Body Corporate 336323 v Selwyn District Council

[2015] NZHC 2335

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-409-000089 [2015] NZHC 2335

BETWEEN

BODY CORPORATE 336323

First Plaintiff

ANTHONY VERNON SMITH & ORS Second Plaintiff

BODY CORPORATE 349497
Third Plaintiff

ALFRED WILLIAM TAYLOR & ORS Fourth Plaintiff

AND

SELWYN DISTRICT COUNCIL First Defendant

C LUND & SON LIMITED Second Defendant

TERRACE DOWNS LIMITED Third Defendant

ST JOHN DEVELOPMENTS LIMITED Fourth Defendant

GRAHAM BOND LIMITED First Third Party

ALUTECH WINDOWS & DOORS LIMITED

Second Third Party

HERBERT LAWRENCE JOHN GOVAN Fourth Third Party

CHRISTOPHER JOHN PREBBLE Fifth Third Party

CHRIS PREBBLE ARCHITECTS LIMITED

Sixth Third Party

A & H TILING LIMITED Seventh Third Party

BODY CORPORATE 336323 v SELWYN DISTRICT COUNCIL [2015] NZHC 2335 [25 September 2015]

BEHAVDDIN HOOMAN SHOLEPAK Eighth Third Party

RYAN COATING SERVICES LIMITED Ninth Third Party

BENJAMIN WILLIAM RYAN Tenth Third Party

GRAHAM DOUGLAS ARMITAGE Eleventh Third Party

Hearing:	18 September 2015
Appearances:	M J Wallace and K L Maclean for Applicant (Second Defendant) P H Bremer and M R C Wolff for First, Second and Fourth Plaintiffs H C Matthews for Third Plaintiff No appearances for First Defendant, Fourth Defendant or any Third Parties
Judgment:	25 September 2015

FINAL JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

[1]      This is a final judgment on the application by the second defendant, C Lund

& Son Limited (Lund) to strike out the claims made against it on the ground that they were filed outside the time limits set for the issuing of proceedings by the Limitation Act 1950. An interim judgment was issued on 2 July 2015.

[2]      In the interim judgment the Court made certain findings in relation to the pleadings against Lund as they stood.   However, an opportunity was given to the plaintiffs  to  amend  their  statement  of  claim.     As  a  result,  a  first  amended consolidated statement of claim was filed on 4 August 2015, and a second amended consolidated statement of claim was filed on 18 September.   Lund was given an opportunity to decide whether it would pursue its application further after consideration of the first amended consolidated statement of claim.  It elected to do so.  The second amended consolidated statement of claim was served shortly before

the resumed hearing of Lund’s application.   Mr Wallace indicated that he was not prejudiced by this and was in a position to proceed with his submissions in relation to the amended pleadings.

[3]      In this judgment it is necessary to refer to the findings and observations in the interim judgment and then to consider whether, as a result of the plaintiffs being given an opportunity to amend their pleading, the second amended consolidated statement of claim now contains causes of action against Lund which are pleaded to arise within the limitation period.

[4]      In the latest pleading there is a cause of action against Lund under the Fair Trading Act 1986 which has not appeared in the pleadings before.   Apart from referring to various passages within this cause of action during the course of argument, Mr Wallace accepts that this application is not directed at this cause of action.

The first cause of action against Lund

[5] The pleadings against Lund in the first cause of action have been materially altered. In the interim judgment the Court observed that the duty pleaded by the plaintiffs was confined to the period up until the point when the code compliance certificates were issued for the buildings, the dates of which were set out at [45]. The pleaded breaches of the duties all related to work during the construction phase which ended in 2005. It was noted1 that nowhere in the pleadings of the cause of action against Lund was there a pleading that defects in the buildings caused by the alleged breaches of duty of care were latent and unknown to the plaintiffs until any

date later than the dates on which they are said to have occurred, which was at the time of building.  The Court therefore found that, on its face, there was a pleading of a breach of duty said to exist up to a date in 2005, by actions which took place at the same time, causing damage which occurred at the same time.  Therefore, the claim

was outside the limitation period.

1 At [48].

[6]      The  pleading  which  was  set  out  in  paragraph  [44]  of  the  then  current statement of claim is now repeated in the second amended consolidated statement of claim, but significantly modified.  It is now pleaded at [49] that Lund owed a duty of care to the plaintiffs “up until the Terrace Downs Apartments were constructed in accordance with the Building Code and/or good trading practice”.

[7] In paragraph [50] the breaches of the duty of care are pleaded to be constructing and/or project managing and/or supervising subcontractors and other trades in such a way that the apartments were built with the defects and failed to comply with the building code. In that way Lund failed to discharge the duty summarised in paragraph [49]. Thus the plaintiffs plead a breach of duty which is ongoing, because they plead that the apartments do not yet comply with the building code. Thus, the time constraint identified in the previous pleading is no longer pleaded. In effect, the plaintiffs plead that the duty continues to be owed, and Lund remains in breach.

[8]      The works undertaken by Lund in an attempt to rectify the identified leaking problems (described as the prevention works) are now pleaded in paragraphs [55] to [57].   In the interim judgment the Court noted that the prevention work in the pleading, as it then stood, was alleged to have been undertaken in breach of Lund’s duty of care, which was circumscribed in relation to the time at which it was pleaded to  be  owed.     The  pleaded  breaches  of  Lund’s  duties  of  care  are  not  now circumscribed in that way, because the duties themselves are not circumscribed by an allegation as to time.  The plaintiffs continue to plead the same losses in relation to both the principal works undertaken by Lund and the prevention works.  I do not see any difficulty with this in terms of limitation; issues of causation are for trial.

[9]      It follows, therefore, that the terms of the pleading before the Court at the time of the interim judgment, which led to the conclusion that the pleadings against Lund did not disclose a cause of action which was not statute barred, have been amended, and that conclusion cannot now be drawn.

The further submissions for Lund

[10]     In the interim judgment there is discussion in relation to amendment of the pleading as it then stood.2   At that point the Court was considering a pleading under which the pleaded duties were said to be owed up to the dates of issue of the code compliance certificates, in September 2004 and May and July 2005.  The breaches were said to have taken place at the same time, but nowhere was it pleaded that defects in the buildings caused by the alleged breaches of the duties of care were

latent and were unknown to the plaintiffs until any date later than the dates on which they are said to have occurred, that is, at the time of building.  As noted, the damage which was pleaded was therefore ostensibly outside the limitation period.

[11]     As  summarised  in  the  interim  judgment,  there  was  a  certain  amount  of evidence before the Court  in  relation  to the  time or times  at  which the bodies corporate for the second and third stages of the development (the first and third plaintiffs), committees of those bodies corporate, staff engaged to run the complex, and individual unit owners and members of the respective bodies corporate, came to have a sufficient degree of knowledge of the condition of the buildings for time to have started to run, in terms of the test enunciated in Invercargill City Council v

Hamlin.3   But as noted in the interim judgment:

[58]    The key plank of the response to this application is that none of the plaintiffs, either the body corporates or the respective apartment owners, had sufficient knowledge of the state of the buildings before July 2008 for the causes of action to have accrued, in terms of the principle enunciated in Hamlin.  It was for this reason that the evidence that I have summarised in paragraphs [22] to [42] of this judgment was introduced.  A review of that evidence amply demonstrates how skeletal the evidentiary basis for this key proposition is.

[12]     The Court noted that by August 2008 the water leaks were continuing, but the body corporate committees were content with the work onsite which Lund was undertaking, and was intending to undertake, and were confident that Lund would remedy the problems without expense to the owners.   This led to the following

observation:

2      At [58] – [64].

3      Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC) at 526.

[60]   It is certainly arguable, in my view, that at that point the defects in the buildings were so obvious “that any reasonable home owner would call in an expert”, as the Privy Council put it in Hamlin.  The defects had existed for three years.   Ongoing attempts to remedy them had failed.   Arguably, the time had come by August 2008 when an independent assessment of the properties should have been undertaken by a suitably qualified expert, followed by analysis of what should be done about the position, and steps taken accordingly.  If that is the position as at August 2008, that is the time when, in terms of Hamlin, the cause of action accrued.   However, it is entirely possible that on a much more detailed examination of the facts, at trial, it will be established that this point was reached before August 2008. Equally it may be shown that it was not, in fact, reached at that point.  In my view, the facts disclosed on this application do not enable the Court to reach the degree of certainty on this point which would be required for the claim against Lund to be struck out.  In short, I am not certain it cannot succeed. But it cannot succeed on the pleading as it stands.

[13]     Since the release of the interim judgment, no further evidence has been filed. There is  no  basis,  therefore,  to  change  the  conclusion  stated  in  this  paragraph. Having reached a conclusion, however, on the pleading as it stood, the Court went on to decide that if the claim against Lund were not to be struck out, the plaintiffs must plead with precision the facts on which each of the first to fourth plaintiffs relies in order to establish that their respective causes of action accrued within six years of their respective claims  being  filed.   The  way the plaintiffs have dealt  with  the opportunity to replead their case is, in part, by repleading the period during which the duty is said to have been owed by Lund to the plaintiffs, in the way I have discussed above, and in part by pleading further particulars of when the plaintiffs say that they first had knowledge of the defects which are the subject of this claim.

[14]     At [35] the plaintiffs follow an unusual format for a pleading:

The plaintiffs did not have knowledge of the defects until after 2008 [footnote] and/or the economic value of the properties was not affected by the discovery of latent defects until after 2008, and as further particularised in schedule 6.

[15]     The footnote referred to states:

Based on the legal test established in Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC), Pullar v R [2007] NZCA 389, Cole v Pinnock HC Auckland  CIV-2011-404-3743,  16  December  2011  and  Body  Corporate

189855 & Ors v North Shore City Council & Ors  CIV 2005-404-5561,

25 July 2008, (HC).

[16]     Schedule 6 lists both the bodies corporate and each of the units within stages

2 and 3.  Against each entry is a date described as the date upon which that plaintiff became aware of the problems and defects, and in a further column a brief explanation is given.

[17]    By means of this pleading, the plaintiffs have sought to give sufficient particulars to comply with the following observation in the interim judgment:

[62]   I do not think it desirable to lay down specific directions on how the claim should be repleaded; this is for the plaintiffs.  However, it will be plain from the findings in this judgment that it will be necessary for each of the first to fourth plaintiffs to specifically plead when they say they had knowledge  of  the  damage  they  say  they  have  suffered,  to  the  extent identified in Hamlin.

[18]     By this means, too, the plaintiffs have squarely signalled their reliance on the defects being latent, and time starting to run at a point, to be established at trial, in accordance with the principle enunciated in Hamlin.

[19]     The Privy Council in Hamlin, summarised the position as follows:4

In other words, the cause of action accrues when the cracks become so bad, or the defects so obvious, that any reasonable homeowner would call in an expert.

[20] All of the plaintiffs have now pleaded the month and the year in which they respectively became aware of the problems or defects which form the basis of this proceeding. All of those dates are within the limitation period. The test enunciated by the Privy Council in relation to how obvious defects are, is of course an objective one, so it will fall for determination at trial whether the defects in question were so obvious that any reasonable homeowner would call in an expert at a point prior to the date upon which each plaintiff has now pleaded knowledge of the defects and/or an effect on the economic value of their respective properties, under paragraph [35].

[21]     Mr Wallace was critical of some of the information in schedule 6, and not without some justification.  For example, in relation to unit 222, which is in stage 2,

the owner pleads becoming aware of the defects in September 2008 as a result of a

4      At 526.

letter received from the body corporate.   On the other hand, the Stage 2 Body Corporate pleads in the same schedule that it was not aware of the defects until November 2013. As Mr Wallace says these dates cannot, on the face of the pleading, be reconciled.  In my view, though, the answer to this apparent contradiction may lie in exactly what the owner of unit 222 knew in September 2008, and what the body corporate knew in November 2013.  The evidence, such as it is, is imprecise, and no conclusion on this point can be drawn.

[22]     Mr Wallace also notes that the owners of five units have stipulated dates on which they became aware of the defects, but have not given an explanation as to how that occurred.  Mr Wallace says this does not comply with the requirements for the pleadings set out at [62] of the judgment.  The unit owners to which this criticism is directed are the owners of units 219, 224, 225, 233 and 235.

[23] I accept that this pleading, in relation to these five units, does not comply with the observation at [62]. It will be noted, however, that the Court did not lay down specific directions on how the claim should be repleaded, leaving this to the plaintiffs. The question now before the Court, therefore, is not whether the plaintiffs have complied with an observation made at [62] in the context of an opportunity to the plaintiffs to replead their case, but whether the pleading is, in fact, now sufficient. It will be noted that the indication that particulars should be supplied to show how each of the first to fourth plaintiffs is said to have derived knowledge of the defects at the time each specifies, and not before, was made in the context of observations about there being issues of agency and imputation of knowledge. Resolution of some potentially complex issues in relation to these matters will be required at trial.

[24]     Throughout the period in question, from 2005 to 2008, there were plainly some defects with the buildings in stages 2 and 3 because they were admitting water. It is clear there will be evidence on what was observed during this period, by whom, and to whom those observations were relayed.  As well, there were discussions at various body corporate committee meetings.   Therefore those who attended those meetings all received the information put before those meetings at each date, and it will be necessary, it seems, for careful analysis of exactly what that information was

and whether it may have triggered the point described in Hamlin at an earlier date in respect of the plaintiffs present at the meetings, than they now claim.  Then there is an issue about who else, if anyone, received the information that was discussed at the meetings.   That raises the question of exactly what was recorded in the minutes, whether that was a full  and detailed record of the information discussed at the meeting, and who received the minutes.

[25]     As well, there were discussions outside the meetings as from time to time Lund was onsite, and communicating with various people about the buildings.  And, of course, at a more fundamental level, at least some of the unit owners would have observed damage to their own units first hand.

[26]     This brief description indicates the complexity of the analysis which will need to be undertaken if the dates pleaded in the second amended consolidated statement of claim are not accepted by Lund.   That analysis, however, is without question  an  exercise  for  trial.    I  made  an  observation  on  this  in  the  interim judgment.5   Nothing needs to be added to that.

[27]     One  of  the  plaintiffs,  Mr  Idour,  is  recorded  as  being  present  at  certain meetings and therefore it is plain that he had, at the date of each of those meetings, the information then presented to that meeting.  Descriptions of that information in the minutes tends to suggest that the point may have been reached where Mr Idour, as a reasonable homeowner, should have called in an expert.  The same may be said of other plaintiffs.  However, to single out Mr Idour or any plaintiff as having had a sufficient  degree  of  knowledge  to  satisfy  the  test  in  Hamlin  would,  on  this application, be wrong.  There is a manifest haze of uncertainty over the date at which the defects in these properties were so obvious that a reasonable apartment owner would call in an expert, and over exactly what would have had to be known for that test to be met.

[28]     It was suggested that at least the claims by the bodies corporate should be struck out, given the level of information being placed before their committees, as

recorded in the minutes.  But in my judgment there remains the haze of uncertainty

5 At [60].

to which I have referred, even in relation to the bodies corporate.   Mr Wallace accepted that at present it is not known which of the defects that were identified before 2008 were to common property.  Indeed, the evidence does not even identify all the common property within the buildings.  Beyond that, I need add nothing to the observations in the interim judgment in this respect.   It follows that although there are plainly live issues in relation to the dates at which the requisite degree of knowledge was attained by each of the plaintiffs, including the bodies corporate, this is not the context in which findings of sufficient certainty to justify striking out a claim by any plaintiff can be made.

[29] It follows that I am satisfied that the pleading as it now stands gives to Lund sufficient particulars of the plaintiffs’ claim to satisfy the requirements of r 5.26 of the High Court Rules. In particular, the plaintiffs now plead a cause of action in negligence within the time limitations imposed by the Limitation Act 1950 and it gives sufficient particulars, save in respect of five units in stage 2, of when the plaintiffs allege they became aware of the defects in their units. So far as the other five units are concerned, those plaintiffs have not complied with the observation I made in paragraph [62]. It was, however, an observation. As is plain from the interim judgment, it was not a direction. These plaintiffs have elected not to give any particulars in relation to how they derived knowledge of the damage they say they have suffered, on the dates on which they claim to have derived it.

[30]     This  final  judgment  is  not  a  review  of  the  interim  judgment  so  the observation stands.  This does not, however, warrant striking out the claims by the plaintiffs who own these five units.   This issue is reduced to a matter of whether further particulars must be given.   I reserve to Lund a right to apply for further particulars in respect of these five units, consistent with this judgment, if these plaintiffs do not provide them.  It appears the most simple and cost effective way that the  plaintiffs  might  resolve  this  issue  would  be  to  file  a  statement  of  further particulars completing in more detail the third column in schedule 6 in relation to units 219, 224, 225, 233 and 235.

Outcome

[31]     The application to strike out the plaintiffs’ statement of claim against Lund is

dismissed.

[32]     Costs are reserved.   If not agreed, counsel may file memoranda within 10 working days, limited to no more than three pages.  My provisional view, to assist in discussions between counsel, is that costs should lie where they fall, as each side has

enjoyed a measure of success.

J G Matthews

Associate Judge

Solicitors:

Tavendale & Partners, Christchurch. Grimshaw & Co, Wellington.

White Fox & Jones, Christchurch.