CONTRACT HOLDINGS LIMITED AND THE WEATHERTIGHT HOMES TRIBUNAL DONALD BRETT HASTIE and LEANNE GAIL DREDGE s BARRY RONALD BARNES and PAMELA BARNES s BARRY RONALD BARNES parties continued over
[2024] NZHC 2670
•16 September 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2024-409-133
[2024] NZHC 2670
UNDER the Judicial Review Procedure Act 2016 BETWEEN
CONTRACT HOLDINGS LIMITED
Applicant
AND
THE WEATHERTIGHT HOMES TRIBUNAL
First Respondent
DONALD BRETT HASTIE and LEANNE GAIL DREDGE
Second Respondents
BARRY RONALD BARNES and PAMELA BARNES
Third Respondents
BARRY RONALD BARNES
Fourth Respondentparties continued over
Hearing: 3 September 2024 Appearances:
M S Henderson and C D Pinkney for Applicant S N Zellman for Second Respondents
Judgment:
16 September 2024
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 16 September 2024 at 3 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
CONTRACT HOLDINGS LIMITED v THE WEATHERTIGHT HOMES TRIBUNAL [2024] NZHC 2670 [16
September 2024]
CHRISTCHURCH CITY COUNCIL
Fifth Respondent
GRAEME JACOBS ARCHITECT LIMITED
Sixth Respondent
DSF BUILDERS LIMITED
Seventh Respondent
Introduction
[1] Contract Holdings Ltd (CHL) applies for judicial review of a decision by the Weathertight Homes Tribunal (the Tribunal) declining to remove CHL from a claim brought by the second respondents. It proceeds in this way, acknowledging it has no right of appeal from an interlocutory decision of the Tribunal (such as this), it only has a right of appeal from a final determination.1
[2] The application is brought on two broad grounds, although CHL raises a number of issues under each ground. The grounds are:
(a)CHL has suffered serious prejudice from the delay in bringing the proceeding and has little, if any, prospect of being found liable, that the threshold for removal in s 112(1) of the Weathertight Homes Resolution Services Act 2006 (the Act) was reached; and
(b)the claim against CHL is time-barred.
[3] The second respondents, the trustees of the Hastie and Dredge Family Trust (the trustees), oppose the application. They say, in reality, CHL is trying to appeal the decision, but CHL has not identified any error in law, fact or principle by the Tribunal, and accordingly, the application must fail.
1 Kells v Auckland City Council HC Auckland CIV-2008-404-1812, 30 May 2008 at [56].
Relevant background
[4] To place the respective positions of the parties in context, it is necessary to outline the background to the claim, and the steps taken by the trustees to advance the claim, in particular, following their engagement of CHL to supervise remedial works on the trustees’ residential property.
[5] The residential property which is the subject of these proceedings is located in Mount Pleasant, Christchurch (the property) and was built between November 2001 and March 2005 by the third respondents. On 22 March 2005, the Christchurch City Council (the Council) issued a code compliance certificate for the property. Shortly afterwards, on 31 March 2005, the trustees purchased the property from the third respondents and became the registered owners.
[6] The trustees resided in the property and first noticed leaks in early 2008. On the advice of a building inspection company the trustees contacted the Weathertight Homes Resolutions Service (WHRS). In late June, the trustees applied to the Department of Building and Housing (DBH) for an assessor’s report under s 32 of the Act. On 11 October 2008 the assessor’s report was completed. It identified the property was a leaky building because of issues with its design and construction. On 3 December 2008 the chief executive of the DBH determined the trustees’ application was an eligible claim under s 48 of the Act.
[7] The trustees then decided to undertake the repairs themselves to establish the actual costs of repair. They engaged Graham Jacobs Architect Ltd (GJA) to prepare remedial designs and obtain a building consent to resolve the defects identified in the assessor’s report. On 31 August 2009, building consent 10094091 was issued by the Council in relation to the remedial works. The trustees then engaged DSF Builders Ltd (DSF) in early 2010 to undertake the remedial work.
[8] Remedial work commenced in early 2010. However, the trustees became concerned about the quality of DSF’s work and about GJA’s approval of payment claims in respect of that work. The trustees withheld payments to DSF and, in response, DSF filed proceedings against the trustees in the High Court.
[9] To settle this claim, DSF and the trustees reached a settlement. That settlement was recorded in a written deed of settlement. As part of the settlement GJA was to be replaced with CHL, and an agreement was drawn up by the trustees’ lawyers recording the terms of the contract between the trustees and CHL (the CHL agreement). On the documents available, the CHL agreement incorporated the existing agreement the trustees had with GJA, but modified it in various ways to reflect that CHL was appointed to take over GJA’s role and the scope of the agreement was restated with reference to the deed of settlement.
[10] The CHL agreement also annexed a list of nearly 100 defects in the work undertaken by DSF which needed rectification. CHL claims that only a small number of these defects potentially related to weathertightness and most of the other listed defects were internal works.
[11] However, a signed copy of the CHL agreement is not available, and CHL says it is not known whether the version of the CHL agreement provided by the trustees is the final version. CHL no longer has a copy of the agreement given that more than 10 years have elapsed since the work was completed, and it has now destroyed those records.
[12] Between August and November 2010, CHL monitored DSF’s work to complete the identified defects. On 29 November 2010 Mr Jamieson, a director of CHL, emailed Mr Hastie, one of the trustees, and said he had inspected the property, and that final retentions could be released to DSF. At the time these remedial works were being undertaken, another company, NZ Build Ltd, was also engaged by the trustees to undertake other work to the property. On 2 December 2010 Mr Jamieson emailed Mr Hastie stating that he had all the information for a code compliance certificate from DSF and that he had been in communication with NZ Build which would apply for the code compliance certificate.
[13] On 10 February 2011 the Council carried out a final inspection of the property. It found some further work was required and documents needed to be provided, so no code compliance certificate was issued. CHL claims these items were not included in the defects lists that it was tasked with ensuring were rectified.
[14] On 22 February 2011 the second major Canterbury earthquake occurred. The property was damaged by it and subsequent earthquakes.
[15] On 7 September 2012 NZ Build recorded in an email to the Council that it was engaged to assist in obtaining a code compliance certificate. Mr Jamieson of CHL tried to assist in that process by making contact with NZ Build, DSF, the cladding contractor and the cladding supplier. However, it seems the issues preventing a code compliance certificate were not resolved. In the meantime, the trustees were also dealing with their earthquake claim in relation to the property. Mr Hastie says he believed the delay in settling their earthquake claim was because there was a dispute between EQC and the Council about the damage and whether it was caused by the defects or the earthquakes.
[16] During this period the Ministry of Business, Innovation and Employment (MBIE) (which was the successor to the DBH) had also sought updates from the trustees as to progress on their claim. On 23 July 2014 the trustees requested an addendum report be completed by an assessor and, on 2 October 2014, an assessor’s addendum report was completed. It described the recladding and repair work undertaken in 2010 and found some deficiencies which needed rectification. It also stated that in the assessor’s opinion, the dwellinghouse was an eligible claim under the Act.
[17] On 17 August 2016 MBIE threatened to terminate the trustees’ claim under s 56 of the Act for failure to progress it, but the trustees continued to advise MBIE that the application for adjudication was being worked on.
[18] In 2018, the trustees sought a further addendum report as they were concerned that the cost would have increased. MBIE issued the second addendum report on 26 October 2018. It identified further construction deficiencies and significantly increased the estimated repair costs for weathertightness issues to approximately
$250,000.
[19] On 31 May 2021 MBIE again threatened to terminate the claim under s 56 of the Act for failure to progress it. However, again the trustees satisfied MBIE that they were taking steps to advance it.
[20] On or about 15 December 2022 the trustees applied for adjudication of their claim in the Tribunal, with particulars of its claim being filed in February 2023. On 20 February 2023 CHL was notified of the claim.
The application for removal under s 112 of the Act
[21] On 15 September 2023, CHL applied to the Tribunal for an order under s 112 to have it struck out as a party to the proceedings. Section 112(1) provides as follows:
112 Removal of party from proceedings
(1) The tribunal may, on the application of any party or on its own initiative, order that a person be struck out as a party to adjudication proceedings if the tribunal considers it fair and appropriate in all the circumstances to do so.
[22]The application was made on the following grounds:
(a)the trustees’ claim against CHL was not the subject of an eligibility decision as required by the Act;
(b)no work that CHL did led to water penetration to the property and so the Tribunal did not have jurisdiction to determine the claim against CHL;
(c)the claim against CHL was barred by limitation under the Act, the Building Act 2004 and the Limitation Act 1950;
(d)there was no tenable breach of contract or breach of duty by CHL but, regardless, it would be prevented by the trustees’ waiver of it or it would be so limited by monetary amount to support removal under s 112;
(e)the inordinate and inexcusable delay by the trustees in prosecuting the claim seriously prejudiced CHL such that justice could not be done on the claim against it;
(f)in all the circumstances, it was fair and appropriate to remove CHL as a party.
The Tribunal’s decision
[23] On 22 February 2024 the Tribunal declined CHL’s application for removal. In summary, the Tribunal held:
(a)There was a general factual dispute between the parties which could only be resolved at hearing in respect of:
(i)CHL’s scope of works for the remediation of the home;2
(ii)the unclear nature of the CHL agreement as to CHL’s role in its contractual agreement with the trustees;3
(iii)the defects that required rectification in 2010.4
(b)Section 14 of the Act determines whether a property is eligible for the resolution process under the Act. It does not require the claimants to substantially prove that the respondents joined to the claim have caused water damage to the property. That is for determination at the hearing.5
(c)There was an eligible and tenable claim against CHL and so the Tribunal had jurisdiction to consider it.6
2 Hastie v Barnes WHT TRI-2023-100-1, 22 February 2024 at [59].
3 At [85].
4 At [59].
5 At [60].
6 At [61].
(d)The trustees’ application for an assessor’s addendum report in 2014 stopped time running for limitation purposes under the Limitation Act 2010 and the Building Act 2004. It constitutes a full assessor’s report and did not require a further eligibility decision because it was essentially an update to the earlier 2008 claim.7
(e)Clause E1(d) of the CHL agreement is not worded broadly enough to exclude all liability, including negligence, in respect of CHL’s work.8
(f)The contractual liability cap in cl E1(h) of the CHL agreement can be taken into account when quantifying the extent of CHL’s liability (if any), but was not a basis for removal.9
(g)The trustees’ delay in bringing the claim was inordinate and inexcusable but it did not seriously prejudice CHL because:
(i)there was sufficient available documentation to ascertain the scope of CHL’s work and to assess it (including the three addendums to the 2008 assessor’s report and Mr Jamieson’s memory of events);10
(ii)in terms of loss of ability to claim contribution from GJA and DSF, CHL would still be able to claim contribution from the other respondents if found liable;11
(iii)CHL continues to have the right to challenge evidence against it, and put the claimants to proof, in respect of the defects or breaches of duty that the trustees seek recovery for;12
(iv)CHL had access to sufficient documents to mount a defence;13
7 At [73], [74] and [76].
8 At [89].
9 At [91].
10 At [125].
11 At [128].
12 At [129].
13 At [131].
(v)the prejudice to CHL arising from lost evidence could be addressed, as best as it can, with the assistance of other contemporaneous evidence and the recollection of witnesses.14
[24] For all these reasons, the Tribunal concluded that CHL was not unfairly prevented from defending itself and the overall justice of the case did not favour its removal.
Principles applying on judicial review
[25] Ms Zellman, for the second respondents, is critical of the applicant for, in substance, treating the current hearing as an appeal, noting that in CHL’s written submissions, CHL states “[i]n essence this is an appeal”.
[26] CHL, on the other hand, now distances itself from that statement. It acknowledges that this is an application for judicial review, and to succeed, it must reach the high threshold for setting aside a decision on review.15
[27] It is important, at the outset, to distinguish between judicial review and appeal. On an appeal the appellate Court has the responsibility of arriving at its own assessment of the merits of the case, and an appellant is “entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment.”16 As was said in Splice Fruit Ltd v New Zealand Kiwifruit Board:17
Judicial review is different from an appeal. Generally, the Court is limited to ensuring that procedural fairness has been observed and that the decision- maker has exercised its powers lawfully, both in respect of its jurisdiction and its reliance on applicable law. If any errors of that type have been made, judicial review will generally run to require reconsideration of the decision in issue.
(footnotes omitted)
14 At [130].
15 That said, I note the relief sought by the applicant is not simply to set aside the Tribunal’s decision, but to grant the substantive relief sought by removing it from the claim.
16 Austin, Nicols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
17 Splice Fruit Ltd v New Zealand Kiwifruit Board [2016] NZHC 864, [2016] NZAR 680 at [16].
[28] Another expression of the approach the Court must take on judicial review can be found in Pring v Wanganui District Council, where the Court of Appeal said the following: 18
It is well established that in judicial review the Court does not substitute its own factual conclusions for that of the [decision-maker]. It merely determines, as a matter of law, whether the proper procedures were followed, whether all relevant, and no irrelevant, considerations were taken into account, and whether the decision was one which, upon the basis of the material available to it, a reasonable decisionmaker could have made.
[29]I approach this application with those principles in mind.
First alleged error of law — failure to discharge gatekeeping role
Applicant’s submissions
[30] The first error of law raised by the applicant is an allegation that the Tribunal failed to discharge its “gatekeeping role” so as to enable claims before it to be heard in an expeditious and cost-effective way.
[31] In this regard, Mr Henderson refers to the decision in Yun v Waitakere City Council.19 That case observed that the underlying purpose of the Act is to provide owners of dwellinghouses with access to “speedy, flexible, and cost-effective procedures for the assessment and resolution of claims relating to [leaky] buildings”.20 Ellis J then observed that to achieve that “the Tribunal must be able to perform an active gate-keeping role in terms of both the joinder and removal of parties.”21
[32] The applicant submits that the Tribunal failed to properly discharge its gatekeeping role despite having all relevant information before it that would have allowed that. It was critical of the Tribunal for saying there were genuine disputes of fact that could only be resolved at the hearing where CHL submitted that all necessary information was before the Tribunal as it had all available documents before it, along with affidavits confirming that all documents relating to the claim had been discovered. Had it reviewed those documents, it would have seen there was no
18 Pring v Wanganui District Council (1999) 5 ELRNZ 464 (CA) at [7].
19 Yun v Waitakere City Council HC Auckland CIV-2010-404-5944, 15 February 2011.
20 Weathertight Homes Resolution Services Act 2006, s 3.
21 Yun v Waitakere City Council, above n 19, at [70].
compelling evidence that any work CHL was involved with, led to the water penetration referred to in the assessor’s reports and, by failing to determine there was no tenable claim against CHL based on the evidence available to it, it erred in discharging its gatekeeping role at the removal application stage.
Discussion
[33] While the second respondents did not expressly address this argument, it strikes me as a submission that rests on the reasonableness of the Tribunal’s conclusion that there were genuinely disputed issues of fact. In this regard, the Tribunal carefully directed itself on the law on applications for removal.22 No issue is taken with the Tribunal’s statement of legal principles. Citing Saffioti v Jim Stevenson Architect Ltd, the Tribunal noted that the High Court “has cautioned against removing parties at a preliminary stage in circumstances where the claims asserted against them are tenable but weak”.23
[34] I am satisfied the Tribunal was conscious of its gatekeeping role and approached its task with this in mind. The Tribunal was able, on the documents, to make a finding that obtaining a code compliance certificate was beyond CHL’s scope of engagement.24 However, in terms of the trustees’ assertion that CHL was engaged to ensure all works carried out at the property were properly remediated before issuing a certificate of practical completion, that possibility could not be excluded on the evidence before the Tribunal and was an issue that would have been to be determined at hearing. This uncertainty arose from the content of contemporaneous documents and from the assertions made by the trustees. Until those were tested in a hearing it would have been premature for the Tribunal to rule the claim was untenable.
[35] This finding was clearly open to the Tribunal and I am satisfied it did not err in failing to discharge its gatekeeping role.
22 Hastie v Barnes, above n 2, at [17]-[25].
23 At [24] citing Saffioti v Jim Stevenson Architect Ltd [2012] NZHC 2519 at [44].
24 At [56].
Second alleged error of law — failure to establish jurisdiction and address limitation issues
[36] The next submission by CHL is more technical. It rests on the Tribunal’s finding as to the effect of the 2014 addendum assessor’s report. The Tribunal found it was, in substance, a new assessor’s report thus, under s 32 and 37 of the Act, it had the effect of filing a proceeding and stopping time running under the Limitation Act 2010. It did not require a further eligibility assessment to have that effect. Eligibility related to the property and the type of damage, not to liability of the parties.
[37]Section 37(1) states as follows:
(1) For the purposes of the Limitation Act 2010 (and any other enactment that imposes a limitation period), the making of an application under sections 32(1) has effect as if it were the filing of proceedings in a court.
[38]Section 32(1) simply states:
(1)An owner of a dwellinghouse who wishes to bring a claim in respect of it may apply to the chief executive –
(a)to have an assessor’s report prepared in respect of it; or
(b)to have an assessor’s report that was prepared in respect of it on the application of a former owner approved as suitable for the owner’s claim.
[39] It is common ground that the first assessor’s report prepared in 2008, and which was subsequently assessed as an eligible claim, was completed prior to CHL’s involvement and work on the property. That report did not, nor could it, engage the Limitation Act protections provided by s 37, in respect of CHL’s work.
Applicant’s submissions
[40] CHL’s argument is that the application for the 2014 addendum report does not have the same effect of filing proceedings in Court for the purposes of s 37 of the Act as did the application for the 2008 assessor’s report. No claim was therefore filed against CHL for the purposes of the Act in either 2008 or 2014, and, instead, this could only be taken to have occurred in 2023 when the proceedings were filed.
[41] CHL argues that time started running against it for limitation purposes in 2010 when it undertook the work, or, at the latest, early 2011 when the Council inspected the property and declined to issue a code compliance certificate. As a consequence, the claim against CHL is time-barred by the Act, s 4 of the Limitation Act and s 393 of the Building Act 2004.
[42] CHL argues that the addendum report prepared in 2014, which looked at the defects in the property following the work by DFS and others, and in which CHL was involved, could not engage s 37. CHL is critical of the Tribunal’s reasoning which says the claim against CHL is part of the existing claim which was determined eligible by the chief executive and that, as a result, the claim against CHL was valid and fell within the limitation protection of s 37.
[43] Mr Henderson argues that s 32(2) requires that it is the claim that needs to be determined as eligible and that was not done. The 2008 assessment which found that the claim is eligible, could not apply to future watertightness damage issues for the property. Part of the decision as to eligibility is to determine that water has penetrated because of some aspect of design, construction, alteration, or materials used in the construction or alteration of the dwellinghouse and that the penetration of water has caused damage to it.25 However, no decision was ever made establishing that the claim involving CHL was eligible. Without such a decision, there is a risk that claims which do not involve damage caused by water penetration could be captured and parties who were not involved in causing that damage would also be included. That would be contrary to the purpose of the eligibility decision process which is to prevent invalid claims using the WHRS.
[44] Mr Henderson was also critical of the Tribunal’s reasoning that an addendum report has effect as a “new assessor’s report” without a basis for doing so. He points out that the only case where an addendum report was used for the purpose of s 37 limitation protection was Coleman v Auckland Council.26 However, that case can clearly be distinguished as it was a case involving a representative claim for different unit owners in a standalone complex and the addendum report was used to add the unit
25 Section 14(c) and (d).
26 Coleman v Auckland Council [2012] NZWHT Auckland 41.
owned by Ms Bamford to the existing claim. In this claim, however, the claimants have been the same all the way through and provided their authorisation to the WHRS at the outset in 2008.
[45] In summary, CHL submits that if the addendum report has the effect as a new assessor’s report, it must be subject to eligibility assessment by the chief executive because of s 48 and was not. Alternatively, if it is part of the previous eligible claim, it cannot have the effect of filing proceedings in Court against CHL, as CHL was not involved until 2010. As the trustees did not apply to the Tribunal for adjudication of its claim against CHL until 14 December 2022, this is more than 10 years after CHL completed any work and the claim against CHL is barred.
Second respondents’ submissions
[46] The trustees disagree with CHL’s approach to the effect of the 2014 addendum report. They point out that s 37 states it is the application for an assessor’s report which has the effect of filing proceedings and stopping time running. On 22 July 2014 the trustees applied for an addendum to the assessor’s report and, in accordance with s 37, that had the effect of filing proceedings in respect of the failed remedial work.
[47] At the time of the application for the addendum report the claim had already been deemed eligible by the chief executive. Furthermore, the claim’s eligibility was reconfirmed in the 2014 addendum report with the assessor stating “the dwellinghouse that is the subject of this report meets the criteria set out in the Weathertight Homes Resolution Services Act 2006.”
[48]In any event, s 48(1) of the Act provides:
(1)The chief executive must evaluate every assessor’s report (other than a full assessor’s report made in respect of a claim that was held to meet the eligibility criteria when an eligibility assessor’s report was evaluated), and decide whether the claim to which it relates meets the eligibility criteria.
[49] Here, the 2014 report was a full assessor’s report in respect of a claim already deemed eligible under the Act. Ms Zellman says the assessor obviously considered the eligibility decision had already been made which is why the addendum report was
not referred to the chief executive under s 48. Given the eligibility decision has been made and has not been challenged, it must stand.
[50] In the alternative, if there was a need to make a second eligibility decision but the chief executive failed to do it, Ms Zellman submits that should not result in detriment to the trustees. The trustees followed the required process and the consequences of failure by MBIE to undertake a further eligibility decision should not be borne by the trustees. In any event, CHL has not submitted that the claim would be deemed ineligible. Rather, it is seeking to escape liability on a technicality.
[51] Accordingly, the trustees submit that the Tribunal’s finding that the assessor’s addendum report had the effect of filing proceedings in Court against CHL was correct and cannot form the basis for setting aside the Tribunal’s decision on judicial review.
Discussion
[52] This alleged error of law can be dealt with briefly relying on the plain wording of the Act. The limitation protections under s 37(1) are triggered by “the making of an application under section 32(1).” The Tribunal was entitled to find that when the claimants applied to have a further assessment done in 2014, this was an application under s 32(1) of the Act. Nothing in s 37(1) requires the claim to be assessed as eligible to trigger the limitation protections. Of course, if the claim was determined to be ineligible, it could not be determined under the Act and so, in practical terms, there would be no impact on potential parties’ liability.
[53] I consider some confusion may have been occasioned by the use of the term “addendum report”. That is not a term used in the Act except in s 26(4) which relates to adding further owners to representative claims involving complexes in multiple ownership. That section provides that where an assessor’s report for such a complex has been completed, but a further owner is to be added, then the chief executive may do, or may be requested to do, “a further assessment … and provide an addendum to the original assessor’s report”. There is no provision for an addendum report to be done in respect of a standalone residential unit such as the property in question here. However, I do not consider the use of the term “addendum report” affects the outcome. Looked at in substance, I am satisfied that the Tribunal was correct to see the request
for an addendum report in 2014 as an application for a further assessor’s report pursuant to s 32.
[54] I reject the applicant’s argument that there needed to be a further eligibility assessment performed under s 32(2). Eligibility is determined, in respect of dwellinghouses, in light of the criteria, listed in that section which are:27
(a)it was built (or alterations giving rise to the claim were made to it) before 1 January 2012 and within the period of 10 years immediately before the day on which the claim is brought; and
(b)it is not part of a multi-unit complex; and
(c)water has penetrated it because of some aspect of its design, construction, or alteration, or of materials used in its construction or alteration; and
(d)the penetration of water has caused damage to it.
[55] The criteria do not require proof that all the parties who have worked on the property have caused water penetration and damage. That is not an element of the eligibility criteria. The issue of whether an individual party was causative of such damage is to be determined at subsequent stages, including before adjudication is initiated, at interlocutory hearings to determine whether parties should be added or removed and then, of course, at the substantive hearing. There was, therefore, no need to make a further eligibility assessment. That assessment had been made in 2008 and was confirmed by the assessor who completed the 2014 report.
[56] The Tribunal did not err in law in determining the 2014 assessor’s report stopped time running against CHL.
27 Section 14.
Third alleged error of law — failure to find seriously prejudicial delay
Applicant’s submissions
[57] CHL submits that the Tribunal erred in failing to find there was serious prejudice to CHL given the trustees’ inordinate and inexcusable delays in bringing their claim against CHL.
[58] CHL takes no issue with the Tribunal’s summary of the principles that apply to an application for removal or with its reference to relevant authorities on this issue. However, CCL maintains the Tribunal erred in finding that there was not serious prejudice to CHL and that justice could still be done despite the delay. In saying this, CHL submits:
(a)the Tribunal applied too high a threshold for what amounts to serious prejudice to CHL;
(b)it was wrong to find prejudice to CHL would be alleviated by the fact the onus would be on the trustees to prove defects at the Tribunal hearing;
(c)the Tribunal gave insufficient weight to the material and seriously prejudicial effects of:
(i)the loss of CHL’s documents relating to the 2010 remedial work;
(ii)the loss of other parties’ documents;
(iii)the unavailability of signed contracts and so not knowing conclusively if the discovered versions are the final versions;
(iv)the Tribunal wrongly determining that there was not sufficient prejudice because of a loss of CHL’s meaningful ability to claim contribution from DSF and GJA simply because other respondents are still contributing to the claim;
(v)a failure to consider CHL’s arguments that the rise in remediation costs to the property was seriously prejudicial;
(vi)the difficulties in identifying other relevant parties to the claim as a result of delays; and
(vii)the impact of the Canterbury earthquakes, noting there is now an inherent complexity in determining leaky home damage as opposed to earthquake damage.
[59] Expanding on these topics, Mr Henderson submitted that the lack of relevant documents was seriously prejudicial. CHL destroyed relevant documents in or about 2020, being 10 years after it completed the work. Detail regarding its inspections of the property and the monitoring of the finishing defects list would have been relevant to CHL’s defence, as would further communications with DSF, the trustees and their lawyers, as these would have assisted in establishing what CHL was to do and would be relevant to any duty of care alleged by the trustees.
[60] CHL cannot even verify that the version of the CHL agreement produced by the trustees is the final version that was agreed to. No signed contract exists, which must give rise to serious prejudice. Furthermore, other contracts between the trustees and GJA and DSF are also not all completely signed and it cannot be known with certainty whether those are the final copies. There is no evidence that that situation will change.
[61] While Mr Tolley, an expert witness for CHL, deposes that defects identified in the addendum report, such as with the mitre joints, have likely been caused by the earthquakes, CHL now cannot access any documents recording the inspections it undertook at the time. It therefore cannot identify which defects were present at the time as against the current alleged defects.
[62] Mr Henderson further submits that the suggestion by the Tribunal that the recollection of witnesses can supplement the lack of contemporaneous documentary evidence is flawed. The Courts have previously stated that memory is inherently
malleable and can be influenced by the process of civil litigation where a witness may have a stake in a particular version of events.28
[63] Mr Henderson argues that the Tribunal applied insufficient weight to this ground of serious prejudice.
[64] He also considers that the Tribunal’s decision that prejudice to CHL would be alleviated by the fact the trustees bear the onus of proving the elements of the claim against CHL was incorrect. If this were the case, the test for removal would be rendered ineffective and pointless and a respondent would always be required to defend itself, no matter how weak the claim.
[65] Mr Henderson also argues that the Tribunal’s assumption that CHL could seek contribution from the remaining respondent even if GJA and DSF could not contribute was also in error. Because these entities have stated they have no assets, and their relevant companies are no longer trading then, even if all respondents are found to be liable for the damage as joint tortfeasors, CHL and the remaining respondents would almost certainly be required to meet the shortfall. There is also one head of claim that is only brought against CHL and DSF where contribution from the other respondents could not be sought.
[66] Furthermore, CHL has lost the ability to pursue other parties who may be responsible for the claim, including possible subcontractors, and the Tribunal failed to consider that, focusing only on the fact prejudice was alleviated by CHL’s ability to seek contribution from other active respondents. The Tribunal in Gwak v Sun held that the loss of an ability to identify other parties involved in construction was a relevant consideration when determining if there was serious prejudice.29
[67] A further prejudice which Mr Henderson argues the Tribunal failed to consider was the increase in remediation costs to the home. The trustees claim for repair costs based on assessor’s reports increased from $289,750 in the 2018 assessor’s report to
28 Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560, [2020] 2 CLC 428 at [17]-[19].
29 Gwak v Sun WHT TRI-2020-100-6, 25 February 2022 at [81].
$329,499 in the 2023 assessor’s report. This increase is a further aspect of serious prejudice to CHL.
[68] CHL also argues that the Tribunal failed to consider the impact of the earthquakes when assessing serious prejudice. CHL’s expert, Mr Tolley, desposed that it was likely that defects which form part of the claim were caused by earthquakes. However, the extent of that damage and the apportionment of the damage between it and leaky home damage will now be difficult, if not impossible, to ascertain properly.
[69] Having regard to all these factors, CHL says the prejudice to it is insurmountable and it is unfair, unjust and inappropriate for it to remain in the claim. The Tribunal did not adequately weigh the respective rights and interests of the trustees and CHL. Had it done so, then the application by CHL, which the Tribunal described as “finely balanced”, should have resulted in a decision to remove.
Second respondents’ submissions
[70] Ms Zellman, for the trustees, responds that none of the matters raised by CHL as to prejudice, justify setting aside the Tribunal’s decision on review.
[71] While CHL claims to be prejudiced by the destruction of its documents in 2020, Ms Zellman submits that CHL should have appreciated it could still face a claim under the Act. This is because while the repairs were done before 1 January 2012, CHL was aware the work had not received a code compliance certificate, and it was also aware the property was already the subject of an assessor’s report under the Act. In any event, she submits the Tribunal was correct to find, on the facts, that sufficient information remained to allow CHL to defend the claim.
[72] In terms of the increase in estimated remedial costs, Ms Zellman says this is not a ground for removal. CHL can submit that any damages awarded to the trustees should be reduced due to delay so it could affect quantum as opposed to liability. That said, she says this is really a question of whether the trustees took reasonable steps to mitigate their loss and the trustees have evidence about why they could not afford to repair the house at an earlier point in time.
[73] In respect of the impact of the Canterbury earthquakes, Ms Zellman notes that this was not a matter raised by CHL in the Tribunal hearing. It cannot be an error of law for the Tribunal not to consider an argument which was not advanced by CHL. Furthermore, the Canterbury earthquakes occurred before the trustees were guilty of any delay so this is not a prejudice which was caused by delay. In any event, on a practical level, the 2018 addendum report addresses this issue and it divides the estimate of costs according to whether they relate to weathertightness repairs, earthquake repairs or other repairs.
Discussion
[74] Many of the points raised by CHL on this issue involved question of fact and degree and invited this Court to come to a different view on the facts. This is highlighted by the use of phrases such as the Tribunal “applied an incorrect and too high threshold”, it gave “insufficient weight” to certain factors and it “did not adequately weigh” the competing interests.
[75] However, this Court will not intervene on judicial review simply because it might have weighed factors differently or come to a different decision on the evidence before it. It is clear that the Tribunal appreciated the difficulties created by the fact many contemporaneous records were missing or destroyed. The Tribunal discusses this carefully from [125] through to [132] in its decision. While acknowledging the difficulties, the Tribunal points to the availability of at least some documentation, the evidence from the various assessor’s reports, and the fact Mr Jamieson showed he retained a detailed memory of the events as recorded in his affidavit. This was a factual finding which was open to the Tribunal and is not amenable to being revisited on an application for judicial review.
[76] Furthermore, the absence of signed versions of the CHL agreement (and other agreements) cannot be reasonably shown to prejudice CHL. CHL relies on the terms of the agreements which have been produced, both in terms of the scope of works it was contracted to undertake, and in terms of limitation of liability. In the absence of credible evidence from the trustees that those agreements were modified to CHL’s detriment (which is not evident), it is not clear how CHL is prejudiced. In any event,
this is a factual finding of the Tribunal which is not amenable to being revisited on judicial review.
[77] The Tribunal was also aware there was prejudice to CHL by having to rely on limited contemporaneous documents and the recollection of witnesses. That was expressly addressed in [130], including by explaining that the Tribunal could do things such as requiring the claimants to provide very detailed explanations of the defects complained of, and their causes, before the proceeding progressed to a hearing.
[78] While CHL complains about the Tribunal referring to the fact the trustees bear the onus of proving the elements of its claim against CHL, that is only one factor which the Tribunal took into account in deciding the prejudice to CHL was not so serious as to justify its removal. It did not rely solely on this point (which would be wrong), but simply recorded it as one of a number of factors which it took into account.
[79] In terms of the statement that CHL was still able to claim contribution from certain other respondents, that was correct. The only claim where losses were sought from just CHL and DSF, was a claim for remedial losses of $26,471. In the context of the claim as a whole, I do not consider the potential loss of the right to seek contribution from DSF (if in fact this is the case), materially undermined the Tribunal’s conclusion at [128] that CHL was able to seek contribution from other respondents.
[80] I do not consider that the Tribunal ignored the fact that the delays increased the costs. This submission was made to the Tribunal in the context of CHL discussing the Gwak v Sun decision.30 The Tribunal recognised the analogy that CHL drew between its circumstances and those in the Gwak case.31 It nevertheless found the delay did not seriously prejudice CHL such that it should be removed from the case. I also observe that the 13.7 per cent increase in remedial costs from 2018 to 2023 does not strike me as being seriously prejudicial and, to the extent delay has increased the costs, it may be relevant to what damages should be awarded against it, should CHL be found liable, but not to whether it should be a party to the proceedings at all.
30 Gwak v Sun, above n 29.
31 At [110].
[81] In terms of the alleged failure to consider the effects of the Canterbury earthquakes, I accept, as the trustees point out, that this was not a submission which was made by CHL, so the Tribunal was not obliged to consider it. In any event, I accept the trustees’ submissions that the complications created by the earthquakes were there regardless of delay. Furthermore, that does not preclude evidence being given on the causes of damage, noting Mr Tolley is confident to express a view on what is likely to be earthquake damage, as is the assessor who prepared the 2018 report.
[82] In conclusion, I consider that CHL is simply inviting this Court to reach a different view on some or all of these issues from that reached by the Tribunal in order to determine whether it is fair and appropriate in all the circumstances to strike CHL out from the proceedings. However, I am not satisfied that the Tribunal had regard to an irrelevant consideration, or failed to have regard to a relevant consideration, or approached the question of removal relying on an erroneous understanding of the law. Although it is a decision on which reasonable minds may differ, I consider the decision on the level of prejudice caused by delay was one that the Tribunal could reasonably have come to relying on the correct legal test and on the facts which were before it.
Fourth alleged error in law — erroneous interpretation of contractual waiver and limitation of liability
Applicant’s submissions
[83] The last ground raised by CHL is that the Tribunal erred in law in interpreting the limitation clauses contained in the version of the CHL agreement the trustees rely on.
[84]Clause E1(d) states:
Neither the Architect nor the Client shall be liable to the other for any loss or damage which has occurred as a result of any breach of this Agreement that is not notified in writing within 6 years of the date of this Agreement.
[85] CHL submits that the plain meaning of this clause is clear, there is no ambiguity, and the claimants were legally advised about the CHL agreement, noting that their lawyers prepared it. The trustees then failed to notify CHL of their claim
within six years of the date of the CHL agreement and no claim was notified within the six year period.
[86] The Tribunal decided that the clause only appeared to exclude contractual liability and did not exclude liability for negligence.32
[87] Mr Henderson submits the Tribunal was in error to do so as parties can contract out of time periods in the Limitation Act and agree to their own limitation periods, including in respect of building negligence claims. By way of example, he points out that in DHL International (NZ) Ltd v Richmond Ltd, a clause limiting a period for bringing claims against DHL to 30 days, rather than six years, was upheld as valid.33
[88] Alternatively, if the clause is not deemed effective to exclude all liability including in tort, clause E1(h) limits CHL’s liability to the trustees to the lesser of
$100,000 or five times the fees charged by CHL whichever is the lesser. Here, CHL invoiced the trustees $4,088.76. The maximum liability of CHL to the trustees can only ever be $20,418.80. The balance of the claim should be struck out. While the Tribunal observed that CHL would be able to rely on the clause to limit the claim against it by the trustees, that should have been taken into account in its decision on removal of CHL.
Second respondents’ submissions
[89] In terms of the Tribunal’s interpretation of the scope of clause E1(d) the trustees support the Tribunal’s reasoning. Unlike other clauses of the contract, which specifically refer to claims in tort as well as claims in contract, clause E1(d) does not make specific reference to tort claims. Given this, clause E1(d) only operates to limit contractual liability and cannot be read as excluding claims in tort.
[90] The trustees then argue that the alleged limitation of liability under clause E1(h) is irrelevant to a removal application. If CHL’s limitation of liability does apply, it would simply provide a cap on the amount of any determination against it.
32 At [87] to [90].
33 DHL International (NZ) Ltd v Richmond Ltd [1993] 3 NZLR 10 (CA).
Furthermore, it would have no relevance to any claims for contribution as between the various respondents.
Discussion
[91] I am satisfied that the Tribunal’s interpretation of cl E1(d) was not in error. That clause expressly refers to, and confines itself to, claims for breach of contract, not any other form of claim. As the Tribunal points out, that is in contrast to other clauses in the same agreement relating to limitation of liability where the wording expressly includes tort liability.
[92] I do not consider the case of DHL International (NZ) Ltd assists CHL. While that case confirms that parties can limit the timeframe in which claims can be brought, it is a question of interpretation whether such limitations cover all claims. In DHL, the time bar related to “any claim” without confining it to a type of claim as is the case here.
[93] Accordingly, under the contractual document produced by the trustees, the time bar for bringing claims under the contract was limited to six years but the Tribunal did not err when it concluded that no such limitation applied in respect of a negligence claim.
[94] I also accept that the limitation on liability is not determinative of the issue of removal. It simply goes to CHL’s potential liability to the claimants and, as Ms Zellman points out, it does not necessarily limit other parties’ ability to seek contribution from CHL.
[95] For all these reasons, I am satisfied the Tribunal did not err in law when assessing the relevance of the contractual waiver and limitation of liability in the contractual document produced by the trustees.
Result
[96] On all grounds raised I am satisfied that CHL has not identified an error of law, procedure or principle in the Tribunal’s decision, and the grounds for setting the decision aside on review are not established.
[97] For completeness, I note that even if grounds had been established, this Court would not normally make a decision to remove CHL as a party, but would refer the decision back to the Tribunal for reconsideration in light of the identified error.
Costs
[98] Costs are reserved. However, as the application has not succeeded, costs would ordinarily follow the event, calculated on a 2B basis.
[99] If costs cannot be agreed, memoranda not exceeding five pages in length can be filed, with the applicant for costs filing within 20 working days of this decision and the respondent to the costs application filing within a further 10 working days. Costs will be determined on the papers.
Solicitors:
Corcoran French, Christchurch Grimshaw & Co, Auckland
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