Boyd v McGregor HC Auckland CIV 2009-404-5332
[2010] NZHC 270
•17 February 2010
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2009-404-005332
BETWEEN JOHN EDWARD BOYD
First Appellant
ANDSTEPHEN MATTHEW HALLIDAY Second Appellant
AND JOAN MCGREGOR
DAVID MCGREGOR AND JOHN PHILLIPS
First Respondents
ANDAUCKLAND CITY COUNCIL Second Respondent
AND NIGEL HAY
Third Respondent
Hearing: 12 November 2009
Counsel: Graham J Kohler and Sinead McLaughlin for Appellants
No appearance for First and Third Respondents
Paul A Robertson and Erin Eckhoff for Second Respondent
Judgment: 17 February 2010 at 4:00pm
RESERVED JUDGMENT OF HUGH WILLIAMS J
This judgment was delivered by
The Hon. Justice Hugh Williams on
17 February 2010 at 4:00pm
pursuant to Rule 11.5 of the High Court Rules
……………………………………………..
Registrar/Deputy Registrar
A The appeal and cross-appeal are dismissed.
B Any applications for costs are to be dealt with in accordance with para [83].
JOHN EDWARD BOYD AND ANOR V JOAN MCGREGOR AND ORS HC AK CIV-2009-404-005332 17
February 2010
Introduction and Adjudicator’s Findings
[1] The section at 336B Hillsborough Road, Hillsborough, Auckland was owned by
Mr and Mrs Winter who engaged Concept Design & Development Limited to design a house
for them for the land. The first respondents, the McGregor Trust, bought both the section and
the plans and contracted Woodtec Projects Limited in November 1997 to build the house according to Concept Design’s plans.
[2] The house was built over the period November 1997-April 1998 with a number of contractors, subcontractors and trades people participating. Two of those were the appellants, Messrs Boyd and Halliday who were “labour only” builders. Auckland City, the second respondent, undertook final inspection of the house on 15 May 1998 and issued a Code Compliance Certificate on 28 July 2000.
[3] The house leaked. The McGregor Trust sued in the Weathertight Homes Tribunal to recover repairs costing $475,679.35 plus interest and costs. The initial respondents included
Mr Jensen, a master builder and project manager of Woodtec, the appellants, the plasterer
(a Mr Hay), Auckland City and others. By the time the claim was heard in June 2009 the only respondents who were not bankrupt or in liquidation or otherwise removed from the claim by settlement or by other means were the appellants, the plasterer and Auckland City.
[4] In a final determination issued on 24 July 2009 the adjudicator, Ms McConnell, found
the McGregor Trust was entitled to be paid $292,518.34. Of that sum Auckland City was to pay $58,503.66 and was entitled to recover a contribution of up to $234,014.68 from Messrs Boyd, Halliday and Hay. Messrs Boyd and Halliday were each to pay $29,251.84 to the McGregor Trust and entitled to recover up to $263,266.50 from Auckland City, Mr Hay and
the other appellant. Mr Hay was to pay $175,511.00 to the McGregor Trust but was entitled
to recover a contribution of up to $117,007.34 from Auckland City and Messrs Boyd and Halliday.
[5] Messrs Boyd and Halliday appeal on the basis that the Adjudicator was wrong to find they owed the McGregor Trust a duty of care and breached it in a way which necessitated the
house being totally re-clad. Though not formally the subject of a cross-appeal, they say Auckland City should have been ordered to pay at least 80 per cent and should not have been held entitled to any contribution from the appellants.
[6] Counsel said that since the determination Auckland City has paid the whole of the judgment to the McGregor Trust and, by this appeal, now seeks to recover the balance of the award, $234,014.68 from the appellants. and Mr Hay by way of cross-appeal from the adjudicator’s decision that the apportioned liability of the appellants was 20 per cent divided equally between them, when the defects for which they were responsible caused substantial damage to the house and their portion should be at least 50 per cent or 25 per cent each. To add a further layer of complication, Mr Hay did not appear and was not represented either before the Tribunal (though he filed some documents), despite the Adjudicator fixing his liability at 60 per cent, or on appeal though the appellants, so it was said, were in touch with him
Pleadings
[7] The McGregor Trust’s claims against Messrs Boyd and Halliday asserted they traded
in partnership under the name B & H Builders and “personally worked on the construction”
of thedwelling. They were alleged to have breached duties owed to the McGregor Trust to: “a) Exercise reasonable skill and care in construction of the house;
b) Ensure construction of the house was carried out in accordance with:
i) Specifications;
ii) The New Zealand Building Code;
iii) Building Act 1991;
iv) Building consents.
c) Build a reasonably sound structure using good materials and workmanlike practices.”
[8] The breaches were particularized. Put generally, they included that the doors and windows had no jamb or sill flashings or sealings to preclude water ingress, there were no head flashings as required by the cladding manufacturer’s technical literature, there was no drainage system at ground level, the hand-rails and decks were not waterproofed, and the textured coating over the proprietary cladding was poorly applied.
[9] In the Tribunal, Messrs Boyd and Halliday asserted they were contracted to Woodtec
on a “labour only” basis to undertake certain carpentry work on site as directed by Mr Jensen and under its supervision and instruction. Were they to be found liable, they sought contribution from a number of other respondents including Mr Hay.
[10] Before the Tribunal Auckland City admitted it owed a duty of care to the McGregor Trust in processing the building consent application, undertaking inspections and issuing the Code Compliance Certificate but said that “poor workmanship by the builders and the very sensitive nature of the cladding used ... left damage to the cladding of the house”. It said a weathertight house could have been built from the plans and specifications by “reasonably competent builders” and sought contributions from the appellants and Mr Hay. As against Messrs Boyd and Halliday it asserted they were “responsible for installing the cladding, the windows including any flashings and all related work” and their failure to follow the cladding manufacturer’s recommendations and good building practice led to the need to re-clad. It sought contribution from the “builders and the texture cladding applicator” of 80 per cent.
Decision under appeal
[11] Because the issues on appeal were restricted it is unnecessary to review all facets of the lengthy determination.
[12] The introductory findings included:
[7] Mr Halliday and Mr Boyd were working in a partnership and that partnership was contracted on a labour-only basis at a fixed price of around $21,000.00. The contract covered the carpentry work on site including framing, installation of windows and erecting the gib board and attending to interior fit-out. It eventuated that Mr Boyd and Mr Halliday did not erect the gib board to the interior and a credit for this work was given to Woodtec.
[8] Mr Hay, the tenth respondent, was engaged by Woodtec to inspect the cladding after it was installed and to carry out the plastering and texture coating of the
property. Mr Jensen in his evidence stated that he contracted Mr Hay as he was an expert in the Harditex system and that he relied on his expertise.
...
[10] ... The exterior walls are lined with Harditex fibre cement sheet, which is texture coated and painted. James Hardie Limited provided a technical information catalogue with this product which was required to be followed by those involved in the dwelling construction. The relevant catalogue for the construction of this dwelling
is the 1996 version. It contains detailed information about how the product was to be installed and fixed to other structural components.
[11] Aluminium joinery was used and this included three large windows with a curved top, referred to as moon windows, two installed in the south wall and one in the west. These three windows were all installed without head flashings.
...
Installation of Joinery
[16] All the experts agreed that the absence of head flashings on the curved windows was a significant cause of water ingress and subsequent damage. All experts further agreed that it was a fundamental requirement for mechanical head flashings to
be fitted to windows in Harditex homes. There were no head flashings included in the plans. This would not necessarily be a problem if specifications or the technical
literature provided more detailed information as to the nature of the head flashings required and the installation of them. However, in this case there is no evidence that there were any further specifications and the experts all agreed that the technical literature available at the time (the 1996 Hardies’ manual) did not provide any detailing for arched windows.
[17] The experts also agreed that the installation of the other windows in the dwelling was inadequate. Whilst sill and jamb flashings were not required at the time, their opinion was that the windows were inadequately sealed. Mr Boyd and Mr Halliday confirmed in their evidence that no sealant or in-seal had been provided behind the windows. The experts agreed that this was a defect and inconsistent with the technical information and standard practice at the time. There were submissions made that there was no evidence of damage caused by water ingress from other windows. However, I am satisfied from the evidence of Mr Medricky and Mr Morrison in particular, that defects in the installation of all windows has contributed
to the damage at this property. Whilst photographic evidence of this is limited, their opinion which is based on their investigation, is evidence I accept. In addition the
moisture readings establish water ingress around some of the windows.
Defective Installation of Cladding
[18] All the experts agreed that there were defects in the installation of cladding but there was some disagreement as to the individual defects and their contribution to water ingress and subsequent damage. Mr Medricky considered that the defective installation of cladding contributed between 30-50% to the damage of the building and Mr Morris considered its contribution was between 30-40%.
...
Texture Coating Poorly Applied
[21] Mr Medricky stated that with a face sealed system such as harditex the sealer, filler and texture coating is an integral part of the harditex fulfilling its function. His investigation showed that the texture coating was not installed uniformly, there were thinner patches and visible pinholes. When questioned, Mr Medricky acknowledged
he was not in a position to say whether this would have been evident at the time the building was constructed. His opinion however was that the poor application of
texture coating contributed between 5-15% to the dwelling leaking. The other experts acknowledged this could have been an issue but agreed it was a more minor issue.
[13] After holding Auckland City owed McGregor Trust a duty of care in the way admitted, she reviewed the evidence on the various facets of its obligations, relevant authority and held, in relation to the building consent process:
[37] I therefore conclude that the Council did not have reasonable grounds on which it could be satisfied that the provisions of the Code could be met in relation to the installation of the curved windows. The lack of detailing for flashing of the curved windows was in part causative of the claimants’ loss. I accordingly conclude that the claimants have established negligence on the part of the Council at the building consent stage in this respect.
and, in relation to the inspection process:
[45] I accordingly conclude that the Council is not only liable for defects that a reasonable Council officer, judged according to the standards of the day, should have observed. It can also be liable if defects were not detected due to the Council’s failure
to establish a régime capable of identifying that all significant aspects of the Code had been complied with. I will therefore be applying this test in determining whether the
Council has any liability. In doing so, it is appropriate to consider each area of defect
...
[14] She then exonerated Council from liability in relation to the joinery installation though noting Council accepted that curved windows required head flashings and the absence
of them not only caused damage but should have been noticed by the building inspector.
[15] In relation to the defective installation of cladding, the adjudicator found Council should have noticed the defects before issuing the Code Compliance Certificate, thus contributing to the defects that “necessitated significant remedial work”.
[16] Then, after considering other issues, she concluded:
[56] In summary I conclude that the Council was negligent in failing to identify defects in the installation of the cladding, the defects to the butyl roof and the lack of flashing to the curved windows. In addition the Council was negligent in approving the building consent without any details or specifications in relation to these flashings.
Given the extent of the damage that has been caused by the defects and the fact that they occur on most, if not all elevations, I conclude that the Council has contributed to defects that necessitated the full recladding of the house. I accordingly conclude that the Council is jointly and severally liable for the full amount...
[17] Turning to the appellants, the adjudicator first held:
[57] Mr Boyd and Mr Halliday were contracted on a labour-only basis to carry out the carpentry work on the dwelling. They were contracted by Woodtec to carry out work for a fixed price of $21,000.00 and worked under the general supervision of Mr Jensen who carried out the role of project manager. They accept part of their work included the installation of windows. They further accept that they installed the curved windows with no head-flashings and that they did not provide any in-seal or sealant behind the other joinery when they installed it.
[18] She then held Messrs Boyd and Halliday had not installed the cladding and were not responsible for the construction of the masonry walls or the plastering, thus:
The only potential area of liability on the part of Mr Boyd and Mr Halliday relates to the installation of the joinery.
[19] The adjudicator then reviewed authority submitted on the appellants’ behalf that they owed no duty of care to the owners but concluded:
[68] While I accept that Mr Boyd and Mr Halliday were contracted on a labour- only basis and had no responsibility for the supervision of other workers, they are not necessarily in a significantly different position than other builders engaged to do construction work on dwellings who have been found to owe a duty of care. Mr Kohler submitted that their inexperience and lack of knowledge and expertise mitigated against finding that they owed a duty of care. I do not however accept this submission.
[69] Whilst much was made of Mr Boyd and Mr Halliday’s lack of experience, both had completed some formal training and Mr Boyd had been building since 1992 and Mr Halliday since 1994. In addition, they had gone into partnership as builders and held themselves out as having the necessary skills to undertake construction work
on dwellings. Whilst they worked under the general supervision of Mr Jensen, they were contracted on a fixed rate contract to complete the majority, if not all, of the
carpentry work involved in the construction of this house. Accordingly I would
conclude there is no legal basis on which Mr Boyd and Mr Halliday can escape liability on the basis that they do not owe the claimants a duty of care.
[20] She then noted there was no dispute that the “lack of adequate flashing and sealing of
the joinery was a major cause of the dwelling leaking” but held, in a passage which was important to the decision and which was the subject of significant submissions on appeal, that
the appellants were jointly and severally liable for the full amount claimed because :
[73] I accept that Mr Boyd and Mr Halliday worked under the general supervision
of Mr Jensen and that Mr Jensen or his company provided the materials. However, I
do not accept Mr Jensen’s failure to provide any sealant or specifically direct them to apply sealant behind the windows absolves them from responsibility. They were contracted, even though on a labour-only basis, to fulfil a task which was to carry out the carpentry work including the installation of the windows. Mr Kohler submitted that they were not experienced builders and this was known to Mr Jensen and he was their supervisor. However I would note that Mr Boyd at the time of this construction had been working as a builder for five years and Mr Halliday for three years. As already stated, they have set themselves up in partnership as builders and accepted the contract to build the house on this basis. Given the contract basis on which they were engaged, it is unreasonable for them to suggest that they had no personal responsibility for their work as they worked under the supervision of Mr Jensen.
[74] They were contracted as builders to carry out building work and therefore must be judged by the standards of a reasonably competent builder. I accept they had
no supervisory responsibility and cannot be judged for anything other than the work
they did and for which they were responsible. In determining whether Mr Boyd and Mr Halliday breached their duty of care, the test is what the builder is reasonably expected to know and not necessarily what the builder actually knows. Before proceeding with the construction work they were contracted to do, they should have ensured they had access to the appropriate plans, specifications and technical material. They did not do this, as they agreed that all they had was the plans.
[75] The reason advanced by Mr Boyd and Mr Halliday for not placing silicone behind the windows was that they were not given silicone and were not told that they had to do it. I do not accept this in itself absolves them from responsibility for inadequately sealing the windows. The installation fell below what was required of reasonably competent builders at the time. I therefore conclude that they were negligent in failing to install the joinery without sealant being placed behind the window flanges.
[76] I however accept that the major cause of leaking in relation to the curved windows was the lack of head flashing rather than the lack of sealant behind the flanges. I accept Mr Boyd and Mr Halliday’s evidence that when they queried this issue they were advised by Mr Hay, whom they understood to be an expert in the harditex system, that it was not required and he would be responsible for sealing and waterproofing of these windows. Whilst I do not consider this negates their responsibility completely, it is a significant factor to take into account when assessing apportionment and contribution between the respondents.
[77] Mr Morrison, the claimants’ expert, agreed that Mr Boyd and Mr Halliday had
no liability for defects given their involvement as portrayed by Mr Kohler. I accept
Mr Morrison’s evidence as significant but not conclusive. The experience and involvement of Mr Boy and Mr Halliday I conclude was greater than what Mr Kohler outlined in questioning Mr Morrison. In addition, Mr Morrison’s views as to liability are not definitive as liability issues involve consideration of both legal and technical issues.
[78] In summary I conclude that Mr Boyd and Mr Halliday owed the claimants a duty to exercise reasonable skill and care in carrying out the building work they were contracted to do on the dwelling. I further find that Messrs Boyd and Halliday breached their duties by failing to properly install and weatherproof the windows at the dwelling. I also conclude they were negligent in carrying out the carpentry or construction work they were contracted to do without consulting the appropriate
technical literature which formed part of the plans and specifications for the construction of the dwelling.
[21] She then turned to Mr Hay’s position, noted documents he had filed and that he gave
no evidence. She held Mr Hay was expert in the Harditex system and failed in the installation of the texture coating and plaster work and checking installation of the cladding before coating. He, too, was found fully liable.
[22] The quantum allowed, $292,518.34, made allowance for a $100,000 settlement from other parties but included $25,000 for general damages. The quantum of the award was originally under challenge but that aspect of the appeal was abandoned.
[23] On apportionment, the adjudicator held:
[104] It is established that the parties undertaking work should have a greater responsibility than the Council certifying the work. However, in this case, the parties
or individuals primarily responsible for some of the defective work are not parties to this claim, either because they have not been identified, they are no longer in existence or have gone bankrupt.
[105] Of the parties to this claim, Mr Hay is attributed the greatest responsibility for the defective work. He inspected the cladding prior to plastering, he inadequately sealed the windows and gave specific advice to Mr Boyd and Mr Halliday that head flashings were not required. I accordingly assess his contribution should be set at 60%.
[106] Mr Boyd and Mr Halliday’s responsibility relates to the installation of the windows only. They were not involved in installing the cladding which was estimated
at contributing between 30-50% to the remedial costs. The apportionment attributable
to Mr Boyd and Mr Halliday is also appropriately reduced by the actions and adviceof Mr Hay who they reasonably considered to be an expert in harditex. I assess their joint contribution to be 20% or 10% each. The apportionment of the Council is set at
20%.
Mr Morrison’s evidence
[24] Mr Morrison was the claimants’ expert. He said that persons other than Messrs Boyd and Halliday were responsible but, in regard to the appellants, his report and his brief, said:
22.I understand Boyd and Halliday claim only to have built the framing and installed the windows. Assuming that is true, in my opinion they are still responsible for the following defects:
(a) The moon windows were installed with no head flashings;
(b) the doors and windows had no jamb or sill flashings or sealing system
to prevent water penetrating from the exterior into the building framing;
(c)there was no gap between the head flashings and the plaster as required by James Hardie in its technical literature;
(d) the deck balustrade wall was constructed flat instead of with a slope
as required by the Harditex technical literature.
Mr Kohler for the appellants submitted that view was reached on an assumption that the appellants had been responsible for the cladding work, but that appears to be belied by what
Mr Morrison’s report actually said.
[25] In a fairly lengthy exchange in cross-examination, too extensive to reproduce,
Mr Morrison acknowledged his view of the appellants’ responsibility might be diminished by
the fact he had neither seen their briefs describing their limited role before he prepared his report, and had not been present at the hearing when a large part of the evidence had been given nor seen a transcript. He asserted others were responsible for the defects but his comments on the appellants’ position led to the following exchange:
Adjudicator: .... he’s asking you whether you think, on the information you’ve been given, Mr Boyd and Mr Halliday have any responsibility or have contributed to the damage through the work they have done.
Mr Morrison: I don’t believe they have.
[26] Further questions were then asked by counsel for the claimants as follows:
Counsel: Perhaps just by way of clarification, if I could take Mr Morrison to paragraph [22] of his statement. You were questioned there about whether you still stand by that statement in terms of responsibility of Mr Boyd and Mr Halliday for those issues A to D. What is your position, having heard what they are supposed to have done? ... Do you still think they’re responsible for items A to D based on what you’ve heard?
MrMorrison: What I’ve heard, there’s been no suggestion they put the head flashings in. The doors and jambs didn’t have sill flashings. The sealing systems to prevent water penetration from the exterior into the interior, there was a failure there, but I don’t know whether they applied that sealant or not.
Counsel: Their evidence was that they didn’t apply that sealant?
Mr Morrison: Therefore they’re not responsible for that.
Counsel: Are you saying that there was no sealing system at all? Their evidence is that you didn’t put silicone or in-seal?
Mr Morrison: Correct.
Counsel: So would you say they were responsible for that problem? Mr Morrison: No.
[27] He adhered to his conclusion that Messrs Boyd and Halliday remained responsible for defects. Even at the end of his cross-examination he maintained the view they had failed to instal head flashings, sill flashings or sealing systems and so were responsible for failing to prevent water penetration. He therefore took the view – though in a way reduced from his original view –that as the appellants contracted to undertake specified building work, some of which was negligently done. Accordingly, contrary to Mr Kohler’s submissions, the Court’s view is that there was an evidential foundation for the factual views the adjudicator expressed in paras [57], [68], [69], [73]-[78] and [106].
Submissions and Authorities
[28] Mr Kohler submitted in opening that his clients were not the “builder” of the house and no amount of repetition of that description could serve to alter the position. In support,
he cited such authorities as Smellie: Building Contract and Practice in New Zealand (2nd ed
1979 p 2) and dictionary definitions. But the Court’s view is that labels are arid ground for debate: in issue are the functions assumed by those said to be liable, what legal obligations may flow from their assumption of those functions, and whether those obligations have been breached (see e.g. Body Corporate 199348 v Nielson HC AK CIV-2004-404-003989
3 December 2008 paras [66], [67]). The adjudicator in this case was correct to note that attempts to differentiate between the roles of people based on their descriptions as “builder”
or “contractor” creates an artificial distinction when all play their respective parts.
[29] In this case, however, that functional approach needs to take account of the fact that
the appellants had no contractual link with the owners or any other party still in the claim when it was heard.
[30] Mr Kohler stressed Mr Jensen was a builder of considerable experience – though this was the first James Hardie house his company had built – and that Mr Hay was employed
because of his particular experience in installing Hardie cladding systems. By contrast, the appellants were employed on a “labour only” basis to do part of the carpentry work.
Mr Jensen knew they had no experience in working with Hardie cladding systems. Naturally,
Mr Kohler emphasised the adjudicator’s finding of the appellants’ limited role and the fact they were not involved in the cladding. He said they simply placed the windows within the frames they had erected and were not involved in any of the further processes involved in window installation.
[31] Mr Kohler laid particular emphasis on the fact that the only expert who opined that Messrs Boyd and Halliday had been negligent was the McGregor Trust expert, Mr Morrison and that he – as the adjudicator held – resiled from that opinion to a significant degree in cross-examination. He took issue with the adjudicator’s findings in para [77] of her decision though that passage seems to mirror Mr Morrison’s final position as shown in paras [25] and [26] of the quoted evidence.
[32] He submitted that the thrust of authority was to the effect that sub-contractors owe no duty of care to owners and the cases relied on by the adjudicator’s finding of a duty of care in fact supported the opposite conclusion.
[33] Mr Kohler submitted that when the adjudicator held (Decision para [67]) that Courts had consistently reached the view that “builders, whether as head contractors or labour-only contractors, of domestic buildings owe the owners” a duty of care, that conclusion, too, was unsupported by the authorities on which the adjudicator relied.
[34] The preponderance of the authorities, Mr Kohler submitted, pointed away from the appellants having any duty of care to the owners of 336B Hillsborough Road. That notwithstanding, he submitted Auckland City’s approach had been to endeavour to put the entire responsibility for breach on the appellants notwithstanding their “labour only” status. The thrust of the Council’s submissions had not even focussed on Mr Jensen and Woodtec.
He submitted that, even were Messrs Boyd and Holliday to be held to owe a duty of care, the fact they were sub-contractors subject to inspection and direction by Mr Jensen and were employed only to do a limited amount of building work- not cladding - and consulted Mr Hay, the expert plasterer, meant their obligations and thus their responsibilities, were limited. They had no obligation to look for a James Hardie manual, query the absence of
flashings in the plans or their factual absence on site. Even had they sought out a manual it would not have assisted at the time because it spoke only of the application of “paintable sealant” by the plasterer. He submitted para [74] of the Decision was an inadequate summary
of the appellant’s position. It was incorrect to say that appellants were “contracted as builders”. They did not have the contract to build a house. Their obligations and thus their liability were severely restricted.
[35] Mr Kohler stressed what he submitted was lack of causation between any negligence and the damage. Here, the house would have leaked anyway because of a problematic cladding system, inadequate plans and manual, absence of flashings from the plans, lack of proper inspection, lack of compliance with Hardies’ recommendations and, of particular relevance, a number of other faults which were no part of the appellants’ responsibilities.
[36] Finally, he submitted, the percentages apportioned by the adjudicator were incorrect. Auckland City was much more involved than the appellants and was involved throughout the life of the contact. The adjudicator found the major cause of the leaking was the lack of flashings rather than the lack of sealant, and the appellants were not responsible for the latter.
[37] For Auckland City, Mr Robertson its leading counsel, commenced his submissions by pointing out the appellants were the day-to-day builders on site and, although technically subject to Mr Jensen’s supervision, factually that seldom occurred. They were inexperienced and untrained in some of the work required to construct 336B Hillsborough Road. They had
not made themselves familiar with the window manufacturer’s requirements. They omitted
the head flashings to three curved or moon windows. They did not seal them. There was therefore ample evidence on which the adjudicator could base her findings.
[38] He elaborated on those submissions, saying it was reasonable in the circumstances to impose a duty of care on the appellants despite lack of any contractual link and because the causal impact of the appellants’ negligence was high – they installed the windows negligently and it was the window flashing absence which allowed water entry causing extensive damage
– so their percentage of liability should be increased and that of the Council decreased correspondingly.
[39] Mr Robertson went carefully through the evidence as to the respective roles of Messrs Boyd, Halliday and Hay and referred to authorities holding the role of those involved in the construction of the house and the consequent ambit of any duty of care were functional matters to be considered against the circumstances of the case, guided by the criteria habitually applying to that assessment.
[40] He particularly drew attention to the observations of Chambers J in Body Corporate
202254 v Taylor [2009] 2 NZLR 17, 52 para [128] dealing with the position of the director of
a building development company that “it is enough if his conduct is a contributory cause; [it does not need to be] in some sense the main or primary cause’” and to the decision on another appeal against a decision of the Weathertight Homes Tribunal, Patel v Offord HC Auckland CIV-2009-404-301, 16 June 2009, Heath J, para [31]. There the project manager and developer was found to have owed a duty of care and have breached it: what was required was to “weigh in the balance the tasks undertaken ... in relation to work undertaken negligently by other actors”.
[41] Mr Robertson submitted it was evidentially relevant but not determinative that the appellants were merely “labour only” contractors undertaking limited carpentry work. Their obligation was nonetheless to adopt best trade practice and they assumed a responsibility for compliance. He distinguished cases depending on the commercial/residential divide by submitting that distinction is now not considered definitive (Te Mata Properties Ltd v Hastings District Council [2009] 1 NZLR 460, 475, 478 per Baragwanath J). In any event this claim was based in both contract and tort.
[42] He submitted the test for whether the appellants had breached their duty was “what
the builder is reasonably expected to know”, not “what the builder actually knows” (Todd et
al Law of Torts in New Zealand 5th ed 2009 Para 7.2.02(2) p371). He referred to a number of other Weathertight Homes Tribunal decisions to that effect.
[43] Mr Robertson summarized what he submitted were errors in the appellants’ assertion that they owed no duty of care. He referred to their day-to-day obligations and their decision
not to seek advice from Mr Jensen or anyone else on the flashings on the curved windows. Additionally, they did not seek the insulation guide.
[44] He took the view Mr Kohler’s submissions on Mr Morrison’s admissions were overstated and the adjudicator was correct in the comments she made in para [77]. Ultimate liability was not for the witness, a submission he buttressed with a number of references to the evidence, including evidence from experts other than Mr Morrison.
[45] On causation, Mr Robertson acknowledged the house leaked for at least six reasons with the Council found not legally responsible for three but the appellants liable for two – absence of head flashings and absence of sealant – and they were a major cause of damage.
[46] On apportionment, Mr Robertson drew attention to Patel where Heath J (at para [38])
held:
[38] Mr Shand referred me to a list of criteria for assessing contribution, taken from a judgment of the Supreme Court of British Columbia in Aberdeen v Township
of Langley [[2007] BCSC 993] at [62] and [63]. Groves J ... identified nine factors
that could be taken into account in determining relative contributions:
(a) The nature of the duty owed by the tortfeasor to the injured person.
(b) The number of acts of fault or negligence committed by a person at fault. (c) The timing of the various negligent acts. ...
(d) The nature of the conduct held to amount to fault. ...
(e) The extent to which the conduct breaches statutory requirements. ... (f) The gravity of the risk created.
(g) The extent of the opportunity to avoid or prevent the accident or the damage. (h) Whether the conduct in question was deliberate, or unusual or unexpected.
(i)The knowledge one person had or should have had of the conduct of another person at fault.
[47] By reference to that list Mr Robertson submitted the appellants owed a duty to ensure
the house was built with reasonable skill and care and in accordance with relevant legislation. The appellants were responsible for two important defects out of six. They were ignorant of basic building concepts. Their work was not in accordance with statutory, regulatory or trade practice requirements at the time. Their breach contributed to the dwelling becoming a leaky home. They could easily have avoided the breaches found against them had they taken steps
to obtain advice and information. As a result of all of that Mr Robertson submitted that, arithmetically, the appellants being liable for two of six of the defects or 33 per cent they
should be liable for 20-28 per cent being 33 per cent of 80-85 per cent, and the Council, liable
for three of six defects, ie 50%, should have been found liable for 50 per cent of 15-25 per cent, the proportion commonly found against Councils, ie 7.5-12.5 per cent.
Discussion and Decision
[48] There is a general right of appeal to this Court from determinations of the
Weathertight Homes Tribunal under s 93 of the Weathertight Homes Resolution Services Act
2006. Accordingly, the observations of the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar [2008] 2 NZLR 141, 147 paras [4] and [5] apply. There, the Supreme Court held in relation to general appeals, including those from tribunals that:
[4] ... The appeal is usually conducted on the basis of the record of the court or tribunal appealed from unless, exceptionally, the terms in which the statute providing the right of appeal is expressed indicate that a de novo hearing of the evidence is envisaged. ... In either case, the appellant bears an onus of satisfying the appeal court that it should differ from the decision under appeal. It is only if the appellate court considers that the appealed decision is wrong that it is justified in interfering with it.
[5] The appeal court may or may not find the reasoning of the tribunal persuasive in
its own terms. The tribunal may have had a particular advantage (such as technical expertise or the opportunity to assess the credibility of witnesses, where such
assessment is important). In such a case the appeal court may rightly hesitate to
conclude that findings of fact or fact and degree are wrong. It may take the view that
it has no basis for rejecting the reasoning of the tribunal appealed from and that its decision should stand. But the extent of the consideration an appeal court exercising a general power of appeal gives to the decision appealed from is a matter for its judgment. An appeal court makes no error in approach simply because it pays little explicit attention to the reasons of the court or tribunal appealed from, if it comes to a different reasoned result. On general appeal, the appeal court has the responsibility of arriving at its own assessment of the merits of the case.
[49] As Mr Robertson noted, this is a claim based in both contract and tort. The appellants have in their favour the fact there was no contractual link between them and the McGregor Trust and accordingly they could never have been held liable in that regard. However, in negligence, the lack of a contractual link is one of the relevant factors to be considered in deciding whether the appellants owed a duty of care to the McGregor Trust and whether, on the evidence, they breached that duty of care in the way found by the adjudicator.
[50] There is, of course, a vast number of cases stretching back many years holding or denying that a duty of care exists over a wide spectrum of factual circumstances and, in New Zealand in the “leaky buildings” area, the number of precedent cases is burgeoning.
[51] There are two avenues open to considering whether the adjudicator was correct in holding that the appellants owed a duty of care to the McGregor Trust: the adjudicator – and this Court on appeal – can trawl through a large body of precedent adopting or distinguishing
the various cases along the way until a conclusion is reached. That, to adopt Mr Robertson’s labelling system, is the “hard way”. The “easy way” is to treat the issue largely as one of function and to regard the precise nature of any contract or lack of it as an aspect of a decision whether or not a duty of care is owed, not as determinative of it.
[52] However, the “hard way” in this case is simplified by two factors. The first is that this
is an appeal and accordingly the precepts set out by the Supreme Court in Austin Nicholls
apply. The second is that the adjudicator discussed a limited number of cases submitted to
her by counsel. Counsel very largely relied on the same precedents on appeal. While it may
be appropriate to hesitate before differing from an expert tribunal on issues of fact, if a consideration of the cases on which the parties relied showed the adjudicator’s decision in law to have been wrong, then this Court should say so. If not, this Court should be slow to interfere.
[53] At the outset, Mr Kohler submitted the adjudicator’s reliance on Mt Albert Borough
Council v Johnson [1979] 2 NZLR 234, Bowen v Paramount Builders (Hamilton) Limited
[1977] 1 NZLR 394 and more recent cases went beyond the existing law. Thus the adjudicator's view earlier cited from para [67] of the Decision was in error. It is sufficient to deal with that submission by saying that, though the cases on which the adjudicator relied are now of some age and dealt with different factual circumstances, they are fully capable of supporting the view expressed in para [67].
[54] The building precedents on which Mr Kohler relied both before the Tribunal and on appeal were Body Corporate No.114424 v Glossop Chan Partnership Architect Ltd and Carter Holt Aluminium (HC AK CP612/93, 22 September 1997, Potter J), Northern Clinic Medical & Surgical Centre Limited v Kingston (HC Auckland CIV-2006-404-068, 3 December 2008, Keane J), Body Corporate No.189855 v North Shore City Council (HC Auckland CIV-2005-404-556, 25 July 2008, Venning J) (“Byron Ave”)) and Body Corporate No.185960 v North Shore City Council (HC Auckland CIV-2006-004-3535, 22 December 2008, Duffy J) (“Kilham Mews”).
[55] Glossop Chan was a claim by later owners against, amongst others, the manufacturer and installer of aluminium-framed windows in a high rise apartment building in Auckland. After a full review of authority here and overseas, Potter J, at the end of a lengthy hearing held on conventional grounds of proximity, policy, statutory requirements and lack of contractual responsibility, that the sub-contracting manufacturer and installer of the windows owed no duty of care to subsequent purchasers of the building.
[56] In Byron Avenue, although the plasterer had taken no step in the proceedings, it is of interest that Venning J held (at 296):
For the sake of completeness I confirm that I accept a tradesman such as a plasterer working on site owes a duty of care to the owner and to the subsequent owners, just as
a builder does.
[57] Northern Clinic was the case on which Mr Kohler relied most strongly. There, a sub- contractor who installed exterior cladding, applied to strike out a claim by a subsequent purchaser from the original developer of the building. Unlike other sub-contractors, the plaintiffs were unable to prove they signed a guarantee. The claims were struck out partly in reliance on Glossop Chan and after Keane J considered conventional questions of proximity, vulnerability, lack of contract, statutory requirements and the like.
[58] However, in Kilham Mews the developer and project manager was held to owe a duty
of care to the Body Corporate and the owners of the units. It is of interest to note the degree
of active involvement of the manager in the development listed by Duffy J (at [112]).
[59] To the degree it is possible to distinguish certain principles from all those cases, they would appear to be:
a) The existence or otherwise of a duty of care in New Zealand has evolved over time and even now is not fixed but a potent factor in the decision is the assumption of responsibility to original buyers.
b)That purchasers other than original purchasers from the developers have a more difficult task in demonstrating they are owed a duty of care by those developers and others who worked on the building.
c) That functionality or the assumption of responsibility has always been an important feature and may be seen to have gained greater importance over time. In that regard, it is important to keep in mind the observations of the Court of Appeal in Rolls-Royce New Zealand Limited v Carter Holt Harvey Limited [2005] 1 NZLR 324, 349 paras [98]-[100]:
[98] The assumption of responsibility and reliance concepts have also been used where the allegation is that services were negligently performed. ...
[99] Assumption of responsibility for a statement or a task does not usually entail a voluntary assumption of legal responsibility to a plaintiff, except in cases where the defendant is found to have undertaken to exercise reasonable care in circumstances which are analogous to, but short of, contract, and it is foreseeable that the plaintiff will rely on that undertaking. If that is the case then, subject to any countervailing policy factors, a duty of care will arise. In other cases, the law will deem the defendant to have assumed responsibility where it is fair, just and reasonable to do so: Attorney-General v
Carter, at pp 168 – 169 (paras [23] – [27]). Whether it is fair, just and reasonable to deem an assumption of responsibility and then a duty of
care will depend on a combination of factors, including the
assumption of responsibility for the task, any vulnerability of the plaintiff, any special skill of the defendant, the need for deterrence and promotion of professional standards, lack of alternative means of protection and so on – that is, essentially the matters discussed above at paras [58] – [65]. Wider policy factors will also need to be taken into account.
[100] Finally, we note that assumption of responsibility for the task cannot be sufficient in itself, at least insofar as the negligent construction cases are concerned.
[60] The passage cited from Rolls-Royce leads to consideration of the functional aspects of
the appellants’ position. First – and, almost certainly, foremost – whatever their contractual position and the possibility of oversight from Mr Jensen, the appellants assumed responsibility for installing the windows, the faulty installation of which was a prime cause of
the house leaking. A competent builder and thus the appellants should have known that good trade practice is to achieve weathertightness and to do that requires the installation of flashings on the windows even if they were not drawn in the plans. A competent builder and thus the appellants should have known that to achieve weathertightness good trade practice and the manufacturer’s manual required the installation of sealant around the windows, even if the manual (if obtained) might have been ambiguous on the point. Competent builders and thus the appellants would have known that once the defects concerning flashings, sealant and
their workmanship around the windows generally was covered up, the owners would be vulnerable in the sense of being unable to discover the lack of weathertightness that resulted. Competent builders and thus the appellants should have had the skills required in carrying out the work that the appellants undertook so as to achieve weathertightness, a fundamental requirement of all statutory obligations and infringing on building and good trade practice. Being unable to ascertain the defects, the owners could not protect themselves against them.
[61] The cases demonstrate the extent of the appellants’ involvement in the building also requires to be taken into account In that regard, an objective assessment must lead to the conclusion that, weathertightness of a building – whether domestic or commercial – is so inherently part of competent building that those who undertake building work are required to achieve weathertightness as a necessary component and should be visited with responsibility to those who erect buildings or have them erected. Thus they should be held liable if their work fails that fundamental function.
[62] There is therefore nothing arising from issues of policy, proximity or any of the other factors mentioned in the authorities to lead to the conclusion the adjudicator was incorrect in finding the appellants owed a duty of care to the McGregor Trust. The appellants’ position is akin to that of the deck-builder in Riddell v Porteous [1999] 1 NZLR 1, 8 that:
[Counsel’s] first argument was that the extent of Mr Porteous's duty of care was restricted by his limited role as a labour only builder, consistently with his limited contractual duties. This argument must fail once it has been found that Mr Porteous took it upon himself to depart from the approved plans and specifications.
[63] With the exception the appellants were one step further removed contractually than
Mr Porteous’ position, that citation is apt to dispose of the arguments advanced on their behalf. They departed from statutory, regulatory and good trade practice requirements where competent builders would not have departed from them, and in ways which caused substantial damage to the McGregor Trust through lack of weathertightness. The adjudicator’s view of the argument advanced on their behalf that nevertheless they owed no duty of care to the McGregor Trust fails, if viewed in the “hard way”.
[64] The same conclusion must be reached even if the “easy way” is adopted.
[65] At least in the “leaky building” area, most authority tends to point to the near- paramountcy of function conclusion. Both generally and in the “leaky building” cases, expressions of principle in earlier cases tend still to be apposite but many deal with intricate factual differences not susceptible to any distillation of general principle and, in any case, there is now the specialist jurisdiction of the Weathertight Homes Tribunal dealing with that discrete area of contract and tort law. Many earlier cases are decisions on striking-out applications, not following trial, and as such are required to treat the pleaded facts as provable when trials usually shed a different light on the facts. And many of those cases decide for or against the existence of contractual or tortuous responsibility on conventional grounds of proximity, policy and the like, when there is now in the building area a broadly uniform approach based on function. In some areas, time has altered accepted areas of responsibility so that earlier cases are regarded only as authority on principle, not application.
[66] Further, as Mr Robertson submitted, modern methods of construction differ from the straightforward earlier owner/builder/subcontractors’ method of working. That further undermines the authority of older building cases.
[67] Seen against that background, the appellants were the persons principally responsible
for the work they contracted to undertake. Within the terms of that limited engagement their work was accordingly required to comply with the Building Code and the New Zealand Standards applicable at the time. True, they were subject to supervision and instruction from
Mr Jensen. True, there were defects in the plans in that they showed no flashings. True, they sought advice from the person who was engaged as the specialist plasterer as to that aspect of
the work. But those are aspects bearing on whether the appellants breached any duty of care rather than whether a duty of care existed. Put another way, Mr Morrison’s report originally took the view that even if the appellants’ view of the work they were required to undertake was correct – and the adjudicator ultimately accepted that view – Messrs Boyd and Halliday remained responsible for defects. He may have resiled to a degree from that view in cross- examination – the transcript indicates that but does not determine it – but, again, those are aspects of compliance with their duty of care rather than establishment.
[68] Their lack of experience, particularly in the work they did on a house designed to be constructed in accordance with a particular system, coupled with their lack of inquiry as to
the means of complying with that system, shows – as the adjudicator also found – that they
were in breach of their obligations. They may have made an inquiry of a supposed expert plasterer, but that hardly explains their failure to call for flashings and instal them over the windows.
[69] As far as causation is concerned, whilst the Hardie system is now known to have been problematic, the plans and manuals may have been inadequate and Mr Jensen may have failed to order the flashings, that does not impact on the adjudicator’s finding after hearing
the evidence and submissions that the appellants’ deficiencies in the discharge of their obligations partially caused the damage from which the house later suffered.
[70] Accordingly, overall, the appellants have not demonstrated the findings of the adjudicator should be disturbed on the issue of liability.
Apportionment
[71] On the issue of apportionment, however, a problem may perhaps arise.
[72] The adjudicator’s approach was as set out in paras [104]-[106] earlier cited.
[73] Section 17(2) of the Law Reform Act 1936 reads:
(2) In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the Court to be just and equitable having regard to the extent of that person's responsibility for the damage; and the Court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.
[74] Although it is uncontroversial that joint tortfeasors are usually held jointly and severally liable for the whole of the damages payable to a plaintiff (see e.g. Cashfield House Limited v David & Heather Sinclair Limited [1995] 1 NZLR 452, 456-457), what does not appear from the Tribunal’s decision is whether any party sought an order from the Tribunal exempting any person from “liability to make contribution” or that it was “just and equitable” that some persons – particularly Mr Hay – should be ordered to bear an even larger proportion of liability than was ordered by the adjudicator.
[75] As mentioned, the Tribunal set Auckland City’s share of responsibility at 20 per cent, that of Messrs Boyd and Halliday at 20 per cent or 10 per cent each, and that of Mr Hay at
60 per cent. Suggested re-apportionments between the appellants and Auckland City were as earlier recounted.
[76] With Mr Hay having essentially taken no part in the litigation either before the Tribunal or this Court, it is not open to disturb the Tribunal’s apportionment of liability to him. Therefore the only re-apportionment possible is by varying the percentages of responsibility found by the adjudicator as between the appellants and Auckland City.
[77] In that regard, Austin Nicholls is again appropriate. Extensive evidence was given before the specialist Tribunal. A reasonable apportionment resulted. Have the parties shown that apportionment to be in error?
[78] As far as the appellants are concerned, it was their “hands on” involvement in the construction and the defects they created which were a major source of lack of weathertightness and water ingress. On the other hand, as far as Auckland City was concerned, had its employees completely fulfilled their functions, the defects created by the appellants (and those of Mr Hay) would have been noted and corrected. On that straightforward basis the adjudicator’s finding that responsibility for the building’s ultimate lack of weathertightness should be shared should not be disturbed.
[79] In considering whether the adjudicator’s percentage apportionment was correct, it is certainly not merely a matter of counting up the number of defects found and apportioning liability on the number for which each party was held responsible since, of course, some defects are the source of greater damage than others.
[80] It has not been demonstrated that the adjudicator was wrong in holding the appellants liable for 10 per cent each or 20 per cent of the total. Any lesser percentage would have had
the effect of almost exonerating the appellants when their actions or omissions were a significant cause of lack of weathertightness. On the other hand, all the defects concerning this property – irrespective of which person or firm working on the property created the defects – could have been corrected had Auckland City’s employees fully complied with their
obligations. In those circumstances it is unsurprising that Auckland City was held as blameworthy as the appellants jointly in the ultimate result.
[81] Put another way, no factual or principled basis has been demonstrated for this Court to interfere with the apportionment ordered by the Tribunal and the appeal therefore also fails
on this aspect of the matter.
Result
[82] In the event, both the appeal and cross-appeal are dismissed on all aspects.
[83] Having regard to that, the Court’s inclination is that costs should lie where they fall.
If any party seeks to persuade the Court to a different view, memoranda may be filed (maximum five pages) with counsel certifying, if they consider it appropriate so to do, that all issues of costs can be determined on the papers.
.................................................................
HUGH WILLIAMS J.
Solicitors:
Fleming Foster, P O Box 76 079 Manurewa, Manukau 2243
Heaney & Co, P O Box 105 391 Auckland 1143
Copy for:
G J Kohler, P O Box 4338 Auckland 1140
Case Officer: [email protected]
Schedulers: Corrina.Macdonald@justice.govt.nz / Michel[email protected]
0
0
1