sent him. Mr Jones represented the project manager. Presumably Mr Ritchie thought it would be useful to have an engineer present, as the council’s own engineer would be inspecting the building and the council was considering whether to issue a code compliance certificate. Mr Jones would be more likely to understand any concerns that Mr Vautier might have. Mr Ritchie did not however instruct Mr Jones to inspect the blockwork and report on it either to himself or the council. Nor did the council enlist Mr Jones to become part of its team to decide whether to issue a code compliance certificate. Mr Jones sent his invoice to Mr Ritchie, not to the council. His report to Mr Richie recognises that any decision was the council’s:
… he seemed satisfied by what he saw, however he’s now gone away to study the drawings, so who knows what he may come up with.
[46] Mr Jones did not independently assume any responsibility for checking the stability of the blockwork in the basement, so that he would be liable, even if he did not speak out. In short, his silence does not count against him.
[47] Mr Jones has shown that the claim against him for the visit in May 2008 cannot succeed because he did not say what the council alleges and because he is not liable for not speaking.
The limitation question
[48] On Mr Jones’ summary judgment application, only one matter remains arguable for the council: the producer statement of November 2006. The other matters do not need to go to trial. There is, however, another matter: limitation. Whereas the producer statement was given in 2006, Mr Jones was not joined in the proceeding until 2018, more than 10 years later. The 10 years are relevant because of the 10-year longstop period under s 393(2) of the Building Act 2004. Mr Jones had not, however, raised limitation to warrant dismissal of the claim. On the other hand, Mr Barr was well up on the issue.
[49] The limitation issue should be considered as part of the present application. It offers efficiencies. Keeping Mr Jones in the proceeding during a lengthy hearing would be pointless, if the limitation defence is sound. However, I need to hear from the parties first. Mr Jones should file an appropriate pleading, putting it in issue. What follows shows some of the groundwork but is not a decision.
[50] Although it has been repealed, the Limitation Act 1950 still applies to proceedings based on acts or omissions before 1 January 2011.23 Under the Limitation Act 1950 s 4(1)(a), the time limit for actions founded on tort is six years from the date on which the cause of action accrued. In building defects cases alleging negligence, the cause of action accrues when the defects are discovered or could with reasonable diligence have been discovered.24 In building cases, that limitation rule is subject to the 10 year longstop under s 393 of the Building Act 2004:
393 Limitation defences
(1)The Limitation Act 2010 applies to civil proceedings against any person if those proceedings arise from—
23 Limitation Act 1950, s 2A; Limitation Act 2010, ss 57 and 59.
24 Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC) at 522-527, Murray v Morel and Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721 at [39]-[42].
(a)building work associated with the design, construction, alteration, demolition, or removal of any building; or
(b)the performance of a function under this Act or a previous enactment relating to the construction, alteration, demolition, or removal of the building.
(2)However, no relief may be granted in respect of civil proceedings relating to building work if those proceedings are brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.
(3)For the purposes of subsection (2), the date of the act or omission is,—
(a)in the case of civil proceedings that are brought against a territorial authority, a building consent authority, a regional authority, or the chief executive in relation to the issue of a building consent or a code compliance certificate under Part 2 or a determination under Part 3, the date of issue of the consent, certificate, or determination, as the case may be; and
(b)in the case of civil proceedings that are brought against a person in relation to the issue of an energy work certificate, the date of the issue of the certificate.
Section 393(2) applies not only to the Limitation Act 2010 but also to the limitation rules under the 1950 Act which have been saved. The override goes not only to the normal limitation periods, but also to provisions allowing time to be extended.25
[51] For leaky homes (including apartment complexes) these rules are in turn subject to s 37(1) of the Weathertight Homes Resolution Services Act 2006:
37 Application of Limitation Act 2010 to applications for assessor’s report, etc
(1) For the purposes of the Limitation Act 2010 (and any other enactment that imposes a limitation period), the making of an application under section 32(1) has effect as if it were the filing of proceedings in a court.
In claims by houseowners for water penetration defects, time stops running when they apply to the Weathertight Homes Resolution Services for a report by an assessor under s 32. In this case, the plaintiffs say that they applied for an assessor’s report on 2 June 2016. For proceedings in the Weathertight Homes Tribunal, s 37 applies not only to
25 Johnson v Watson [2003] 1 NZLR 626 (CA).
the respondents initially sued by the building owners, but also to other respondents joined by the initial respondents.26
[52] In Lee v Whangarei District Council,27 the Supreme Court held that s 37(1) of the Weathertight Homes Resolution Services Act applies not only to proceedings in the Weathertight Homes Tribunal, but also to proceedings in this court alleging water penetration defects.
[53] Difficulties arise in building defects cases in this court when home-owners allege not only water penetration defects but also other defects. There is a question whether there is a common limitation period for all defects, or whether different limitation periods apply, according to the nature of the defect.
[54] In Retro Apartments,28 I held that where a defendant was pursued for both water penetration and other defects where there are overlapping defects and damage so that owners have to deal with all defects together, there is a common limitation period – s 37(1) of the Weathertight Homes Resolution Services Act. On the other hand, in Washington Apartments,29 Associate Judge Smith took a different view. He held that s 37(1) of the Weathertight Homes Resolution Services Act applies only to water penetration defects and for all other defects s 393(2) of the Building Act applied. While Associate Judge Smith and I are apart where a defendant is sued for both water penetration and non-water penetration defects, we agree that where a defendant is sued only for non-water penetration defects, s 393(2) applies.30
[55] There is a possible argument for Mr Jones that as a structural engineer he is being sued for an alleged structural defect, not a water-penetration defect, and he is being sued more than 10 years after he gave the producer statement. He therefore has the benefit of s 393(2).
26 Kells v Auckland City Council HC Auckland CIV-2008-404-1812, 30 May 2008 (Asher J).
27 Lee v Whangarei District Council [2016] NZSC 173, [2017] 1 NZLR 401.
28 Body Corporate 202692 v Auckland Council [2019] NZHC 1976 [Retro Apartments].
29 Body Corporate 378351 v Auckland Council [2020] NZHC 587 [Washington Apartments]
30 Retro Apartments, above n 28, at [50].
[56] Mr Barr, however, had counter arguments. He submitted that the council had a contribution claim against Mr Jones under s 17 of the Law Reform Act 1936 and time had not started to run against the council under s 34(4) of the Limitation Act 2010:
(4) It is a defence to A’s claim for contribution from C if C proves that the date on which the claim is filed is at least 2 years after the date on which A’s liability to B is quantified by an agreement, award, or judgment.
He accepted that most decisions have held that s 393(2) of the Building Act prevails over the limitation period for contribution claims under the limitation legislation.31 Notwithstanding that, in BNZ Branch Properties Ltd v Wellington City Council,32 Clark J has held to the contrary.
[57] Mr Barr also submitted that while Mr Jones’ producer statement was about a structural issue, it could be considered a water penetration defect because structural weakness could lead to water ingress.
[58] With that background, I would be grateful for submissions from the parties on the limitation issue. Within 10 working days of this decision, I ask Mr Jones to file and serve an amended application, relying on the limitation defence, and submissions on the limitation issue. Further evidence is not required.
[59] The council is to file and serve a notice of opposition and submissions within a further 10 working days. I will consider the submissions on the papers unless I consider that a hearing is required. That decision will be the final judgment on the application.
31 Dustin v Weathertight Homes Resolution Service HC Auckland CIV-2006-404-276, 21 June 2006; Carter Holt Harvey Ltd v Genesis Power Ltd (No 8) HC Auckland CIV-2001-404-1974, 29 August 2008; Davidson v Banks HC Auckland CIV-2006-404-6150, 23 March 2009; Body Corporate 169791 v Auckland City Council HC Auckland CIV-2004-404-5225, 17 August 2010; Perpetual Trust Ltd v Mainzeal Property and Construction Ltd [2012] NZHC 3404; Minister of Education v James Hardie New Zealand [2018] NZHC 22; Body Corporate 378351 v Auckland Council [2020] NZHC 1701.
32 BNZ Branch Properties Ltd v Wellington City Council [2021] NZHC 1058.
[60]I will deal with costs after I have given judgment.
…………………………………….
Associate Judge R M Bell
Solicitors:
Smith and Partners (Rachael Chandra), Auckland, for the 2nd and 3rd Third Parties Simpson Grierson (David Barr), Auckland, for the Auckland Council
Copy for:
Nic Scampion, Shortland Chambers, Auckland, for the 2nd and 3rd Third Parties
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