Body Corporate No 375130 v Huang

[2016] NZHC 2038

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-0142 [2016] NZHC 2038

IN THE MATTER

known as "Arrenway Drive"

BETWEEN

BODY CORPORATE NO. 375130
First Plaintiff

AND

STOTT INVESTMENTS LIMITED Second Plaintiff

AND

SATI PROPERTIES LIMITED Third Plaintiff

CONTINUED ON NEXT PAGE

Hearing:	17 August 2016
Appearances:	C Baker for the Plaintiffs
Judgment:	31 August 2016

JUDGMENT OF THOMAS J

This judgment was delivered by me on 31 August 2016 at pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:………………………….

Solicitors:

Price Baker Berridge, Henderson.

BODY CORPORATE NO. 375130 & ORS v HUANG & ORS [2016] NZHC 2038 [31 August 2016]

AND

J AND R TRUSTS

Fourth Plaintiff

AND

SDH MANAGEMENT LIMITED Fifth Plaintiff

AND

W H AND C A MCKENZIE, J P BORICH AS TRUSTEES OF THE HAMISH & CHRISTINE MCKENZIE FAMILY TRUST

Sixth Plaintiffs

AND

SHUGUANG HUANG also known as SHU GUANG HUANG also known as PAUL HUANG AND TING WANG also known as TINA WANG also known as TINA HUANG

First Defendants

AND

AUCKLAND COUNCIL
Second Defendant (discontinued)

AND

MSC CONSULTING GROUP LIMITED Third defendant (discontinued)

Introduction

[1]      The plaintiffs, Body Corporate 375130, Stott Investments Ltd, Sati Properties Ltd, J  and R Trusts, SDH Management  Ltd, and the trustees of the Hamish  & Christine McKenzie Family Trust apply for judgment against the first defendants, Mr Huang and Ms Wang. The plaintiffs claim the defendants were the developers involved in the construction of the unit title development known as “Arrenway Drive” (the Complex).   Body Corporate 375130 is the body corporate for the Complex which is a collection of commercial premises.  The second, third, fourth, fifth and sixth plaintiffs are the unit owners.

[2]      A trial was set to commence against the defendants, as well as Auckland

Council  and  MSC  Consulting  Group  Ltd  as  second  and  third  defendants,  on

4 July 2016.   Following   settlement,   the  claims   against   the  second   and   third defendants were discontinued.

[3]      The plaintiffs therefore proceed solely against the first defendants Mr Huang and Ms Wang (the defendants), by way of formal proof.  The defendants have not taken any steps in this proceeding at any stage.

Claim

[4]      By the third amended statement of claim dated 2 May 2016, the plaintiffs claim  that  the defendants  owed  them  a duty of care in  the construction  of the Complex and that the defendants breached that duty by failing to exercise all reasonable skill and care in the construction of it, in failing properly to supervise the work  undertaken  by sub-contractors,  and  in  failing  to  ensure  that  the  Complex complied with the Building Act 1991 (the Act) and schedule 1 to the Building Regulations 1992 (the Building Code).

[5]      The plaintiffs claim that as a result of the defendants’ breaches of duty they have suffered loss, being the cost of repair works, consultant costs, increased body corporate secretarial costs, and diminution in value of the Complex due to stigma as

a result of the building defects.  Some of them claim general damages and lost rental. They also claim interest and costs.

[6]      The plaintiffs say the names used by the defendants include Paul Huang, Shu Guang Huang, Tina Wang and Tina Huang. The plaintiffs seek that the intituling be amended to reflect these variations in name.

[7]      As the matter proceeded by way of a formal proof hearing, the evidence was by way of affidavit.  Extensive affidavit evidence was filed.

[8]      This decision is structured as follows:

(1)Did the defendants owe a duty of care to the plaintiffs in respect of construction of the Complex?

(2) Was there a breach of that duty?

(3) Have the plaintiffs suffered loss as a result of any breach of duty?

(4)Should the proceedings be amended to reflect the pseudonyms used by the defendants?

Did the defendants owe a duty of care to the plaintiffs in respect of construction of the Complex?

[9]      The Complex was constructed between 2004 and 2006.

[10]     The plaintiffs claim that the defendants were the developers of the Complex. [11]     I  am  satisfied  from  the  affidavit  evidence  that  the  defendants  were  the

developers for the following reasons:

(a)      They applied for the building consent for the construction of the Complex. Shuguang Huang signed the application for the amended building consent

(b)They were shown as the owners of the site and the code compliance certificate was issued in their names.

(c)      The defendants were the vendors on the sale and purchase agreements for units in the Complex.

(d)The   defendants   were   present   on   site   during   construction   and orchestrated the on-site work, and dealt with purchasers over the construction and development up until the point of sale.   Mr Huang was described as appearing to be “the site foreman and the person in charge”.   Ting Wang was described as “on site on a regular basis, generally assisting Huang and participating in discussions.

[12]     Mt Albert Borough Council v Johnson held that a development company which had built a block of flats was liable for the negligence of its contractor, as the company had a duty of care to see that proper skill and care was exercised in building the flats which could not be avoided by delegation.1  The Court of Appeal found that an owner of a defective property could recover in tort for financial loss caused by negligence. This principle has been affirmed in more recent cases.2

[13]     The second, third, fourth, fifth and sixth plaintiffs are the owners of units A, C, D , E and F in the Complex and the Body Corporate is the body corporate pursuant to the Unit Titles Act 2010, comprising all owners of units in the Complex.

[14]     I am, therefore, satisfied from the evidence that the defendants were the developers of the Complex and owed a non-delegable duty of care to the plaintiffs. The duty of care owed as a developer was to exercise all reasonable skill and care in the construction  of the Complex, to properly supervise the work, and  ensure it

complied with the Act and Building Code.

1      Mount Albert Borough Council v Johnson [1979] 2 NZLR 234 (CA).

2      North Shore City Council v Body Corporate 188529 [2010] NZCA 64, [2010] 3 NZLR 486 [Sunset Terraces].

Was there a breach of that duty?

[15]     Widespread weathertightness issues were noticed by the unit owners at the end of 2010 to mid 2011, with water coming down walls and into the units. These issues were raised at the June 2011 AGM.  There were failings of the internal gutter systems, cracks in the concrete panels and poor construction of concrete tilt slabs, and poor painting work, amongst other defects, which led to the Complex being non- code compliant and requiring significant remedial work. In total 18 defects were identified. Remedial work was undertaken in 2012 and 2014, but is not yet complete.

[16]     The evidence on this issue came from, inter alia:

(a)      Craig Turner of Forensic Building Consultants, who was instructed by the Body Corporate to investigate water leaks, including the roof of the  Complex.    He  provided  extensive  detail  of  the  damage  and breaches of the Act and Building Code;

(b)Karl Kent, Operations Manager of Inner Sanctum Ltd a specialist waterproofing company who also occupies premises at the Complex; and

(c)      Robert  Taylor,  an  architect  who  was  brought  in  to  assist  the remediation   project   by  Forensic   Building  Consultants   in   early May 2013.

[17]     I  am,  therefore,  satisfied  that  there  were  defects  in  the  Complex  with resulting damage.  This is specified in, inter alia, a schedule to the third amended Statement of Claim.   The defects and damage were a result of the breach of the defendants’ duty of care to the plaintiffs.

Have the plaintiffs suffered loss as a result of any breach of duty?

[18]     Some remedial work has been carried out to the Complex but some remains to be done.   I am satisfied from the evidence that, in respect of the work already completed, the cost was fair and reasonable and that the estimates for the work yet to

be carried out are fair and reasonable.   I am also satisfied as to the figure set for contingencies.

[19]     The Body Corporate seeks judgment in the sum of:

(a)      $535,705.54 for the cost of remedial works to the Complex as a result of the breach of duty by the defendants as developers of the Complex, resulting in  the defects. The cost  of remedying these defects  was proved in the affidavits of Karl Kent and Craig Turner;

(b)$49,535.48 comprising consultants’ costs incurred in designing and overseeing the remedial works.   Those costs were proved in the affidavits of Craig Turner, Peter Nolan, and Paul Taylor.

(c)      Increased secretarial and administrative Body Corporate costs in the sum  of  $20,000.00.     This  cost  was  proved  in  the  affidavit  of Phillip Lockyer.

(d)      Interest in the sum of $29,154.97 at the prescribed rate.

[20]     The total sum awarded by way of judgment against the defendants to the first plaintiff is the sum of $634,395.99.

[21]   Each of the second to sixth plaintiffs seek judgment for “stigma loss” (diminution in value of their respective units) in the total sum of $172,500 (particularised  in  schedule  G  to  the  third Amended  Statement  of  Claim).    The evidence supporting this loss was in the affidavit of Matthew Taylor, a valuer, who sets the loss at 5 per cent based on the unaffected value of the units.  I accept that evidence.

[22]     The fourth, fifth and sixth plaintiffs seek judgment against the defendants for lost rent during periods of necessary vacation of their units during the proposed remedial works.   The total sum for which judgment is sought is $56,402.99 (particularised in Schedule H to the third Amended Statement of Claim).  Evidence for these losses was contained in the affidavits of Rosalind Hayward, John Hayward,

Stephen Houghton, Christine McKenzie, and William McKenzie.   I accept that evidence.

[23]     I indicated to counsel that I considered the sum sought for general damages to be high, particularly given that these are commercial premises.  I am satisfied that the sum of the $10,000 to each relevant plaintiff appropriately recognises their upset, stress and inconvenience.

Should the proceedings be amended to reflect the pseudonyms used by the defendants?

[24]     The  third  amended  Statement  of  Claim  (together  with  its  predecessors) describes the defendants as “Shuguang Huang” and “Ting Wang”.  Those names are taken from the application for building consent.

[25]     The plaintiffs, following judgment, wish to be able to pursue appropriate enforcement action and therefore wish to ensure that the judgment correctly records the variations of the names used by the defendants.

[26]     The affidavit evidence of Mr Kondic and the annexures referred to therein, showed  the  following  names  being  used  by  the  defendants:  Shuguang  Huang recorded in the building consent application; Ting Wang recorded in the building consent  application;  Paul  Huang  (another  name  used  by  Shuguang  Huang); Shu Guang Huang (another name used by Shuguang Huang); Tina Wang and/or Tina Huang (other names used by Ting Wang).

[27]     Craig Turner exhibits evidence of Mr Huang’s name being spelled on the

Code Compliance Certificate issued for the Complex as “Shu Guang Huang”.

[28]     The main link with the various pseudonyms comes through the same address consistently being used on documentation, which is the address of the defendants and  also  where  they  have  been  served  with  these  proceedings.    The  affidavit evidence provided compelling evidence of the same signature being used by each defendant under the various pseudonyms.

[29]     Accordingly, I am satisfied that the evidence shows that Shuguang Huang, Shu Guang Huang and Paul Huang are all the same person and variations of the names used by that person, and Ting Wang, Tina Wang and Tina Huang are also the same person and variations of the names used by that person.

[30]     Rule 1.9 of the High Court Rules provides that:

(a)       The Court may, before, at, or after the trial of any proceeding, amend any defects  and  errors in the  pleadings  or procedure  in  the  proceeding, whether or not there is anything in writing to amend, and whether or not the defect or error is that of the party (if any) applying to amend.

(b)       The Court may, at any stage of a proceeding, make, either on its own initiative  or  on  the  application  of  a  party  to  the  proceedings,  any amendments to any pleading or the procedure in the proceeding that are necessary for determining the real controversy between the parties.

[31]     In  Hopgood  v  Haywood  Bracegirdle  & Bayliss,  the High  Court  allowed amendment to the names of parties (in a slightly different context) in the intituling and against whom relief was sought.3   Since no new parties were introduced by the amended party names, it was accordingly allowed.

[32]     I  am  satisfied  the  use  of  rule  1.9  is  appropriate.    The  evidence  clearly supports the fact that different names are being used by the same person, and there is therefore no prejudice to the defendants in the alteration sought.

[33]     The intituling is therefore amended by noting that the defendants are also known as the names recorded.

Costs

[34]     The plaintiff claims 2B scale costs in this proceeding.

[35]     Total costs sought amount to $59,095.00.   Total disbursements amount to

$3,780.00.  The total costs claimed are therefore $62,875.00.  I am satisfied they are appropriate.

3 Hopgood v Hayward Bracegirdle & Bayliss (1997) 11 PRNZ 701 (HC).

Results

[36]     Judgment  is  entered  against  the defendants in favour of the plaintiffs as follows:

(a)       The first plaintiff in the sum of $634,395.99 (b)          The second plaintiff in the sum of $35,000.00. (c)  The third plaintiff in the sum of $44,000.00. (d)  The fourth plaintiff in the sum of $56,898.00. (e)       The fifth plaintiff in the sum of $33,338.55.

(f)       The sixth plaintiff in the sum of $25,774.62.

[37]     Costs and disbursements of $62,875 are awarded to the plaintiffs.

Thomas J