Chiem v Fordyce Company Limited
[2022] NZHC 1978
•11 August 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-754
[2022] NZHC 1978
BETWEEN BON CHEAK CHIEM
Plaintiff
AND
FORDYCE COMPANY LIMITED
Defendant
Hearing: 2, 3, 5, 6 and 11 August 2021
Further submissions and documents received 7, 18, and 28 July and 3 August 2022
Appearances:
R J Latton and K B Arthur for Plaintiff
D S McGill and D L Bennington for Defendant
Judgment:
11 August 2022
JUDGMENT OF PETERS J
This judgment was delivered by Justice Peters on 11 August 2022 at 10.30 am pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: Graham & Co, Auckland
Duncan Cotterill, Auckland
Counsel:R J Latton, Auckland K B Arthur, Auckland
CHIEM v FORDYCE COMPANY LIMITED [2022] NZHC 1978 [11 August 2022]
Table of Contents
Para No
Background.......................................................................................................... [8]
Resource consent[18]
Brooklands Ltd and Deane Consultancy Ltd[19]
Abatement notice[23]
Shareholder meeting 21 February 2017[26]Mr Blomfield[29]
Parakai Subdivision Ltd[30]
ENGEO[33]
Mr Chiu and Mr Chiem[35]
Lifting of abatement notice[39]
Airey, Coffey, Shepherd and Mr Richards[41]
Events after 5 December 2017[49]Evidence.............................................................................................................. [50]
Claim................................................................................................................... [53]
Counterclaim...................................................................................................... [59]
Duty of care[60]
Role of a project manager[62]
Assumption of responsibility[63]
Discussion[70]
Breach[81]
Particular (a)[95]
Particular (b)[96]
Particular (c)[98]
Particulars (d), (e) and (f)[99]
Particular (g)[100]
Particular (h)[101]
“Allowed or directed”[103]
Conclusion on breach[105]
Damages............................................................................................................ [108]
Result................................................................................................................. [113]
Costs.................................................................................................................. [115]
Post-script......................................................................................................... [116]
[1] This proceeding began life as a claim by the plaintiff, Mr Chiem, to recover a substantial sum that he alleged was due to him from the defendant (“FCL”). However, the sum Mr Chiem now claims is modest, being $38,771.49 for remuneration he contends is due for services rendered between 2 November 2016 and 20 November 2017.
[2]FCL denies liability to Mr Chiem for this or any other sum.
[3] The more substantial claim is by FCL against Mr Chiem by way of counterclaim. FCL contends that Mr Chiem is liable to it in negligence for damages of $2,792,733.
[4] FCL alleges that between 2 November 2016 and 5 December 2017 Mr Chiem owed it a duty of care to ensure that the development undertaken on what is referred to as the Stage 1 land was carried out in a manner which complied with the applicable resource consent(s), and in a good and workmanlike manner. FCL alleges that Mr Chiem breached his duty, in that earthworks undertaken under his (alleged) direction on the Stage 1 land between 24 October 2017 and 5 December 2017, were conducted to a poor standard, and with a lack of quality control in respect of “fill” materials placed on the site. The sum claimed by way of damages is said to be that of remediating the site, plus costs said to be required to ready the site for works, such as insurance, fencing, health and safety measures, and so on.
[5]Mr Chiem denies both liability and quantum.
[6] There is an obvious irony to the case, in that Mr Chiem alleges that FCL engaged him to manage the development for $800 per week but denies he assumed the role of project manager, whereas FCL denies it agreed to pay Mr Chiem but asserts he undertook to project manage the development without payment.
[7] For reasons set out below, I am not satisfied either the claim or counterclaim is established.
Background
[8] At all material times prior to this dispute, the land in issue was farmland. In August 2015, a developer obtained resource consent to develop and subdivide the land for residential purposes. The total land area involved was approximately 10 ha. It was contemplated, and indeed this is what transpired, that the development would be conducted in two stages.
[9] In early 2016, a local real estate agent approached Mr Chiem to see if he had any interest in purchasing the land. Mr Chiem was known to the agent as he had previously owned a café in the vicinity. Mr Chiem expressed interest in the proposal.
[10] The chronology is not entirely clear on the evidence but, by mid-2016, Mr Chiem had contacted Chi Wai Wong, whom Mr Chiem had known for many years, to see if he had any interest in investing in the project. Mr Wong was interested and introduced two other investors, Hung-Chi Chiu and Tung Ming Liu. In due course all became shareholders in FCL. After discussions, they agreed that they would purchase the land marked for Stage 1, which comprised approximately 5.5438 ha.
[11] By this time, the developer (“FRTL”) had entered into agreements for the sale and purchase of both the Stage 1 and Stage 2 land with Fordyce Partnership Ltd (“FPL”). FPL was a company wholly owned and controlled by Mr Chiem, incorporated especially for this acquisition. FPL then entered into an agreement to sell the Stage 1 land to Mr Chiu and Mr Wong or nominee. Mr Chiu and Mr Wong subsequently nominated FCL as the purchaser.
[12] The agreements in respect of the Stage 1 land settled on 1 November 2016, that is from FRTL to FPL, and from FPL to FCL.
[13]FPL purchased the Stage 1 land for $4,000,000 and sold it to FCL for
$5,229,000. Mr Chiu’s evidence (and Mr Liu’s was to similar effect) was that he did not know or understand that Mr Chiem was beneficially interested in FPL and that he understood from Mr Chiem that he was acting purely as an agent for FPL. Mr Chiu was unhappy at Mr Chiem’s “mark-up” on the purchase price when he learned of the
true position even though, as Mr Latton for Mr Chiem submits, the information was available to FCL’s solicitors from the Companies Office.
[14] As at settlement of FCL’s purchase, Mr Chiu (or, rather, the trustees of the Chiu Family Trust) and Mr Wong were FCL’s sole shareholders. The shareholding was varied shortly thereafter, so that the shares in FCL came to be held as follows: 50 per cent by the trustees of the Chiu Family Trust (“trustees”); Mr Wong as to 25 per cent; Mr Chiem as to 20 per cent; and Mr Liu as to five per cent. These shareholdings reflected the parties’ respective contributions to the purchase price, Mr Chiem’s being met by FPL’s profit on the sale.
[15]At all material times, Mr Chiu and Mr Wong were FCL’s directors.
[16] None of the shareholders had experience in subdivisions. Mr Chiu had, and has, a substantial business supplying items to the defence force; Mr Wong’s business is in supplying sheet metal and he has interests in food manufacturing and restaurants; Mr Chiem has owned and operated cafés and bakeries; and Mr Liu has or had a landscaping and construction business.
[17] I go on now to set out the further background information required to put the dispute in context. Fortunately, it is unnecessary to determine many of the factual disputes that developed between the witnesses. As appears above there are two principal issues. The first is whether FCL engaged Mr Chiem at $800 per week. The second is whether, from 2 November 2016, Mr Chiem owed a duty of care to FCL and, if so, whether he breached it between 24 October 2017 and 5 December 2017 causing the loss claimed.
Resource consent
[18] The resource consent for the development permitted the subdivision of the Stage 1 land into 67 lots and, amongst other things, included conditions governing earthworks on the site. These required that 68,000 m3 of “clean fill” be imported to the site, with this fill to meet particular specifications as to its composition and lack of contaminants. The purpose of importing the fill was to “lift” the site so that it would be less susceptible to flooding or inundation.
Brooklands Ltd and Deane Consultancy Ltd
[19] In early-November 2016, FCL engaged an earthworks contractor, Brooklands Ltd (“Brooklands”). There is no dispute Mr Chiem introduced Brooklands to FCL. Brooklands subsequently introduced Deane Consultancy Ltd (“DCL”) to provide geotechnical engineering services.
[20] By the end of January 2017, and quite possibly before, FCL had engaged Terra Group Ltd (“Terra”) as “engineer to the contract”. The evidence at trial was that this title generally signifies appointment as “project manager”. FCL did not engage Terra under a formal written contract, although Terra did supply one. Nevertheless, Terra, principally through its director Mr Mark Kearney, rendered services to FCL, for which it was paid.
[21] Mr Kearney subsequently advised FCL to terminate Brooklands’ contract for several reasons, including that Terra was not satisfied as to Brooklands’ quality control of the earthworks. With FCL’s agreement, Terra effected the termination on 27 January 2017. DCL, which had worked closely with Brooklands, then withdrew from the project.
[22] Brooklands disputed the termination, said it was owed a substantial sum, and ultimately served a statutory demand on FCL. It is clear, and FCL put weight on the point, that Mr Chiem undertook to the other shareholders that he personally would be responsible for resolving the dispute with Brooklands, and at his sole expense. This Mr Chiem did, whilst keeping the other shareholders informed of progress. Brooklands withdrew its statutory demand in late-February 2017 and that appears to have been the end of the matter.
Abatement notice
[23] On 2 February 2017, Auckland Council served an abatement notice on Mr Chiu in his capacity as a director of FCL. This followed an inspection of the site by the Council on 1 February 2017. With some exceptions, the notice required the cessation of all works on the site for what were said to be contraventions of conditions of the resource consent pertaining to earthworks and fill.
[24] Not surprisingly the abatement notice was a matter of concern. On receipt of the notice, Mr Chiu sought advice from Mr Sam Hsu, a family friend and an experienced project manager and developer. Mr Hsu gave evidence at trial to the effect that he visited the site, reviewed the existing documents, and then reported to the shareholders, Mr Chiem excluded, in writing and at a meeting on 16 February 2017. Mr Hsu found that work was continuing on the site in breach of the abatement notice (this was a matter of dispute at trial, as the notice permitted the continuation of some work). Mr Hsu also considered there were deficiencies in the manner in which the site had been established. For instance, there were no silt or traffic management controls in place; no “clean fill” logs were being kept; and there was no engineer “supervision or sign off”. Mr Hsu also considered there were deficiencies in the contractual documents and in respect of the fill that was on-site and its origin.
[25] Mr Hsu recommended to the shareholders (and directors of course in the case of Mr Chiu and Mr Wong) that work stop immediately pending engagement of a suitable group of professionals.
Shareholder meeting 21 February 2017
[26] All the shareholders met on 21 February 2017, including Mr Chiem. What purported to be the translated, but not the original, minutes of this meeting were included in the common bundle. However, when the signed original was made available and translated, its contents were different in important respects to that in the bundle. It is fair to record that the differences were a surprise to counsel.
[27] By way of example, the document in the bundle included two agenda items, and recorded that Mr Chiem was responsible for resolving matters with Brooklands (not in dispute) and the abatement notice. The translation of the original includes four agenda items. The third of these evidences a general acceptance that steps had to be taken to bring the development into compliance with the resource consent and an agreement that Mr Chiem would ask “Mark” — Mark Kearney of Terra — “to take charge” and would ask “project manager to be responsible for loan and engineering”. At the time, the shareholders were looking to arrange finance to fund the ongoing work
which would inevitably require detailed information about the project and anticipated costs.
[28] In cross-examination, Mr Chiu accepted that the shareholders had resolved at this meeting to engage Mr Kearney as project manager, and to ask him to take charge. This is an important point because it is part of FCL’s case that Mr Chiem undertook responsibility for resolving the abatement notice. Mr Chiem accepted in cross- examination that he did undertake to deal with the notice but I am not satisfied that is consistent with the minutes of the meeting. There is also evidence in the common bundle that at least one potential lender (Strata) was told to liaise with Mr Kearney to obtain information. Unfortunately, this new translation of the minutes became available after Mr Liu had given evidence and, as I understood it, it was Mr Liu who drafted the document appearing in the common bundle.
Mr Blomfield
[29] It appears that Mr Chiem had also engaged or purported to engage another earthworks contractor, Mr Daniel Blomfield, to undertake works on the site. This was in or about January 2017. Mr Hsu discovered that Mr Blomfield was working on the site after the abatement notice was served, although it is not clear whether he was working in breach of the notice or attending to permissible works. In any event, Mr Blomfield was instructed to stop work on 16 February 2017, and subsequently trespassed from the site.
Parakai Subdivision Ltd
[30] After termination of Brooklands’ contract, Mr Chiem incorporated Parakai Subdivision Ltd (“Parakai”). As I understood his evidence, he did so at the request of the shareholders, so that there was an intermediate entity between FCL on the one hand and contractors on the other. The intention was that contractors would invoice Parakai, FCL would put Parakai in funds, and Parakai would pay the contractors’ fee.
[31] FCL relied on an invoice from Parakai to FCL on 21 April 2017 for $200,000 for “Subdivision Management as agreed. Filling on site ...”. Mr McGill, for FCL, questioned Mr Chiem on whether this invoice was in respect of fees Mr Chiem was
claiming personally, that is for services he had rendered. I understood Mr Chiem to deny that it was. I note also that the invoice was not paid.
[32] This invoice and another from Parakai were also treated as evidence that earthworks were being conducted on-site during the period when the abatement notice was in effect. Of course, earthworks in breach of the abatement notice should not have been conducted at the time. However, I am not satisfied that this adds particularly to FCL’s case against Mr Chiem.
ENGEO
[33] In March 2017, FCL engaged ENGEO, a firm of geotechnical engineers, to undertake a retrospective review of the placement of fill on the site. Mr David Brodie of ENGEO had the day-to-day involvement. Mr Brodie was already familiar with the site as he had provided geotechnical advice to other interested parties.
[34] ENGEO found that fill imported to the site was not geotechnically suitable and did not comply with the cleanfill requirements of the resource consent.
Mr Chiu and Mr Chiem
[35] By April 2017, Mr Chiu and Mr Chiem’s relationship had deteriorated. On Mr Chiu’s evidence this was because of the issue of the abatement notice, the dispute with Brooklands, and because he considered Mr Chiem had misled him at the time of the purchase. This led to an agreement, contained in a Deed of Settlement of 14 May 2017, between Mr Chiu, the trustees, and Mr Chiem. There was dispute at trial about how the deed came to be executed but that is a matter I need not resolve. Indeed, the deed is the subject matter of separate proceedings. Suffice to say that the deed comprised an option A and an option B, with either one or the other to be implemented at a time of Mr Chiu’s choosing. Option A, if implemented, would have seen Mr Chiu or the trustees acquiring the Stage 2 land and exiting FCL. Option B provided for Mr Chiem to exit FCL. As matters developed, option B was implemented in November 2017. That is why Mr Chiem ceased to be involved with the development after 5 December 2017.
[36] It was a term of the deed that, post-execution, Mr Chiem would refrain from continuing or beginning what was referred to as new work or the execution of any contracts in relation to either the Stage 1 or Stage 2 land without first obtaining Mr Chiu’s written consent.
[37] On the face of it, and again this may be the subject of future proceedings, Mr Chiem did not comply with this provision. Works on-site did proceed once the abatement notice was lifted and Mr Chiem did execute contracts, specifically those engaging professionals. What Mr Chiu knew of these matters is unclear. However, on the face of the evidence, after the deed was executed, and although he remained a director of FCL, Mr Chiu distanced himself from FCL’s affairs. This is consistent with Mr Chiem’s evidence that, after the deed was executed, he considered Mr Chiu had left the venture. In fact, in May 2017, Mr Chiem incorporated a new company, NBM 2017 Construction Ltd, that he expected would come to hold the trustees’ shareholding in FCL under option A. Mr Chiem also entered into arrangements with new business partners, Yan Sun and Sing Pang, and their names begin to appear in email correspondence from this time on.
[38] Lastly on this point, I note that Mr Wong continued as a director of FCL and it is common ground that Mr Wong knew that works were continuing on-site. To the extent it is material, Mr Wong’s knowledge would fall to be attributed to FCL.
Lifting of abatement notice
[39] After discussions and attendances with Terra and ENGEO, in April 2017 the Council advised that it would permit fill that had already been imported to the site to remain, provided that suitable management controls were put in place.
[40] In addition, by late September 2017, the Council were satisfied that it should cancel the abatement notice. This meant that earthworks could resume in the forthcoming earthworks season, commencing on 1 October 2017.
Airey, Coffey, Shepherd and Mr Richards
[41] At about the same time, there was a change in the professionals engaged on the project.
[42] First, by mid-September 2017, Airey Consultants Ltd (“Airey”) had replaced Terra. Mr Chiem executed Airey’s terms of engagement on behalf of FCL. That Airey was engaged, and the nature of the services it was to provide, is important to Mr Chiem’s defence to FCL’s claim that he assumed responsibility for the project management of the development. Airey’s terms of engagement anticipated that it would provide many of the services usually expected of a project manager. This was confirmed in the evidence of Mr Hamish Anderson, an expert witness called by FCL and which I discuss below. For instance, under its terms of engagement, Airey was to liaise with the geotechnical engineer for fill monitoring and settlement controls; prepare tender documents; arrange for the lodging of health and safety and traffic management plans with the Council; monitor construction works to ensure compliance with Council standards; certify progress payments to contractors; provide site instructions to contractors; and numerous other tasks connected with compliance with the conditions of the resource consent. The Airey representative with the day-to-day involvement in the project was Mr Michael Lee.
[43] Secondly, from 20 October 2017, Coffey Geotechnics Ltd (“Coffey”) replaced ENGEO as the geotechnical engineers. The person principally responsible for the assignment at Coffey was Mr Joshua Fisher.
[44] Thirdly, Mr Chiem engaged Shepherd Consultants Ltd (“Shepherd”) as FCL’s earthworks contractor. Shepherd had previously undertaken earthworks on the site, essentially to remove “fill” that Mr Blomfield was said to have off-loaded on the site, apparently as a retaliatory measure for non-payment of invoices. Shepherd was the principal earthworks contractor on-site during the period in which FCL alleges Mr Chiem breached the duty of care he is said to have owed.
[45] No formal written agreement was entered into between FCL and Shepherd. Although Mr Lee was asked to prepare this, he did not forward a draft for execution until 30 November 2017, shortly before works ceased.
[46] Shepherd was Mr Tom Shepherd’s company, and Mr Chiem’s evidence was that Shepherd had three or four employees on-site from the time at which earthworks resumed after 24 October 2017. I record here that Mr Chiem himself acknowledged assisting Mr Shepherd by driving a “compactor” on two days when several of Mr Shepherd’s staff were unwell. Again, FCL set considerable store by this but I do not consider it adds much to FCL’s case.
[47] It was another notable feature of the case that Mr Shepherd does not communicate by email. Accordingly, instructions to Mr Shepherd needed to be relayed either on-site or by telephone or to Mr Chiem for him to provide to Mr Shepherd. Although some scepticism was expressed at trial as to the suitability of Mr Shepherd and his staff for this project, Mr Lee did approve progress payments to Shepherd totalling more than $600,000.
[48] Fourthly, Mr Chiem acknowledged in evidence that he had also engaged another earthworks contractor, a Mr Richards, and that Mr Richards also undertook some earthworks after 24 October 2017. Mr Richards did not feature to any great extent in the contemporaneous documents or in the evidence given at trial.
Events after 5 December 2017
[49] As I have said, works came to a halt on 5 December 2017 because option B had been implemented. Subsequently, FCL engaged Mr Hsu to investigate the earthworks on-site between 24 October 2017 and 5 December 2017. At Mr Hsu’s request, Coffey wrote a letter dated 11 May 2018 setting out its observations of what had occurred on-site in this period and the works it recommended to remediate the existing fill on-site. Coffey’s letter in turn formed the basis for a request by FCL for tenders to undertake the works they recommended. The sum FCL claims by way of damages from Mr Chiem derives in part from a tender submitted for those works by Yakka Contracting Ltd (“Yakka”) in September 2018.
Evidence
[50] Each of the shareholders gave evidence as did Mr Hsu, Mr Brodie of ENGEO, Mr Lee of Airey; Mr Peter Bosselmann of Coffey; and Mr Anderson, an expert.
[51] There are two points to note regarding the evidence. First, Much of the viva voce evidence from the shareholders was translated. It was apparent throughout that often the shareholder concerned did not grasp what was being asked of him. The answers were not always apposite or pertinent to the question and, in some cases, were unintelligible despite the best efforts of all concerned. Moreover, there were many points of detail which witnesses were unable to recall. Given these matters, I have placed considerable reliance on the contemporaneous documents in the common bundle.
[52] Secondly, a notable omission from the witness list was Mr Fisher of Coffey. By the time of trial, Mr Fisher had left Coffey. I have no doubt that Mr Fisher could have given relevant evidence to many of the issues in dispute. However, his absence meant that evidence was not available, and also that he could not be cross-examined.
Claim
[53]Mr Chiem’s claim can be dealt with relatively briefly.
[54] Mr Chiem’s pleading is that he was retained to manage the development pursuant to an oral agreement with Mr Chiu, made on behalf of FCL but prior to its incorporation, on 15 October 2016.
[55] Mr Chiem’s evidence as to the nature of this agreement and how it came about was different to his pleading. It was that the shareholders agreed at the outset that one of them needed to be on-site dealing with day-to-day issues, a “client contact” or representative for contractors and professional consultants that the shareholders engaged, and then reporting back to shareholders. Mr Chiem’s evidence was that he agreed to be that person, and that “we all agreed that I would be paid $800 per week for that role”.
[56] I am satisfied that Mr Chiem did have that role but I am not satisfied there was any agreement, whether made on 15 October 2016 or any other date (in evidence Mr Chiem suggested several other possibilities), pursuant to which FCL would pay him $800 per week. Mr Chiu and Mr Liu were adamant there was no such agreement. Mr Wong’s evidence was that he suggested to Mr Chiem that he could be paid $800
per week to oversee the development, but no agreement to do so was reached. Rather, Mr Wong’s evidence was that, in December 2016, he asked Mr Chiu to have FCL buy Mr Chiem a vehicle so that Mr Chiem could visit the site. He also asked that Mr Chiem be given some cash, totalling $5,000, to cover expenses. The vehicle was purchased in early December 2016, with funds provided by FCL. Likewise the $5,000, which was paid in two instalments in December 2016.
[57] In addition to the other shareholders’ denials of any agreement, there is no evidence of any contemporaneous demand by Mr Chiem for payment. This could be expected if the agreement Mr Chiem alleges had been made.
[58] On the evidence before me, Mr Chiem has not proved the agreement on which he relies and I dismiss his claim accordingly.
Counterclaim
[59] I turn now to FCL’s counterclaim. This requires that FCL establish that Mr Chiem owed FCL a duty of care, that he breached that duty, and caused loss to FCL in the sum claimed. Each element of the cause of action is denied.
Duty of care
[60]The relevant parts of FCL’s pleading as to the duty is as follows:
17Between 2 November 2016 and 5 December 2017, the plaintiff assumed the role of project manager for the development of Fordyce Road Stage 1.
18In assuming the role of project manager, the plaintiff owed the defendant a duty of care to ensure that the development undertaken on Fordyce Road Stage 1 was carried out in compliance with the Resource Consent applicable to the property, and in a good and workmanlike manner.
[61] Accordingly, it is necessary for FCL first to establish Mr Chiem assumed the role of project manager between those dates and, secondly, that in doing so he owed FCL the duty of care alleged. I have construed that duty as one requiring Mr Chiem to exercise the skill and care of a reasonable, prudent project manager, providing
services with the intention that the development of the Stage 1 land would be carried out in compliance with the resource consent, and in a good and workmanlike manner.
Role of a project manager
[62] Mr Anderson gave evidence of the expected role and responsibilities of a reasonable and prudent project manager on a development site requiring earthworks. Mr Anderson’s evidence was that the project manager’s role is to oversee the planning and delivery of the specified project on time and within budget. The project manager should have appropriate qualifications, experience, and organisational, communication, and document management skills. The project manager should also ensure suitably qualified experts are engaged. For a project of the nature at issue in this case, Mr Anderson would have expected to see a “development feasibility model” containing revenue and cost assumptions, and a forecast of profitability; a development programme and budget; and regular reporting to the principal (FCL). The project manager should be familiar with the resource consent and have the expertise required to assemble a tender package, including a form of contract appropriate to the task at hand. The project manager is also responsible for holding and minuting regular site meetings and maintaining appropriate records.
Assumption of responsibility
[63] Mr McGill referred me to the following passage in Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd in the context of FCL’s claim that Mr Chiem owed it a duty of care as a result of an assumption of responsibility:1
[99] Assumption of responsibility for a statement or a task does not usually entail a voluntary assumption of legal responsibility to a plaintiff, except in cases where the defendant is found to have undertaken to exercise reasonable care in circumstances which are analogous to, but short of, contract, and it is foreseeable that the plaintiff will rely on that undertaking. If that is the case then, subject to any countervailing policy factors, a duty of care will arise. In other cases, the law will deem the defendant to have assumed responsibility where it is fair, just and reasonable to do so: Attorney-General v Carter, at pp 168 – 169 (paras [23] – [27]). Whether it is fair, just and reasonable to deem an assumption of responsibility and then a duty of care will depend on a combination of factors, including the assumption of responsibility for the task, any vulnerability of the plaintiff, any special skill of the defendant, the need for deterrence and promotion of professional standards, lack of alternative
1 Rolls-Royce New Zealand Ltd v Carter Holt Harvey Ltd [2005] 1 NZLR 324 (CA).
means of protection and so on – that is, essentially the matters discussed above at paras [58] – [65]. Wider policy factors will also need to be taken into account.
[64] As Mr McGill submits, it is necessary to review a combination of factors to determine whether it is fair, just and reasonable to deem an assumption of responsibility and then a duty of care. In his closing submissions, Mr McGill submits the relevant combination of factors in this case is as follows.
[65] First, in the course of many meetings with the shareholders, Mr Chiem acknowledged that he was responsible for the works that needed to be undertaken to lift the abatement notice. This is said to be consistent with Mr Chiem assuming the responsibility of a project manager. Mr McGill also placed reliance on the invoice from Parakai to FCL referred to above.
[66] Secondly, Mr McGill submits that two of the consultants working on the development, Mr Brodie from ENGEO and Mr Lee from Airey, understood that Mr Chiem had “control of the site, and was managing the development”. Both gave evidence to this effect.
[67] Thirdly, Mr McGill contends that FCL was “vulnerable”, in that it owed a non-delegable duty to all future purchasers of the land as to its stability and suitability for residential construction.2 Mr Chiu, Mr Wong, and Mr Liu did not have the experience to do or monitor the earthworks themselves and they relied on Mr Chiem to oversee the contractors engaged to do the works.
[68] Thus Mr McGill contends that it is fair, just and reasonable to deem Mr Chiem assumed responsibility to project manage the development and impose a duty of care accordingly.
[69] Mr Latton submits that the requisite combination of factors for the imposition of a duty of care did not exist. I accept that submission. My reasons, which incorporate most of Mr Latton’s points, are these.
2 Mount Albert Borough Council v Johnson [1979] 2 NZLR 234 at [179].
Discussion
[70] First, I am satisfied that Mr Chiem undertook to provide the service described above, that is to be FCL’s point of contact on-site, essentially a conduit, relaying information and documents as required. This was Mr Chiem’s evidence. Mr Wong’s evidence was consistent with this, and was to the effect that Mr Chiem was to “oversee” the development. Likewise, Mr Chiu’s evidence, which was that Mr Chiem was to be “looking after the contractors” that FCL engaged.
[71] There is some evidence supporting FCL’s contention that Mr Chiem assumed a larger role than this. In that respect, I refer particularly to Mr Chiem engaging Shepherd and Mr Richards to do earthworks on-site, and to his execution, on FCL’s behalf, of contractual documents with Airey and Coffey. However, there was a broad measure of agreement between the shareholders that Mr Chiem was not appointed as the project manager of the development, and they did not perceive him to be such. Mr Chiem denied that he undertook or said that he would undertake such a role. Mr Wong’s evidence was that the shareholders did not “agree to engage [Mr Chiem] as the project manager”. Mr Chiu’s evidence was to the same effect.
[72] Secondly, Mr Chiem was not possessed of any special skill or expertise equipping him to act as a project manager of a development of this kind. Mr Chiem had no experience in the development or subdivision of land and, importantly, all of the shareholders knew that. Mr Liu’s evidence was that he knew Mr Chiem did not have the required skills. Mr Wong’s evidence was to similar effect. On the other hand, FCL had the services of Terra and Airey who were qualified to act as project manager.
[73] Mr McGill relied on what he said was Mr Chiem’s contemporaneous undertaking to attend to all matters required to lift the abatement notice. As I have said, Mr Chiem did give evidence at trial that he was responsible for this. However, I am unable to take that evidence as anything more than an acknowledgment that he was to be the FCL representative in this process. The abatement notice was lifted, principally through the endeavours of Terra and ENGEO, with some assistance from Airey also. It was they who were able to satisfy the Council as to the state of the site
and to assure the Council that future earthworks would proceed in accordance with the resource consent. The contemporaneous documents do not evidence Mr Chiem undertaking any substantive role in the discussions with the Council.
[74] Mr McGill also submits, correctly, that Mr Brodie and Mr Lee both gave evidence (in chief at least) that they considered Mr Chiem to be the project manager for the development. However, this evidence did not withstand cross-examination.
[75] Although Mr Brodie’s evidence-in-chief was that he received most of his instructions on the project from Mr Chiem, in cross-examination Mr Brodie acknowledged that most of ENGEO’s communications on significant matters were with Terra. For instance, ENGEO remitted its proposal to carry out a geotechnical and environmental suitability assessment of the site to Terra. ENGEO received and responded to requests by Terra for information. ENGEO liaised with Terra and other parties regarding silt control measures on-site. Mr Brodie acknowledged to Mr Latton that there were no instructions from Mr Chiem in the contemporaneous correspondence. Mr Brodie also accepted in cross-examination that the correspondence and communications at the time were those to be expected between a consultant, such as ENGEO, and the engineer to the contract, Terra.
[76] Nor did Mr Lee’s evidence that he perceived Mr Chiem to be the project manager withstand cross-examination. On the contrary, as I have said, Airey’s terms of engagement provided for Airey to undertake many services for FCL, consistently with those Mr Anderson said he would expect a project manager to perform. And Mr Lee did attend to many of the matters required by the Airey contract. He communicated with the Council; he arranged site meetings, including with Council representatives; he liaised with the surveyors who had been engaged; he did prepare a contract for Shepherd; and he approved Shepherd’s claims for progress payments, totalling more than $600,000.
[77] Mr Lee and Mr Fisher did ask Mr Chiem to attend to various matters from time to time. For instance, Mr Lee asked Mr Chiem to arrange for the manufacture of “settlement markers”, these being a means to establish the extent to which fill is
settling and compacting. As far as I can ascertain, this is one of the few actions Mr Lee did ask Mr Chiem to take, and Mr Chiem did as requested.
[78] Mr Fisher asked Mr Chiem to provide photographs of the works being conducted on-site, in lieu of Mr Fisher visiting the site. Mr Chiem did so. Most importantly of all, Mr Chiem also received instructions from Mr Fisher as to which parts of the site were ready for fill to be placed, matters such as compacting the fill, regarding contamination testing of fill on and brought to the site, and such like. Mr McGill put it to Mr Chiem that his receipt of these instructions constituted evidence that he, Mr Chiem, was directing or instructing works on-site. However, Mr Chiem’s evidence was that he was receiving this information so that he could relay it to Mr Shepherd and his employees, and that he did so.
[79] Drawing all of these threads together, the position is that all the shareholders agree Mr Chiem was to act as FCL’s client representative on-site but not as project manager. FCL and its shareholders knew Mr Chiem did not have the skills required to perform that role. On the contrary, FCL engaged properly qualified experts to work on the development. There are certainly instances of Mr Chiem going beyond his role as a point of contact, but I am not satisfied the circumstances are such that it would be fair, just and reasonable to impose the duty of care alleged.
[80] In case I am wrong, I turn now to discuss whether FCL would have established a breach of the duty of care.
Breach
[81]FCL’s allegation of breach of the duty of care it alleges is as follows:
In breach of the duty of care, the Earthworks [defined as those between 24 October 2017 and 5 December 2017] undertaken under the direction of the plaintiff were conducted to a poor standard and with a lack of quality control, in respect of the nature of the fill materials placed on the site.
[82] FCL’s pleading includes particulars of the breach alleged. These are that Mr Chiem allowed or directed:
(a)the importation and placement of “inappropriate” fill onto the site;
(b)inadequate “discing” of existing fill on the site;
(c)inadequate compacting of imported fill;
(d)the placement of fill without appropriate testing of an underlying failed layer;
(e)the incorporation of uncertified clay stockpiles into existing soils on the eastern side of the site;
(f)works to be undertaken without the removal of vegetation;
(g)the importation of fill that had not been the subject of contamination testing; and
(h)the stockpiling of fill containing concrete and steel along the eastern boundary of the site.
[83] In short, FCL’s contention is that, during the period pleaded, Mr Chiem allowed or directed earthworks on-site which were conducted to a poor standard, and that there was also a lack of quality control in respect of fill placed on-site.
[84] In the main, FCL’s case on breach and these particulars are based on the letter from Mr Fisher of Coffey to Mr Hsu dated 11 May 2018, referred to in [49] above (“Coffey letter”). It is this letter that FCL relies on to establish that the earthworks on-site at the time were deficient. It is in this context that Mr Fisher’s evidence would have been highly relevant. Also, no expert evidence was called as to geotechnical matters which might have allowed an independent assessment of the state of the site as of 5 December 2017.
[85] In lieu of Mr Fisher, FCL called Mr Bosselmann, Mr Fisher’s supervisor at Coffey at the relevant time, as a witness. However, although he signed the Coffey letter under a note indicating that he had reviewed and authorised it, Mr Bosselmann had little, if any, familiarity with the project and had never visited the site. Nor had Mr Bosselmann reviewed Mr Fisher’s file before he gave evidence. Mr Bosselmann’s
evidence was based on his recollection of his discussions with Mr Fisher, who he said consulted him from time to time.
[86] Before I go any further, I should say something about the evidence generally relating to the earthworks on-site after 24 October 2017.
[87] Mr Fisher visited the site on a number of occasions. Mr Bosselmann’s evidence was that a site visit would not usually be for longer than an hour. Mr Fisher also sent various emails to Mr Richards, Mr Lee and Mr Chiem regarding matters such as preparation of the site, which areas were suitable or ready for filling, surveying (which Mr Lee organised), contamination testing which Coffey’s environmental team was to undertake, and so on. As I have said, Mr Chiem’s evidence was, to the extent he was given instructions as to earthworks on-site, he relayed them to Shepherd and Mr Richards.
[88] On 21 November 2017, Mr Fisher emailed Mr Chiem and Mr Lee and said he wished to have a meeting at his office on 24 November 2017 to discuss:
.. earthworks methodology going forward and what we need to see in order for us to provide completion reports.
At the moment, as the engaged consultant on the job, we feel that our requests aren’t being met and therefore won’t be in a position to sign anything off.
[89]Mr Lee forwarded Mr Fisher’s email to Mr Sun and Mr Pang the same day (see
[37] above). Mr Lee also said that Mr Fisher had tried to advise Mr Chiem of Coffey’s requirements but that those requirements were not being met.
[90] Mr Chiem’s response to this email from Mr Fisher was to require a meeting of all interested parties, on-site, and no later than 23 November 2017. The meeting took place on the 23rd.
[91] The following day, Mr Fisher emailed Mr Chiem the locations of two areas that had been inspected and cleared for filling and, amongst other things, said he was compiling “an earthworks methodology that we wish to be implemented”.
[92] As it turned out, Mr Fisher did not forward the methodology to Mr Chiem until 5 December 2017, some 10 days later, and the day earthworks ceased. This made the methodology of little practical use, to Mr Chiem at least. It is also difficult to reconcile Mr Fisher’s delay in sending the methodology, and Mr Lee’s authorisation of substantial progress payments to Shepherd, with a sense that the earthworks were seriously awry. Nor am I able to detect any significant concerns in the contemporaneous correspondence, prior to the email of 21 November 2017. I note also that, in his covering email of 5 December 2017, Mr Fisher said that since the meeting on 23 November 2017, “we have started moving in the right direction”. The methodology itself refers to matters such as keeping appropriate separation between piles of fill, and where the contractor should pile material such as vegetation and concrete. It does not establish any breach of the duty alleged.
[93] Mr McGill questioned Mr Bosselmann about the circumstances in which the Coffey letter, that is the 11 May 2018 letter, came to be written. Mr Bosselmann initially said it was because Coffey “had to bring things to a head” as works were not being undertaken “in accordance with [Coffey’s] prescribed methodology”. However, as Mr Bosselmann subsequently acknowledged in cross-examination, this evidence could not be correct, because earthworks on the site had ceased six months prior. Mr Bosselmann then said he thought Coffey had supplied the letter as Mr Hsu wished to understand events and what was going to be required to get the site to a point where earthworks could resume.
[94] I turn now to consider the extent to which the allegation of breach, and the particulars pleaded, are borne out by the evidence.
Particular (a)
[95] Mr Bosselmann confirmed in cross-examination that he could not identify any matter raised in the Coffey letter to the effect that “inappropriate” fill, by which I assume is meant fill that did not comply with the Council’s cleanfill requirements, was imported and placed on the site after 24 October 2017. The Coffey letter refers to fill from subdivisions in Penihana and Waikumete. The fill from these sites met the
Council’s requirements, although only just in the case of the fill imported from the Penihana site.
Particular (b)
[96]Mr Fisher states in his letter that on 1 and 2 November 2017:
…Existing fill along the eastern boundary was disced to condition it prior to re-compaction. Contractors disc’s were inadequate (too lightweight) and didn’t penetrate deep enough into the fill.
[97] In an email to Mr Chiem dated 2 November 2017, Mr Fisher said that the contractor’s discs were only “scratching the surface” and that “you will need to try again when it is dry perhaps with a heavier set of discs”. Mr Chiem’s unchallenged evidence on this point was that he had relayed Mr Fisher’s advice to Mr Shepherd who did or said he would hire discs of a greater depth. There is no evidence of any subsequent advice from Mr Fisher to Mr Chiem that the discing remained or continued to be inadequate.
Particular (c)
[98] There are statements in the Coffey letter to the effect that on, 13 to 15 November 2017, some fill was discovered to be compacted insufficiently. That entry also indicates that the contractor began to “rip up” this fill, presumably to compact it again.
Particulars (d), (e) and (f)
[99] There are statements in the Coffey letter bearing out these particulars. The entry for 17 November 2017 refers to placement of fill on the eastern boundary of the site without re-testing an underlying failed layer. The entry for 27 November 2017 refers to incorporation of clay, and the entry for 28 and 29 November 2017 states that vegetation had not been removed and was being mixed into existing fill.
Particular (g)
[100] The Coffey letter states that, on 1 December 2017, fill was imported to site from Waikumete without prior testing for contamination. The letter also states that
testing on-site indicated that the fill met cleanfill criteria. Rather, the complaint was that fill had been mixed into unchecked stockpiles on-site. Accordingly, the contamination point is not borne out by the letter, but plainly the fill should not have been mixed into unchecked stockpiles.
Particular (h)
[101] The entry in the letter for 5 December 2017 is that the majority of small mounds of fill placed along the eastern boundary of the site were unsuitable for bulk filling due to the presence of concrete and steel. That may well be correct but the earthworks methodology forwarded by Coffey anticipated the presence of such materials in imported fill. The important point step was to remove that material, which may well be what was intended by stockpiling it as the letter records had been done.
[102] To conclude on this point, parts of the Coffey letter do suggest that the earthworks conducted in the relevant period were deficient in some of the respects particularised, but that is as far as it goes. However, that letter is the sole evidence that those deficiencies occurred, and when, and there is no evidence that they persisted or remained as of 5 December 2017. Nor is there evidence bearing out the allegation as to a lack of quality control in respect of fill brought to site.
“Allowed or directed”
[103] In addition, the allegation of breach is that Mr Chiem directed the earthworks and/or that he allowed or directed them. There is no evidence that Mr Chiem “directed” the earthworks, or knowingly allowed deficient work to continue. Mr Fisher was directing what needed to be done. Had Mr Chiem been acting as project manager, it most certainly would have been his obligation to ensure those instructions were faithfully relayed to the contractor, and to be diligent in monitoring them. In my view, those were his obligations in any event. However, Mr Bosselmann’s evidence was that the deficiencies identified in the Coffey letter were those for which the earthworks contractor would be responsible. Indeed, the Coffey letter expressly lays the blame for many of the issues on the contractor.
[104] In cross-examination, Mr McGill pressed Mr Chiem repeatedly on whether he had relayed Mr Fisher’s instructions to the contractor and understood that they would comply with them. Mr Chiem was adamant that he had relayed those instructions and he did expect them to be complied with. Passages of Mr McGill’s cross-examination of Mr Chiem give the flavour of it:3
Q.We’ll move on, page 3425 please Mr Chiem. Now in the middle of the page there’s a record of an email from you to Mr Fisher on the 29th of November 2017, correct?
A. That’s correct.
Q. And over the page on 3426, 3427, 3428, 3429 and 3430 are some photos, just have a look at those.
A.So when they start to do the excavation at the site I took the photos and sent to Mr Fisher and waiting for his reaction.
Q. Thank you, you’ve answered my question already. So those are your photos and you sent them to Mr Fisher and then at the top of page 3425 is Mr Fisher’s response to you, on the same day, correct?
A. That’s correct.
Q. Take a minute to read it.
A. Yep, I know that one.
Q. You know this one. So this is Mr Fisher telling you what to do on site, again, correct?
A.So at the season, at the time, it was dry season so therefore is mission to try to compact according to the advice of Mr Fisher.
Q.It’s just Mr Fisher telling you what needs to happen on site though, isn’t it?
A.That’s true so once he’s seen the photos he will tell the contractor what to do and approach how to do it.
Q. And did you tell Mr Shepherd what to do when you’d seen this instruction?
A.So I already know that Mr Shepherd understand the situation and he went on ahead and hire the water blaster to put, soften the ground so that he can continue to work.
Q. But did you tell Mr Shepherd what Mr Fisher had instructed?
A. Yes, I have sent a message.
3 Notes of Evidence at 346 – 348.
Q. Did you tell Mr Richards also, was he on site then?
A. Yes, he aware of the procedure.
THE COURT:
Q.No, that wasn’t the question, the question was whether you told Mr Richards?
A.Yes, I have told Mr Richards because at that time the ground is very hard and the reason.
...
Q.Please turn to page 3451, the bottom half of the page is an email from Mr Lee to Timothy O’Grady at the Auckland Council on the 30th of November 2017, copied to you, just take a minute to read that Mr Chiem, bottom half?
A. Yes, I have witnessed this email, I have seen this email.
Q. Do you want to take a minute just to read it?
A. So I don’t know about the issue with this, but whatever I received, a problem, I will forward it to the geotech engineer and Mr Lee. Because I have no expertise in the technical issues and I will forward all the technical stuff to them.
Q. This is an email from Mr Lee to the council giving them an update on what’s happening on the site, isn’t it?
A. That’s correct.
Q. And you can see in the fourth bullet point where Mr Lee says to the council: “We have advised Bon to shape up the north-eastern corner of the site to ensure that flows will discharge back towards the SRP.” So Mr Lee has given you an instruction to do that work, correct?
A.So I have instructed Tom Shepherd’s staff to come and correct the point, settlement as mentioned in the fourth point.
Q. And Mr Lee didn’t tell Mr Shepherd to do that work did he?
A.So only the professional can act to do carry those work and at the end Mr Lee will come and inspect the result of the work done.
Q.And the next sentence says: “We have also advised Bon to widen the SRP which can be completed to provide more storage, et cetera.” So again, Mr Lee telling you what needs to be done, correct?
A.It’s the usual practice Mr Lee will tell, it’s the normal practice that Mr Lee will tell me the instruction and I will pass on the instruction to Mr Shepherd and otherwise his staff as well.
Conclusion on breach
[105] To conclude, had the duty of care FCL alleges been established, I would not have found that Mr Chiem had breached it.
[106] On the evidence before me, it is not possible to conclude that the earthworks on-site between 24 October 2017 and 5 December 2017 were conducted in a deficient manner or, if they were, that those deficiencies were not remedied. There is also no evidence that would lead me to conclude that Mr Chiem directed or allowed them.
[107] For the sake of completeness, I should mention Mr Anderson’s on this topic, such as it was. It appeared from Mr Anderson’s evidence that he was not sufficiently familiar with the many relevant communications post-August 2017. Mr Anderson was thus unable to offer an informed opinion on what might have been expected of a reasonable and prudent project manager throughout and whether Mr Chiem had acted consistently with this standard.
Damages
[108] Having reached these conclusions, it is unnecessary for me to consider the next controversial topic which is the damages claimed, and the extent to which these too were proved.
[109] Briefly, FCL’s evidence as to its damages claim was given by Mr Hsu. His evidence was that the damages claimed comprise two main components.
[110] The first component comprises 50 per cent of the costs estimated by Yakka for preliminary and general items, essentially to do with re-establishment of the site, and the costs of supplying, importing and receiving 25,000 m3 of fill. The total claim for this first component is $1,751,223.76, with the cost of the fill estimated to be
$1,566,750.
[111] The second component of the claim totals $1,040,509.32. This is Yakka’s estimate in respect of the cost of the earthworks said to be required to remediate the site. This sum includes more than $620,000 for the uplifting and disposal of unsuitable
material, more than $200,000 for discing and associated works, and approximately
$150,000 for excavating material.
[112] In case it assists the parties, I would not have declined an award of damages solely because the claim is based on estimates. My principal reservation regarding the claim was that I could not be sure from Mr Hsu’s evidence that the sum claimed was confined to the costs attributable to restoring the site to its 24 October 2017 state, and possibly such associated earthworks as were required in the course of that restoration. My impression of Mr Hsu’s evidence was that the damages claimed included a component of betterment for which Mr Chiem could not be liable.
Result
[113] I dismiss the plaintiff’s claim against the defendant. The agreement on which the claim is based is not proved on the evidence before me.
[114] I dismiss the defendant’s counterclaim against the plaintiff. The duty of care alleged is not proved. If I am wrong in that, FCL has not proved a breach of that duty.
Costs
[115]In the absence of agreement, the parties may make submissions on costs.
Post-script
[116] In July 2022, Mr Latton advised that he considered documents that Mr Chiu had recently discovered in the related proceeding to which I have referred were relevant to the issues of credibility, and particularly Mr Chiu’s. That memorandum led to the provision of other memoranda, and the documents themselves. For the avoidance of doubt, I record that this judgment is based on the evidence presented at trial and I have taken no account of subsequently received material.
Peters J
0
0
0