Body Corporate 406198 v Argib Construction Limited

[2019] NZHC 887

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-1772

[2019] NZHC 887

IN THE MATTER OF

the Bianco Off Queen Apartments

BETWEEN

BODY CORPORATE 406198

First Plaintiff

HHTS LIMITED & OTHERS
Second Plaintiff

AND

ARGON CONSTRUCTION LIMITED and OTHERS

Defendants

CALLANDAR ELECTRICS LIMITED and OTHERS

Third Parties

PACIFIC CONSULTANTS BUILDING ENGINEERS LIMITED and OTHERS

Fourth Parties

Hearing:

On the papers

Appearances:

G J Kohler QC and D Fotiades for the Plaintiffs

C J Booth and L A Mills for Argon Construction Ltd J K Wilson and M Lin for the Auckland Council

K B Dillon for the David James Turkington D W Grove for H W Coyle Ltd

J C Dymock for AWL Limited

J A Thompson for Firepelp Kidd Limited

K N Mortimer for Building and Fire Safety Ltd D G Collecutt for B.A. Drainage Co (1990) Ltd L G Cox for Tonkin & Taylor Ltd

J Schwarcz for GHD Ltd

Judgment:

18 April 2019

BODY CORPORATE 406198 v ARGON CONSTRUCTION LIMITED and OTHERS [2019] NZHC 887 [18
April 2019]

COSTS JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 18 April 2019 at 4:00pm

pursuant to Rule 11.5 of the High Court Rules.

…………………………………

Deputy Registrar

[1]    The first and second defendants, Argon Construction Ltd and the Auckland Council, apply for costs on their applications for the plaintiffs to file and serve a more explicit statement of claim, and to strike-out defects 101 and 102 in the defects schedule to a statement of claim. Their applications did not go to a hearing. They withdrew them after the plaintiffs tendered a draft fifth amended statement of claim. The first and second defendants broadly accept that that draft pleading generally met their concerns. They say, however, that they have been vindicated in making their applications because they have now obtained the relief they sought.

[2]    The third defendant, Mr Turkington, also applied to strike out defects 101 and 102 in the schedule of defects. He has withdrawn his application. The plaintiffs and the third defendant have agreed that costs on his application are to be reserved. That arrangement does not bind the first and second defendants. They remain entitled to seek costs, notwithstanding any arrangement the plaintiffs have made with other parties.

[3]    This is a building defects case. The plaintiffs are the body corporate and owners of units in the Bianco Off Queen apartments in Turner and Waverley Streets, Auckland. The building figured prominently in earlier Blue Chip litigation. The building is a two-tower complex, one 12 storeys, the other 13 storeys, with 157 apartments. The plaintiffs allege a wide range of defects: weathertightness and façade defects, structural and seismic defects, fire safety and protection defects, and defects in services. The detection and investigation of these defects require expertise in many different fields. In the latest statement of claim, the plaintiffs say that substantial remedial work will be required and give a preliminary repair estimate of $32 million (plus GST).

[4] The plaintiffs say that construction took place in 2007 and 2008. The Auckland Council issued building consents between 26 May 2006 and 16 November 2009 and code compliance certificates between 17 November 2008 and 23 November 2009. The plaintiffs began this proceeding on 31 July 2017. Limitation deadlines under s 393 of the Building Act 2004 are a factor for all parties. The plaintiffs were obviously concerned to issue the proceeding in good time to sue on acts and omissions in the 10 years before the start of the proceeding. Likewise, defendants interested in joining third parties want to make sure that their claims against third parties are also within time. And third parties will also be alive to the limitation question.

[5]    When they began the proceeding, the plaintiffs’ experts had not completed all their enquiries and investigations. Investigations by the plaintiffs’ experts have continued and I understand are likely to continue for some time yet. At the start of the proceeding, the plaintiffs pleaded general allegations of defects. The defendants, the Auckland Council in particular, pressed for better particulars. It had good reason to do so. As usual, it wants to see if those primarily responsible for any defects are joined in the proceeding so as to reduce its own exposure. It could not know which parties to join if the plaintiffs do not plead defects with sufficient detail to allow the council to identify who amongst potential third parties would be responsible. The council eventually joined 28 third parties, not because it was sure that they were liable, but out of caution, lest it was time-barred later. Many of these third parties say that there is no basis for suing them, or that their involvement with the project came to an end outside the 10 years before they were joined.

[6]    It will be years before this case is ready for trial. The plaintiffs have still to decide whether to carry out remedial work first, or to go to trial, relying on estimates of repairs. If the plaintiffs decide to carry out remedial work first, the design period may be between one and two years. To that must be added the time to obtain consents and to carry out the remedial works.

[7]    A feature of the initial pleading was defects 101 and 102 in the schedule of defects:

101There are additional currently hidden deficiencies and inadequacies in the underlying steel frame such that it does not and will not meet the performance requirements of the Building Code.

102There are consequential and additional hidden defects and deficiencies in the buildings as constructed relating to weathertightness, hydraulic services, fire safety and structural integrity such that they do not and will not meet the performance requirements of the Building Code – further particulars of which will be provided prior to trial.

The first, second and third defendants took the point that they cannot be sued for unknown defects.

[8]    From early in the case, Argon Construction and the Auckland Council advised the plaintiffs that they considered that the pleadings were inadequate and did not meet the usual requirements for particulars in building defects litigation. The tests are well recognised. For the general approach to particulars, see the Court of Appeal’s decision in Pricewaterhouse v Fortex Group Ltd1 and for building defects cases see Platt v Porirua City Council.2 The plaintiffs’ response was generally three-fold:

[a]They offered a ‘without prejudice’ site visit to representatives of the

defendants to assist them in understanding what the case is about.

[b]While filing fresh pleadings, they denied that the current pleadings were inadequate.

[c]They said that they were still carrying out investigations and would be able to provide further particulars later (although they did not concede that they were required to do so).

[9]    The defendants say that the site visit was not helpful, and that the fresh pleadings also failed to provide adequate particulars. Auckland Council filed its application on 11 July 2018, Argon Construction on 1 August 2018. Both sought particulars and the striking-out of defects 101 and 102.

1      Pricewaterhouse v Fortex Group Ltd CA179/98, 30 November 1998.

2      Platt v Porirua City Council [2012] NZHC 2445.

[10]   On 28 August 2018, Lang J gave directions for me to hear the application on 12 November 2018. In a telephone conference on 12 November 2018 I adjourned the hearing to 22 March 2019 because the plaintiffs said that their consultants were still carrying out investigations to provide information about the defects and their causes. I directed the plaintiffs to circulate a proposed statement of claim and gave the defendants the opportunity to submit on the adequacy of that pleading. The first and second defendants resisted the adjournment and sought immediate strike-out of defects 101 and 102. I ruled that the defendants could disregard those defects in the meantime and that the plaintiffs should prepare on the basis that by the close of pleadings date the statement of claim should show all defects on which they intended to rely at trial. They would not be able to sue on unknown defects.

[11]   The plaintiffs filed a draft pleading on 8 March 2019 as directed. The first and second defendants filed memoranda advising that they were generally satisfied with the pleading of defects. I directed a case management conference for 22 March 2019 and gave case management directions. The plaintiffs have since filed and served a fifth amended statement of claim.

[12]   In my minute of 15 March 2019, I said that the question of particulars had been resolved. Because the first and second defendants no longer wished to continue their applications, they can be treated as withdrawn.

[13]   Rule 14.8 of the High Court Rules 2016 says that unless there are special reasons to the contrary, costs on an opposed interlocutory application must be fixed when the application is determined and become payable when they are fixed. Case law has held that under r 14.8, an application may be determined by a decision of the court, but also by other mechanisms such as agreement of the parties or withdrawal by leave.3 A court decision determines the merits of the application, and that will usually point to how costs should be ordered.4 But the matter is not so clear when the court has not given a decision. If the parties cannot agree, the court has a discretion as to costs.

3      Ip v Ip [2016] NZHC 528 at [12]; Winton v Winton [2018] NZHC 406 at [16]-[17].

4      Under High Court Rules 2016, r 14.2(1)(a) the party who fails pays costs to the winner.

[14]   Under r 15.23 of the High Court Rules, a plaintiff who discontinues a proceeding against a defendant must pay costs unless the defendant otherwise agrees or the court otherwise orders. That applies by analogy to interlocutory applications which the applicant has withdrawn. The rule states a default position but gives the court a discretion to depart from it. The case law shows that a number of factors may be considered relevant:5

[a]Generally the court will not consider the merits of the respective cases unless it is obvious that they should influence the costs outcome.

[b]The court will consider the reasonableness of the stance of both parties up to the point of discontinuance: whether it is reasonable for the applicant to begin and continue the application and for the respondent to oppose.

[c]The applicant will not be able to avoid the presumption by showing that at one point it had reasonable grounds for believing it would be successful.

[d]The reason for discontinuing may be relevant – for example a change of circumstances making the proceeding unnecessary; but then it must be clear that the applicant would have succeeded if the circumstances had not changed.

[15]   In this case it was understandable that the defendants applied for further particulars. They had good reason for requiring the plaintiffs to specify in formal pleadings the defects, any damage alleged to flow from them, what standards were breached, what breaches of the building code and related requirements were involved in the defects, and how each of the defendants could be alleged to be liable. They required those details for two reasons:

5      Kroma, Prince Ltd v Tridonicatco New Zealand Ltd [2008] NZCA 150, (2008) 18 PRNZ 973; FM Custodians Ltd v Pati [2012] NZHC 1902; Star Trust v Hamilton City Council [2016] NZHC 821 at [10].

[a]to instruct their own consultants to enquire to carry out investigations; and

[b]to make informed decisions whether to join third parties or to discontinue against them.

Contrary to the plaintiffs’ submission, I do not regard the pleadings before the fifth amended statement of claim as giving the defendants the particulars they required.

[16]   The defendants’ objections to defects 101 and 102 were sound, but if anything over-stated. Read in context, with defects 101 and 102 the plaintiffs were giving notice that further defects might come to light and that they would be identified later. The defendants were not seriously in peril of being sued for unknown defects. The plaintiffs might have pleaded that there are ongoing investigations and that if further defects are found, the pleadings will be amended to include them. The 101 and 102 defects pleading is not significantly different. The defendants’ partial strike-out application against defects 101 and 102 was an over-reaction.

[17]   At the same time, the plaintiffs could not supply the defects which the defendants required. I accept the plaintiffs’ position that in a twin tower complex with 157 apartments, the investigation and detection of defects requires the input of many people and will be time-consuming and exacting. Given the timing issues, the plaintiffs had to start the proceeding with what information they had, even though it was not complete. Even now, while there is a pleading that satisfies the first and second defendants’ requirements, there is no assurance that all defects have been identified yet. As the close of pleadings date may be some time off, the plaintiffs can continue their investigations, subject of course to not adding time-barred causes of action.6

[18]   Under r 15.23, it is not common for a judge to express a view as to the ultimate merits when the case has not been fully argued, but I do so here. The parties prepared fully for hearing. I read their written synopses of submissions. If I had not adjourned the hearing in November 2018, I would still have ruled for defects 101 and 102 that

6      High Court Rules 2016, r 7.77(2).

the plaintiffs had not competently pleaded known defects, and that the plaintiffs could rely only on known defects. I would have accepted that the plaintiffs needed more time in which to give fuller particulars, and I would have given them time to do so. In short, that is what I ruled in my minute of 12 November 2018.

[19]   In the light of that, the merits are more or less evenly divided, save for one matter. The plaintiffs properly applied for particulars, but in the circumstances of the case, they would not have obtained orders directing those particulars at the time of the hearing. The plaintiffs would have been upheld by being given time in which to continue their investigations and provide those particulars in the future. The challenge to defects 101 and 102 was something of a sideshow. The first and second defendants can point to one measure of success. Their application succeeded in chivvying the plaintiffs into providing a new draft pleading in March this year. To that extent and that extent only, have the defendants been vindicated.

[20]   In the circumstances, I allow the first and second defendants their costs in launching their applications, but not further steps. By the time they received the plaintiffs’ opposition to their applications, they should have appreciated that they were unlikely to obtain orders to provide particulars immediately when the plaintiffs’ experts deposed that they were continuing their investigations. Apart from those initial steps, the plaintiffs and the defendants should each pay their own costs.

[21]   I direct that the first defendant may recover costs of $4,014 from the plaintiffs as follows:

Item	Date of filing application	Time allocation	Total
22	1 August 2018	0.6	$1,338.00
11	Memorandum of 1 August 2018	0.4	$892.00
11	Memorandum of 8 August 2018	0.4	$892.00
11	Filing memorandum of 24 August 2019	0.4	$892.00

And the second defendant has costs of $2,230:

22	Filing interlocutory application	0.6	$1,338.00
11	Memorandum of 21 August 2018 accompanying the application	0.4	$892.00

Each defendant also has disbursements of $500.00 for the filing fee on each application.

[22]   The defendants also sought as disbursements the costs of their experts who swore affidavits. I do not allow those disbursements at this stage. It is better to regard the experts as being on an ongoing brief for this proceeding. There are obvious difficulties in separating their work for these applications from their work generally for this proceeding. Their costs may be recoverable later, at the end of the proceeding.

[23]   The plaintiffs objected that the defendants should have combined their applications, but I do not accept that. Each defendant is entitled to run its case independently of the others. The particulars each sought would not necessarily be the same. Each defendant was entitled to run its application in the way it thought best without being tied to the other. There is no reason to reduce costs because the defendants brought separate applications.

………………………………….

Associate Judge R M Bell

Solicitors/Counsel:

G Kohler QC, Auckland, for the Plaintiffs

Price Baker Berridge (C Baker/D Fotiades), Auckland, for the Plaintiffs Kensington Swan (C Booth/L A Mills), Auckland, for the 1st Defendant

MinterEllisonRuddWatts (Stephen Price/Jennifer Wilson), Auckland, for the 2nd Defendant David Heaney QC, Kate Dillon, Auckland, for the 3rd Defendant

Cameron Fleming & Associates, Auckland for the 3rd Defendant

Martelli McKegg (A J Steel/K R Narayan), Auckland, for the 4th Defendant

Foy Halse (Graeme Halse), Auckland, for the 5th Defendant (and 2nd Third Party) Daniel Grove, Barrister, Auckland, for the 5th Defendant (2nd Third Party)

Brookfields (D Neutze/E Fox), Auckland, for the 7th Defendant (9th Third Party)

Cook Morris Quinn (C Morris/J L Libbey), Auckland, for the 8th Defendant (5th Third Party) Meredith Connell (W Potter/R Belcher), Auckland, for the 9th Defendant (4th Third Party) Simpson Western (Paul Hunter), Auckland, for the 6th Third Party

Holland Beckett (S Fellows), Tauranga, for the 7th Third Party

Rice Craig (N Woods/ R Amaranathan), Papakura, for the 8th Third Party Morrison Kent (P Ahern), Wellington, for the 11th Third Party

Robertsons (M Robertson/J Thompson), Auckland, for 13th Third Party Lewis Callanan (K Mortimer), Auckland, for the 14th Third Party Keegan Alexander (Crossley Gates), Auckland, for the 15th Third Party Cogswell Law (Paul Cogswell), Auckland, for the 18th Third Party

Simpson Dowsett Meggitt (W A Meggitt), Auckland, for the 19th Third Party D Grant Collecutt, Barrister, Auckland, for the 19th Third Party

Morgan Coakle (L G Cox/Elizabeth Tobeck), Auckland, for the 21st Third Party Chapman Tripp (J A McKay/Z Fookes), Auckland, for the 22nd Third Party Scott Russell Law (S E Russell), for the 23rd Third Party

LeeSalmonLong (M Heard/D Bullock), Auckland, for the 24th Third Party AF Law Ltd (Andrew Ferguson), Auckland, for the 25th Third Party

Buddle Findlay (D Broadmore/J Schwarcz), Auckland, for the 26th Third Party DLA Piper (C Laband/S Hudson), Auckland, for 1st Fourth Party

Wotton Kearney(Rebecca Scott/James Dymock), Auckland, for the 2nd Fourth Party

Kensington Swan (C Booth/Jin Guo/Laressa Mills), Auckland, for the 3rd Fourth Party (1st Defendant)