Buchanan v Tasman District Council
[2023] NZHC 53
•1 February 2023
IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKATŪ ROHE
CIV-2021-442-4
[2023] NZHC 53
IN THE MATTER OF a claim in negligence, breach of statutory duty and negligent misstatement BETWEEN
LOUISE ELIZABETH BUCHANAN, KEITH MARSHALL AND ALISTAIR
LESLIE DONALD as Trustees of the Buchanan Marshall Family Trust
Plaintiffs
AND
TASMAN DISTRICT COUNCIL
Defendant
Hearing: 25 – 27 July 2022 with supplementary submissions on 19 and 23
December 2022
Appearances:
A R Shaw and C R Osborne for the Plaintiffs
S C Waalkens and A C Harpur for the Defendant
Judgment:
1 February 2023
JUDGMENT OF PALMER J
Solicitors
C & F Legal Ltd, Nelson Jackson Russell, Auckland Rice Speir, Auckland
BUCHANAN AND MARSHALL v TASMAN DISTRICT COUNCIL [2023] NZHC 53 [1 February 2023]
Contents
Summary.............................................................................................................. [1]
What happened?.................................................................................................. [3]
The property and pool [3]
Consent, Code Compliance Certificate and two inspections [4]
The third inspection and non-compliance [8]
Further effects [16]
The proceedings [18]
Issues................................................................................................................... [22]
Issue 1: Duty and breach in negligence............................................................ [23]
The Fencing of Swimming Pools Act 1987 context [27]
Was it reasonably foreseeable that a negligent pool inspection would cause
loss? [32]Was the relationship sufficiently proximate? [36] Is it fair, just and reasonable to impose the duty on the Council? [54] Did the Council breach the duty? [59]
Issue 2: Negligent misstatement........................................................................ [61]
Issue 3: Breach of statutory duty..................................................................... [65]
Law of statutory breach of duty [65]
Submissions [68]
Was there a statutory duty enforceable by private action? [71]
Issue 4: Time bars.............................................................................................. [73]
Does the Building Act long stop bar the claims? [74]
Do the Limitation Acts bar the claim? [89]
Effect of Beca Carter Hollings v Wellington City Council [100]
Issue 5: Damage, loss and relief...................................................................... [101]
The relief sought [101]
Loss of an opportunity and remoteness of damage [102]
The evidence regarding loss of value [114]
Special damages [116]
General damages [123]
Declaration [125]
Issue 6: Contributory negligence.................................................................... [127]
Result................................................................................................................ [131]
Summary
[1] In 2006, the Tasman District Council (the Council) issued a Code Compliance Certificate (CCC) for a high-end award-winning home, centred on a swimming pool, on Eighty Eight Valley Road, Wakefield. In 2008, Ms Louise Buchanan and Mr Keith Marshall bought the property. In 2009, and again in 2012, the Council inspected the pool and confirmed its compliance with the Fencing of Swimming Pools Act 1987 (FOSPA). In 2019, when Ms Buchanan and Mr Marshall put the property on the market, the Council inspected the pool again and said its fencing did not comply. It is agreed it had never complied. In proceedings issued in 2020, Ms Buchanan and Mr Marshall sue the Council for negligence, negligent misstatement, and breach of a statutory duty. They seek damages and a declaration. They are unable to recover for the Council’s admitted breach of duty in relation to the building consent and CCC because that claim is time-barred. They sue the Council for the pool inspections in 2009 and 2012, causing them to lose the opportunity to sue the Council for negligently issuing the CCC.
[2] I hold that the Council owed to Ms Buchanan and Mr Marshall a duty to undertake the 2009 and 2012 pool inspections with reasonable skill and care, which it breached. It is also liable for the associated negligent misstatements. But the Council did not owe an additional statutory duty to Ms Buchanan and Mr Marshall under s 10 of the FOSPA, for which they could sue in tort. Relief for the 2009 pool inspection is barred by the long stop time bar in s 393 of the Building Act 2004. But the claim based on the 2012 pool inspection is not time barred by the Building Act or the Limitation Act 2010. Ms Buchanan and Mr Marshall are awarded damages of some
$270,000, including $25,000 general damages, plus interest and costs. A declaration is made about the Council’s negligence. There was no contributory negligence.
What happened?
The property and pool
[3] In 2006, an innovative house, studio, garage, and swimming pool was constructed on a 2.9 hectare lifestyle block at 1373 Eighty Eight Valley Road, Wakefield. It was designed by Glennie Architects and built by Ian McCully Builders
Ltd. It was a Local Category Winner in the Master Builders House of the Year Gold Awards 2007. In the 2007 New Zealand Institute of Architects Architecture Awards it won an award in the Nelson Marlborough Residential Category and a Resene Colour Award. The house and studio are oriented around the pool in a central courtyard, as depicted in Photograph 1 below.1
Photograph 1: Pool as inspected three times
Consent, Code Compliance Certificate and two inspections
[4] The Council issued a building consent for the house and pool on 13 September 2004. It conducted inspections of the house and the pool during construction on 27 and 30 June 2006. The Council carried out its final inspection of the building work on the house and pool on 10 October 2006 and issued the CCC on 19 October 2006.
[5] In August 2008, Mr Marshall was appointed to the position of Chief Executive of Nelson City Council, having previously held chief executive positions at other councils. He and his wife, Ms Buchanan, who used to work for a large New Zealand
1 There is a further large hedge behind the vantage point from where the photograph was taken.
corporate organisation, looked for a property to buy. In September 2008, Ms Buchanan and Mr Marshall (as trustees of the Buchanan Marshall Family Trust) agreed to purchase the property for $780,000, with settlement in October 2008. Prior to the purchase, they sighted the CCC. Mr Marshall and Ms Buchanan’s evidence is that provided all they needed to proceed with the purchase. But for the CCC, they would not have purchased the property, including for Mr Marshall’s reputational reasons.
[6] In May 2009, the Council required the pool to be registered. Ms Buchanan filled out a form for that purpose. She did not check one of the boxes under the heading “immediate pool area” and she ticked “yes” to indicate the pool had gates that were “self-closing and self-latching”. When doing so, her evidence is that she did not turn her mind to the FOSPA.2
[7] The Council conducted further inspections of the pool on 4 August 2009 and 24 January 2012. On both occasions, the inspector examined the locking and latching mechanisms on the doors and advised Ms Buchanan that the pool and fence complied with the law. The checklist attached to the 2012 inspection ticked “yes” in relation to a 1.2m high fence, the gates being self-closing and self-latching, and any door having a locking device preventing it being readily opened by children under six.
The third inspection and non-compliance
[8] In 2019, Ms Buchanan and Mr Marshall decided to sell the house to buy something smaller in preparation for retirement. They advertised the property for sale. The pool, and the gates and doors that lead to it, had not changed in any material way during their ownership.
[9] On 13 November 2019, having seen the property advertised for sale, the Council conducted a further inspection. To Ms Buchanan’s surprise, the inspector advised her that the pool had failed the inspection because the doors were not self- closing or alarmed, and the east gate in the side fence did not self-close. Ms Buchanan
2 Notes of Evidence (NOE) at 18/6–7.
and Mr Marshall’s uncontradicted evidence is that the east gate is wedged tightly shut and cannot be practically opened from the outside.3
[10] That evening Ms Buchanan and Mr Marshall emailed the Council challenging its preliminary view of non-compliance. On 14 November 2019, the Council sent them a letter advising the property was not compliant with ss 162A to 162E of the Building Act, which had come into force on 1 January 2017, because the pool barrier was non-compliant. The letter attached an email that was sent the same day, advising that the failed items were that the doors opening into the pool area from the house, studio and garage did not self-close/self-latch and the east gate did not self-close/self- latch. There was no mention of alarms, which was wrongly identified as a problem by the inspector, in the letter or email.4 The Council accepts it did not pick up on the issue of the immediate pool area needing to be fenced, that was subsequently identified by the Ministry of Business, Innovation and Employment (MBIE)
[11] Mr Marshall and Ms Buchanan took the property off the market. On 11 December 2019, they challenged the Council’s decision by seeking a formal determination from MBIE under s 177 of the Building Act. In the first half of 2020, Ms Buchanan and Mr Marshall commissioned costings of remedial solutions.
[12] On 16 December 2020, MBIE issued its draft determination.5 It concluded that the pool must, but did not, comply with the requirements to have self-locking or self- closing doors or to have a physical barrier that restricts access to the pool by unsupervised children under five. It also determined, following the High Court judgment of Waitakere City Council v Hickman, that the pool fencing was not compliant with the current Building Code and Act, had not complied with the Building Code in force at the time of construction, did not comply with the FOSPA at the time
3 NOE at 15/12–17 (Ms Buchanan) and 28/23–29/7 (Mr Marshall).
4 Alarms are only required if there is a door in a building wall that provides access to the immediate pool area when the door does not have a self-closing device. These doors must also be single leaf, no more than 1000mm in width, and hinged or sliding: see Building Act 2004, sch 1 F9.3.4; and Ministry of Business, Innovation and Employment Acceptable Solutions F9/AS1 and F9/AS2: For New Zealand Building Code Clause F9 Means of Restricting Access to Residential Pools (22 April 2017) at [4.2.1] and [4.2.2].
5 Ministry of Business, Innovation and Employment Draft Determination 3209: Regarding the compliance of an existing pool barrier at Eighty Eight Valley Road, Wakefield (16 December 2020) [Draft Determination]
of construction, and had not been exempted from the requirements of the FOSPA.6 This is not disputed.
[13] On 23 December 2020, Ms Buchanan and Mr Marshall issued proceedings against the Council. On 19 July 2021, MBIE issued its final determination which confirmed its draft determination.
[14] In September 2021, the Council issued two Notices to Fix, requiring a temporary fence by 12 October 2021 and permanent barrier by 1 December 2021. Ms Buchanan and Mr Marshall challenged those notices with MBIE. MBIE’s draft determination found the notices were correctly issued. It also noted Ms Buchanan and Mr Marshall were not responsible in any way for carrying out the original building work or actively contributing to its non-compliance. There had been no final determination by the date of the trial of these proceedings.
Photograph 2: Pool with compliant barrier
6 At 19–20 citing Waitakere City Council v Hickman [2005] NZRMA 204 (HC) at [26]–[29].
[15] In December 2021, Ms Buchanan and Mr Marshall applied for a building consent for remediation which was installed in 2022, as depicted in Photograph 2. It passed its final inspection and was issued a CCC in June 2022. Ms Buchanan and Mr Marshall say the required remediation has destroyed the central design feature of the house by interposing a reflective box-like structure into the central courtyard, ruining the character of the property.
Further effects
[16] In 2021, Ms Buchanan and Mr Marshall gathered information from the Council and 66 other councils around New Zealand about their pool inspection regimes and issued a report about the data. Among other things, the data shows that, from 2014 to 2016, 18 of 34 pools failed inspections conducted by this Council. From 2017 to 2019, when three-yearly inspections by councils were required, 40 of 156 pools failed inspections by this Council; 27 of which had previously passed.
[17] Ms Buchanan and Mr Marshall say the whole experience has drastically affected their emotional well-being. Mr Marshall has found the process since November 2019 “crushing to my sense of public service” and believes the Council’s actions have broken the spirit of Ms Buchanan. Mr Marshall seeks some public accountability of the Council despite believing that, consequently, no other council will likely employ him as a chief executive again. He has had to take full-time contract work, which involves him living away from home. Ms Buchanan suffers from a long- term health issue. She has found the process incredibly stressful and has worried herself sick, resulting in significant mental health issues as well.
The proceedings
[18] It is common ground that the Council owed Ms Buchanan and Mr Marshall a duty of care in issuing the building consent in 2004 and the CCC in 2006, which it breached. It is also common ground that recovery for that negligence is time barred.
[19] Instead, Ms Buchanan and Mr Marshall sue the Council in respect of the 2009 and 2012 pool inspections for negligence, negligent misstatement, and breach of a statutory duty under s 10 of the FOSPA. They claim that those inspections caused
them to lose the opportunity to sue the Council for the negligent issuing of the building consent and the CCC. Ms Buchanan and Mr Marshall seek special damages for the loss of the opportunity to sue for the negligently issued CCC, general damages, interest, costs, and a declaration.
[20] Mr Waalkens, for the Council, indicated in cross-examination of Ms Buchanan that the Council apologises and acknowledges what she has been through as a result of the Council incorrectly issuing the consent and CCC.7 He made the same acknowledgement to Mr Marshall.8 Mr Ryno Botha, a Council witness, indicates the Council is regretful and appreciates that the requirement has caused them distress.9 But the Council defends what it says is an interesting but weak legal claim, on the basis it owed no duty of care to protect the economic interests of Ms Buchanan and Mr Marshall in its inspections under the FOSPA and, in any case, the claims are time- barred. It disputes the claimed quantum of damages and pleads contributory negligence.
[21]The trial was held in Nelson over three days. I heard the evidence of:
(a)Ms Buchanan, Mr Marshall, and their expert valuer Mr John Hancock; and
(b)Mr Botha, the Team Leader, Building Compliance at the Council, and the Council’s expert valuer, Mr Rod Baxendine.
Issues
[22]I examine the issues in the following order:
(a)issue 1: whether the Council owed and breached a duty of care to Ms Buchanan and Mr Marshall in inspecting the pool in 2009 and 2012;
7 NOE at 11/25–12/1.
8 NOE at 28/13–18.
9 Brief of Evidence of Ryno Botha, signed 26 July 2022, at [81].
(b)issue 2: whether the requirements of negligent misstatement regarding the results of the pool inspections are satisfied here;
(c)issue 3: whether the Council is liable for breach of statutory duty;
(d)issue 4: whether the claims are time-barred;
(e)issue 5: whether the damage from loss of opportunity was too remote, what the loss was, and what relief should be granted; and
(f)issue 6: whether there was contributory negligence.
Issue 1: Duty and breach in negligence
[23] A key issue in considering whether the Council was negligent is whether the Council owed a duty of care to Ms Buchanan and Mr Marshall to use reasonable skill and care in inspecting their pool under the FOSPA in 2009 and 2012. This is apparently the first occasion on which such a duty of care has been litigated in New Zealand.
[24] There was little disagreement between the parties about the law. In North Shore City Council v Attorney-General [The Grange], the Supreme Court set out the approach to analysing a novel duty of care.10 I follow the steps set out there, which involve examining:
(a)whether the defendant owes a duty of care to the plaintiff in terms of:
(i)whether, as a screening mechanism, the court is satisfied the loss was a reasonably foreseeable consequence of the defendant’s act or omission;11
10 North Shore City Council v Attorney-General [2012] NZSC 49, [2012] 3 NZLR 341 [The Grange] at [157]–[158]. The Court applied the same approach in Body Corporate No 207624 v North Shore City Council [2012] NZSC 83, [2013] 2 NZLR 297 at [220] [Spencer on Byron] and again in Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [14].
11 In Spencer on Byron at [157], the Court says “the plaintiff’s act or omission” which must been meant to be “the defendant’s act or omission”.
(ii)whether the foreseeable loss occurred within a relationship between the parties that was sufficiently proximate; and
(iii)whether factors external to the relationship would mean it is not fair, just and reasonable to impose the duty of care on the defendant.
[25]I note the general observation of the majority in The Grange that:12
The important insight found in Canadian and New Zealand cases is that when a court is considering foreseeability and proximity, it is concerned with everything bearing upon the relationship between the parties and that, when it moves to whether there are policy features pointing against the existence of a duty of care – that is, whether it is fair, just and reasonable to impose a duty – the court is concerned with externalities – the effect on non-parties and on the structure of the law and on society generally. But, as already remarked, aspects of some matters may require to be considered more than once.
[26] The Court also endorsed Lord Cooke’s precept that such an approach “is only a framework”, the formulation of which “should not matter in the end” since “[f]ormulae can help to organise thinking but they cannot provide answers”.13 In other words, “this approach is a framework, rather than a straitjacket”.14
The Fencing of Swimming Pools Act 1987 context
[27] The pleaded duty of care derives from the Council’s obligations under s 10 of the FOSPA. The context of the Council’s exercise of its powers and functions under that Act is therefore important.
[28] From 1979, territorial authorities were statutorily empowered to enact by-laws to require pool fencing.15 The FOSPA was enacted in 1987. Relevantly:
12 The Grange, above n 10, at [156].
13 At [149] and [161] (per Blanchard, McGrath and William Young JJ) and at [26] (per Elias CJ), citing South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282 (CA) at 294(i). The Court further reiterated this point in Spencer on Byron, above n 10, at [184].
14 Carter Holt Harvey Ltd v Minister of Education, above n 10, at [14].
15 Local Government Amendment Act 1979, s 684(34). See also Local Government Amendment Bill 1979 (30-1) (Explanatory Note) at xviii, where it states powers to create bylaws in relation to fencing or covering or other protection of swimming pools is new.
(a)The long title provided that its purpose is “to promote the safety of young children by requiring the fencing of certain swimming pools”.
(b)Section 8 placed an obligation on pool owners to ensure that their pool is fenced consistently with the requirements of the Schedule.
(c)Section 10 required:
10 Obligation of territorial authorities
Every territorial authority shall take all reasonable steps to ensure that this Act is complied with within its district.
(d)Section 11 conferred powers of entry to properties, stating that territorial authority officers may:
… at any reasonable time enter on the land and carry out an inspection to determine whether or not there is on the land such a pool that is not fenced as required by this Act, or whether or not the condition is being complied with.
[29]When the Building Act 1991 was passed, the FOSPA was amended:
(a)To provide, in s 7, for notification of the existence of pools to the territorial authority, and to deem an application for a building consent to be a notification.
(b)To require, in s 8, that pool owners’ obligation was to ensure consistency with the Building Code. Section 8(1) (as subsequently amended) provided:
(1)Every owner of a pool to which this Act applies shall ensure that, except as provided in any exemption granted under section 6, the pool, or some or all of the immediate pool area including all of the pool, is fenced by a fence that complies with the requirements of the building code in force under the Building Act 2004 in respect of swimming pools subject to this Act at all times when this Act applies in respect of the pool.
(c)To require all pool fences to comply with the Building Code. The Schedule provides for means of compliance for fences under the Act
which, under s 13B, must be treated as an acceptable solution or verification method establishing compliance with the Building Code for the purposes of s 19 of the Building Act, and the requirements of the FOSPA.
[30] In 2004, in Waitakere City Council v Hickman, Randerson J affirmed that the purpose of the FOSPA was, as set out in the long title, to promote the safety of young children.16 That case dealt with an application for a declaratory judgment about the meaning of the “immediate pool area” in the FOSPA and the requirements of the FOSPA relating to doors providing access to a pool from a building. In clarifying these requirements, the Judge observed that there was a most unsatisfactory inconsistency between the schedule to the FOSPA and the separate provisions of the building code, which added to the confusion surrounding the application of the FOSPA.17
[31] The Building Act 2004 made further consequential amendments to those provisions. The FOSPA was repealed by the Building (Pools Amendment) Act 2016 and the regulatory requirements for pools were incorporated into subpart 7A of part 2 of the Building Act 2004. Relevant provisions in that and other parts make more explicit, but do not materially change the regulatory regime:
(a)Section 8(1)(b)(ii) defines “building” to include “any means of restricting or preventing access to a residential pool”.
(b)Section 162A provides that the purpose of the subpart “is to prevent drowning of, and injury to, young children by restricting unsupervised access to residential pools by children under 5 years of age”.
(c)Section 162C requires every pool, which is at least partly filled with water, to have physical barriers that restrict access to the pool by such children, and requires the means of restricting access to comply with the requirements of the building code that:
16 Waitakere City Council v Hickman [2005] NZRMA 204 (HC) at [36].
17 At [50].
(i)are in force; or
(ii)were in force when the pool was constructed and in respect of which a building consent or code compliance certificate was issued.
(d)Section 162D requires territorial authorities to ensure residential pools are inspected at least once every three years “to determine whether the pool has barriers that comply with the requirements of s 162C”. Councils are empowered to accept certificates of periodic inspection from an independently qualified pool inspector for that purpose.
(e)Section 222(1)(a) authorises inspections by territorial authorities of building work, buildings and “any residential pool (or the immediate pool area)” and s 222(1)(c) authorises authorised officers of a territorial authority to enter premises for the purpose of determining whether s 162C is being complied with. Inspection is defined specifically by s 222(4)(a)(iia) to include taking all reasonable steps to determine whether s 162C is being complied with.
(f)Section 391 continues the effect of s 90 of the 1991 Act that “[a]ny civil proceedings against a building consent authority in respect of the performance of its statutory function in issuing a building consent or a code compliance certificate must be brought in tort and not in contract”.18
Was it reasonably foreseeable that a negligent pool inspection would cause loss?
[32]In The Grange, Blanchard J for the majority stated: 19
Foreseeability is in such novel cases at best a screening mechanism, to exclude claims which must obviously fail because no reasonable person in the shoes of the defendant would have foreseen the loss. The law would then regard the
18 The 1991 Act applied to building certifiers. The 2004 Act was enacted in the context of the finding of council liability for negligent inspections in Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC).
19 The Grange, above n 10, at [156].
loss as such an unlikely result of the plaintiff’s act or omission that it would not be fair to impose liability even if that act or omission were actually a cause, or even the sole cause, of the loss.
[33] Mr Shaw, for Ms Buchanan and Mr Marshall, submits that it was a natural and foreseeable consequence of the negligent inspections in 2009 and 2012 that they would be misled or otherwise prevented from understanding that their property was not compliant with the Building Code, which would inevitably give rise to causes of action against the responsible parties.
[34] Mr Waalkens, for the Council, accepts that under s 10 of the FOSPA it has a duty to take reasonable steps to promote the safety of young children, but submits it does not owe a duty of care to Ms Buchanan and Mr Marshall to protect their economic interests or protect them from financial loss in carrying out pool barrier inspections under the FOSPA. Financial loss is a foreseeable result of damage due to a consent or CCC being issued when it should not have been. But the foreseeable loss of a failed pool inspection is not financial loss to the pool owner but risk of harm to a young child who could gain unsupervised access to the pool.
[35] I accept it is reasonably foreseeable that, if the Council undertook the 2009 and 2012 pool inspections negligently and advised them the pool complied with the Building Code and the FOSPA, Ms Buchanan and Mr Marshall would be unaware that the pool did not comply and would not take action to seek redress for any loss they suffered thereby:
(a)The consent plans were required to meet the Building Code at the time of consent. The Council is required by s 94 of the Building Act 2004 to issue a CCC if it is satisfied, on reasonable grounds, that the building work complies with the building consent.
(b)The purpose of Council inspections of pools is to ensure that the pool and its fencing comply with the requirements of the FOSPA and the Building Code on an ongoing basis. As is now made explicit by s 222(4)(a)(iia) inspection is defined to include taking all reasonable steps to determine whether the pool barrier complies with the building
code. As the Council also knows, the ultimate policy objective of that regulatory regime is safety, particularly the safety of children who may otherwise access a pool without supervision and drown.
(c)A pool that does not comply with the regime must be remediated so that it does comply. Remediation costs money. It is reasonably foreseeable, including by the Council, that remediation of a non-compliant pool barrier could affect a property’s amenity value, particularly where the house has been designed around the pool. That would affect the economic value of a property that had been constructed on the basis of a non-complying design.
(d)Under the current regulatory regime, Parliament has given to territorial authorities the role of checking that regulatory requirements are satisfied at the design stage, through the building consent requirement, at the construction stage, and through the CCC requirement. Where a Council inspects a pool after construction, it does so to ensure the regulatory requirements are satisfied on an ongoing basis. The Council knows this too. There may have been some change to the pool or to its barriers after construction that makes the pool non-compliant. Or it may be that the pool had never been compliant. Either way, it is reasonably foreseeable, and statutorily required, that the Council will identify non-compliance with the regulatory standards through a pool inspection. That is the point of a pool inspection under the law.
(e)It is reasonably foreseeable that, if a Council’s pool inspection does not reveal that the original design of a pool within a property breached regulatory requirements, the property owner would not be aware of the breach, would not remediate the breach, and would not take steps are available at that time to seek any redress available in that regard. It is reasonably foreseeable that the property owner would rely on the advice of the Council following a pool inspection without independent inquiry. It is further reasonably foreseeable that, if Council inspections continue not to reveal the breach until after a limitation period has
expired, the property owner will lose the opportunity to seek any such redress and would suffer loss accordingly.
Was the relationship sufficiently proximate?
[36] In The Grange, in relation to the approach by which a novel duty of care is established, the majority stated:
[158] Assuming foreseeability is established in a novel situation, the court must then address the more difficult question of whether the foreseeable loss occurred within a relationship that was sufficiently proximate. This is usually the hardest part of the inquiry, for as Lord Bingham said in Customs and Excise Commissioners v Barclays Bank plc, the concept of proximity is “notoriously elusive”.20 He was speaking of claims for economic loss but, in New Zealand at least, because of our no-fault accident compensation scheme, the majority of novel claims are of this character and those that are not will be sufficiently unusual as to raise comparable difficulties. Lord Oliver said in Alcock v Chief Constable of South Yorkshire that the concept of proximity is an artificial one which depends more on the court’s perception of what is a reasonable area for the imposition of liability than upon any logical process of analogical deduction.21 An examination of proximity requires the court to consider the closeness of the connection between the parties. It is, to paraphrase Professor Todd,22 a means of identifying whether the defendant was someone most appropriately placed to take care in the avoidance of damage to the plaintiff.
[159] Richardson J has observed that the concept of proximity enables the balancing of the moral claims of the parties: the plaintiff’s claim for compensation for avoidable harm and the defendant’s claim to be protected from an undue burden of legal responsibility.23 A particular concern will be whether a finding of liability will create disproportion between the defendant’s carelessness and the actual form of loss suffered by the plaintiff. Another concern is whether it will expose the defendant and others in the position of the defendant to an indeterminate liability. The latter consideration may, however, be better examined at the second stage of the inquiry: whether the finding of a duty of care will lead to similar claims from other persons who have suffered, or will in the future suffer, losses of the same kind, but who may not presently be able to be identified.
[37] By way of legal context, in 1995 in Hamlin v Invercargill City Council, the Judicial Committee of the Privy Council confirmed that, for 20 years, a line of New Zealand cases had imposed a duty of care on councils to ensure compliance with local by-laws in undertaking inspections of residential construction, on which purchasers
20 Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181 (HL) at [15].
21 Alcock v Chief Constable of South Yorkshire [1992] 1 AC 310 (HL) at 411.
22 Stephen Todd (ed) Law of Torts in New Zealand (5th ed, Brookers, Wellington, 2009) [Todd on Torts] at 143.
23 Fleming v Securities Commission [1995] 2 NZLR 514 (CA) at 532.
rely.24 The Committee noted a number of provisions of the Building Act 1991 clearly envisaged that private law claims for damages against local authorities will continue to be made as before.25 In particular s 90 provided that civil proceedings against a building certifier in relation to a CCC were to be brought in tort and not in contract.
[38] In 2012, the Supreme Court in The Grange examined whether the Building Industry Authority (BIA) owed a duty of care to local authorities. A majority considered the BIA’s statutory functions and responsibilities and concluded:26
… neither expressly nor by implication did the Act place upon the BIA a duty of care when advising the Council concerning its building control systems by way of a report following its review, and thereby to protect the Council from the consequences of its own neglect”.
[39] The majority observed that, while the BIA had a review function to inform itself about a territorial authority’s performance, it had no general function to monitor authorities.27 Territorial authorities had primary responsibility to administer the Building Act and enforce the Building Code. They also had a statutory duty to gather such information and commission such research as was necessary to carry out their functions effectively. The BIA did not have any direct power of correction of an authority nor any comparable duty.28 The Court also noted that four further features counted against the existence of the asserted duty of care on the part of the BIA arising from the Act:
(1)the lack of any provision giving it an ability to exercise control over the day-to-day operations of the territorial authorities;
(2)its separation from the events which gave rise to the loss suffered by the Council;
(3)that the Council had, or should have had, the ability to manage its building control systems so as to prevent the construction of non- compliant buildings, and so was not a vulnerable person; and
(4)that the Council’s loss resulted from its own negligent failure to do so.
[40]Mr Shaw submits:
24 Invercargill City Council v Hamlin, above n 18, at 521.
25 At 522.
26 The Grange, above n 10, at [186].
27 At [171]–[173].
28 At [174]–[175].
(a)There is a relationship between Ms Buchanan and Mr Marshall and the Council of such closeness that the Council must be under an obligation to be mindful of their interests when conducting its affairs. New Zealand social mores and the common law demand the same.
(b)The FOSPA is materially the same as the regime for residential construction which supports common law duties on all territorial authorities to take reasonable skill and care when carrying out inspections for compliance. From Hamlin to The Grange, the duty of care owed by territorial authorities arose by an assumption of responsibility on their part for consenting and inspection of building work. The New Zealand public put their faith in territorial authorities to perform that function with all reasonable care and skill and consequently they are liable for economic loss flowing from breach of their duties. The FOSPA was simply another mechanism by which authorities assumed responsibility.
(c)The Council exercised their powers of entry under s 11 of the FOSPA to enter into the property for the express purpose of determining compliance with the Building Code. The Council had the powers to ensure compliance and the duty under s 10 to do so. This is materially the same as the power and responsibility a territorial authority has under the Building Act 1991 or Building Act 2004 to ensure compliance with the Building Code. The statements made by the Council officers assumes responsibility for communicating advice and indicates the close proximity of the relationship.
(d)It could not reasonably be said that pool owners must second guess the statutorily empowered expert territorial authority. The fact councils could not contract a private pool inspector before 2017 strongly supports the notion that territorial authorities were best and only placed to conduct these inspections, subject only to an MBIE determination.
[41]Mr Waalkens submits:
(a)The Hamlin line of authorities does not apply. Hamlin dealt with buildings, not pool barriers or fences inspected under the FOSPA. The purposes of the Building Act are to ensure people who use buildings can do so safely and to promote the accountability of owners, consent authorities, and others who have responsibilities for ensuring building work complies with the Building Code. The FOSPA has one single, entirely different purpose, to promote the safety of young children by requiring the fencing of certain swimming pools, which places pool owners at the centre of being responsible for compliance.
(b)A Council wears multiple hats, enforcing and prosecuting as well as undertaking building consent functions. Its role during a construction process involves multiple inspections for many hours against the consented plans. Its regulatory and compliance role under the FOSPA differs substantially, being very confined to taking reasonable steps to ensure owners comply with their obligations. Its level of control is entirely different with powers being very limited to take enforcement and regulatory action. There is no evidence s 11 powers of entry were used here.
(c)The pool owners here were not charged a fee by the Council for the inspections and there is no public expectation to sue councils in relation to inspections, which were not then legislatively required and were limited in scope and purpose. Homeowners have day-to-day control over pool barriers, which can change quite easily over time. Parliament not extending the s 393 long-stop limitation period for building work to pools indicates that civil proceedings over pool inspections were not anticipated. Homeowners are not as vulnerable in relation to pool fences which are open and available to inspect, as they are in checking aspects of buildings which are covered up.
[42] As the Supreme Court said in The Grange, the economic aspect of the foreseeable loss that occurred within the relationship here is not sufficiently unusual
to raise difficulties in New Zealand.29 Councils routinely bear liability for economic loss in relation to their role in regulating residential construction. Defects during the construction process of a residential home that are contrary to regulatory requirements may not be obvious to homeowners because they are defects that only become apparent after some time or because it is technically difficult to establish that they do not comply with the requirements. Either causes information asymmetries to the disadvantage of the homeowner. When such defects are discovered, they can cause serious economic loss to whoever happens to be the property owner, by requiring expensive remediation which is then priced into the market value of the property until it is undertaken. Architects and builders at the time of construction can mitigate this risk but have clear incentives not always to do so.
[43] The regulatory regime of the Building Act recognises and requires that territorial authorities are in the best independent position to mitigate this risk, by approving design plans before construction, by inspecting construction as it occurs, and by certifying immediately after construction is finished that it complies with the relevant regulatory standards. Accordingly, tort law assigns liability for negligent construction of residential houses to those best able to mitigate that risk: to the builders, architects, and the territorial authorities exercising their independent regulatory role. As the Privy Council emphasised in Hamlin, New Zealand homeowners rely on territorial authorities’ control over construction defects and liability is imposed on them accordingly.30
[44] The issue here is whether the relationship between a territorial authority and a pool owner is similarly sufficiently proximate when territorial authorities undertook ongoing pool inspections after construction of a pool for consistency with the FOSPA and the Building Code it invoked. Section 8 of the FOSPA placed a statutory obligation on pool owners to ensure their pool is fenced in compliance with the Building Code. Section 10 placed a statutory obligation on territorial authorities to take all reasonable steps to ensure the Act is complied with and empowered it to conduct inspections. That effectively required territorial authorities to conduct inspections as part of their reasonable steps to ensure compliance with the Act. The
29 The Grange, above n 10, at [158].
30 Invercargill City Council v Hamlin, above n 18, at 517–522.
Council here may not have been required to conduct these particular inspections, as Mr Shaw acknowledges. But, once a territorial authority conducts an inspection, he submits that, on the basis of s 10, tort law should impose liability on the Council if the inspections were not conducted with reasonable skill and care. Should territorial authorities bear that risk?
[45] As noted above, non-compliance of pool barriers with regulatory requirements can arise in two ways. Pool barriers may not be compliant when the pool was originally designed and constructed. Or pool barriers may have been originally compliant and become non-compliant due to some change made to them after construction. The former risk is mitigated by territorial authorities’ role in approving designs, inspecting construction, and certifying compliance on completion. The latter risk is mitigated by territorial authorities’ power inspect pools from time to time – now explicitly required by statute every three years.
[46] It is not much of a stretch to find that territorial authorities’ required regulatory role during the design and construction of a pool, like a residential house, puts them in the best position to independently check that pool barriers comply with the relevant regulatory requirements. A pool is now explicitly defined to be a building. An inspection involves determining whether the building code is being complied with, as is now made explicit by s 222(4)(a)(iia). The policy rationale for territorial authorities having a duty to subsequent pool owners to take reasonable skill and care, in issuing building consents and CCCs about the compliance of pools with the Building Code when they are designed and constructed, is materially similar to issuing the same instruments about the compliance of residential houses with the Building Code. The proximity of the relationship between territorial authority and pool owner is similar.
[47] It is a slightly longer stretch to find that territorial authorities’ regulatory role of inspecting pools, to ensure that changes have not been made to pool barriers after construction, puts them in a similarly proximate relationship with pool owners. Those pool owners may themselves have made the changes that result in non-compliance. It could be argued that the pool owners who made those changes should bear that risk alone, rather than territorial authorities sharing it. But it is also arguable that a
subsequent pool owner should be able to rely on the results of a pool inspection that a territorial authority that has conducted.
[48] Where a pool inspection has been conducted, the Council is in the best independent position to assure a subsequent pool owner that the pool complies with regulatory standards, for whatever reason. Where the apparently expert determination of the Council is that a pool barrier complies with the building code, a subsequent pool owner cannot reasonably be expected to be required to go behind that determination to establish the matter independently. The pool owner relies on what the Council tells them as a result of a pool inspection. That suggests territorial authorities should bear the risk of non-compliance (as well as any previous pool owner who made a non- complying change). They should therefore be subject to a duty of care to conduct pool inspections with reasonable skill and care. In practice, remediation of most changes to pool barriers that cause regulatory non-compliance is not usually likely to be expensive so the issue is unlikely to be tested in court – as it appears not to have been to date in New Zealand.
[49] This not a case where a pool inspection failed to identify a change made to a pool barrier that was originally compliant. Here, the 2009 and 2012 pool inspections failed to identify that the pool barrier, which had been thought originally to be compliant, was not and never had been compliant with the Building Code and the FOSPA. This is a direct extension of a territorial authority’s original regulatory role in approving, inspecting, and certifying compliance during construction. Pool inspections may be required on an ongoing basis because of the risk of changes to pool barriers. But it is an inherent part of such an inspection against regulatory standards that compliance with the original design and construction are also at issue, as now explicitly stated in ss 222 and 162C.
[50] Having inspected a pool again, the Council is in the best position to act as an independent check on the compliance of the design and construction of a pool with the regulatory requirements against which it routinely assesses design and construction of pools. The pool owner relies on that. The fact this ongoing risk is the same that the Council was originally required to mitigate highlights that the Council should bear the same legal duties and liabilities that it did originally. Liability will not create
disproportion between the Council’s carelessness and the loss suffered, any more than it would in relation to inspection during the original construction.
[51] The Council can reasonably be expected, by virtue of its statutory functions and powers, and likely experience and resources, to be more expert than a homeowner in determining whether a pool barrier complies with the Building Code. The requirements can be technically complex. Here, the requirements regarding doors and locks do not appear particularly complex. But the requirement regarding fencing of the immediate pool area was not obvious, including to the Council in its 2019 inspection. The technical difficulty of the requirements is illustrated by the need for the declaratory judgment from the High Court in Waitakere City Council v Hickman about both of these two sets of requirements.
[52] I conclude that the proximity of territorial authorities and pool owners regarding inspections of pools, to determine their compliance with regulatory requirements, is similar enough to their proximity to determine the compliance of residential buildings with regulatory requirements to justify the same duty of care. The pool owners rely on the authorities to inspect with reasonable skill and care. An authority has powers under the FOSPA to enter the property and to require the pool owner to comply with the regulatory regime. The Council did that here by issuing notices to fix with potential criminal liability. That gives them sufficient control to require pool owners’ compliance, in the same way as they can enforce regulatory compliance in relation to construction of houses.
[53]I do not accept the Council’s submissions to the contrary. In particular:
(a)The Council’s attempt to minimise their regulatory powers in relation to pools is misplaced. Ms Buchanan and Mr Marshall could not reasonably be expected to have the expertise that the Council could reasonably be expected to have. I do not consider Mr Marshall’s occupation as a council manager (not a pool inspector), changes that.
(b)Pools and pool fencing that are constructed as part of a new build of a residential house are consented, inspected, and a CCC issued in the
same way and at the same time is the construction of the house. Ongoing pool inspections check whether the pool and pool barriers continue to comply with the same standards, whether any breaches arose at the time of construction or subsequently. I do not accept the Council’s submission that the purposes of the Building Act are materially different from the purposes of the FOSPA. Both Acts create mandatory regulatory regimes over built structures in the interests of safety. Non-compliance with either can, reasonably foreseeably, lead to economic loss on the part of the affected property owner. The similarity of the regimes is reflected by the fact that Parliament has now combined them in one Act.
(c)I do not consider the fact that the Council did not charge a fee for their pool inspections materially diminishes their proximity. As a result of the 2009 and 2012 inspections, the Council specifically advised Ms Buchanan and Mr Marshall that their pool and fence complied with the regulatory requirements. While a charge may reinforce proximity, it is the Council’s inspection of the pool and advice to Ms Buchanan and Mr Marshall of the results of the inspection that create the proximity.
Is it fair, just and reasonable to impose the duty on the Council?
[54]In The Grange, the majority stated:
[160] In a relatively small number of cases, at the final stage of the inquiry the court will find no duty of care exists notwithstanding that the loss was foreseeable and the relationship sufficiently proximate. It will do so because a factor or factors external to that relationship (perhaps indeterminate liability) would make it not fair, just and reasonable to impose the claimed duty of care on the defendant. At this last stage of the inquiry the court looks beyond the parties and assesses any wider effects of its decision on society and on the law generally. Issues such as the capacity of each party to insure against the liability, the likely behaviour of other potential defendants in reaction to the decision, and the consistency of imposition of liability with the legal system more generally may arise.
[55] Mr Shaw submits the duty of care here must be dealt with on the same basis as the building inspector cases. As they hold, it is not against public policy to hold territorial authorities liable for negligent inspections. The law cannot expect laypeople
to question the statements of a territorial authority on the legality of matters over which they have oversight, otherwise the floodgates of MBIE determinations would be released. Under the FOSPA, the Council had total control over the timing, duration, and number of its inspections and over its inspectors. It could insure itself for departures from standards so is not economically burdened such that the Court should interfere with its duties. The Council can determine what statements it makes to the pool owners as a result of an inspection. The duty is owed to an extremely limited class of person, substantially less than the building inspection duties.
[56] Mr Waalkens submits it is important that homeowners, who have day-to-day control over their pool safety measures, have an obligation to comply to ensure the safety of the pool. If they abrogate their responsibility, and rely on periodic but infrequent council inspections, there is a real risk that unsafe barriers will be left in place for extended periods of time, contrary to the public interest in promoting child safety, and disincentivising councils to conduct inspections under the FOSPA. Extending a duty of care to avoid economic loss to owners to pool fencing inspections would create too high a burden on councils and significantly increase costs which would have to be passed on.
[57] I do not consider this is one of the relatively small number of cases where no duty of care should exist notwithstanding that the loss was foreseeable and the relationship sufficiently proximate. Liability is not indeterminate. It is only owed to pool owners, who may often not find it worth it to take proceedings. Territorial authorities have the means to ensure they discharge their statutory obligation to inspect pools with reasonable skill and care. The existence of such a duty on territorial authorities does not obviate the statutory obligation on pool owners to ensure their pools comply with the building code. Pool owners continue to have a legal duty to ensure the pool barriers comply. But the duty of care of territorial authorities, reflecting their statutory functions, powers, and duties, reinforces the ability of pool owners to discharge their obligations by increasing the likelihood pool owners get correct information on the basis of which to do so.
[58] I do not accept territorial authorities will be disincentivised to conduct pool inspections. They now have a statutory duty to do so every three years. And if their
inspections are more focussed on being accurate that may make up for any reduction in quantity of inspections. Placing the duty of care on the territorial authorities ensures the body with the most expertise and information about pool inspections has the incentives to carry them out with reasonable skill and care by ensuring they bear the costs of not doing so.
Did the Council breach the duty?
[59] The Council accepts it breached its duty of care in issuing the building consent in 2004 and the CCC in 2006 and it would have been liable in negligence but for the time-bar canvassed below. Ms Buchanan and Mr Marshall accept that, if the Council had not elected to inspect the pool in 2009 and 2012, it would not have breached its duty of care to them to conduct those inspections with reasonable skill and care. But it did conduct the inspections.
[60] Sensibly, the Council does not really challenge the proposition that, if it had a duty of care in conducting those inspections, it breached the duty. It would be difficult for it to do so when it argues that it should have been patently obvious to Ms Buchanan and Mr Marshall that the doors and gates were non-compliant. It did not identify that in its inspections in 2009 or 2012. It did not identify that a fence was required in any of its inspections, including the 2019 inspection. The Council did not take reasonable skill and care in conducting its inspections of the pool and fence of Ms Buchanan and Mr Marshall in 2009 and 2012.
Issue 2: Negligent misstatement
[61] In relation to negligent misstatement, as I stated in Cygnet Farms Ltd v ANZ Bank New Zealand Ltd:31
[77] I consider negligent misstatement is an example of a duty of care imposed by the law of negligence on particular relationships involving statements by one party to another. Conceptually, such a duty fits within the general law of negligence and is encompassed by the Supreme Court’s framework in The Grange. Other sorts of statements may also attract the imposition of a duty of care by the law of negligence in the right circumstances using that framework. But the elements of the duty not to make a negligent misstatement are now well-established.
31 Cygnet Farms Ltd v ANZ Bank New Zealand Ltd [2016] NZHC 2838, [2017] 2 NZLR 538 at [77].
[78] In Carter Holt Harvey v Minister of Education the Supreme Court recently cited the summary by the majority in The Grange of the requirements that must “typically” be met before a plaintiff can say it is entitled to rely on a statement or advice:32
The necessary relationship between the maker of the statement and the recipient will typically arise where:33
(a) the advice is required for a purpose that is made known (at least inferentially) to the adviser;
(b) the adviser knows (at least inferentially) that the advice will be communicated to the advisee specifically or as a member of an ascertainable class;
(c) the adviser knows (at least inferentially) the advice is likely to be acted on without independent inquiry; and
(d) the advisee does act on the advice to its detriment.
[79] I note three points about the elements of negligent misstatement:
(a)The nature of the relationship in all its aspects must be examined in determining whether there is a prima facie duty.
(b)Negligent misstatement cases usually proceed on the basis that the plaintiff is required to have reasonably relied on the defendant. Whether or not that is necessarily required,34 the question of whether there was reliance is fact dependent and goes to causation in negligent misstatement cases anyway.35 As such it is one obviously relevant and potentially important consideration in relation to misstatements.
(c)Chambers and McGrath JJ in the Supreme Court stated in Spencer on Byron that, if a defendant owes a duty of care in pure negligence, a negligent misstatement cause of action may add nothing but may just put an additional hurdle in the plaintiff’s way (establishing reliance, if that is an additional requirement).36
[62] Much of the analysis in Issue 1 regarding negligence is relevant to these elements of negligent misstatement:
32 Carter Holt Harvey Ltd v Minister of Education, above n 10, at [80].
33 The Grange, above n 10, at [189]; citing Caparo Industries PLC v Dickman [1990] 2 AC 605 (HL) at 638.
34 The Supreme Court in Carter Holt Harvey, above n 10, at [85] appears to have left for future determination whether proof of actual reliance is necessarily required.
35 As noted by Tipping J in Spencer on Byron, above n 10, at [34].
36 Spencer on Byron, above n 10, at [220] and [223] (Chambers and McGrath JJ) and see Carter Holt Harvey, above n 10, at [85].
(a)The advice of the Council about the results of its pool inspection is required for the purpose of determining whether the pool and pool barrier complies with the requirements of the Building Code. The Council knows this.
(b)The Council knows that the advice will be communicated to the pool owner directly, because it communicates the advice.
(c)The Council knows that the advice is likely to be acted on without independent inquiry because it is the only body accorded the statutory responsibility of making independent inspections.
(d)The pool owner here has acted on the advice to their detriment.
[63] Where the Council conducts a pool inspection, as noted above, a pool owner is entitled to rely on the Council to perform that function properly, with reasonable skill and care. Where the apparently expert determination of the Council is that a pool barrier complies with the Building Code, pool owners cannot reasonably be expected to be required to go behind that determination to establish the matter independently. Otherwise, there is little point to having council inspections.
[64] Here, the evidence is that Ms Buchanan and Mr Marshall relied on the Council’s building consent and CCC to assure them in purchasing the property that the pool barrier was compliant. The advice by the Council to them on the basis of the 2009 and 2012 inspections provided further reassurance to them about that. As explored further below, they relied on those inspections in not initiating proceedings against the Council before the time-bar expired. The Council made negligent misstatements on which Ms Buchanan and Mr Marshall relied.
Issue 3: Breach of statutory duty
Law of statutory breach of duty
[65] In X (Minors) v Bedfordshire County Council, Lord Brown-Wilkinson in the House of Lords said:37
. . . a private law cause of action will arise if it can be shown, as a matter of construction of the statute, that the statutory duty was imposed for the protection of a limited class of the public and that Parliament intended to confer on members of that class a private right of action for breach of the duty.
[66] This approach has been adopted in New Zealand.38 If it is not explicit, there must be a necessary implication in the statute that there is a duty which is intended to be enforced by a private right of action. In Wool Board Disestablishment Co Ltd v Saxmere Co Ltd, the Court of Appeal cautioned:39
[188] That said, the first point is that a court will not lightly imply such a right, for it requires the Court to read the statute as if such a private law right should exist, and in a sense is obvious. As was I think made plain enough in X (Minors) v Bedfordshire County Council the reviewing Judge must be driven to the view that something is necessary to achieve the purpose of the statute, and therefore objectively within the intention of the legislature, yet was not provided for.
[67] In Harriman v Attorney-General, Simon France J held that there are no indications in the Parole Act 2002 or the Corrections Act 2004 that Parliament intended to create duties in respect of which an affected person might have a private law cause of action over and above existing remedies in law.40
Submissions
[68] Ms Buchanan and Mr Marshall claim that the Council are liable to them for breaching its statutory duty to them as pool owners, under s 10 of the FOSPA, in carrying out its 2009 and 2012 inspections negligently.
37 X (Minors) v Bedfordshire County Council [1995] 2 AC 633 (HL) at 731.
38 Attorney-General v Carter [2003] 2 NZLR 160 at [43].
39 Wool Board Disestablishment Co Ltd v Saxmere Co Ltd [2010] NZCA 513, [2011] 2 NZLR 442 at [188]. The Supreme Court denied leave to appeal in Saxmere Company Ltd v Wool Disestablishment Company Ltd [2011] NZSC 12.
40 Harriman v Attorney-General [2015] NZHC 3197 at [30] and [35]. And see Tomar v Attorney- General [2019] NZHC 3485 at [84].
[69] Mr Shaw submits that pool owners are clearly owed the duty just as much as children under the age of six. The territorial authority’s duty is aimed at assisting pool owners in complying with their legal obligations under the FOSPA. There is no alternative mode of enforcement under the FOSPA. The background and context of the FOSPA indicate it was designed to prevent swimming pools, and their fencing, from falling below the standard of the Building Code. Accordingly, the damage Ms Buchanan and Mr Marshall suffered is exactly of the kind the statute is designed to prevent. They were misled as to their property’s compliance with the Building Code. Had they known it did not comply before the time-bar, they would have brought proceedings against the Council.
[70] Mr Waalkens submits there is no such statutory duty. Any duty is owed to young children, not to protect the economic interests of pool owners. The failures in the inspections did not cause damage to the safety of young children. There is no causal link between the duty and the economic loss.
Was there a statutory duty enforceable by private action?
[71] Section 10 of the FOSPA requires that “[e]very territorial authority shall take all reasonable steps to ensure that this Act is complied with within its district”. The FOSPA confers powers on territorial authorities to ensure the Act is complied with. Section 8 obliges pool owners to ensure their pools comply. From 1991, the standards with which pools must comply have been set out in the Building Code under the Building Act. From the mid 1990s, after Hamlin, territorial authorities were subject to a common law duty of care in tort deriving from their functions in enforcing the Building Code under the Building Act in relation to residential houses. That liability has been recognised in the Building Act for some time, as the Privy Council noted in Hamlin.41
[72] Whether or not the liability of territorial authorities for negligence extends to their functions under the FOSPA, there is no sign of any intention by Parliament that pool owners were intended to have an additional right to sue territorial authorities for breach of statutory duty by failing to fulfil their duty under s 10 of the FOSPA.
41 Invercargill City Council v Hamlin, above n 18, at 522.
Parliament can be taken to be aware that affected individuals can seek relief against territorial authorities who fail to fulfil their legal duties in public law by way of judicial review. But there is no indication of an intention to impose additional liability in tort giving rise to damages as relief. Such a private law right is not obvious, is not necessary to achieve the purpose of the statute, and is not objectively within the intention of Parliament. I dismiss this cause of action.
Issue 4: Time bars
[73] The proceedings were issued on 23 December 2020. The Council pleads an affirmative defence that they were time-barred.
Does the Building Act long stop bar the claims?
[74] Section 91 of the Building Act 1991 provided for a 10 year long stop limitation period by preventing civil proceedings relating to building work from being brought:
91 Limitation defences
(1)Except to the extent provided in subsection (2) of this section, the provisions of the Limitation Act 1950 apply to civil proceedings against any person where those proceedings arise from –
(a)Any building work associated with the design, construction, alteration, demolition, or removal of any building; or
(b)The exercise of any function under this Act or any previous enactment relating to the construction, alteration, demolition, or removal of that building.
(2)Civil proceedings relating to any building work may not be brought against any person 10 years or more after the date of the act or omission on which the proceedings are based.
[75] Section 393(2) of the Building Act 2004 provides for a similar 10 year long- stop limitation period by preventing relief being granted in civil proceedings related to building work:42
393 Limitation defences
(1)The Limitation Act 2010 applies to civil proceedings against any person if those proceedings arise from—
42 Amendments to the section since the trial are not relevant here.
(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
…
[76] Section 7 of the 2004 Act defines “building work”, unless the context otherwise requires:43
building work—
(a)means work—
(i)for, or in connection with, the construction, alteration, demolition, or removal of a building:
(ii)on an allotment that is likely to affect the extent to which an existing building on that allotment complies with the building code; and
(b)includes sitework; and
(c)includes design work (relating to building work) that is design work of a kind declared by the Governor-General by Order in Council to be restricted building work for the purposes of this Act (see subsection (2)); and
(d)in Part 4, and the definition in this section of supervise, also includes design work (relating to building work) of a kind declared by the Governor-General by Order in Council to be building work for the purposes of Part 4 (see subsection (2)); and
43 Amendments since the trial are not relevant here.
[77]The Court of Appeal discussed s 91 in Johnson v Watson: 44
[7] Mr Kohler, for the Johnsons, accepted that unless s 28 of the Limitation Act 1950 (which deals, amongst other things, with concealment of a cause of action by fraud) prevails over s 91(2), his clients’ claim based on the original work was barred by s 91(2). The acts or omissions claimed to amount to defects in the original work all took place prior to 16 December 1990. The proceedings were commenced more than ten years later in March 2001. Hence, unless s 28 applies, s 91(2) clearly bars this head of the Johnsons’ claim, whether that claim be framed in contract or tort.
[8] We cannot, however, accept Mr Kohler’s submission that if there was concealment by fraud, as is alleged, s 28 operates so as to extend the ten-year period prescribed by s 91(2). Section 28 is concerned with when a cause of action accrues. If concealed by fraud, its accrual is postponed. Section 91(2) is by contrast concerned with the act or omission on which the proceedings are based. An act or omission occurs on a particular day. No question of extension of time can logically arise when the starting point is measured from the day of the occurrence of an act or omission. Furthermore, it is clear from the introductory words of s 91(2) that the provisions of the Limitation Act do not apply to the subs (2) time limit of ten years. Subsection (2) is in this respect a statutory bar which is self-contained, both as to the commencement of the period allowed and its duration. In short, s 91(2) means exactly what it says. A plaintiff cannot in any circumstances sue more than ten years after the act or omission on which the proceedings are based, if the case involves, as this one clearly does, building work associated with the construction of a building.
[78] In Carter Holt Harvey Ltd v Minister of Education, the Supreme Court stated that “[t]he most natural interpretation of the words ‘civil proceedings relating to building work’ in s 393(2) is that those words are a shorthand reference for civil proceedings of the kind described in s 393(1)”.45 In the same proceedings, in a passage with which the Supreme Court did not disagree, the Court of Appeal said:46
The proper analysis in respect of the time-barring of claims against regulators (such as in relation to accreditation certificates), is that where their act or omission is a statutory function prescribed by the Building Act, it is likely to be captured by s 393(1)(b) and will be time-barred.
[79] The Court of Appeal identified that “the parliamentary materials suggest that drivers for a longstop limitation involve limiting local authority liability for defects many years after a building has been built and enabling building certifiers referred to in the 1991 Act to obtain professional indemnity insurance”.47 Again, the Supreme
44 Johnson v Watson [2003] 1 NZLR 626 (CA).
45 Carter Holt Harvey Ltd v Minister of Education, above n 10, at [94].
46 Carter Holt Harvey Ltd v Minister of Education [2015] NZCA 321 at [169].
47 At [164] (footnote omitted).
Court did not disagree, though it did not find the statutory history helpful in determining the scope of the long stop provision in that case.48
[80] Mr Waalkens, for the Council, submits the plaintiffs are trying, creatively but artificially, to get around the time bar. Even in cases of fraudulent concealment of the wrongdoing as noted in Johnson v Watson, there is no way around the time bar. If you cannot sue for fraudulent concealment of negligence, you cannot sue here. The genesis of the claim is the issuing of the consent and CCC, and all damages flow from that. So the negligent act alleged is building work and therefore captured by the time-bar in s 393. He submits, though, that pool inspections are not “building work”.
[81] Mr Shaw submits that, but for the Council’s negligent inspections in 2009 and 2012, Ms Buchanan and Mr Marshall would have launched an action against the Council for the negligent issue of the CCC. In Johnson v Watson, the Court of Appeal held only that the availability of a claim under s 393 does not override the relevant Limitation Act provision. The claims here, based on the 2009 and 2012 inspections, do not relate to building work as defined by the Act, which occurred outside the time bar. Section 393(2) cannot prevent recovery. Ms Buchanan and Mr Marshall lost their opportunity to sue when their action became time-barred in 2016, 10 years after the CCC was issued. So the CCC is relevant only for the purposes of establishing what the situation would be if there had been an opportunity to sue.
[82] I agree that the building consent, issued on 13 September 2004, and the CCC, issued on 19 October 2006, are not the foundations of the cause of action in these proceedings. Ms Buchanan and Mr Marshall accept they are out of time to sue for the Council’s admitted negligence in issuing the consent and CCC. They sue for the loss of that chance to sue that was caused by the negligent pool inspections by the Council, in August 2009 and January 2012, and their subsequent statements to Ms Buchanan and Mr Marshall that their pool and pool barriers complied with regulatory requirements. I do not accept that the issuing of the consent or CCC is relevant to calculating the limitation period.
48 Carter Holt Harvey Ltd v Minister of Education, above n 10, at [108].
[83] Johnson v Watson does not indicate otherwise. It determines the relationship between s 28 of the Limitation Act 1950 and s 91 of the Building Act. It finds that s 91 is a genuine long stop, which is not extended by operation of the Limitation Act. Ms Buchanan and Mr Marshall accept they cannot receive relief in proceedings based on the consent and CCC. But s 393 of the Building Act, the successor to s 91, does not limit relief in proceedings based on a separate act that occurred within the 10 year long stop period.
[84] The civil proceedings were brought in December 2020. That is less than ten years after the alleged negligent acts occurred and misstatements were made in 2012. Accordingly, even if the proceedings are considered to be “relating to building work”, s 393(2) does not bar relief in relation to the negligent inspection in 2012.
[85] Section 393(2) bars relief in proceedings “relating to building work” that were issued more than 10 years after the alleged negligent acts or statements. The pool inspection in 2009 falls within that category if it relates to building work. Legislative context makes clear that the reference in s 393(2) to building work is intended to be wider than the reference to actual building work in s 393(1)(a). The text of s 393(3)(a) indicates that Parliament envisaged that “civil proceedings relating to building work” for the purposes of s 393(2) can include “proceedings that are brought against a territorial authority [or] a building consent authority … in relation to the issue of a building consent or a code compliance certificate”. That function fits under s 393(1)(b), “the performance of a function under this Act … relating to the construction … of the building”. As stated in Carter Holt Harvey Ltd v Minister of Education, s 393(2) provides a longstop limitation for proceedings that fall under subsection (1).
[86] Does the Council’s inspection of pools after they are constructed relate to building work for the purposes of s 393(2)? I have found above that the Council’s pool inspection function is sufficiently proximate to pool owners that it bears a duty of care to them in a similar way that it does in relation to relation to the owners of houses it inspects. The same reasoning leads to the conclusion that pool inspections relate to building work in the same way as do house inspections:
(a)Section 8 of the FOSPA required pool owners to ensure their pools are fenced in compliance with the building code. Section 10 of the FOSPA required territorial authorities to take all reasonable steps to ensure that Act was complied with, which included compliance of pools with the building code. Territorial authorities were empowered to conduct inspections to ensure compliance with the Act.
(b)Compliance with the Act involves compliance with the building code, which involves independent assurance to pool owners that their pool complies with regulatory standards, including because of steps taken during the construction process.
(c)Undertaking a territorial authority’s pool inspection involves performance of a function under the Building Act relating to the construction of a pool barrier, for the purposes of s 393(1)(b). That is now explicitly recognised by the definition of “building” in s 8(1)(b)(ii) of the Building Act to include “any means of restricting or preventing access to a residential pool”. Accordingly, as the Court of Appeal suggested in Carter Holt Harvey Ltd v Minister of Education, an authority’s act is likely to be captured by s 393(1)(b) and will be time- barred.
[87] Furthermore, standing back and applying a purposive interpretation, the purpose of the longstop limitation in the Building Act is relevant. As the Court of Appeal stated in Carter Holt Harvey Ltd v Minister of Education, that involves limiting local authority liability for defects many years after a building has been built and enabling building certifiers to obtain professional indemnity insurance. That rationale applies to the limitation of liability of territorial authorities for pool inspections too. Pool inspections involve checking compliance of pools and pool barriers with the Building Code. Whether they are conducted at the time of the original construction of a pool like any other building, or subsequently, territorial authorities should not face proceedings more than 10 years afterwards, any more than they should be residential building inspections. And professional indemnity insurance should be
just as encouraged as well. So, a pool inspection is building work. The claim based on the 2009 pool inspection is barred by the Building Act long stop.
[88] I conclude s 393(2) bars the claim regarding the 2009 pool inspection but does not bar the 2012 pool inspection.
Do the Limitation Acts bar the claim?
[89] Irrespective of the application of a time bar in s 393, the parties disagree about whether, in addition, the Limitation Act 1950 (the 1950 Act) and the Limitation Act 2010 (the 2010 Act) bar the causes of action based on the 2009 and 2012 pool inspections respectively.
[90] Section 4(1) of the 1950 Act provides for a six-year limitation period from when a cause of action accrued in tort. The parties agree that applies to the August 2009 inspection but differ on whether it bars a claim based on that inspection.
[91] In Invercargill City Council v Hamlin, the Privy Council held that a cause of action in negligence in respect of economic loss, caused by latent building defects, accrues for limitation purposes when the defects become obvious.49 That is because that is the point at which the market value of the building is thereby depreciated, and thus when all the elements necessary to support the plaintiff’s claim, which include the occurrence of loss, exist. In Murray v Morel & Co Ltd, the Supreme Court noted the Privy Council’s reasoning did not involve any departure from the conventional approach to when a cause of action accrues, because discoverability in a building context affects when the loss occurs.50 The focus is on the occurrence of the loss, which is an element of the tort, rather than its discoverability.51 Blanchard J noted that the fundamental change of introducing reasonable discoverability as the basis for limitation would need to be accompanied by a long stop provision to bar a claim despite it not being reasonably discoverable.52 That would require a complete legislative overhaul of the Limitation Act.53
49 Invercargill City Council v Hamlin, above n 18 at 526.
50 Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721 at [42].
51 At [42] and [69].
52 At [74].
53 At [76].
[92] Sections 11 and 14 of the Limitation Act 2010 (the 2010 Act) provide, relevantly:
11 Defence to money claim filed after applicable period
(1)It is a defence to a money claim if the defendant proves that the date on which the claim is filed is at least 6 years after the date of the act or omission on which the claim is based (the claim’s primary period).
(2)However, subsection (3) applies to a money claim instead of subsection (1) (whether or not a defence to the claim has been raised or established under subsection (1)) if—
(a)the claimant has late knowledge of the claim, and so the claim has a late knowledge date (see section 14); and
(b)the claim is made after its primary period.
(3)It is a defence to a money claim to which this subsection applies if the defendant proves that the date on which the claim is filed is at least—
(a)3 years after the late knowledge date (the claim’s late knowledge period); or
…
14 Late knowledge date (when claimant has late knowledge) defined
(1)A claim’s late knowledge date is the date (after the close of the start date of the claim’s primary period) on which the claimant gained knowledge (or, if earlier, the date on which the claimant ought reasonably to have gained knowledge) of all of the following facts:
…
(c)if the defendant’s liability or alleged liability is dependent on the claimant suffering damage or loss, the fact that the claimant had suffered damage or loss:
…
(2)A claimant does not have late knowledge of a claim unless the claimant proves that, at the close of the start date of the claim’s primary period, the claimant neither knew, nor ought reasonably to have known, all of the facts specified in subsection (1)(a) to (e).
(3)The fact that a claimant did not know (or had not gained knowledge), nor ought reasonably to have known (or to have gained knowledge), of a particular fact may be attributable to causes that are or include fraud or a mistake of fact or law (other than a mistake of law as to the effect of this Act).
[93] In Westland District Council v York, the Court of Appeal emphasised the Supreme Court’s approach in Murray v Morel & Co Ltd, as well as the fact that owners’ loss in building cases stems from physical defects that are latent or undiscoverable.54 The Court of Appeal noted that, unlike the context in that case, the Building Act 2004 and the Limitation Act 2010 “provide for reasonable discoverability and its necessary corollary, a longstop”, which it characterised as the sort of reform urged on the legislature in Murray v Morel & Co Ltd .55
[94]Mr Waalkens, for the Council, submits:
(a)The cause of action in relation to the 2009 inspection accrued on 4 August 2009 and the limitation period expired on 4 August 2015. So recovery in proceedings which commenced in December 2020 is time- barred by the 1950 Act. The reasonable discoverability test in Invercargill City Council v Hamlin does not apply here. It was patently obvious that the large sliding doors to the buildings, and the east gate, were not self-closing or self-latching as required by the FOSPA. It is not relevant that Ms Buchanan and Mr Marshall may not have known the doors did not comply with the FOSPA. Time starts to run when advice is relied upon, not when the plaintiff gains knowledge of an error. Any loss was suffered on purchase.
(b)The cause of action based on the 2012 inspection is time-barred under s 11 of the 2010 Act and Ms Buchanan and Mr Marshall did not have late knowledge under s 14(1)(c). Mr Buchanan, as a former chief executive of various councils, ought to have known about the FOSPA requirements, particularly the simple and fundamental concept that gates and doors need to be self-closing, which he knew for 15 years were not. These were not latent defects but were patently visible. A plaintiff cannot shut their eyes to the obvious, which is what happened here. It is unreasonable to place all the blame on the Council.
54 Westland District Council v York [2014] NZCA 59 at [21]–[22], citing Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR 726 at [48].
55 At [25].
[95] Mr Shaw, for Ms Buchanan and Mr Marshall, submits that time does not start running until all elements of the cause of action, including loss or damage, exist. That was in 2016 when the lost opportunity to sue crystallised (10 years after issuance of the CCC). Ms Buchanan and Mr Marshall did not have actual or constructive knowledge of loss or damage because they had no reason to suspect compliance was in question. The elements of the cause of action were not reasonably discoverable by them due to the Council’s negligent inspections. They were reasonably entitled to rely on the Council’s statements in 2009 and 2012, and did so. Ms Buchanan and Mr Marshall also brought their claim based on the 2012 inspection within three years of obtaining late knowledge of the matters specified in s 14(1)(c) of the 2010 Act. They were not reasonably discoverable before the November 2019 inspection.
[96] The causes of action based on the 2009 and 2012 pool inspections are that the Council breached its duty of care to Ms Buchanan and Mr Marshall, causing them to lose their opportunity to sue the Council in respect of the building consent and CCC, thereby causing them economic loss. Given the Council’s negligent inspections, the defects in the construction of the pool and pool barrier were effectively latent for the purposes of causing loss. They had not yet caused economic loss, as in the other building defect cases. The elements of these causes of action were complete only when Ms Buchanan and Mr Marshall lost their opportunity to sue. That was in 2014 in respect of the consent and 2016 in respect of the CCC, due to the application of the 10 year long stop provision, as analysed above, to that cause of action. Before those points, the inspections had not caused loss or damage because the opportunity to sue had not been lost, and the economic loss had not occurred. Since the occurrence of loss is a required element of the causes of action, the causes of action were not complete and did not accrue until then. The proceedings issued in December 2020, suing for the loss of the opportunity to sue caused by the 2009 pool inspection, were therefore within the six-year limitation period under the 1950 Act for accrual of that cause of action.
[97] The s 14(1)(c) late knowledge period applies in relation to the 2012 pool inspection. Ms Buchanan and Mr Marshall reasonably gained knowledge of the fact they had suffered damage or loss, due to the lost opportunity caused by that inspection, only when the 2019 inspection incurred.
[98] If Ms Buchanan and Mr Marshall had appreciated before 2014 and 2016 that the pool and pool barrier did not comply with the regulatory requirements, they would have been able to sue for the negligently issued consent and CCC. The cause of action they pursue now would not have been available at all. And, if it had been reasonable for them to have appreciated the non-compliance, then the Council’s negligence would not have caused their loss. That is the sense in which reasonable discoverability bears on this case, as analysed below in relation to loss and remoteness of damage.
[99] It is clear that neither Ms Buchanan nor Mr Marshall nor anyone else were aware there were defects in the design and building of the pool, and pool barrier, that meant it did not comply with the regulatory requirements until the 2019 inspection. I accept that was reasonable. Ms Buchanan and Mr Marshall did not shut their eyes to the obvious. The inspections attested to the official view, of the body which was legislatively tasked with the function of checking, that their pool complied with the relevant regulatory requirements. That was the same as the Council’s conclusion in 2004 and 2006. As stated above in relation to negligent misstatement, Ms Buchanan and Mr Marshall reasonably relied upon the Council’s advice. No pool owner could reasonably have been be expected to go behind that.
Effect of Beca Carter Hollings v Wellington City Council
[100] Finally, in relation to limitation, I provided the parties with the opportunity to make brief submissions about the effect of the recent Court of Appeal case of Beca Carter Hollings v Wellington City Council on the limitation issues in this case.56 Among other things, that case examined the inter-relationship between the 10 year long stop limitation periods under the Building Acts and the limitation periods for contribution claims in the Limitation Acts. Both parties agreed that the decision is distinguishable on its facts and subject matter from this case. Both also submitted that the case assisted their arguments. I agree it is distinguishable. I do not consider it helps either of the parties’ cases particularly.
56 Beca Carter Hollings v Wellington City Council [2022] NZCA 624.
Issue 5: Damage, loss and relief
The relief sought
[101]Ms Buchanan and Mr Marshall seek:
(a)a declaration that the Council negligently issued the building consent, carried out the original inspection and issued the CCC, negligently carried out the 2009 and 2012 inspections in breach of its statutory duties, made negligent misstatements about the property’s compliance in the inspections, and caused them loss thereby;
(b)damages of $240,000 for the difference in value between the price paid for the property and its market value at the time, plus interest under s 10 of the Interest on Money Claims Act 2016, from purchase of the property until the judgment debt is paid;
(c)damages of $13,601.42 for the increased costs of remediation in 2022 due to the loss of opportunity to remediate the property in 2008 plus
$1,022.15 for site clean up after remediation;
(d)costs of $15,503.03 in attempting to resolve these matters with the Council, including valuation costs, legal fees not directly related to the proceedings, and their costs of the MBIE process;
(e)$50,000 general damages for distress and humiliation and $447.50 medical costs; and
(f)costs in respect of the proceedings.
Loss of an opportunity and remoteness of damage
[102] For the Council to be liable in negligence, Ms Buchanan and Mr Marshall must prove, on the balance of probabilities, that its breach of duty caused them loss that is sufficiently closely connected with the damage to justify imposition of liability.
[103] In 2002, in Johnson v Watson the Johnsons claimed they relied on their builder’s negligent misstatements that he had remedied the problems caused in his original construction of their house.57 Accordingly they faced a statutory time-bar in the absence of which they could have sued the architect, builder, and council. The Court found on the facts that the Johnsons became aware of the extent of the problems six months before the limitation period expired, which gave them a reasonable time to sue, so the negligence did not cause the claim to become time-barred.58 It did not otherwise comment on the availability of damages for the loss of the opportunity to sue.
[104] Damages for the loss of an opportunity have been held to be available in other cases, particularly in relation to solicitor negligence. In 2004, in Benton v Miller & Poulgrain (a firm), the Court of Appeal identified two different approaches to dealing with uncertainty regarding loss in negligence cases:59
[44] Uncertainty can be addressed in two ways; either on what is often described as an “all or nothing” basis by reference to the balance of probabilities standard of proof, or, alternatively, on a proportionate (or loss of a chance) basis according to the Judge’s assessment of the probabilities. The law as to when Judges should take “all or nothing” or a “loss of chance” approaches to causation and damages is, to say the least, difficult. The cases are not easy to reconcile. Where reconciliation is attempted the distinctions drawn are often artificial.
[105] The Court distinguished between uncertainty as a matter of historical fact, which can and must be determined in accordance with the standard of proof, and uncertainty which involves counter-factual analysis of hypothetical questions.60 It determined:
[47] In cases which turn on how a plaintiff would have acted in the absence of a breach of duty, the all or nothing approach is usually (although not always; see Davies v Taylor) applicable. So if the plaintiff shows that it is more likely than not that he or she would have acted in a particular way, the Court acts on the assumption that this is the way the plaintiff would have acted. If this is not established as being more likely than not, then the Court acts on the basis that the plaintiff would not have acted in that particular way.
57 Johnson v Watson, above n 44.
58 At [28].
59 Benton v Miller & Poulgrain (a firm) [2005] 1 NZLR 66 (CA).
60 At [45]–[46].
[106] That approach was justified on the basis that the plaintiff who could not show they would have acted differently might not have been able to show reliance (in negligent misstatement cases) or that the defendant had caused any loss.61 But the Court of Appeal also adopted English and Welsh precedent on the “loss of a chance” approach to establishing causation and loss where negligence consists of an omission, rather than a positive act, and causation of the plaintiffs’ loss depends upon a hypothetical question about the actions of an independent third party.62 Under that approach, the plaintiff has to show they had “a substantial chance rather than a speculative one, [with] the evaluation of the substantial chance being a question of quantification of damages”.63 The Court of Appeal said:
[50] In making a “loss of chance” assessment, broad judgments are called for. At one end of the spectrum, very low probabilities are unlikely to be reflected in an award of damages. So if the chance of avoiding an adverse event is as low as say one in ten, a Court will probably reject the claim rather than fix damages at ten per cent of the cost to the plaintiff associated with those adverse events. At the other end of the spectrum that approach is sometimes, but not always, adopted. So a 90 per cent chance of avoiding an adverse event may result either in complete recovery of all losses associated with that adverse event (on the theory that the chance of not avoiding those losses was sufficiently speculative to be able to be ignored) or alternatively a discount of ten per cent for contingencies.
[107] As Professor Todd points out in his authoritative text, most cases in New Zealand, the United Kingdom, and elsewhere that deploy the “loss of a chance “approach involve hypothetical questions as to the chance of obtaining future financial benefits.64 That can include loss of the opportunity to pursue litigation.65 Benton v Miller & Poulgrain (a firm) has been applied in New Zealand by the Court of Appeal in 2014 in Macalister Mazengarb v Annan Law, where solicitors’ negligence prevented cancellation of a contract.66 It was applied by Clark J in the High Court in 2017 in Signal v Berry, where solicitors’ negligence prevented sale of sub-divided properties.67
61 At [47].
62 At [48].
63 At [48], citing Allied Maples Group Ltd v Simmons & Simmons (a firm) [1995] 1 WLR 1602 (CA) at 1611.
64 Todd on Torts, above n 22, at 1118.
65 Perry v Raleys Solicitors [2019] UKSC 5, [2019] 2 WLR 636 at [344] – [48]; and Edwards v Hugh Ford Simey Solicitors [2019] UKSC 54, [2019] 1 WLR 6549 at [23].
66 Macalister Mazengarb v Annan Law [2014] NZCA 554, [2015] 2 NZLR 525 at [45].
67 Signal v Berry [2017] NZHC 2466.
[108] The evidence of Ms Buchanan and Mr Marshall is that, if they had known in 2009 or 2012 that the property was not compliant with the Building Code, they would have “[i]mmediately taken advice” and advanced funds to their Trust to bring proceedings against the Council forthwith.68 They plead that they have suffered loss from the Council’s negligent inspections in 2009 and 2012, in that they lost the opportunity to bring a claim against the Council for the negligent issue of the building consent and the CCC in 2004 and 2006. Mr Shaw submits such a claim to the Court would have had a 100 per cent chance of success.
[109] The Council accepts that if a duty of care was owed when it completed its inspections under the FOSPA in 2009 and 2012, subject to the nature of the duty found and the time-bar, Ms Buchanan and Mr Marshall will have suffered some loss. But Mr Waalkens submits that the only possible loss is any increased costs to install the barrier as a result of the delay in the Council informing them of the non-compliance between 2009 or 2012 and 2019.
[110] It is clear that Ms Buchanan and Mr Marshall would have initiated legal proceedings against the Council if they had become aware of the pool was non- compliant when the pool was inspected in 2009 or 2012. They relied upon the CCC in buying the property. They were well aware of the potential liability of the Council for a negligently issued CCC. A very short time after MBIE issued its authoritative determination, they issued proceedings. Ms Buchanan and Mr Marshall would have succeeded in such proceedings if they had not faced a time-bar.
[111] The Council’s negligence was not an omission but a positive act of inspecting the pool followed by a misstatement. That suggests a balance of probabilities test is appropriate. Ms Buchanan and Mr Marshall clearly meet the standard. But alternatively, if a loss of a chance approach were used, I agree that it would be appropriate to assess their chance of success in proceedings at 100 per cent. That is not a usual approach to estimating the chance of success of litigation, before it has happened. But with the benefit of hindsight, the Council here responsibly admits it had a duty of care in issuing the CCC, and that it breached that.
68 Brief of Evidence of Louise Buchanan, 29 April 2022, at [22]; and Brief of Evidence of Kevin Marshall, 29 April 2022, at [21].
[112] If Ms Buchanan and Mr Marshall had succeeded in proceedings brought within the time-bar, for negligence or negligent misstatement in relation to the CCC, there is at least a substantial likelihood:
(a)They would have recovered damages for their expenditure in remediating the property at that time. This is a loss that they would not have incurred had the CCC not been negligently issued, because they would not have purchased the property.
(b)They would have also recovered damages for the diminution in the value of their property caused by its loss of amenity value due to the remediation. The design of the pool area, as its central focal point, was integral to the design and amenity value of the house. The remediation detrimentally affected this. As canvassed above, a loss in the overall value of the property is reasonably foreseeable. The expert valuers agree there would have been a loss of value, though they disagree on the amount. I consider the amount of the loss later in the judgment. It represents the difference between the value of the property they bought and the amount they spent to purchase it. This is also a loss Ms Buchanan and Mr Marshall would not have suffered had the CCC not been negligently issued.
[113] Whether the usual standard of proof or the loss of chance approach is used, I consider the costs of remediation and the diminution in the value of their property are sufficiently closely connected with the damage from their loss of opportunity to sue the Council to justify imposition of liability for those losses.
The evidence regarding loss of value
[114] Mr Hancock is the expert valuer for Ms Buchanan and Mr Marshall and is the chair of the New Zealand Property and Valuation Standards Board. His evidence is:
(a)In an assessment in April 2022, he applied a 15 per cent deduction to the property as a whole in September 2008 for the loss of the amenity value. But, having seen the remediation structure in place, he assesses
the loss of amenity value, which he describes as architectural excellence butchered, as 25 per cent.69 The views are impeded, access is impeded, and the glass would likely be marked by condensation and pollens.
(b)Mr Hancock identifies comparable property sales in 2008 in the same range as this property if it had been remediated, but says they are not really comparable because they are not architectural excellence butchered.70 In Mr Hancock’s opinion, the impact of the pool fence on aesthetics and ambience hits you when you walk through the gate. It is incomprehensible that the market would pay only $40,000 less for it for that reason as Mr Baxendine estimates, which is a margin of error, not a deduction.
(c)He assesses the value of the property at the time of purchase in September 2008, taking into account the negligent issuance of the CCC, as $540,000. That is $240,000 less than the $780,000 they paid. Of the
$240,000 difference, $195,000 is the 25 per cent loss of amenity value in the property and $45,000 was the remediation costs (the actual remediation cost in 2022 of $58,939.50 discounted to 2008 values).
(d)Mr Hancock criticises Mr Baxendine’s failure to refer to relevant valuation standards, his failure to include data about comparable sales in 2008 in reaching his market valuation, his failure to have regard to the impact of the pool barrier on the property’s value, and the lack of comparability of three properties with 2022 values with this property.
[115]The evidence of Mr Baxendine, the expert valuer for the Council, is:
(a)He acknowledges he erred in not referring to the applicable valuation standards but considers he followed the retrospective valuation approach correctly in any case.
69 NOE at 52/9 and 53/4–14.
70 NOE at 70/11–12.
(b)He was instructed to accept the cost of remediation was $58,950.50 and discounted that by the CPI to obtain that cost of remediation at 28 September 2008 as $46,000, at 4 August 2009 as $47,000, and at 24 January 2012 as $50,000.
(c)The added value of the pool to the property value, which he assesses to be $150,000, involves a subjective assessment.71 He considers the installation of any type of barrier adds safety measures to the property which will appeal to some purchasers, but that there is likely a slight loss in value “due to aesthetics, interruption to views and utility of the pool, and some loss of amenity when using the pool area”.72 He considers there would be a 20 to 25 per cent loss in value of the pool and surrounds, a 10 per cent loss in the value of the decking areas, a 2.4 to 5 per cent reduction in the value of the house structures and site, and no adjustment to services, balance land, garaging, or chattels. He did not have regard to the property no longer being in an award-winning state.
(d)He assesses the market value as at February 2022 at $1,643,000, a reduction of $82,000. He disagrees with Mr Hancock’s methodology and considers his estimate of the loss of value is significantly overstated and inconsistent with the market. He assesses the market value of the property in 2008 with the current glass barrier to be $740,000, or a loss of $40,000, which represents a 3 per cent deduction in site value, 4.5 per cent reduction in house and studio value, 10 per cent reduction in decking value, and 23.5 per cent reduction to the pool and surrounds.
(e)Mr Baxendine emphasised the net rate value of the property per metre. Under cross-examination, he accepted that the net rates of a revised valuation of this property conducted by Mr Hancock according to Mr Baxendine’s methodology was comparable to the net rate for other
71 Brief of Evidence of Roderick Baxendine, signed 4 July 2022, at [22].
72 At [31].
properties he had identified but he considered this property was superior so the net rate should be superior too.73
(f)Mr Baxendine had not identified any comparable properties or market data in 2008, 2009, or 2012 where he claimed to have performed retrospective market valuations. He used market sales values of three properties he considered the most comparable, for his valuation of this property in 2022. He reconstructed this property’s value in 2008, 2009, and 2012 using the rating valuations of those three properties in 2020 or so.74 He conceded this property was unsuitable for families with young children and families with older children would prefer there to be no fence, both of which reduce the saleability of the property.
Special damages
[116] Mr Shaw submits that Mr Hancock’s evidence was not shown under cross- examination to have flaws in methodology, the standards applied, or the valuation. He criticises several aspects of Mr Baxendine’s methodology and submits Mr Hancock’s valuation should be preferred. He submits the Court can confidently accept that Mr Baxendine’s 5 per cent reduction in market value after the remediation is not credible and is within a valuer’s margin of error.
[117] Mr Waalkens submits the evidence of Mr Baxendine should be preferred. Mr Hancock’s evidence was overly focussed on his viewings of the property before it was remediated and use of “butchered” is overly subjective and emotive. Prospective purchasers will not be viewing the property through the same lens. His evidence also changed from a 15 per cent discount to a 25 per cent discount without any reliable justification. There is no justification for the 25 per cent discount other than properties which are not comparable. Despite the remediation this is still a high specification home in a 2.9 hectare property. A number of components of the property are not affected by the pool barrier.
73 NOE 110/5–111/19.
74 NOE 88/27–31 and 91/24–92/2.
[118] As noted above, I accept Ms Buchanan and Mr Marshall would have had succeeded in proceedings against the Council for the negligently issued CCC if they had not been time barred. They are entitled to be put back in the position they would have been had they been able to sue the Council for not issuing the CCC negligently. The evidence is that they would not have purchased the property without a CCC, so they would not have lost the difference between what they paid and the value they received, plus interest on that. They are entitled to that difference.
[119] Both of the valuation experts accept there would be some loss in the amenity value of the property after remediation. They disagree about the amount of the loss. I prefer Mr Hancock’s evidence. His valuation is more soundly based than that of Mr Baxendine’s in terms of methodology and robustness. The 5 per cent estimate by Mr Baxendine is not credible. The effect of remediation on the valuation of the property as a whole must be greater than that. It is artificial to calculate it by reference to the value of individual components of the house and property when it is the property as a whole which would be bought and sold. On the basis of Mr Hancock’s expert evidence, and the photographs of the property before and after remediation, I accept the loss of amenity value in the property is 25 per cent. While Mr Hancock’s choice of language was emotive, it represents his professional opinion. Accordingly, I accept that Ms Buchanan and Mr Marshall suffered a loss of $195,000 from losing the opportunity to sue the Council for the loss of value in their property when they bought it. They are entitled to damages for that amount plus interest.
[120] In addition, if the Council had not been negligent, Ms Buchanan and Mr Marshall would not have had to fund the cost of remediating the property. If they had been able to sue the Council earlier, they would have been able to sue for that cost too. The expected cost of remediation, discounted back to 2008 values, was $45,000 as estimated by Mr Hancock and agreed by Mr Baxendine. Ms Buchanan and Mr Marshall are entitled to that amount in damages plus interest from 2008.
[121] Mr Shaw submits that Ms Buchanan and Mr Marshall would have also recovered damages for the additional cost of remediation that they actually faced, above the discounted costs of remediation in 2008. But adding this in double counts the increase in the costs of remediation between the two time periods. The discounted
costs of remediation in 2008 are based on the actual remediation cost. Bringing that up to the present value of those costs is achieved by adding interest onto the discounted amount. The additional clean-up costs of $1,022.15 are part of the remediation and can be recovered as damages since they were not included in the costs that were discounted back to 2008.
[122] I accept that Ms Buchanan and Mr Marshall would not have had to incur the valuation costs and legal fees of trying to resolve the issue with the Council had the 2012 inspection not been negligent. But I do not accept they needed to incur the costs of the MBIE determinations, however understandable it is that they did so. Those costs were not caused by the Council’s breach of duty. So the other special damages amount to $4,640.67
General damages
[123] Ms Buchanan and Mr Marshall also seek general damages of $50,000 for their distress and humiliation. Mr Shaw also submits the Council accepted by December 2019 that it had liability at least to contribute towards a suitable pool barrier but ignored its liability and hid behind an enforcement process carrying the threat of criminal prosecution. The Council did not concede until the hearing that the CCC was negligently issued and the 2019 inspection was incorrect in having no regard to the immediate pool area. It did not apologise until the first day of trial, some two and a half years after these matters first arose. Mr Waalkens submits the level of general damages sought is way too high.
[124] On the basis of the evidence, I accept the process of dealing with the Council over these issues has caused distress and humiliation to Ms Buchanan in particular. But the Council was entitled to defend the legal proceedings brought against it based on a novel duty of care. I assess the general damages at $25,000. That is comparable to recent awards of general damages for the stress and inconvenience of a leaky home due to negligent inspections.75
75 Johns v Hamilton City Council [2022] NZHC 379 at [366]-[367]. And see White v Rodney District Council (2009) 11 NZCPR at [75]–[76].
Declaration
[125] Mr Shaw submits that the interests of justice cry out for a declaration that the Council has failed in its obligations to Ms Buchanan and Mr Marshall and in its obligations to the public generally under the FOSPA.
[126] I accept that the level of actionable negligence and negligent misstatements by the Council, in the context of its unactionable negligence, in issuing the building consent in 2004, in issuing the CCC in 2006, in conducting the pool inspection and making the associated misstatement in 2009, and in conducting the pool inspection and making the associated misstatement in 2012, warrants the declaration sought by Ms Buchanan and Mr Marshall. That form of public accountability is appropriate in the circumstances.
Issue 6: Contributory negligence
[127] Section 3(1) of the Contributory Negligence Act 1947 provides that where a person suffers loss as the result of partly their own fault and partly someone else’s fault, the damages recoverable “shall be reduced to such extent as the court thinks just and equitable having regard to the claimant’s share in the responsibility for the damage”.
[128] The Council pleads that, if it was negligent, the Court should make a reduction for the contributory negligence of Ms Buchanan and Mr Marshall. Mr Waalkens submits that they were responsible for compliance with the FOSPA and failed to look after their own interests and to make the reduction. He emphasises that Mr Marshall is a former chief executive of councils, ultimately responsible for council operational delivery and aware of the existence of the FOSPA which is a short Act with few obligations. He notes: there was no pre-purchase inspection; Ms Buchanan incorrectly ticked “yes” to the question “gate/s – self-closing and self-latching”, misstating the position to the Council; it was obvious to anyone that they were not; they did not check the legislation; they did not take any steps to check their obligations; and they did not get any independent person to give them any advice around the FOSPA or check the pool barriers. A discount of around 45 per cent may be appropriate.
[129] Mr Shaw submits Ms Buchanan and Mr Marshall are here at no fault of their own and it is simply not just and equitable that they share in any responsibility for the loss of opportunity. Their responsibility under the FOSPA does not abrogate the Council’s responsibility for breaching duties of care. The Council assumed responsibility in circumstances where it should not be allowed to diminish its responsibility.
[130] As I held in finding the Council owed Ms Buchanan and Mr Marshall a duty of care, where the apparently expert determination of the Council is that a pool barrier complies with the Building Code, pool owners cannot reasonably be expected to be required to go behind that determination to establish the matter independently. This is not like the cases relied upon by Mr Waalkens where reasonable plaintiffs should have taken steps to clarify the position.76 The Council’s negligent misstatements effectively assured them there was no need to do so. Mr Marshall’s expertise as a chief executive of councils does not change that. Indeed, he might be expected to have more confidence in a council being competent enough to discharge its duty of care. Ms Buchanan did not contribute to the Council’s negligence in filling out the registration form. Ms Buchanan and Mr Marshall were not contributorily negligent.
Result
[131]I order the following relief:
(a)The Court declares that the Tasman District Council negligently issued the building consent, negligently carried out the original inspection and issued the CCC, negligently carried out the 2009 and 2012 inspections, made negligent misstatements about the property’s compliance in the inspections, and caused loss to Ms Buchanan and Mr Marshall thereby;
(b)the Council will pay special damages of:
76 Gauld v Waimakariri District Council [2013] NZAR 1320 (HC) at [91]; and Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council [2017] NZSC 190, [2018] 1 NZLR 278.
(i)$195,000 plus interest under s 10 of the Interest on Money Claims Act 2016, from the date of purchase of the property until payment, for their loss in property value when they bought it;
(ii)$45,000 plus interest under s 10 of the Interest on Money Claims Act 2016, from the date of purchase of the property until payment, for their costs of remediation;
(iii)$1,022.15 (without interest) for additional clean-up which is part of the remediation;
(iv)$4,640.67 for the costs of Ms Buchanan and Mr Marshall attempting to resolve these matters with the Council, including valuation costs and legal fees not directly related to the proceedings;
(c)the Council will pay $25,000 general damages for distress and humiliation and $447.50 of medical costs; and
(d)the Council will pay costs in respect of the proceedings.
[132] If the parties cannot agree on the amount of costs, Ms Buchanan and Mr Marshall may file submissions of up to 10 pages within 15 working days of this judgment. The Council may file submissions of up to 10 pages within 10 working days of that. Ms Buchanan and Mr Marshall may file a reply of up to five pages within five working days of that.
Palmer J
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