Campbell v Auckland City Council HC Auckland CIV 2009-404-1839

[2010] NZHC 1503

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-001839

BETWEEN  HAMISH NEIL CAMPBELL AND JOHANNA MARIA CAMPBELL Plaintiffs

ANDAUCKLAND CITY COUNCIL Defendant

Hearing:         7 May 2010

Appearances: D McGill for the Plaintiffs

D Heaney SC and C Frame for the Defendant

Judgment:      10 May 2010

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

10.05.10 at 4.30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors/Counsel

D McGill, Duncan Cotterill, Auckland – [email protected]

D Heaney and C Frame, Heaney & Co, Auckland – [email protected]

HAMISH NEIL CAMPBELL AND JOHANNA MARIA CAMPBELL V AUCKLAND CITY COUNCIL HC AK CIV 2009-404-001839  10 May 2010

The defendant’s summary judgment application

[1]      The proceeding concerns a leaky home claim brought by the plaintiffs.  They bought their apartment on 31 March 1999.  Their proceeding was filed on 25 March

2009.     Their  claim  against  the  defendant  (the  Council)  is  a  straightforward negligence claim.  They allege the Council owed them a duty of care in performing its statutory functions under the Building Act 1991 in connection with the issue of a Code Compliance Certificate (the Certificate).   It is alleged the Council breached that duty.

[2]      The Council has filed a summary judgment application.   In effect it claims that none of the plaintiffs’ causes of action can succeed.  The Council’s challenge has three parts:

(a)Pursuant to section 393(2) of Building Act 2004 (the Building Act) a claim can only be brought for acts and/or omissions that fall within the ten year limitation period. Therefore this case only concerns acts or omissions after 25 March 1999. Also, the Council submits that any duties relate to the issue of the building consent and inspections only, and the clear evidence is that those all occurred prior to 25 March

1999.

(b)      Although a Certificate was issued by the Council, that occurred on 28

April 1999 which was after the date of settlement to purchase on 31

March 1999.   The Council submits that the concept of general or community reliance does not apply to certificates; that the plaintiffs cannot argue specific reliance upon the Certificate; and therefore its issue is not causative of any loss.

(c)That  although  the  plaintiffs’  evidence  refers  to  their  settling  the purchase of the property having received an assurance from a Council employee/representative that a Certificate would be issued, the plaintiffs  have  not  pleaded  reliance  upon  a  representation  and/or

breach of duty of care in relation to a representation.  If a Court finds that there was a representation that a Certificate would issue then the fact it was indeed issued four weeks after settlement is evidence such representation  was  provided  in  good  faith.     As  such,  it  is  not actionable.  Regardless, evidence of a representation is equivocal and even if it had been made, was protected by s 41 of the Local Government Official Information and Meetings Act 1987 (the LGO

Information Act).

Chronology

[3]      The relevant background facts are:

(1)      2 February 1998 - the Council issued a building consent.

(2)6 February 1999 – the plaintiffs enter into a conditional agreement for the sale and purchase agreement of the property.  Relevant conditions included the requirement of the vendor to supply a Certificate by settlement date being 31 March 1999.

(3)10  February  1999  –  the  Westpac  Bank  approves  funding  to  the plaintiffs’ conditional upon a number of factors including the issue of a Certificate prior to settlement.

(4)17 March 1999 – the Council carried out a final inspection of the dwelling.

(5)30 March 1999 – the Council confirmed that a Certificate will issue in respect of the property.

(6)31  March  1999  –  purchase  settled  and  title  is  transferred  to  the plaintiffs.

(7)      28 April 1999 – the Council issues a Certificate.

(8)September/October 2008 – the plaintiffs become aware of weather- tightness issues with the dwelling.

(9)      25 March 2009 – the plaintiffs issue a proceeding against the Council.

Principles

[4]      Relevantly they include:

(a)The Council has to show the plaintiffs cannot succeed in any action pleaded.

(b)For  present  purposes  the  Court  should  assume  facts  pleaded  are capable of proof, if not disputed by evidence of the Council.

(c)Summary judgment is inappropriate where there are disputes about material facts.

(d)Summary judgment is not appropriate where it is possible a plaintiff can amend its claim to remedy pleading defects.

Considerations

Limitation

[5] Section 393 of the Building Act governs the limitation of civil proceedings relating to building work. It provides:

393(1)     The  provisions  of  the  Limitation  Act  1950  apply  to  civil proceedings against any person if those proceedings arise from:

(a)building work associated with the design, construction, alteration, demolition, or removal of any building, or

(b)the performance of a function under this Act or a previous enactment relation to the construction, alteration, demolition, or removal of the building.

393(2)      However, civil proceedings relating to building work may not be brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.

393(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 chief executive in relation to the issue of a building consent or a 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.

…

[6] Section 393(2) provides what is known as the 10-year long stop provision. It anticipates the bringing of negligence claims against territorial authorities in relation to acts or omissions associated with the issue of building consents and Certificates. It identifies the relevant date of the act or omission, for the purposes of calculating the limitation period, as being the date of the issue of the building consent or the Certificate.

[7]      The plaintiffs’ statement of claim was filed on 25 March 2009.  The relevant date for determining whether a claim is statute barred in this proceeding is 25 March

1999.

[8]      It is clear that the building consent and subsequent inspections all occurred prior to 25 March 1999.  The plaintiffs therefore concede they cannot pursue causes of action alleging negligent issue of a building consent or negligent inspection in their claim against the Council.  However the plaintiffs submit that the issue of the building consent and subsequent inspections will be relevant in the substantive hearing of this claim to determine whether the issue of the Certificate was negligent in the circumstances.  As earlier noted, the Certificate was issued on 28 April 1999.

[9]      The Council argues that the concept of general or community reliance on the Council to properly exercise its regulatory functions does not apply to Code Compliance Certificates; that the plaintiffs cannot argue reliance upon such and in any event their issue is not causative of any loss – because it issued subsequent to the plaintiffs settling their purchase.

[10] I disagree with all of the propositions contained by that submission on behalf of the Council. Section 393 expressly provides for acts or omissions relating to the issue of a Certificate. The completion of that Certificate is a certification on behalf of the Council that its obligations have been fulfilled. It provides an assurance of performance. It confirms that it has occurred. But, I think it is more than that because of the significance upon others of its issue in connection with the sale and purchase of residential properties. As much is, I think, clear from the judgment of

Heath J [1]  in Body Corporate 188529 v North Shore City Council.  Addressing the

Council’s duty with respect to all aspects of the building process, including the issue of a Certificate, his Honour stated:

In my judgment a territorial authority owes a duty of care to anyone who acquires a unit, the intended use of which has been disclosed as residential in the plans and specifications submitted with the building consent application, or was known to the Council to be for that end purpose.  The duty is to take reasonable  care  in  performing  the  three  regulatory  functions  in  issue: deciding whether to grant or refuse a building consent application, inspecting the premises to ensure compliance with the building consent issued, and certification of compliance with the Code. [para 220]

[1] [2008] 3 NZLR 479

[11]     As well the Certificate is sometimes critical to the considerations of persons intending to buy a property.  As the chronology herein notes, purchase funding was provided  to  the  plaintiffs  on  the  condition  that  the Certificate  was  obtained  by settlement date.  If it is the Council’s contention that the Certificate is a somewhat formal document to confirm only that previous inspection and consents have been done/given,  then  I  think  that  submission  is  wrong.    It  is  certification,  it  gives certainty, that a territorial authority’s obligations have throughout been attended to. Its existence is important to those who rely upon it.   It is a document by which Council’s obligations in connection with the actions certified, can be judged.

[12]     The plaintiffs are entitled to rely on the Council and where a Certificate has been negligently issued, the plaintiffs are arguably entitled to the losses suffered in respect of that negligent act.

Whether the Code Compliance Certificate is causative of any loss

[13]     The Council’s position is that the plaintiffs were committed to purchasing the property before the Certificate issued.  Council submits that had it refused to issue a Certificate, the loss would have occurred on the date the sale became unconditional. Further they claim that the obligation of the vendor to supply a Certificate is not expressed in the agreement for sale and purchase as a condition precedent to settlement.  Therefore, it is submitted the plaintiffs were committed irrespective of the supply of the Certificate and a failure by the vendors to supply it could result only in a claim for damages for breach of warranty against the vendor.

[14]     I disagree with these submissions.  There is evidence that settlement did not occur until the plaintiffs received an assurance from the Council that the Certificate would be issued.   In this case a Certificate memorandum retained by the Council records that the property was “passed” on 30 March 1999.

[15]     Clause 16 of the agreement for sale and purchase commits the vendor to do a number of things by settlement date including the supply of a Certificate.  The first page of the agreement recorded that it was subject to the purchasers obtaining 90% funding from the National Bank.   The offer of funding from the Westpac Bank contained a condition that the Certificate be supplied prior to settlement.

[16]     The Council submits the plaintiffs had to settle their purchase on 31 March and would by the agreement’s terms have been left only with a claim for breach of warranty in respect of any of the vendor’s obligations being met.  In my judgment clause 16 was a condition precedent.  The provision of a Certificate was a condition of the provision of finance.   Clause 16 was a term provided in addition to that contained in clause 6.1(8) of the standard terms and conditions which required:

Where the vendor has done or caused or permitted to be on the property any works for which a permit or building consent was required by law, such permit or consent was obtained for those works and they were completed in compliance with that permit or consent and, where appropriate, a code compliance certificate was issued for those works.

[17]     The provision of the Certificate was of singular importance about which contractual obligations were defined.

[18]     The Council, arguably, gave an assurance that the Certificate would issue. Settlement of the purchase proceeded on that basis.  Thereby, the Council has denied the plaintiffs the opportunity to refuse to settle a purchase and to require the vendor of the property to make the property code compliant.  The plaintiffs have pleaded in their claim against the Council that the property was not code compliant due to weather tightness issues that later became apparent.  It is pleaded that the Council should have known of these issues and refused to issue the Certificate until the building’s shortcomings had been rectified.

[19]     The plaintiffs pleaded losses include the cost of rectifying building defects. Those losses have occurred, it is pleaded, because the Council issued an assurance that a Certificate would issue and it then did issue that Certificate.   The plaintiffs plead  that  its  losses  would  have  been  avoided  if  the  Certificate  had  not  issued thereby entitling the  plaintiffs  to  require  the  vendor  to  make  the  property code complaint.

Representation by Council employee

[20]     The issues here concern evidence from the plaintiffs regarding receiving an assurance that a Certificate would be issued.  As earlier noted the Council’s position is that if that representation was made then indeed it was in good faith fulfilled, albeit four weeks after settlement date.  As Mr Heaney notes whatever happened on

30 March was the only thing that happened inside the 10 year period, the issue of the certificate on 28 April 1999 apart.

[21]     As Mr Heaney explains apparently a conversation occurred with somebody in Council who might have said that a Certificate was going to issue.  As a Certificate did issue the Council cannot be negligent due to a person saying that it was going to issue.

[22]     Besides, it is submitted, section 41 of the LGO Information Act protects Council from legal suit in these circumstances.  The person to whom the vendor’s solicitors spoke on 30 March 1999 may have been in possession of information

given to him/her and may have confirmed a Certificate would issue as a result.  That scenario, Mr Heaney submits, falls squarely within s 41 of the LGO Information Act.

[23]     Section 41 provides:

(1)Where  any  official  information  is  made  available  in  good  faith pursuant to Part II or Part III or Part IV of this Act by any local authority, -

(a)No proceedings, civil or criminal, shall lie against the local authority or any other person in respect of the making available of that information, or for any consequences that flow from the making available of that information; and

(b)No   proceedings,   civil   or   criminal,   in   respect   of   any publication involved in, or resulting from, the making available of that information shall lie against the author of the information or any other person by reason of that author or other person having supplied the information to a local authority.

(2)The making available of, or the giving of access to, any official information in consequence of a request made under Part II or Part III or Park IV of this Act shall not be taken, for the purposes of the law relating to defamation or breach of confidence or infringement of copyright, to constitute an authorisation or approval of the publication of the document or of its contents by the person to whom the information is made available or the access is given.

[24]     Section 41 deals with requests made to a local authority for the provision of specified official information.  Section 10 of the LGO Information Act provides:

(1)       Any person may request any local authority to make available to that person any specified official information.

(1A)Notwithstanding subsection (1) of this section, a request made, on or after the date of commencement of this subsection, by or on behalf of a natural person for access to any personal information which is about that person shall be deemed to be a request made pursuant to subclause (1)(b) of principle 6 of the Privacy Act 1993, and shall accordingly, and nothing in this Part or in Part V of this Act shall apply in relation to any such request.]

(2)The official information requested shall be specified with due particularity in the request.

(3)If the person making the request asks that that request be treated as urgent, that person shall give that person’s reasons for seeking the information urgently.

[25]     Section 41 provides protection for some information provided, but not for others.   Mr Heaney submits that the request made of the vendor’s solicitor on 30

March 1999 comes within the terms of a section 10 request which is information protected by section 41.   The vendor’s solicitor made a request by telephone and information was provided in response.

[26]     Those submissions ignore, I consider, the significance of the memorandum dated 30 March 1999, and the significance of the enquiry by the vendor’s solicitor.

[27]     The Court has evidence that it is common place for such enquiries to be made by solicitors acting for parties due to settle agreements for sale and purchase.

[28]     The 30 March 1999 memorandum is the Council’s document.   There is no evidence from the Council about what the document means.  As best the Court can it must determine its purpose by reference to it and to handwriting on it.   In that exercise, the following is to be noted:

(a)       It is described as a Code Compliance Certificate memorandum. (b)    It notes a final inspection was due by 17 March 1999.

•       An inspection on 17 March 1999 was indicated with a ‘pass’.

•       An inspection on 29 March 1999 was indicated with a ‘fail’.

•       An inspection on 30 March 1999 was indicated with a ‘pass’.

(d)A box before the words Code Compliance Certificate was marked with a tick.

(e)       In handwriting at the top of the memorandum was noted the words:

‘URGENT settlement tomorrow afternoon (Wed)’

(f)       In handwriting is the name of a person with a phone number attached.

There  is  evidence  this  phone  number  was  that  of  the  vendor’s solicitor.

[29]     Hamlin [2] held that the territorial authority had a duty of care in the exercise of reasonable care and skill in the issue of Building Consents and the carrying out of inspections.  It is about community reliance upon local authorities in a New Zealand setting.  It would seem odd if that reliance was somehow sidestepped because of a claim that section 41 protected the Council in situations where advice of the kind sought in this case could not be relied upon.  Code compliance is a significant factor in most routine residential property transactions.   Its significance in this case was highlighted  by an  additional  clause  dealing  specifically with  the  provision  of  a Certificate at settlement.   The Council‘s memorandum, which presumably formed the foundation of the advice given by the Council officer to the vendor’s solicitor, appears to suggest the property in question was code compliant.

[2] Invercargill City Council v Hamlin [1994] 3 NZLR 513 (CA) and 1996 1 NZLR 513 (PC)

[30]     However, it is clear to the Court that the representation relied upon by the plaintiffs  was  not  that  from  an  employee  confirming  a  certificate  would  issue. Rather the plaintiffs relied on a representation that the dwelling was code compliant when they say it was not.  The plaintiffs accept that they cannot sustain a claim that advice given that the certificate would issue, was not given in good faith.

[31]     As Mr McGill submits the plaintiffs key contention in its claim is that the Council represented that the dwelling was code compliant, that the plaintiffs relied on  that  representation  in  settling  the  purchase  and  that  as  a  result  of  that representation they lost the ability to require that the dwelling be made code compliant before completing their purchase.

Adequacy of pleadings

[32]     It is submitted for the Council that the conversation on 30 March 1999 can only give rise to a claim for negligent misstatement by which the plaintiffs would

plead that they relied upon the Council and the statement made on its behalf, and that the plaintiffs knew it was being relied upon.

[33]     That however is not how the matter has been pleaded.  Mr Heaney submits that no appropriate amendment can be made to sustain a claim about the events which occurred on 30 March 1999.  The Council says the case cannot adequately be repleaded because of the simple fact that any representation made on 30 March 1999 that  a  Certificate  would  issue,  was  indeed  verified  by  the  issue  of  that  same Certificate subsequently.

[34]     Mr McGill reports that when the proceeding was drafted in the form filed, the memorandum of 30 March 1999 was not then available to the plaintiffs.

[35]     The  Council’s  position  is  that  the  plaintiffs’  pleading  does  not  assert  a negligent act referring to advice given that the Certificate would issue.  Mr McGill submits and I accept that the pleading can be amended to include as part of the negligent act the representation that the Certificate would issue on the basis that the building  was  code  compliant.    It  is  abundantly  clear  from  the  circumstances described by the proceeding that the plaintiffs had actual reliance upon the Council in terms of the building being code compliant.   No new or significant shift in the pleadings would be required to respond adequately to the Council’s criticisms of the current pleading.  Nor would there be any prejudice to the Council if the plaintiffs claim of negligence was amended in this way.  The issues between the parties do not include other persons or potential parties.  It is focussed upon the significance of a claim that the Council represented on 30 March 1999 that the building was code compliant.

Summary

[36]     To succeed the plaintiffs will have to prove their claim of negligence on the balance of probabilities.   On the basis of the evidence available to the Court the Court cannot discount a claim that a representation was made by the Council that the building was code compliant when stated that a Certificate would issue.  Bearing in mind the significance attached to the purpose of the vendor’s solicitor’s enquiry on

30 March 1999, I am not prepared without more to rule that section 41 of the LGO Information Act precludes a right of claim.

Result

[37]     I find that the plaintiffs have an arguable case for each of their causes of action because:

(a)       Their claim is not precluded by limitation rules;

(b)      There is an arguable case for loss because the plaintiffs required an assurance a certificate would issue in circumstances where an undertaking that it would be provided, was a condition of the contract and by settlement date the Council had agreed to issue that certificate.

(c)Upon the case presented for the plaintiffs it is arguable that Council represented the dwelling was code compliant when in fact it was not.

(d)      The Council owed a duty of care to the plaintiffs when issuing the

Certificate.

(e)Because the Council has obligations to inspect and certify code compliance and in this case the plaintiffs were not required to show reliance to establish a duty of care in respect of the issue of a Certificate.

(f)       Regardless,  the  plaintiffs  arguably  did  rely  on  the  issue  of  that

Certificate.

(g)It  is  arguable the  plaintiffs  were not  committed  to  their  purchase unless the Certificate issued.

Judgment

[38]     The summary judgment application is dismissed.  This is an appropriate case for an award of costs to be fixed now, and I do so on a 2B basis, payable to the plaintiffs.

[39]     This matter is adjourned for call in the chambers list at 2.15pm on 4 June

2010.

Associate Judge Christiansen