Body Corporate 384825 v Queenstown Lakes District Council
[2021] NZHC 2019
•5 August 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2016-425-29
[2021] NZHC 2019
BETWEEN BODY CORPORATE 384825
First Plaintiff
AND
GEORGE FRASER RALSTON & ORS
Second Plaintiffs
AND
QUEENSTOWN LAKES DISTRICT COUNCIL
First Defendant
AND
YEO CONTRACTING LIMITED
Second Defendant
AND
JK’S & WBE LIMITED
Third Defendant (Discontinued)
AND
STUART IAN CRUICKSHANK
Fourth Defendant
AND
PAREMATA CONSTRUCTION LIMITED
Fifth Defendant
AND
HOLMES STRUCTURES LIMITED
(In Liquidation) Sixth Defendant
AND
ARCH UNDERWRITING AT LLOYD’S LIMITED
Seventh Defendant
AND
ASTA MANAGING AGENCY LIMITED
Eighth Defendant
AND
HARDY (UNDERWRITING AGENCIES) LIMITED
Ninth Defendant
AND
LIBERTY MANAGING AGENCY LIMITED
Tenth Defendant
BODY CORPORATE 384825 v QUEENSTOWN LAKES DISTRICT COUNCIL [2021] NZHC 2019 [5 August
2021]
AND ELLIOT ARCHITECT LIMITED (IN LIQUIDATION)
Eleventh DefendantAND
STEPHEN BRUCE MCLEAN
First Third Party
AND
ELLIOTT ARCHITECT LIMITED
Second Third Party
AND
ROSS MCGREGOR WENSLEY
Third Third Party
AND
ARCH UNDERWRITING AT LLOYD’S LIMITED
Fourth Third Party
AND
ASTA MANAGING AGENCY LIMITED
Fifth Third Party
AND
HARDY (UNDERWRITING AGENCIES) LIMITED
Sixth Third Party
AND
LIBERTY MANAGING AGENCY LIMITED
Seventh Third Party
Hearing: 2 August 2021 Appearances:
D J Powell and G B Lewis for Plaintiffs
C M Meechan QC and R M Saunders for First Defendant
Judgment:
5 August 2021
JUDGMENT OF ASSOCIATE JUDGE LESTER
This judgment was delivered by me on 5 August 2021 at 3.00 pm Pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
…..
[1] On 21 May 2021, Associate Judge Paulsen ordered the first defendant to give particulars of affirmative defences (the May Judgment).1 The background is fully set out in his Honour’s judgment and I do not repeat it here.
[2] The proceeding concerns a claim by the Body Corporate and owners of 44 units in the Oaks Club hotel complex in Queenstown (the Oaks Club) in relation to building defects. The plaintiffs’ claim is in tort against various defendants, including the Queenstown Lakes District Council, the first defendant (the Council).
[3] The Council undertook functions under the Building Act 1991 and the Building Act 2004 in relation to the construction of the Oaks Club in the period from 2004 to 2007. The plaintiffs allege the Oaks Club was constructed with major weathertightness, non-weathertightness, fire, structural and other defects.
[4] In purported compliance with the orders made as to further particulars in the May Judgment, the Council filed an amended statement of defence on 18 June 2021 (ASOD). The plaintiffs consider the ASOD does not provide the ordered particulars and have applied for an unless order against the first defendant requiring it to file an ASOD that complies with the May Judgment.
[5] The plaintiffs say the Council has failed to provide particulars in relation to three affirmative defences, that is:
(i)limitation under the Limitation Act 1950;
(ii)contributory negligence; and
(iii)failure to mitigate.
[6] As this matter is set down for a hearing of up to 16 weeks commencing on 18 October 2021, this application has been brought on for hearing with urgency. The
1 Body Corporate 384825 v Queenstown Lakes District Council [2021] NZHC 1157 [the May Judgment].
plaintiffs have also sought leave to bring this application after close of pleadings under r 7.7 of the High Court Rules 2016.
[7] I am satisfied that leave is appropriate and it is granted. Elders Pastoral Ltd v Marr provides guidance in relation to leave: leave may be granted where the application is in the interests of justice, will not significantly prejudice other parties and will not cause significant delay.2 The plaintiffs submit it is important that the Council’s affirmative defences are properly pleaded, both to assist the parties and the Court. The reality is the need for this application has only arisen after setting down.
[8] The Council opposes leave, saying that it would require the Council to reassess parts of its briefs of evidence and it would be prejudiced in the preparation for the trial. Such is not a consequence of leave but of the plaintiffs’ application succeeding. If the plaintiffs’ application has merit, then the Council cannot rely on prejudice resulting from non-compliance with Associate Judge Paulsen’s orders to resist leave being granted.
[9] The application by the plaintiffs was filed on 21 July 2021 and the hearing held within two weeks, with each party filing written submissions before the hearing.
Defence under the Limitation Act 1950
[10] Associate Judge Paulsen recorded the Council’s pleading in respect of limitation was that the plaintiffs “could or ought reasonably to have been aware of the existence of defects as a consequence of”:3
(a)Interactions with consultants and contractors.
(b)Various reports provided to, or obtained by, the first and/or second plaintiffs: including [a list of inspection, pre-purchase and builders reports and correspondence follows] …
(c)Concerns raised regarding the condition of the property within the body corporate.
(d)Inspections by contractors.
2 Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA).
3 The May Judgment, above n 1, at [65].
[11] The plaintiffs sought that the Council particularise: “The facts and circumstances giving rise to the allegation the plaintiffs’ cause of action against the first defendant accrued prior to 14 March 2010” – that is, six years before the commencement of the proceeding.
[12] Associate Judge Paulsen accepted the plaintiffs’ criticism of the pleading recorded at [68] of the May Judgment and said:4
There is no detail provided of the “interactions”, “concerns” or “inspections” relied upon in paras 65(a), (c) and (d) of the statement of defence from which the plaintiffs could determine what is being alleged against them. Similarly, it is not adequate that in para 65(b) of the statement of defence the Council simply lists reports and/or correspondence without identifying which of the plaintiffs were provided with that report/correspondence, when and what content of the report/correspondence it is said put the plaintiffs on notice of the existence of defects. I do not accept the Council’s submission that what is sought is in the nature of evidence and/or legal submission. Without the particulars sought the plaintiffs have no way of knowing what is alleged against each of them nor can they prepare for trial. The further particulars sought in (a) above are to be provided.
[13] The Council in its ASOD, repeated the pleading set out at [10] above and added the following under the heading “Particulars”:
Details of the interactions, reports, concerns and inspections referred to at paragraph 65(a)-(d), and the plaintiffs affected are particularised at Schedule 4.
[14] Before dealing with sch 4 of the ASOD, I turn to Ms Meechan QC’s submission on behalf of the Council that the last line of para [69] of the May Judgment set out at
[12] above was a reference to para [68(a)] of the May Judgment. Paragraph [68(a)] recorded the plaintiffs’ submission that the limitation pleading was deficient as there was “no link between any of the plaintiffs and the reports, directions, concerns or inspections”. Ms Meechan said sch 4 answered this concern. I am satisfied that Associate Judge Paulsen was referring to [66(a)] of the May Judgment at the conclusion of para [69]. So much is clear from reading para [65] to [69], in particular the closing line of [67]. That said, I can understand why the Council may have read the judgment in the way it did. However, it means the Council has not complied with the directions in respect of limitation.
4 The May Judgment, above n 1, at [69].
Schedule 4 of the ASOD
[15] This is a schedule with three columns: date, the plaintiff concerned, and the document/event said to provide “details of the interactions, reports, concerns and inspections”.
[16] I do not intend to go through the schedule line by line but I accept the plaintiffs’ submission that a number of the documents/events are simply descriptions of the document or event, with no information as to the content it is said put the plaintiffs on notice of the existence of defects.
[17] It is no answer for the Council to say, as it does, that the detail will be found in the briefs. It is too late for that argument. Associate Judge Paulsen ordered the particulars be given in the ASOD.
[18] In respect of those entries that simply refer to a letter, report or email chain, I find this does not comply with the Judge’s direction that the content of the report or correspondence said to put the plaintiffs on notice of the existence of defects be pleaded.
[19] Some of the entries in sch 4 do refer to recommendations by building inspectors or the like that further sealing work needed to be done and the possibility that some aspects of the work may not be watertight. The plaintiffs say that, to the extent the schedule quotes extracts from documents, the pleading does not make clear which of the pleaded defects (if any) the extract from the report allegedly relates to. In other words, if a defect identified in a building report is not a defect which is the subject of the proceeding, it is not explained how that unpleaded defect means the plaintiffs could, or ought reasonably to have been aware of some or all pleaded defects prior to 14 March 2010.
[20] The plaintiffs submit the Council must know what defects each document in the schedule allegedly put the plaintiffs on notice of, and such should be pleaded. I agree. It is not for the plaintiffs to do the Council’s job for it. Plaintiffs’ counsel are not required to review all of the documents, reports and letters referred to, and to then try and work out what the Council relies on for its limitation defence.
[21] I find that the Council has not complied with the orders of Associate Judge Paulsen.
What the Council must now do
[22] The pleaded defects related to the balcony roofs, the level 9 roof, structural connections, fire safety, bathroom pods, cladding, and the driveway. When the Council says a plaintiff was or should have been aware of defects, it will be one or more of the above defects that is referred to. The Council is to take the following steps in relation to each unit owner against whom it wishes to maintain a limitation defence. By reference to each unit owner individually, the Council must identify which defect or defects it says is statute barred. In relation to each defect said to be statute-barred, it must specify what report, document or other matter is relied on as showing that unit owner was on notice as to the existence of the defect. In respect of the report etc identified, the Council must specify the paragraph or page number that is said to put the plaintiff on notice of the particular defect said to be subject to limitation. It will be sufficient compliance if the Council refers to the broad categories of defects set out above to which limitation is said to apply, these categories being taken from the headings to sch 5 of the statement of claim.
Contributory negligence
[23] The essence of the Council’s pleading under the Contributory Negligence Act 1947 is set out in the particulars reproduced at [75] of Judge Paulsen’s decision as follows:5
…
(a)The plaintiffs acquired their properties without undertaking proper pre- purchase checks and failed to make proper inquiry into the condition of their properties (which inquiry could reasonably have been made to the first plaintiff) and/or they (or their agents) knew, or ought to have known, the defects existed when they acquired their properties.
[24]Judge Paulsen’s order in respect of this pleading was set out as follows:
[79] Accordingly, in respect to each plaintiff against whom this defence is pleaded the Council is to provide particulars of:
5 Above n 1.
(a)Whether it is alleged they and/or their agents either knew or ought to have known defects existed when they acquired their properties; and
(b)In so far as it is alleged that the plaintiffs and/or their agents ought to have known of the existence of defects the facts and circumstances giving rise to that allegation.
[25] The amended pleading repeats the particulars set out above at [23] and adds: “The facts and circumstances giving rise to this allegation are particularised in Schedule 5.” Schedule 5 is headed “Contributory Negligence and Failure to Mitigate”. This is unhelpful when Scheduled 6, which I refer to below, is also headed “Failure to Mitigate”. I accept the plaintiffs’ submission that they should not have to guess which items relate to the contributory negligence defence and which relate to a failure to mitigate.
[26] Schedule 5 does not answer the requirement that, in respect of each plaintiff against whom this defence is pleaded, the Council particularise whether it is alleged the unit owner had personal knowledge or whether knowledge of their agent is relied on. Nor does it address whether the plaintiffs or their agents had actual knowledge or whether they ought to have known of the defects. If the allegation is that a plaintiff had actual knowledge no particulars are required.6 If it is alleged that a plaintiff had the knowledge of their agent then the Council has to comply with [79(b)] of the May Judgment.
[27] However, as with the previous schedule, it is left to the plaintiffs to identify from the documents in the schedule what documents it is said each unit owner actually knew of or should have been aware of.
What the first defendant must do
[28] In respect of each unit owner against whom the Council wishes to plead contributory negligence, the Council is to specify whether it is alleged a plaintiff had actual knowledge that a defect existed and, if so, which defect it is alleged they were aware of. If it alleged that the plaintiff has constructive or imputed knowledge through their agent, the Council must specify the identity of the agent and the facts and circumstances giving rise to the agent’s knowledge of the defect. Finally, if it is said
6 Hagaman v Hagaman [2020] NZHC 1800 [81]-[85].
that the agent ought to have known of the existence of a defect and that the agent’s imputed or constructive knowledge should itself be treated as the knowledge of the plaintiff, the Council is to specify the facts and circumstances giving rise to the allegation that the agent ought to have known of the particular defect.
Failure to mitigate
[29] Associate Judge Paulsen summarised the Council’s position in regard to the plaintiffs’ request for particulars of the failure to mitigate defence in the May Judgment as follows:
[84] The Council argues this is a standalone pleading which puts the plaintiffs on notice that mitigation is a live issue in relation to the steps taken to address defects identified by the plaintiffs in a timely and appropriate way. It says the details of the allegations are matters of evidence and it is not necessary or appropriate to overload the pleading with greater detail. I disagree. The Council makes positive allegations that plaintiffs failed to address in a timely way issues identified in reports prepared by consultants and contractors and failed to require contractors to return and address issues identified within the defects period in the original construction contract. The plaintiffs cannot meaningfully prepare their evidence for trial without further particulars of these allegations.
[30]An order was made as follows:7
[85] The Council must provide the following particulars of the allegations in para 71 of the statement of defence as follows:
(a)Details of the reports prepared by consultants and/or contractors in which it is alleged issues were identified with the property. The details would include the date of the reports, who prepared them and for whom they were prepared;
(b)What issues were identified with reference to those reports;
(c)Which plaintiffs are said to have been made aware of those issues;
(d)When and in what circumstances were the plaintiffs made aware of those issues.
[31] The Council’s ASOD removed an allegation that the plaintiffs failed to require contractors to return and added the particulars set out in schs 5 and 6.
7 The May Judgment, above n 1.
[32] As noted, sch 5 does not distinguish between which items are said to relate to contributory negligence and which relate to failure to mitigate.
[33] Schedule 6 is organised under the headings “Date”, “Plaintiff” and “Description”, with the last category referring to various letters, reports and emails. The details provided in the schedule do not in all cases meet the requirements of para [85(a)] of the May Judgment set out at [30] above. It is not clear on the face of the schedule who the reports referred to were prepared for. Ms Meechan says the schedule is to be read on the basis that the report in each case was prepared for the named plaintiff.
[34] Nor is it clear, given at times there is only reference to emails and invoices, what issues identified in those documents are relied on.
[35] I accept the plaintiffs’ submission that in some cases the references to the content of the documents relied on by the Council are too vague to constitute identification of the issue. For example, one entry is “Email from Duncan Cotterill re maintenance issues at apartment complex” and another one is “Email from Duncan Cotterill re completion of remedial works”. Ms Meechan accepted there had not been full compliance with the requirements of [85(b)].
[36] I accept the plaintiffs’ submissions that in most cases the plaintiffs are none the wiser on the strength of the pleading as to what the Council alleges the plaintiffs should have done differently to mitigate their loss. I find the Council has failed to comply with the order for particulars made by Associate Judge Paulsen in this regard as well.
[37] The failure to mitigate defence comes into play once it is held there are defects as pleaded and that such defects are the cause of the alleged damage and were caused by a breach of duty by the Council. Given the Council will have to revisit sch 6 to provide the particulars required by para [85(b)], it can also take the opportunity to provide clarity in relation to whom the reports were prepared for and comply with [85(b)].
Knowledge of Body Corporate
[38] Ms Meechan referred to how loss was pleaded in the last statement of claim. The pleading is “As a result of the Defects and Damage, the plaintiffs have suffered and/or will suffer losses”. Ms Meechan submitted the pleading is that all plaintiffs claim all of the loss. There is no demarcation in the pleading between the claim of the Body Corporate and the unit owners. Ms Meechan said that meant that the “knowledge of the Body Corporate transcends the contribution argument … in respect of the individual owners”. Ms Meechan submitted there would be a reduction to the total claim because of the Body Corporate’s knowledge.
[39] Ms Meechan went further to say that members of the Body Corporate were fixed with the knowledge of the Body Corporate. Ms Meechan submitted this was not a pleading point but a matter of law. I do not accept that. In relation to the contributory negligence defence, the Council relied on what it alleged the owners or their agents knew or ought to have known. Unless it is going to be argued that the Body Corporate is the agent of the unit owner, then seeking to fix the unit owners with knowledge of information within the Body Corporate would require an amendment to the pleadings.
[40] The particulars that are required do not require a duplication of the material in the Council’s briefs of evidence attached to its notice of opposition. The revised schedules (if the first defendant wishes to reuse the mechanism of schedules which seems sensible) will be a pared-back/skeletal series of propositions as per the brief guidance given above. For example, sch 4 as it stands does not require significant modification. Under the heading “Document/Event”, the Council is required to identify from the report (or other document referred to) the issue in the report it is said gave the unit owner notice of a pleaded defect.
[41] If the issue or defect identified in the report is not a defect pleaded by the plaintiffs, then the Council will need to specify how such a defect is said to have put a plaintiff on notice of a pleaded defect so as to give rise to a limitation defence.
Costs
[42]Costs are reserved.
Further timetabling
[43]There will be a telephone conference with me Monday, 9 August 2021 at
9.00 am for counsel for the first defendant to advise the timetable for the provision of the further particulars. I do not make an unless order at this time. I did not hear the first defendant’s counsel on the time they would require to provide particulars. Until such can be assessed it is premature to make further orders. That said, counsel are acutely aware that the fixture is fast approaching.
Associate Judge Lester
Solicitors:
Grimshaw & Co, Auckland (for Plaintiffs)
Copy to counsel: R W Raymond QC, Barrister, Christchurch Wynn Williams, Christchurch (for First Defendant) Scholfield Cockroft Lloyd, Invercargill (for Third Defendant) Counsel: H M McIntosh, Barrister, Wellington
Mortlock McCormack, Christchurch (for Fourth and Fifth Defendants)
Counsel: K T Dalziel, Barrister, ChristchurchDLA Piper, Auckland (for Sixth to Tenth Defendants and Fourth to Seventh Third Parties) RVG Law (Stephen Brent), Christchurch (for First Third Party)
Counsel: Kelly Quinn, Bankside Chambers, Auckland Greig Gallagher & Co, Wellington (for Second Third Party) Counsel: J M Morrison, Barrister, Wellington
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