Body Corporate S91535 v Danegeld Limited (in liq) HC Tauranga CIV 2006-470-922

[2010] NZHC 751

IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY

CIV-2006-470-922

CIV-2009-463-285

BETWEEN  BODY CORPORATE S91535

First Plaintiff

ANDKOPUA FARM LIMITED & ORS Second Plaintiffs

ANDDANEGELD LIMITED (IN LIQ) First Defendant

BETWEEN  BODY CORPORATE 318596

First Plaintiff

ANDTYPHOON INVESTMENTS LIMITED & ORS

Second Plaintiffs

ANDGEOFFREY CHARLES MATHIS First Defendant

And Others

Hearing:         13 May 2010

Appearances: Mr A Hough for plaintiffs

Mr C Gudsell QC and M Ward-Johnson for defendants

Judgment:      24 May 2010 at 10 a.m.

JUDGMENT OF ASSOCIATE JUDGE DOOGUE

This judgment was delivered by me on

24.05.10 at 10 a.m., pursuant to

Rule 11.5  of the High Court Rules.

Registrar/Deputy Registrar

SOLICITORS/COUNSEL:

Date……………

A Hough,, Grimshaw & Co, Auckland
N Ward-Johnson, Barrister, Tauranga

Mr C Gudsell QC, Barrister, PO Box 19085, Hamilton

BODY CORPORATE S91535  AND ANOR V DANEGELD LIMITED (IN LIQ) HC TAU CIV-2006-470-922

24 May 2010

Background

[1]     Cutters Cove and Beachside are two apartment developments at Mount Maunganui.   The developments were sizeable with Cutters Cove comprising 40 units.  One unusual feature of the litigation is that the inspections and certifications required for the purposes of the Building Act 1991 were not carried out by the territorial authority but by a private company of building certifiers which has now been struck off.  That company was called Bay Building Certifiers Ltd.  One of the defendants, a Mr Bruce, actually carried out certification in the sense that he signed Code Compliance Certificates on behalf of his employer.   The defendants deny liability on a number of grounds.   One of the grounds is what Mr Gudsell QC described as a “policy issue arising from [the certifier’s] statutory insurance requirements”.

[2]      The argument as I understand it is that building certifying companies were required by statute to provide a bond to the relevant public authority.   The bond would be used for the purpose of continuing run-off insurance cover for the company even if it ceased to be in business or was liquidated.  Mr Gudsell QC told me that the particular policy that he considered to be relevant related to the matter of insurance. Any liability would be negatived by the statutory intention that the private certifying company would have insurance available to meet any claims and that it was implicit in such an arrangement that employees would not be personally liable.  It now turns out that the insurance arrangements ran out before the point was reached where a claim was actually made and so there is no cover.

[3]      Mr Gudsell said that whether or not the certifiers were under a duty of care was a reasonably concise issue which could be readily disposed of by using the procedure for resolving separate questions which is provided for by r 10.15.  He said that the facts could in the main be agreed.  The result would be that any requirement for the Court to determine legal questions would be limited and that it would be a matter of the Court hearing legal submissions and making a decision.  That decision, if it went in favour of the defendants would mean that they would obtain a just, speedy and inexpensive resolution of the claims against them.

[4]      I understand that at one stage the plaintiffs were prepared to engage in having the question of any liability on the part of the building certifiers determined by the r

10.15 procedure.  Further they were prepared to substantially agree to a statement of the facts  which would  mostly dispose of  a need for the Court to make factual findings.   However the plaintiffs have since resiled from such an arrangement. Notwithstanding that, Mr Gudsell QC appeared to approach matters on the basis that factual matters would be limited and if necessary the Court could state a case. However, the procedure for stating a case cannot be used as a means of compelling an unwilling party to subscribe to a statement of facts to which it does not in fact agree. The entire process therefore would involve a trial of facts with respect to the segment of the case concerned with the claims that the plaintiffs bring against the building certifiers.

[5]      The  parties  were  not  able  to  agree  either  on  the  issue  that  was  to  be determined if the separate question procedure was to be directed. The defendants formulated the question as follows:

In the circumstances particularised in the agreed statement of facts, did the inspectors personally owe to the owners of the building work they inspected, duties to exercise reasonable skill and care to protect their health and safety/safeguard them from possible injury, illness, or loss of amenity by ensuring all building work they inspected complied with the Building Code?

[6]      The plaintiffs’ formulation was as follows:

Can the employee of a private building certifier owe a duty of care to owners of residential property when performing inspections of building work and issuing certificates under the Building Act 1991?

[7]      An enquiry into the existence of a duty of care on the part of private building certifiers would involve novel questions of law.  The Court would be required to deal with complicated policy questions.   One of those questions is whether, when they checked the work and reported or actually certified that the buildings complied with the relevant code, they were doing so pursuant to a contractual duty assumed by the company which employed the defendants.   Related questions include whether the company and the defendants were joint tortfeasors.  As well there is the policy issue of the statutorily mandated insurance which Mr Gudsell raised in his submissions before me.

[8]      The process of determining such questions is very fact specific, as was made clear in Couch v Attorney-General [2008] 3 NZLR 725:

[53]Except in cases of clear impediment (such as where tortious liability is inconsistent with statute), the judgment whether as a matter of proximity and policy it is right to recognise a duty of care in novel circumstances will usually be intensely fact-specific. Lord Steyn in Gorringe v Calderdale Metropolitan Borough Council emphasised the especial need to focus closely on the facts and background social context when negligence arises in the exercise of statutory duties and powers, a subject he regarded as one of “great complexity and very much an evolving area of the law”.   Kirby J  in Pyrenees Shire Council v Day thought it best to accept that liability in negligence in such hard cases is fixed by reference to a “spectrum” of factors of the kind examined in Stovin v Wise by Lord Nicholls  and by the “candid evaluation of policy considerations” by Lord Hoffmann in the  same  case.   We  agree  with  that  view.  It  is  effectively  the approach taken in South Pacific Manufacturing.

[9]      Couch was  a strikeout  application.   In  effect,  the statement  from Couch favours the position of the defendants rather than plaintiffs for whom Mr Hough argued  that  the  appropriate  vehicle  for  obtaining  a  decision  on  the  question  of whether the defendants owed a duty of care was a strikeout application.   But the important point is that any enquiry into the existence of a duty of care is unlikely to involve presenting legal arguments in a vacuum where the factual background is only to be noted as a matter of backdrop.  I do not therefore accept that the hearing would be over in a day.  Nonetheless, I do not disagree with Mr Gudsell that if it were possible for the defendants to have the question of their liability established after, say even three or four days hearing, that would be preferable to being locked into the main proceedings which are estimated to take some three months to hear. Even if the defendants and their counsel could be excused for part of that time, involvement in the proceedings will be very burdensome for them.

[10]     Counsel for the defendants took me through the relevant factors which are listed  in  Andrew  Beck  et  al  McGechan  on  Procedure (looseleaf  ed,  Brookers). Without referring to each one of those in detail I will briefly indicate my views.

[11]     First, given that these proceedings have yet to be allocated a trial date, and assuming that the hearing of a separate question would take less than a week, it is

unlikely that the trial would have to be deferred in order to accommodate the hearing of the separate question.

[12]     Second, if the issue of the existence of a duty of care could be extricated from the other issues, then there is no doubt that the Court would avoid a lengthy enquiry into matters such as whether a breach of duty had occurred, what loss, if any at all resulted from it, and quantum issues. That part of the case against the defendants which would be avoided would otherwise make a substantial contribution to the overall length of the trial.

[13]     Third, if the matter was dealt with under the separate question procedure, the possible outcomes would be either that a duty of care would be found to exist or that it would not. There is no third position open as there is under a strikeout application where, notwithstanding hearing argument, the Court might conclude that it is impossible to determine the issue so that the application is dismissed and the issue has to be dealt with at trial.

[14]     A fourth and important matter is one that was identified by Fisher J in his decision in Clear Communications Ltd v Telecom New Zealand Ltd (1998) 2 NZPC

833, which is that of ‘demarcation difficulties’. Part of the problem is trying to compartmentalise the various issues that arise at the negligence trial into discrete stages  and  arguing that  that  stage  which  is  concerned  with  enquiring  as  to  the existence of a duty of care can successfully be determined in isolation from other phases of the enquiry such as whether there has been a breach of duty.   The very question about whether there is a duty of care calls for consideration of what the duty of care is supposed to protect against – the events which are said by the plaintiff to amount to the complained of breach.  It is difficult to be precise or prescient about the course that a negligence claim against the defendants in these proceedings might take.  In the end it becomes a matter of judgement and experience as to whether there is a risk that one could embark upon  an  attempt to determine the issue of the existence of duty of care as a standalone question only to be ultimately defeated in that quest.  Such an outcome might not only be disadvantageous to the defendants.  It might force the plaintiffs into a procedure which ultimately results in their claim being finally disposed of in less than ideal circumstances.   This last factor is the

single  most  persuasive  factor  that  weighs  with  me  in  deciding  the  present application.  In my view it tells strongly against granting the application.

[15]     In my view this is not an appropriate case to resolve by means of the r 10.15 procedure and I disallow the application.  Counsel should confer on the question of costs and if they are unable to resolve it I will schedule a time to hear the parties on

that matter.

J.P. Doogue

Associate Judge