Body Corporate 88863 v Pimento Holdings Limited
[2012] NZHC 2225
•30 August 2012
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2011-485-1873 [2012] NZHC 2225
BETWEEN BODY CORPORATE 88863 AND ORS Plaintiffs
ANDPIMENTO HOLDINGS LIMITED First Defendant
ANDMAINZEAL PROPERTY AND CONSTRUCTION LIMITED Second Defendant
ANDWELLINGTON CITY COUNCIL Third Defendant
ANDT R & E L WYCHERLEY TRADING AS CREATIVE ALUMINIUM
Fourth Third Party
ANDMARSDEN DECORATORS LIMITED Sixth Third Party
Hearing: 27 June 2012
Counsel: P J Woods and J W Goddard for Second Defendant
M Freeman for Sixth Third Party
Judgment: 30 August 2012
In accordance with r 11.5 I direct that the delivery time of this judgment is 4.30pm on the 30th day of August 2012.
RESERVED JUDGMENT OF MACKENZIE J
BODY CORPORATE 88863 AND ORS V PIMENTO HOLDINGS LIMITED HC WN CIV-2011-485-1873 [30
August 2012]
[1] These are applications by the sixth third party (Marsden) seeking the striking out of, or summary judgment on, the third party notice issued against it by the second defendant (Mainzeal), on the grounds that the proceeding against it is statute barred by virtue of s 393(2) of the Building Act 2004. The applications are opposed by Mainzeal.
[2] Marsden’s applications, as filed, extended also to the claim by the third defendant (the Council). Marsden’s submissions at the hearing dealt only with the claim against it by Mainzeal. The Council has by memorandum from its counsel supported Mainzeal’s opposition, but did not file an opposition and did not seek to be heard on the application. The first defendant has taken no steps in relation to the application.
[3] A strike-out application by the fourth third party (Wycherley) was withdrawn on terms agreed between the relevant parties.
[4] The plaintiff’s proceedings were filed on 14 September 2011. There is some uncertainty around when Mainzeal’s claim against Marsden was filed. Both parties’ submissions proceeded on the basis that the claim was filed on 8 December 2011. The Court Registry’s register of documents filed records that the claim was filed on
12 December 2011. I proceed on the basis that the relevant date is 8 December 2011, being the earlier of those two dates. The Council’s claim against Marsden was filed on or about 2 February 2012.
Leave to bring summary judgment application
[5] Marsden requires leave to bring its summary judgment application, because it was not filed at the same time as the statement of defence.1 Mainzeal opposes the
grant of leave.
1 High Court Rules 2008, r 12.4.
[6] I consider that, in the circumstances, leave should be granted. I consider that it would be inappropriate to address the relevant issues only in the context of the strike-out application. Some consideration of the facts is necessary to address the issues fully. Mainzeal is not prejudiced by the delay in filing the summary judgment application, and it was reasonable for Marsden to investigate the matter before filing the application.
The issues
[7] The strike-out application and application for summary judgment raise two issues:
(a) Whether the limitation in s 393(2) applies to the third party claims by
Mainzeal against Marsden; and
(b)If so, whether the date of the act or omission on which the third party notice is based was earlier than 8 December 2001, being 10 years before Mainzeal’s proceedings were brought.
[8] It is unnecessary for me to address in detail the relevant principles to be applied on an application for strike-out, or for summary judgment. They are well established. On the strike-out application, the Court must assume that Mainzeal’s allegations against Marsden are true. On that assumption, the cause of action must be so clearly untenable that it cannot possibly succeed. The jurisdiction is to be exercised sparingly and only in a clear case where the Court is satisfied that it has
the requisite material.2 On the application for summary judgment, Marsden has the
onus of proving on the balance of probabilities that Mainzeal cannot succeed. Summary judgment will be inappropriate where there are disputed issues of material fact, or where material facts need to be ascertained by the Court and cannot
confidently be concluded from affidavits.3
2 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.
3 Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA)
at 314.
[9] Section 393 of the Building Act 2004 provides:
(1) The Limitation Act 2010 applies to civil proceedings against any person if those proceedings arise from—
(a) building work associated with the design, construction, alteration, demolition, or removal of any building; or
(b) the performance of a function under this Act or a previous enactment relating to the construction, alteration, demolition, or removal of the building.
(2) However, no relief may be granted in respect of civil proceedings relating to building work if those proceedings are brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.
(3) For the purposes of subsection (2), the date of the act or omission is,—
(a) in the case of civil proceedings that are brought against a territorial authority, a building consent authority, a regional authority, or the chief executive in relation to the issue of a building consent or a code compliance certificate under Part 2 or a determination under Part 3, the date of issue of the consent, certificate, or determination, as the case may be; and
(b) in the case of civil proceedings that are brought against a person in relation to the issue of an energy work certificate, the date of the issue of the certificate.
[10] The relevant parts of Mainzeal’s statement of claim against Marsden are:
37.On or about July 2001, [Mainzeal] entered into a subcontract with Marsden for the textured coatings on the exterior cladding at the Loft Apartments.
38. It was an implied term of the subcontract that:
(a) Marsden would carry out and complete the work with reasonable care and skill;
(b) The materials used would be fit for purpose; and
(c) The work undertaken and the materials used would be fit for their intended purpose.
39.At all material times, Marsden owed a duty of care to undertake the works using all reasonable care and skill to:
(a) Ensure that the works were completed using all care and skill and in compliance with:
(i) The Building Code;
(ii) The Building Act 1991; and
(iii) Other relevant building standards.
40. Marsden breached the above duties in that the work:
(a) Contains the defects specified in Schedule 1 of the plaintiffs’ statement of claim and in particular the failure of the textured coating on the exterior cladding; and
(b) Was not completed in:
(i) Accordance with the plans and specifications; (ii) Accordance with the building consent; and
(iii) Accordance with the Building Act 1991, the Building Code and/or all other applicable standards in force at that time.
41.If [Mainzeal] is liable to the plaintiffs (which is denied), then [Mainzeal] is entitled to damages for negligence from Marsden on the grounds that Marsden was in breach of the duty of care it owed to [Mainzeal] by reason of Marsden’s failure to ensure that the [work] was completed in a proper and workmanlike manner and in accordance with the plans and specifications and building consent.
WHEREFORE THE FIRST [sic] DEFENDANT CLAIMS AGAINST THE SIXTH THIRD PARTY:
AA declaration pursuant to section 17(1)(c) of the Law Reform Act 1936 that the second defendant is entitled to recover from the sixth third party such contribution as is found by the Court to be just and equitable towards any liability which the second defendant may have to the plaintiffs in respect of the alleged damage.
BJudgment against the first third party for the amount of contribution determined by the Court including any award of interest and costs against the second defendant in favour of the plaintiffs.
C Costs.
[11] As I raised with counsel at the hearing, there is an inconsistency in that pleading. The essence of the inconsistency is that paragraphs 39 to 41 plead a breach of a duty of care owed by Marsden to Mainzeal, yet the prayer for relief seeks a remedy on the basis that Mainzeal and Marsden are joint tortfeasors against the plaintiffs.
[12] Paragraphs 37 and 38 refer to the existence of a subcontract between Mainzeal and Marsden. There is no claim in contract pleaded. Any claim in contract would clearly be statute barred, whether or not s 393(2) applies. Work under the subcontract was completed at the latest by 2002, so that a claim in contract would have become statute barred in 2008, under s 4 of the Limitation Act 1950.
[13] Paragraphs 39, 40 and 41 allege that Marsden owed a duty of care to undertake the works using all reasonable skill and care; that the duty of care was owed to Mainzeal; and that Mainzeal is entitled to damages from Marsden for breach of that duty of care. The claim pleaded by Mainzeal against Marsden is a claim in tort, based on the concurrent liability, in tort and in contract, of Marsden to Mainzeal.
[14] The prayer for relief in the statement of claim seeks a declaration pursuant to s 17(1)(c) of the Law Reform Act 1936. Section 17 is concerned with contribution between joint and several tortfeasors. Subsection (1) provides as follows:
(1) Where damage is suffered by any person as a result of a tort
(whether a crime or not)—
(a) Judgment recovered against any tortfeasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tortfeasor in respect of the same damage:
(b) If more than one action is brought in respect of that damage by or on behalf of the person by whom it was suffered, or for the benefit of the estate, or of the wife, husband, [civil union partner, de facto partner,] parent, or child of that person, against tortfeasors liable in respect of the damage (whether as joint tortfeasors or otherwise), the sums recoverable under the judgments given in those actions by way of damages shall not in the aggregate exceed the amount of the damages awarded by the judgment first given; and in any of those actions, other than that in which judgment is first given, the plaintiff shall not be entitled to costs unless the Court is of opinion that there was reasonable ground for bringing the action:
(c) Any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued [in time] have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.
[15] That section applies where damage is suffered by any person as a result of a tort. Any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is liable in respect of the same damage. The relevant damage in this case is that suffered by the plaintiffs. It is that damage, suffered by the plaintiffs, which is the subject of the claim against Mainzeal. There is no pleading by Mainzeal that Marsden is or would have been liable to the plaintiffs for the damage suffered by them, so as to bring Marsden within the scope of s 17(1)(c). Mainzeal does not allege that Marsden owed a duty of care to the plaintiffs so as to render Marsden liable in respect of the damage suffered by the plaintiffs. What is alleged by Mainzeal against Marsden is that Marsden is liable, as a tortfeasor, to Mainzeal for breach of a duty of care owed by Marsden to Mainzeal.
[16] Mainzeal’s claim is not a claim to recover contribution from Marsden, as a tortfeasor liable in respect of the same damage as that for which Mainzeal is liable. The basis for Mainzeal’s claim against Marsden is a breach of a duty of care owed by Marsden to Mainzeal, not a breach of a duty of care owed by Marsden to the plaintiffs. Marsden is not, as the claim against it is pleaded, “any other tortfeasor” in terms of s 17(1)(c). That expression refers to a person who has committed a tort against the claimant (in this case the plaintiffs) not a person who has committed a tort against the person claiming contribution (in this case Mainzeal). As Harrison J
said in Osmose New Zealand v Wakeling.4
The question of liability to contribute under s 17(1)(c) must be determined from the notional standard of whether or not the third parties would necessarily be tortfeasors together with the defendants as against Osmose if it had sued them directly. The question is not to be determined by the different touchstone of whether the third party is independently liable to the defendant. …
[17] Also, the damage suffered by Mainzeal is not “the same damage” as the damage suffered by the plaintiffs. As the discussion by Harrison J in Osmose v Wakeling at [88] to [90] makes clear, the basis for contribution under s 17 is the common law principle that parties jointly or concurrently liable to a plaintiff are
accountable for their respective shares of the damage. Damage suffered by one
4 Osmose New Zealand v Wakeling [2007] 1 NZLR 841 (HC) at [36].
tortfeasor as the result of a separate tort committed against it by another person is
accordingly not “the same damage” as that suffered by the plaintiff, in terms of s 17.
[18] Section 17(1)(c) does not apply to Mainzeal’s claim against Marsden, as pleaded in paragraphs 39 to 41 of Mainzeal’s statement of claim. Section 17 is a remedial provision, enacted to provide a right to contribution, between joint tortfeasors, where no right previously existed at common law.5 If Marsden is in breach of a duty of care owed to Mainzeal, then Mainzeal has a cause of action at common law. Mainzeal’s right to claim contribution or indemnity by reason of that
breach of duty arises separately, and is procedurally provided for in r 4.4 of the High
Court Rules. Recourse to s 17 is unnecessary.
[19] On the question whether s 393(2) applies to a claim for contribution, counsel refer to a conflict of authority in this Court between, on the one hand, Cromwell Plumbing Drainage & Services Ltd v De Geest Brothers Construction Ltd6 and, on the other hand, Dustin v Weathertight Homes Resolution Service.7 Those decisions were concerned with the operation of s 393(2) to a claim to contribution under s 17
of the Law Reform Act 1936.
[20] In Cromwell Plumbing Drainage & Services Ltd v De Geest Brothers Construction Ltd,8 Hansen J was concerned with the interrelationship between the predecessor of s 34 of the Limitation Act 2010 (s 14 of the Limitation Act 1950), and the predecessor of s 393 of the Building Act 2004 (s 91 of the Building Act 1991). He held that the claim for contribution was a separate statutory cause of action that did not arise until the party claiming contribution had been found liable, or had
compromised the claim. He further found that the claim for contribution was not a
claim covered by s 91 of the Building Act 1991.
5 Dairy Containers Ltd v NZI Bank Ltd [1995] 2 NZLR 30 (HC), at 121.
6 Cromwell Plumbing Drainage & Services Ltd v De Geest Brothers Construction Ltd (1995)
9 PRNZ 218 (HC).
7 Dustin v Weathertight Homes Resolution Service HC Auckland CIV-2006-404-276,
25 May 2006.
8 Cromwell Plumbing Drainage & Services Ltd v De Geest Brothers Construction Ltd, above n 6.
[21] That case was considered by Courtney J in Dustin v Weathertight Homes Resolution Service & Ors.9 She discussed, in obiter comments, Cromwell Plumbing v De Geest. She reached a contrary conclusion. On the facts of this case, I reach the same conclusion as in Dustin, namely that the limit in s 393 applies. The reasoning in Cromwell Plumbing is dependent on the proposition that the claim in that case involved a cause of action created by s 14 of the Limitation Act 1950, and that s 91
of the Building Act 1991 did not apply to the causes of action statutorily created by the provision of s 14. For the reasons I have given, Mainzeal’s claim to contribution against Marsden, as pleaded, is not a cause of action created by s 17 of the Law Reform Act 1936 or by s 14 of the Limitation Act 1950. It is a cause of action in tort. Section 393 of the Building Act 2004 clearly applies to claims in tort. It applies a “long stop” limitation to a claim in tort which has not been earlier statute barred by the Limitation Act 1950 (or the Limitation Act 2010).
[22] Counsel for Mainzeal further submits that s 393(2) is to be construed in a way which is consistent with s 27(1) of the New Zealand Bill of Rights Act 1990 (BORA). Counsel submits that Parliament has not used express words in relation to applying the 10 year limitation period to claims for contribution, and that s 393 does not constitute an express repeal of s 27 of BORA.
[23] I do not consider that s 27 of BORA is engaged in the present circumstances. The issue is not the right to observance of the principles of natural justice by the Court in determining Mainzeal’s claim. Rather, it is Mainzeal’s right to bring the claim before the Court after the expiry of a period prescribed by statute.
[24] To the extent that BORA principles may be engaged, I consider that the language which Parliament has used in enacting the 10 year long stop limitation period is clear and unambiguous. I further consider that the imposition of a time limit for the bringing of a claim by Mainzeal in tort against Marsden is not an unjustified limitation on any BORA right. An appropriate balancing of the rights of all litigants requires measures to protect against the pursuit of stale claims. The balancing of the interests of all litigants may require that a claim be precluded
because of the lapse of time since the events to which it relates, even if the claim
9 Dustin v Weathertight Homes Resolution Service, above n 7.
could not have been pursued earlier. That is the balance which Parliament has clearly provided for in building cases. The application of s 393(2) to the circumstances of this case is, for the reasons I have given, clear, and must be given effect. There is no ambiguity, such as might give rise to the need for a BORA consistent interpretation.
[25] For these reasons, I consider that s 393(2) of the Building Act 2004 applies to
Mainzeal’s claim against Marsden.
The date of the act or omission
[26] In determining whether Mainzeal’s claim in tort against Marsden is barred by s 393(2), it is necessary to identify the date of the act or omission on which the proceedings are based. Mainzeal must rely upon an act or omission occurring after
8 December 2001, being the date 10 years before Mainzeal’s third party proceedings
were brought.
[27] The affidavit evidence discloses that Marsden was originally contracted by Mainzeal in June 2000 to do the interior painting in the Lofts Apartments. About June 2001, Marsden agreed also to do some of the exterior painting, by way of a variation to the contract. The allegations against Marsden relate to the exterior painting, not the interior work. Mr Marsden’s evidence is that his company was under pressure to complete the work by 30 November 2001. He says that on
23 November 2001 Mainzeal provided Marsden with a draft producer statement with instructions to sign and post-date it to 30 November 2001, which Mr Marsden did. That statement said that Mr Marsden, a duly authorised representative of his company, “believe on reasonable grounds that Marsden Decorators Limited has carried out and completed: Painting to Interior and Exterior including Hardies Cladding”. Mr Marsden says that although work was effectively completed by
30 November 2001 there was minor touch up work to apartments which Marsden was involved in up to 4 December 2001. He says that touch up work had nothing to do with the external cladding. Mr Marsden’s evidence is that the last work carried out by his company was to the interior of one of the apartments and this was completed on 4 December 2001.
[28] Mr Toovey, a quantity surveyor employed by Mainzeal, contests
Mr Marsden’s assertion that overall practical completion occurred on
4 December 2001. He says that overall practical completion was not certified until
7 February 2002. He says that he believes that it is probable that Marsden was on-site up until overall practical completion on 7 February 2002. He does not however depose to any work being carried out by Marsden on site, to either the exterior or the interior, after 4 December 2001, although he was on-site continuously during construction and had direct contact with subcontractors. Mr Toovey also refers to the maintenance period, and the defect liability period, under the contract which ran for six months after the date of overall practical completion.
[29] In a reply affidavit, Mr Marsden contests Mr Toovey’s assertion that it is probable that Marsden was on-site up until 7 February 2002. He said that the last progress claim was on 30 November 2001. That was not paid and led to the relationship between Mainzeal and Marsden breaking down entirely. In a second affidavit, Mr Toovey has produced a second producer statement signed by Mr Marsden dated 12 December 2001, in the same terms as the producer statement dated 30 November 2001. The evidence does not make it clear why a second producer statement should have been produced.
[30] On the evidence, I find that Marsden has established that there was no work carried out by Marsden on the site, and specifically no work on the exterior painting, after 4 December 2001. The fact that Marsden may have been on-site for other work after the date, and that practical completion of Marsden’s subcontract did not take place until February 2002, do not establish that work was carried out after that date. There can, on the evidence, have been no relevant negligent act after
4 December 2001. That is a finding which can and should be made now, in the context of a summary judgment application.
[31] Mainzeal asserts, in support of the proposition that there has been a relevant negligent omission after that date, that Marsden owed a continuing duty to remedy defects, and that a failure to remedy a defect at any time while that duty continued was a continuing omission, sufficient to support the cause of action relied on. Marsden owed contractual duties to Mainzeal to remedy omissions. It had a
continuing duty to remedy defects in the work that it performed, and it warranted the quality of the building work throughout the duration of the maintenance period and the period of guarantee. Mainzeal accordingly submits that the 10 year long stop limitation period commenced on the date of expiry of either the maintenance period or the period of guarantee.
[32] New Zealand law has taken its own path in relation to concurrent liability in tort and contract. It is now well established under New Zealand law that, where negligence occurs in the course of the performance of a contractual obligation, the existence of a cause of action in contract does not exclude the existence of a concurrent cause of action in tort. So, if a contractor is negligent in the performance of the work necessary to complete the contract, the principal will have a remedy both in contract and in tort.
[33] In applying that principle to the determination of the date of the act or omission on which Mainzeal’s claim is based, it is necessary to bear in mind that the cause of action in contract and the cause of action in tort are not identical. Marsden undoubtedly owed Mainzeal contractual obligations to remedy defects in the performance of its subcontract work, and to remedy defects in the maintenance period and the period of guarantee. An omission to remedy defects will be a breach of contract. But those contractual obligations do not give rise to an identical duty of care in tort to take positive action to remedy defects. While Mainzeal may owe a concurrent obligation in tort for a negligent act or omission in the performance of its work, a failure to perform the contractual obligation to remedy defects is not by itself an omission giving rise to a breach of duty in tort as well as a breach of duty in contract.
[34] Counsel for Mainzeal relies on Johnson v Watson as authority for the proposition that builders and contractors are under a continuing duty.10 Tipping J delivering the judgment of the Court of Appeal, said:11
The building work commenced in March 1990. Thus a period of ten years
from the earliest relevant acts or omissions on Mr Watson’s part would have
10 Johnson v Watson [2003] 1 NZLR 626 (CA).
11 At [27].
expired in March 2000. Indeed, in a case like the present where the Johnsons could not be expected to point to an exact day on which the act or omission took place, there may be an argument for saying that where original building work is faulty the builder is under a continuing duty to remedy it right through until the date of completion, and there is a continuing “omission” until that date. On that basis the Johnsons would have had until December
2000 within which to sue without falling foul of s 91(2).
[35] It is clear from the context that Tipping J was there referring to a contractual duty, not a duty of care in tort. He described the position in tort in these terms:12
We have no doubt that Mr Watson did owe the Johnsons a duty of care in tort when he returned on each occasion for the purpose of fixing the leaks. Appropriately Mr Bell did not argue to the contrary. The parties were in a relationship of close proximity. The Johnsons were clearly relying on Mr Watson to exercise appropriate skill and care. He assumed responsibility to them by returning for the purpose of fixing the problems. It is in all the circumstances fair, just and reasonable to impose a duty of care upon him in respect of work designed to cure the leaks and thereby prevent further damage. It must be assumed for strike out and summary judgment purposes that the Johnsons will be able to establish that Mr Watson carried out the prevention work negligently. The primary issue, as counsel acknowledged, is causation. Did Mr Watson’s assumed negligence cause loss or damage to the Johnsons of a kind which can be recovered in law? The first thing which should be said is that such loss or damage as had already occurred at the date of the relevant prevention work, cannot be recovered. It was not caused by any act or omission involved in that work. It is only such further or additional loss or damage which resulted from a negligent prevention act or omission which can be the subject of a claim on the present basis.
[36] That passage makes it clear that the duty in tort under a defects clause is not a continuing duty, but one which arises when the builder returns to perform its contractual obligations. When the builder carries out work to remedy defects, it owes a duty of care in the performance of that work, and any negligent act or omission in the performance of that work will be a breach of that duty. But an omission to return and remedy defects will not give rise to a cause of action in tort for negligent omission. It will give rise only to a cause of action in contract.
[37] Counsel for Mainzeal also relies upon Gedye v South in support of the proposition that there is a continuing duty of care in tort.13 That case concerned a claim by the purchasers of a property against the vendors for breach of a warranty
given by the vendors that building work carried out earlier complied with the
12 At [12].
13 Gedye v South [2010] 3 NZLR 271, [2010] NZCA 207.
Building Act. The relevant act or omission, for the purposes of s 393, was the giving of the warranty by the vendors, not the earlier building work, which had been carried out by an independent contractor. That case does not address the issue of a continuing duty on the part of the builder.
[38] For these reasons, there is in this case no omission giving rise to a liability in tort after 4 December 2001. I find that Marsden has established, to the extent necessary for summary judgment, that Mainzeal’s cause of action against Marsden is barred by s 393(2) of the Building Act 2004, because the act or omission on which the claim is based occurred more than 10 years before the proceedings were brought.
Result
[39] There will be summary judgment in favour of Marsden in respect of
Mainzeal’s claim under its third party notice.
[40] Costs are reserved. The parties may submit memoranda.
“A D MacKenzie J”
Solicitors: Anthony Harper Lawyers, Auckland for Second Defendant
Thomas Dewar Sziranyi Letts, Lower Hutt, for Sixth Third Party