Body Corporate 406198 v Argon Construction Limited
[2024] NZHC 237
•20 February 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-001772
[2024] NZHC 237
BETWEEN BODY CORPORATE 406198 & ORS
Plaintiffs
AND
ARGON CONSTRUCTION LIMITED
First Defendant
AUCKLAND COUNCIL
Second Defendant
Hearing: On the papers Appearances:
D R Bigio KC, R D Butler, S C I Jeffs, I J Stephenson, R J H Scott, H Chung and J C Wedlake for Plaintiffs
W A McCartney and D A Cowan for First Defendant
S C Price, M J Ferrier, C M Fairnie and S H Ji for Second Defendant
K J Sheehan for self-represented plaintiffs and othersJudgment:
20 February 2024
JUDGMENT OF ANDREW J
[Damages]
This judgment was delivered by Justice Andrew on 20 February 2024 at 4.00 pm
pursuant to r 11.5 of the High Court Rules 2016 Registrar / Deputy Registrar
Date …………………………
BODY CORPORATE 406198 & ORS v ARGON CONSTRUCTION LIMITED [2024] NZHC 237 [20 February 2024]
Introduction
[1] In my judgment on liability dated 30 October 2023, I found that the two defendants were jointly and severally liable for damages. I directed that the damages are to be calculated as follows:
(a)Based on the factual findings made in my judgment; and
(b)Upon receipt of further submissions (if necessary) from the parties addressing the quantification of such damages, based on the starting point of Mr Brock’s estimate, based on Mr Alexander’s scope of repairs.1
[2] The Court has received further submissions from the parties addressing the issue of quantification of damages. This judgment addresses that issue and is being determined on the papers without the need for any further hearing.2
[3]The plaintiffs contend for a remedial quantum totalling $4,974,830.11.3
[4] The defendants contend for a remedial quantum of $3,218,696. They say that there should be no allowance for any moving out costs.
[5]The issues I need to address are as follows:
(a)Preliminary and general (P & G) and scaffolding;
(b)Construction duration – the effect of removing defect 7 (settled);
(c)Construction duration – whether there should be an adjustment;
1 Body Corporate 406198 v Argon Construction Ltd [2023] NZHC 3034 at [353].
2 The Court has received the following submissions from the parties on the question of quantification of damages: plaintiffs’ submissions dated 24 November 2023, second defendant’s submissions dated 1 December 2023, first defendant’s submissions dated 1 December 2023 and plaintiffs’ reply submissions on damages dated 13 December 2023.
3 Plaintiffs’ reply submissions dated 13 December 2023. In their original submissions dated 24 November 2023, the calculation was $4,685,891.54 (the amended quantum appears to relate to escalation). The amount claimed by the plaintiffs includes a moving out contingency of $350,000.
(d)Weathertightness detail;
(e)Escalation;
(f)Consultant costs;
(g)Costs of moving out.
Analysis and decision
[6]I address each of the issues in turn.
[7] I accept in principle that it is, of course, for the plaintiff to establish the quantum of loss and on the balance of probabilities. However, it is important also to acknowledge that in some cases the following approach to damages assessment can properly be adopted:
There are cases where, although the assessment can only be largely speculative and the evidence is exiguous, the Court will do the best it can to arrive at a figure if satisfied that there has been some real damage. Cases on the value of a chance are well known. But perhaps the most instructive precedent is the Privy Council decision cited by Tipping J himself, Tai Hing Cotton Mill Ltd v Kamsing Knitting Factory [1979] AC 91, where, having held that the true measure of damages was one to which neither the evidence nor the judgments in the Courts below had been directed, their Lordships came to “the conclusion that the ends of justice would be best served if they were to fix a new figure of damages as best they can upon the available evidence, such as it is”.4
[8] To some extent this is one of those cases. In applying the Walsh v Kerr principle, it is important to consider the claims in context and to apply the proportionality principle. Some of the items in issue are relatively small amounts and in my view it would be wrong at this stage to call for further evidence or, indeed, to seek the recall of Mr Brock. This litigation needs to be brought to an end.
4 Walsh v Kerr [1989] 1 NZLR 490 (CA) at 494.
Issue (a) – Preliminary and general (P & G) and scaffolding
[9] In my substantive judgment I accepted Mr Brock’s estimate of $490,000 for P & G as a starting point and directed the parties to make submissions in adjustments in light of my findings of fact.
[10] It is agreed that the cost estimate of Mr Brock included works for defect 7, namely fire code defects, and that the claim for defect 7 settled during trial.
[11]The defendants submitted that there should be a splitting of cost estimates of
69.3 per cent for the defects on which my findings were made (defects 1 and 2) and
30.7 per cent for defect 7.
[12] The plaintiffs submit that a percentage allocation as proposed by the defendants fails to take into account that P & G costs overlap between the defects or are otherwise fixed regardless of whether defect 7 is included in the scope or not.
[13] I agree with the plaintiffs’ submission. I find that a deduction of $20,000 to the P & G cost would better reflect Mr Brock’s evidence on the total deduction for defect 7.
[14] I further conclude that it would be incongruous to exclude the entire P & G item in the absence of any finding that no P & G costs are attributable to defects 1 or
2. P & G costs, as the plaintiffs submit, for defects 1 and 2 are inevitable. In order to assess and determine the quantum recoverable for the finding of damage, making a further adjustment is in keeping with my preferred approach of making adjustments in light of findings of fact.
Issue (b) – Construction duration, the effect of removing defect 7
[15] I find that it is not necessary to factor in the exclusion of defect 7 when assessing duration.
[16] Mr Andrews’ evidence, assisting the Court as an expert programmer, includes a supplementary report dated 24 May 2023 excluding from prior analysis the works relating to fire protection.5
[17] I reject the Auckland Council’s challenge to Mr Andrews’ evidence. The following statement from Mr Andrews explains why there is no effect on the overall duration by excluding fire protection:
The works relating to the fire rectification defects is not in the critical path to completion … The works to address watertightness to the balconies and fire protection to the apartments must be completed concurrently.6
Issue (c) – Construction duration
[18] I accept that Mr Andrews’ analysis does not explicitly address the construction duration applicable to defects 1 and 2 in isolation to defect 7.
[19]However, the value of the adjustment (as proposed by the plaintiffs) is a modest
$98,000 at a sub-total of $2,961,980 (before escalation, consultant fees, consent costs and contingency).
[20] I find that the 10 per cent increase in construction duration should be allowed for. I reject the Auckland Council submission that the 10 per cent additional contingency (at [276] of my liability judgment) be treated as being netted out for the removal of the defect work 7.
Issue (d) – Weathertight detail
[21] I have already made a finding that an allowance is to be made for a weathertight detail.
[22] The Auckland Council’s criticism of the plaintiffs’ claim of $54,080 may have some merit. However, some allowance has to be made and in the circumstances, I find that the sum of $40,000 is to be provided for. There will inevitably be cost for the design detail.
5 NOE 776: 15 and 13.
6 Exhibit B, p3 of Mr Andrews’ report, paragraph 14.
Issue (e) – Escalation
[23] I find that the Court should adopt the plaintiffs’ proposal that escalation should run until October 2025. That is 24 months from the date of judgment, namely 30 October 2025. Mr Brock’s evidence allowed approximately 18 months from the date of assessment to complete the tender and award for the main contractor, followed by a further six months for completion of the works.
[24] Auckland Council proposes to deduct from the period of time over which cost is forecast to escalate until the works are undertaken. It submits the deduction has been made based on a hypothetical opportunity to earn interest on term deposits. While I accept the deductions for anticipated interest costs and a present value payment is common in contractual cases such as lost earnings for breach of contract, such an approach is not the correct approach here. An award of damages is made in tort to compensate, to the extent possible, as if a breach of duty and damage had not occurred.
[25] Auckland Council also argues that there no evidence of any intention to carry out Mr Alexander’s scope. For reasons given by the plaintiffs, that may not be surprising. I agree with their submission that they should not be penalised by denying an escalation allowance on a scope that I have confirmed and applied for the purpose of quantifying damages when escalation is an inevitable component of any remedial project yet to be put out to tender.
Issue (f) – Consultants’ costs
[26] There is some merit to the Auckland Council’s submission that the total sum claimed by the plaintiffs for the consultant costs is quite disproportionate to the overall costs for remedial repair of defects 1 and 2.
[27] In my liability judgment I have found that the plaintiffs were entitled to consultant costs of $450,000.7
7 Body Corporate 406198 v Argon Construction Ltd, above n 1, at [286].
[28] I accept that that finding related to the investigation of defects while Mr Brock’s estimate in October 2022 was prepared for the costs “to carry out the remedial scope prepared by Mr Merriweather and Mr Alexander”.
[29] In the circumstances, I find that there should be an allowance for consultants’ costs in relation to the remedial scope of $200,000 (in addition to the allowance already made of $450,000).
Issue (g) – The costs of moving out
[30] The plaintiffs claim $350,000 for the costs of moving out.8 This appears to be based on 27 units (i.e. approximately 15 per cent of the total 178 units) needing to be empty 100 per cent for six months. They apply a weekly rate of $500.
[31] I find that that sum is too high. There is an inevitable degree of speculation in reaching this assessment, but I adopt the approach as set out in the decision Walsh v Kerr above. I find that there should be an allowance of $54,000 for moving out costs. That is based on 10 per cent of the units (i.e. 18 units needing to be vacated for approximately six weeks at the assumed rate of $500 per week).
[32] I further find that it was appropriate to award this sum to the Body Corporate as an incident of its responsibilities under s 138 of the Unit Titles Act.
Conclusion on remedial damages
[33]I order that the defendants are to pay to the plaintiffs, damages of
$4,974,830.11 (remedial costs) as set out in schedule 1 to the plaintiffs’ reply submissions of 13 December 2023, but with the various adjustments and determinations I have made in this judgment. That includes a $20,000 deduction for P & G and scaffolding, the sum of $40,000 for weathertight detail, an award of consultants’ costs of $200,000 and moving out costs of $54,000. The plaintiffs are to submit an amended schedule with the relevant deductions made (and any associated adjusted calculations) and the remedial costs judgment may be sealed on that basis.
8 At [278] of my liability judgment.
General damages
[34] I record that the defendants agree with the plaintiffs’ calculation of general damages at $779,500 (excluding unrepresented second plaintiffs).
[35] I order that general damages are to be paid in accordance with that agreement and the position of the defendants as set out in the memorandum of counsel for the first and second defendants dated 21 November 2023,9 and the memorandum of counsel for the second defendant dated 14 December 2023.10
[36] I further record that the defendants have reached agreement with the two self- represented plaintiffs (who appeared and also gave evidence, being Yinling Linda Wu for Unit 4/E8 and Haixin Wang for Unit 1/A8). I order that damages are to be paid to those two self-represented plaintiffs in accordance with the agreement reached with the defendants.
[37] As to Yon Kieng Law (Unit 10/C2) and Thim Chow Wong and Li Kien Chan (Unit 30/C2) who were not represented by Lane Neave (or any counsel, nor attended the trial, let alone gave evidence), are not the beneficiaries of my judgment on general damages. They are not entitled to any general damages.
[38] Ms Sheehan, solicitor, has filed a memorandum dated 13 December 2023 on behalf of the “previously self-represented plaintiffs and a new group of plaintiffs”.11 However, I find that there is no basis for any award of general damages to any “new group” or new individual plaintiffs, namely those who have not been parties to this proceeding in their individual capacity. Furthermore, the award of general damages to the previously self-represented plaintiffs is the amount that has already been agreed to and that I have ordered to pay in [37] above.
9 At [9] and [10].
10 See [7] and the yellow highlighted chart.
11 At [1] and [2] of her memorandum of 13 December 2023, Ms Sheehan advises “Counsel has only just been instructed today to act for the two self-represented parties Yinling Linda Wu Haixin Wang (who were self-represented second plaintiffs) along with other unit owners as highlighted in yellow as per schedule 2 (attached). Counsel understands that some of these unit owners were initially included as part of Lane Neave’s group of second plaintiffs. They have now formed their own separate group or class of unit owners.”
[39] There is no basis for awarding general damages to the unit owners of 1E (i.e. the new owners Linda Wu and Haixin Wang – as from 8 December 2023). Those persons are not the beneficiaries of my judgment on general damages and, in any event, I have already decided that persons who purchased any unit after the 2017 AGM minutes were not entitled to general damages.12
[40] There is no basis for amending the award of general damages made to Yinling Linda Wu (Unit 4/E8). The position is as set out at [6] of the memorandum of counsel for the second defendant dated 14 December 2023. The general damages award for Unit 4/8E is $10,000 and there is no basis to re-visit that.
[41] There is no basis for the claim of $10,000 sought by Unit 7/E8 (Ge Sheehan). Ge Sheehan purchased the unit after the 2017 AGM minutes and is not a party that is the beneficiary of my judgment on general damages.
Clarification sought by Ms Sheehan in memorandum of 13 December 2023
[42] At [7] of her memorandum of 13 December 2023, Ms Sheehan seeks clarification that the “highlighted unit owners’ repairs” (as set out in schedule 2 of her memorandum) were included in the award of remedial damages to the Body Corporate. Ms Sheehan seeks clarification on “what units were included vs what units (if any) have not been included in the total award of remedial damages.”
[43] The plaintiff Body Corporate sought remedial costs based on building-wide repairs. The damages I have ordered were based on a remedial scope that involved building-wide repairs. I ordered that the remedial costs for those repairs are to be paid to the Body Corporate. It is then for that Body Corporate to determine, in accordance with its legislative and other legal responsibilities how the funds are to be applied. Beyond that, I cannot comment, and it is certainly not the role of the Court to provide advice on these issues.
12 Body Corporate 406198 v Argon Construction Ltd, above n 1, at [333].
Costs
[44] Costs are now to be determined in accordance with the timetable I made in my minute of 5 December 2023 at [9].
[45]There is no order for costs in relation to the memorandum filed by Ms Sheehan.
Andrew J
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