Body Corporate 355492 v Queenstown Lakes District Council
[2020] NZHC 2590
•2 October 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2015-425-000036
[2020] NZHC 2590
BETWEEN BODY CORPORATE 355492
First Plaintiff
AND
JOHN ROBERT CHESTNEY & ORS
Second Plaintiffs
AND
QUEENSTOWN LAKES DISTRICT COUNCIL
First Defendant
AND
ELLIOTT ARCHITECT LIMITED
Second Defendant
AND
EDWIN GERARD ELLIOTT
Third Defendant
AND
HOLMES CONSULTING GROUP LIMITED
Fourth Defendant
AND
ARCH UNDERWRITING AT LLOYD’S LIMITED
Fifth Defendant
AND
ASTA MANAGING AGENCY LIMITED
Sixth Defendant
AND
STEPHEN BRUCE MCLEAN
First Third Party
AND
JULIE RAEWYN WENSLEY JACK
Second Third Party
AND
PETER LAWSON
Third Third Party
AND
DANIEL STEWART
Fourth Third Party
BODY CORPORATE 355492 v JOHN ROBERT CHESTNEY & ORS [2020] NZHC 2590 [2 October 2020]
AND ARCH UNDERWRITING LIMITED
Fifth Third Party
AND
ASTA MANAGING AGENCY LIMITED
Sixth Third Party
AND
HARDY (UNDERWRITING AGENCIES) LIMITED
Seventh Third Party
AND
LIBERTY MANAGING AGENCY LIMITED
Eighth Third Party
Hearing: 10 September 2020 Appearances:
D J Powell for Plaintiffs
C M Meechan QC and R M Saunders for First Defendant
Judgment:
2 October 2020
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 2 October 2020 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
The Application
[1] The plaintiffs sue the defendants in respect of building defects affecting a Queenstown apartment development known as Oaks Shores.
[2] This judgment concerns an application by the first defendant, Queenstown Lakes District Council (QLDC), that the plaintiffs provide further and better particulars of their amended statement of claim under r 5.21 High Court Rules 2016.
[3] There is a very similar proceeding under CIV-2016-425-029 concerning the Oaks Club development. In that proceeding also the QLDC sought further particulars of the amended statement of claim. That application raised identical issues as arise here. I have issued a judgment in that proceeding. Much of what follows is necessarily repetition of what is contained in that judgment.
The Background
[4] Oaks Shores comprises four blocks of apartments at 327-343 Frankton Road, Queenstown. The plaintiffs allege it was constructed with defects requiring extensive repairs. They want the defendants to pay for the repairs and other alleged losses.
[5] QLDC is sued as the local authority responsible for issuing the Building Consents, inspecting the building work and issuing Code of Compliance Certificates.
[6] The statement of claim has been amended several times. Further amendments will be required. This application concerns the amended statement of claim dated 1 May 2020. That particular pleading was itself amended but not in a manner materially affecting this application. References to the amended statement of claim are to the 1 May 2020 document.
[7] QLDC served a notice requiring the plaintiffs to give further particulars of the amended statement of claim relating to five paragraphs and schedule 4 (the notice). Schedule 4 lists defects in the building.
[8] The particulars were not provided and QLDC filed this application (the application).
[9] The plaintiffs filed a notice of opposition to the application along with a memorandum containing responses to the requests for particulars (the memorandum). In some, but not all instances, the plaintiffs’ responses satisfied QLDC.
[10] The plaintiffs have undertaken remedial work on one of the four blocks but say it will be several months before their experts will be in a position to identify all the remedial work arising from the various defects or groups of defects. They say that some of the particulars sought will only be available when their experts’ reports are prepared.
The Amended Statement of Claim
[11]The amended statement of claim makes the following allegations.
[12] The first plaintiff is the body corporate under the Unit Titles Act 1972 incorporated for Oaks Shores. The second plaintiffs are owners of units at Oaks Shores. In sixteen cases (the sixteen units), second plaintiffs acquired their units after this proceeding was commenced and took assignments of the former unit owners’ rights of action arising from defects in Oaks Shores.
[13] QLDC is the local authority responsible for the district in which Oaks Shores is located.
[14] QLDC issued Building Consents for Oaks Shores, carried out inspections of the building work and issued Code of Compliance Certificates. The last of the Code of Compliance Certificates was issued in September 2007.
[15] Oaks Shores was constructed with defects. Schedule 4 lists 19 defects under the headings: balconies, roof and barge junctions, fire defects, structural, bathroom pods, and miscellaneous. There is no pleading that the buildings suffered damage except in schedule 4, which refers to water penetration that has or will cause undue
damage and dampness to building elements. There are other defects which also suggest water penetration of the buildings.
[16] The plaintiffs allege that as a result of the defects they need to carry out extensive repairs, to be particularised at trial.
[17]As a result of the defects Oaks Shores does not comply with:
(a)the Building Code;
(b)the Building Act 1991;
(c)the Building Act 2004;
(d)the Building Consent.
[18] QLDC owed the plaintiffs certain duties of care in issuing the Building Consents, inspecting the building work and issuing the Code of Compliance Certificates and has breached those duties in that it:
(a)issued the Building Consents when there were no reasonable grounds for it to be satisfied that the proposed building work would comply with the Building Code;
(b)failed to undertake a sufficient inspection regime and sufficiently thorough inspections to ensure compliance with the Building Consents and/or the Building Code;
(c)failed to identify the defects;
(d)failed to ensure the defects were rectified; and
(e)issued the Code of Compliance Certificates when it did not have reasonable grounds to be satisfied that the building work would comply with the Building Code and/or the Building Consents.
[19] QLDC’s breaches of duty caused the plaintiffs to suffer losses being the cost of repairs estimated to be approximately $75,000,000 and consequential losses to be quantified prior to trial (the Economic Losses).
[20] Judgment is sought for the Economic Losses as well as general damages, interest and costs.
The Rules and Legal Principles
[21] Rule 5.26 of the High Court Rules 2016 requires that a statement of claim must show the general nature of the plaintiffs’ claim to the relief sought; and must give sufficient particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances to inform the court and the party against whom relief is sought of the plaintiffs’ cause of action.
[22] Rule 5.27(1) provides that a statement of claim must conclude by specifying the relief or remedy sought. Rule 5.31(1) provides the relief claimed must be stated specifically, either by itself or in the alternative. A defendant is entitled to know the amount of money sought from it and exact figures should be supplied to the extent possible. A plaintiff seeking to recover special damages must show the “nature, particulars, and amount” of those special damages under r 5.33.
[23]The functions of pleadings are to: 1
(a)fairly identify the contest between the parties;
(b)limit the scope of matters the plaintiff may put in issue;
(c)enable a defendant to know what witnesses it will need to retain and enable the defendant to start preparing evidence ahead of a formal exchange of evidence;
1 Platt v Porirua City Council [2012] NZHC 2445 at [19] and Milne v North Shore City Council
HC Auckland M264/90, 9 November 1990 at 10.
(d)provide an opportunity for a defendant to seek summary determination on the basis a claim is untenable; and
(e)provide a basis for pre-trial settlement discussions.
[24] The pleadings, not the briefs of evidence (or affidavits or discovery), establish the parameters of the case. A statement of claim must state the factual allegations necessary to establish the right to a remedy which must be included. Material facts should be stated but evidence and law should not.
[25] There is not necessarily a “bright line” between particulars and evidence but a request for further particulars can be resisted if the request goes beyond the scope of particulars and probes for evidence.
[26] A common-sense and balanced approach is required. Pleadings are not an area for mechanical approaches or pedantry. The standard of particularisation required varies with the facts of the individual case, but it is important not to overload the exercise, as over-pleading can obscure rather than clarify.2
[27] Platt v Porirua City Council was a claim against a council for negligence in respect of defects in a residential property. The alleged breaches of duty were similar as in this case. Kós J identified the following matters that need to be adequately particularised in a “double standard case” (a case such as this, based on the defendant’s failure to identify defective construction, design or performance by third parties): 3
(a)the defects that caused loss;
(b)the particular standards that the third parties failed to meet in the case of each defect, either individually or collectively (that is “how” they were “defects”);
2 BNZ Investments Ltd v Commissioner of Inland Revenue (2008) 23 NZTC 21,821 at [45] referred to in Platt v Porirua City Council, above n 1, at [18].
3 Platt v Porirua City Council, above n 1, at [24].
(c)the circumstances in which the defendant came to have an inspectoral or supervisory role (including, normally, when);
(d)the standard(s) required of the defendant in undertaking that role;
(e)particulars of the breach of duty by the defendant; and
(f)the loss thereby caused (that is – the loss caused by the third parties’ defective performance which would have been avoided by the defendant performing its duty to the required standard).
[28] Body Corporate 199883 v Auckland Council involved allegations of negligence by a council in issuing a Building Consent, inspecting and issuing a Code of Compliance Certificate in respect of remedial building works.4 The council applied to strike out the claim because the pleading lacked sufficient specificity.5 While not striking out the claim, Fitzgerald J ordered the plaintiffs to provide further particulars of:6
(a)whether the alleged physical state of affairs was said to have arisen from defective design, defective construction, some other mechanical defect, or the use of defective materials;
(b)in relation to each pleaded defect, what particular duty the council was alleged to have breached;
(c)to the extent that there was any alleged insufficiency with the consented plan(s) and/or specifications, details of the relevant plan(s) or specifications relied on and the location of the alleged insufficiency in the identified plan(s) and/or specifications; and
4 Body Corporate 199883 v Auckland Council [2017] NZHC 2042.
5 At [17].
6 At [36].
(d)detail in respect of the location of each alleged defect and to the extent that diagrams assist in identifying precise locations, they could be provided.
[29] Both Platt and Body Corporate 199883, provide useful guidance on what particulars are required in a case like this. They also serve to illustrate the point that particulars cannot be approached in a mechanical manner. Whether a pleading is adequate will be influenced, amongst other things, by the nature of the case, the scope of the pleadings, the issues in dispute and the stage of the proceeding that has been reached. Ultimately the question to be asked is “in the circumstances of this claim, is that statement sufficiently detailed to state a clear issue and inform the opposite party of the case to be met?”7 This is the standard against which I have judged the requests for particulars in this case.
The Further and Better Particulars Sought
[30] I turn now to consider the particulars sought by the plaintiffs but only to the extent that they are still in issue.
Paragraph 50 of the Amended Statement of Claim
[31] In respect to the sixteen units, QLDC requires particulars of the consideration for the sale of the units and the assignments of the vendors’ rights of action. It regards this information as being relevant to loss on the basis that the vendors suffered no loss for which they could assign the right to sue to their purchasers.
[32] In circumstances where the relevant second plaintiffs acquired their units and took assignments of the vendors’ rights of action with knowledge of the defects, I do not see how it could be argued the consideration paid for the units and/or the assignments was curative of the vendors’ losses.8
7 Price Waterhouse v Fortex Group Ltd CA179/98, 30 November 1998 at 19.
8 Body Corporate 326421 v Auckland Council [2015] NZHC 862 at [283]; Manchester Securities Ltd v Auckland Council [2016] NZHC 2441 at [26].
[33] In any event, the consideration is not required to inform QLDC or the court of the plaintiffs’ claim. The consideration is not relevant to the plaintiffs’ claim in any respect. It can only concern a defence QLDC may wish to pursue. The plaintiffs have discovered the sales files. The consideration paid to the vendors is known to QLDC. The particulars do not need to be supplied.
Paragraph 52 of the Amended Statement of Claim
[34] QLDC seeks further particulars of how it is said that as a result of the defects Oaks Shores does not comply with the provisions, terms and conditions of the Building Consent.
[35] The amended statement of claim is objectionable to the extent that it implies (at para 51) that further defects may exist but are not pleaded. At this late stage the plaintiffs’ pleading should identify all defects that are relied upon.
[36] The plaintiffs have provided substantial responses to QLDC’s requests for particulars in relation to this paragraph of the amended statement of claim. I consider further particulars are not required.
[37] In so far as QLDC requests further detail of the location of defects, that was not sought in the notice. Schedule 4 provides the locations of the defects and, in some instances, the location of defects is apparent from plan references provided by way of further particulars. There is also no evidence that QLDC and its experts are having difficulty understanding the plaintiffs’ case because the locations of defects have not been sufficiently identified.
[38] QLDC argues particulars should be incorporated in an amended statement of claim (as opposed to the memorandum). The notice requested the plaintiffs to provide particulars in an amended statement of claim or a memorandum. No criticism can be made of the plaintiffs’ use of a memorandum. However, the plaintiffs need to file an amended statement of claim and particulars that have already been provided, or are provided in response to this judgment, should be incorporated in it.
[39] Further particulars have not been provided of how some of the alleged defects do not comply with the Building Consent. The plaintiffs say that no further particulars are required. The defects do not comply, they say, because the Building Consent required work to be carried out in compliance with the provisions of the Building Code and schedule 4 sets out the relevant Building Code breaches. In such instances, I do not consider the plaintiffs are required to provide further particulars, as long as their position in respect of such defects is expressed in their further amended statement of claim, thereby limiting the issues QLDC need address at trial.
Paragraph 53 of the Amended Statement of Claim
[40]QLDC seeks:
(a)further particulars of the repair work that the plaintiffs allege is required to fix each defect set out in schedule 4; and
(b)such particulars in a schedular format as set out in schedule A to the notice.
[41]Schedule A is based on schedule 4 but with added columns for particulars of:
(a)repair work required to remedy each alleged defect; and
(b)the cost to remedy each alleged defect.
[42] QLDC’s position is the plaintiffs have an obligation to plead their loss and a necessary part of this is pleading the works required to remedy the defects/damage alleged to exist within the buildings. It argues details of the plaintiffs’ remedial strategy are required so it can instruct experts and prepare evidence. The particularisation will define the trial issues and also enable QLDC to assess its exposure on one or more issues.
[43] The plaintiffs argue this request goes beyond the necessary scope of particulars of pleadings. They rely on Platt where it was held particulars as to the scope of remedial work made necessary by each defect was not required and could be addressed
in evidence rather than in the pleadings.9 They argue it is not clear what is meant by “each defect” as under some defect headings in schedule 4 there are particulars which occur across different locations. They also contend it may not be possible to attribute repairs to a single defect.
[44] As noted, the plaintiffs say their experts are in the process of identifying the required remedial work and the evidence concerning the nature of the repair work will be provided in their briefs of evidence, but cannot be provided at this time. QLDC is not prejudiced by this, the plaintiffs submit, as its experts and inspectors have had access to the block 1 remedial works and are familiar with the nature of those works.
[45] I have already pointed out what I consider an inadequacy in the amended statement of claim in its failure to identify damage said to have resulted by reason of the defects. Unless particulars of damage are provided QLDC is not fairly informed of the case that it must answer nor can it make an assessment of the plaintiffs’ loss.
[46] Notwithstanding the plaintiffs’ reliance upon Platt, the court has ordered particulars of damage and remedial solutions to be provided in other similar cases.10 QLDC is entitled to particulars of repair work necessary to fix both defects and damage. In cases involving building defects or damage (such as leaky building or earthquake litigation) it is not uncommon that the principal issue between the parties is the proposed remedial solution. The particularisation of the remedial solution is required not only to inform QLDC and the court of the nature of a plaintiff’s claim but to define the trial issues.
[47] It is abstruse for the plaintiffs to argue that it is not clear what is meant by “each defect”. The alleged defects are plainly listed. It is also not open to the plaintiffs to argue that they need not provide details of the repair work when para 53 of the amended statement of claim states that the repairs will be particularised prior to trial.
9 Platt v Porirua City Council, above n 1, at [37].
10 Body Corporate 170812 v Auckland Council HC Auckland CIV 2003-404-007259, 29 August 2008 at [65]. See also Body Corporate 351522 v Queenstown Lakes District Council [2013] NZHC 559.
[48] However, in a case involving numerous defects affecting a large multi-unit residential development it would be inappropriate for the plaintiffs to set out the remedial work required to repair each and every defect, even if that were possible. I accept that it may not be possible to attribute repairs to specific defects. That would also seriously overload the pleading exercise.11 What is required are adequate particulars of the damage caused by the defects and a general description of the remedial solution that the plaintiffs say are necessary to fix the defects and damage.
[49] The plaintiffs say they are not in a position to yet provide particulars of the remedial work. This claim was filed in 2015. After more than 5 years the plaintiffs have had plenty of time to get their claim in order. QLDC is entitled to know what case it has to answer. I do not accept that the plaintiffs’ experts cannot provide details of the repair work and there is no evidence filed to support the submission.
I therefore consider the plaintiffs are required to provide further particulars of:
(a)the damage it is alleged has or will be caused by reason of the defects;
(b)the location of such damage;
(c)the nature of the repairs/remedial solution that must be carried out to repair both defects and damage.
[51] It is for the plaintiffs to determine how these particulars are provided in their amended pleading. There is no obligation on them to adopt QLDC’s schedule A if they consider the particulars can be provided more appropriately in another form.
Paragraph 54 of the Amended Statement of Claim
[52] QLDC seeks further particulars of the Economic Losses. The plaintiffs say they are not yet in a position to provide further particulars of the Economic Losses but will be upon completion of their briefs of evidence. They rely on Platt where it was
11 Platt v Porirua City Council, above n 1, at [21].
held the cost of remedial work and consequential losses could be addressed in evidence rather than in the pleadings.12
[53] The particulars sought by QLDC go beyond what is required, in so far as QLDC seeks estimated repair costs to fix each defect. It would be extremely difficult to allocate a cost to the repair of each defect and I cannot see such an exercise would be worthwhile. In some respects QLDC is seeking evidence not particulars.
[54] For the reasons I have already set out, I do not accept the plaintiffs’ position that they are not in a position to provide particulars until their experts’ evidence is completed. I accept that the cost of remedial works will, even at this stage, be only an estimate requiring updating, but that is usual in such cases. I consider there is much information about other heads of loss claimed which the plaintiffs will be able to provide without an expert’s input.
[55] The plaintiffs have proposed they will, when the information is available, provide in an amended pleading and upon completion of the experts’ briefs of evidence, the following:
(a)remedial work costs, meaning the overall cost of remedial work, but not the cost per defect;
(b)the total claimed for stigma loss;
(c)alternative accommodation costs and lost rental income with the totals being claimed per unit;
(d)the amount of lost business income claimed by the relevant plaintiffs;
(e)moving and storage costs per unit; and
(f)cleaning costs per unit.
12 At [36].
[56] I consider what the plaintiffs propose is generally sufficient except that in addition they should also provide the following further particulars:
(a)in respect of the remedial work costs, to be meaningful the plaintiffs need to provide more than an estimate of the total of all costs. They should provide the estimated remedial costs with a breakdown of the extent to which those costs relate to investigations, design and remedial work;
(b)in relation to stigma loss, the plaintiffs should provide a description of the nature of this claim and the amount sought;
(c)in relation to alternative accommodation costs and lost rental income, the plaintiffs should provide the rates and periods in respect of which such claims are made per unit; and
(d)in relation to lost business income, the basis for such claims, the periods in respect of which the claims are made and the amounts claimed per unit should be provided.
Paragraph 58 of the Amended Statement of Claim
[57] QLDC seeks further particulars of the allegation that QLDC did not have reasonable grounds to issue the Building Consents or Code of Compliance Certificates tied to each of the defects pleaded. It also requires the plaintiffs to provide further particulars of whether the alleged breach of duty relates to an error at the Building Consent, inspection, or Code of Compliance Certificate stage.
[58] The plaintiffs argue the questions regarding whether QLDC had reasonable grounds to issue the Building Consents or Code of Compliance Certificates are mixed questions of fact and law and it is neither possible nor appropriate to plead the bases upon which QLDC did not have reasonable grounds. These requests, they say, require
the plaintiffs to stray into setting out evidence and legal submissions and produce an excessively refined pleading.13
[59] I do not accept the plaintiffs’ submission. It is axiomatic that in an action alleging negligence the plaintiffs must provide proper particulars of the breach. In this case, that means setting out the respects in which it is said QLDC has fallen short of the standard to be expected of a reasonable competent council. It is not sufficient that the plaintiffs plead QLDC did not have reasonable grounds to issue the Building Consents (or Code of Compliance Certificates) without stating why that is the case. To substantiate the allegation, the plaintiffs must identify particular issues or circumstances putting QLDC on notice that the proposed building work would not comply with the Building Code. Those issues or circumstances must be pleaded. That may require the plaintiffs to provide particulars of insufficiencies in plans/specifications or other information that was before QLDC at the time the consent was issued.
[60] The position is different in relation to the allegation QLDC failed to undertake a sufficient inspection regime or sufficient inspections. I accept the plaintiffs’ submission they are not required to provide particulars as to which inspection ought to have identified each defect or at which point in the construction of the buildings the alleged defect(s) should have been identified. The plaintiffs will likely have no direct knowledge of that and less knowledge than QLDC of the inspection process. It is sufficient for the plaintiffs to prove that defects ought to have been identified in the course of QLDC’s inspection regime.14
[61] I consider, then, that the plaintiffs must provide in relation to para 58 of the amended statement of claim:
(a)particulars of the bases upon which it is said QLDC issued the Building Consents when there were no reasonable grounds to be satisfied the proposed building work would comply with the Building Code;
13 Platt v Porirua City Council, above n 1, at [38].
14 At [38].
(b)particulars of the bases upon which it is said QLDC issued the Code of Compliance Certificates without reasonable grounds to be satisfied that the building work complied with the Building Code and/or the Building Consents; and
(c)in both instances, such particulars should include any insufficiencies in plans/specifications or other information that was before QLDC at the time the Building Consents and/or Code of Compliance Certificates were issued.
Schedule 4 of the amended pleading Structural – Defect 13
[62] QLDC sought particulars in relation to alleged defective connections between the foundation and tilt slab panels. The plaintiffs provided a substantive response but QLDC says that is inadequate and requires the plaintiffs to provide the calculation upon which an allegation that the tilt panels cannot withstand lateral loads is based. That is a matter of evidence and not of pleading and the particulars provided are adequate.
Structural – Defect 14
[63] QLDC sought particulars in relation to alleged insufficient seismic bracing. The plaintiffs provided a substantive response but QLDC says that is inadequate. In the plaintiffs’ counsel’s submissions yet more particulars have been provided which appear to satisfy QLDC’s request and are, in any event, adequate.
Summary of Conclusions
[64] I am satisfied that the amended statement of claim is not sufficiently particularised in the following respects.
[65] In respect to para 53 of the amended statement of claim, the plaintiffs are to provide particulars at [50].
[66] In respect to para 54 of the amended statement of claim, the plaintiffs are to provide particulars at [55] and [56].
[67] In respect to para 58 of the amended statement of claim, the plaintiffs are to provide the particulars at [61].
Result
[68] Unlike the proceeding under CIV-2015-425-029, this proceeding has not yet been set down for trial. Present indications are that the case could not be heard until around early, or even mid, 2022. There is a further telephone conference on 14 December 2020 and counsel are to file memoranda for that by 7 December 2020. The plaintiffs should file their amended statement of claim before the telephone conference.
[69] The application is granted to the extent set out in [65]-[67] above. I direct the plaintiffs are to file an amended statement of claim including the particulars provided in the memorandum and required by this judgment by no later than 30 November 2020.
[70] I reserve costs. If the parties are unable to agree on costs they may file memoranda within 21 days.
O G Paulsen Associate Judge
Solicitors:
Grimshaw & Co, Auckland (for Plaintiffs)
Wynn Williams, Christchurch (for First Defendant)
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