Derwin v Wellington City Council
[2014] NZHC 341
•28 February 2014
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2012-485-553 [2014] NZHC 341
BETWEEN PATRICK DEAN DERWIN & RAMA DIAR
Plaintiffs
ANDWELLINGTON CITY COUNCIL Defendant
ANDCOLIN JAMES DALLAS First Third Party
ALCHEMY ENGINEERING AND DESIGN LIMITED
Second Third Party
BUILDERS PLASTICS LIMITED Third Third Party
Hearing: 14-16 and 23 October 2013
Counsel: A K Hough and K M Mortimer for the Defendant
J D Haig for the First Third Party
No appearance for the Plaintiffs, Second Third Party and Third
Third Party
Judgment: 28 February 2014
JUDGMENT OF MALLON J
Table of Contents
Introduction ....................................................................................................................................... [1] The facts ............................................................................................................................................. [7] A leaky home .................................................................................................................................. [7] Kingdom ....................................................................................................................................... [10] The Craig home ............................................................................................................................ [13] Sale to Derwin and Diar............................................................................................................... [35] Subsequent events ......................................................................................................................... [37] The Building Act and Code ............................................................................................................ [38] Claim as concurrent tortfeasor ...................................................................................................... [40] Outline of claim ............................................................................................................................ [40] WCC’s liability ............................................................................................................................. [41]
Mr Dallas’ liability ....................................................................................................................... [44]
Same damage................................................................................................................................ [56]
DERWIN v WELLINGTON CITY COUNCIL [2014] NZHC 341 [28 February 2014]
Just and equitable......................................................................................................................... [57] Negligent misstatement ................................................................................................................... [58] WCC’s claim ................................................................................................................................. [58] Representation that the building was weathertight ...................................................................... [60] Representation as to kick outs ...................................................................................................... [64] Representation concerning window(s) ......................................................................................... [74] Representation as to parapets ...................................................................................................... [96] Conclusion.................................................................................................................................... [97] Fair Trading Act ............................................................................................................................ [100] Conclusion...................................................................................................................................... [106]
Introduction
[1] This claim concerns a leaky home built in late 2001/2002 and given a Code
Compliance Certificate (“CCC”) by the Wellington City Council (“WCC”) in March
2005. The home was built for Mr and Mrs Craig. It was purchased by Mr Derwin and Ms Diar (the plaintiffs) in 2005 shortly after the CCC was given.1 By February
2012 at the latest the problems with the house became evident to the plaintiffs.2
Work to rectify the home is quantified at $774,000.
[2] The plaintiffs brought a claim in negligence against WCC to recover special damages of $809,968.25 and consequential losses, general damages of $30,000 per plaintiff, interest and costs. The claim alleged that WCC breached its duty to exercise reasonable skill and care by failing to carry out proper inspections and issuing a CCC when there were no reasonable grounds for believing that the building work complied with the Building Code.
[3] WCC in turn claimed against:
(a) Mr Dallas, the managing director of Kingdom Residential Housing
Limited (“Kingdom”), which was the building company that contracted with Mr and Mrs Craig to build the house;
1 A building report from Mr Redican of Capital House Inspections to the plaintiffs indicates that the plaintiffs were investigating purchasing the property in early 2005. The title was not transferred until 19 July 2005.
2 Mr Derwin and Ms Diar lodged their claim with the Weathertight Homes Resolution Service (“WHRS”) on 21 February 2012. The WHRS Assessor’s eligibility report at 6.3 notes that Ms Diar and Mr Derwin experienced a leak in 2007 in their bedroom, and that leaking again became a problem in January 2012.
(b) Alchemy Engineering and Design Limited (“Alchemy”), which
installed balustrading to the house; and
(c) Builders Plastics Limited (“Builders Plastics”), which installed a liquid applied waterproof membrane to the upper level of deck at the house.
[4] Prior to trial WCC settled the claim brought by the plaintiffs for $670,000. It then entered into settlements with Alchemy and Builders Plastics for $124,000. WCC proceeded to trial against Mr Dallas seeking contribution to the balance of the settlement it reached with the plaintiffs. WCC seeks judgment against Mr Dallas for
$464,000 (representing 85 per cent of $670,000 less $124,000), which it says is a fair and reasonable assessment of Mr Dallas’ responsibility for its loss.
[5] WCC’s claim is made on three bases:
(a) a claim that Mr Dallas made negligent representations in relation to the issuing of the CCC and is a tortfeasor with WCC liable to the plaintiffs for the same damage;
(b)a claim that, in response to queries raised by WCC prior to issuing the CCC, Mr Dallas made negligent representations to WCC which suffered loss as a result;
(c) a claim that Mr Dallas breached the Fair Trading Act when responding to queries raised by WCC prior to issuing the CCC.
[6] Mr Dallas denies these claims. He says that he was at all material times acting in his capacity as managing director of Kingdom, that all correspondence was between WCC and Kingdom (rather than himself) and that at no time did he perform building work, coordinate construction or conduct moisture testing on site. He also raises two affirmative defences: contributory negligence by WCC; and that the Fair Trading Act claim is out of time.
The facts
A leaky home
[7] A leaky dwelling is one into which water has penetrated as a result of any aspect of the design, construction, or alteration of the dwelling, or materials used in its construction or alteration.3 The building’s timber framing retains sufficient moisture to permit fungal activity. This fungal activity causes decay to the timber framing and poses health risks to occupants of the building.4
[8] The problem of leaky homes arose from building systems and practices which became increasingly prevalent during the 1990s.5 This included the use of monolithic cladding and untreated pinus radiata timber, flat roof structures, the absence of eaves, the replacement of flashings with sealants and incorporation of balconies and decks.6 The dwelling in this case utilised these practices.7 The house is also positioned on a sloping, exposed, south facing site in an area identified by
WCC maps as experiencing a high wind load.8
3 Weathertight Homes Resolution Services Act 2006, s 8.
4 As described in Attorney-General v Body Corporate 200200 [2007] 1 NZLR 95 (CA) [Body
Corporate 200200] at [26].
5 Knowledge about the problem of leaky buildings and their causes emerged over years. A November 2000 survey carried out by the New Zealand Institute of Architects Incorporated (“NZIA”) referring to a BRANZ discussion paper which “implied almost a pandemic of ‘leaky’ buildings”. The survey identified common problem areas and was said to reinforce that “the absence of, or the bad form of flashings, caused most of the difficulties, particularly in plaster
based systems”. Such systems were said to have a small margin of error. BRANZ and BIA
were said to have “very real concerns” and “a considerable amount of rethinking of details, processes and regulatory documents is occurring”. Mr Cody says that as the problem began to emerge sectors of the building industry “play[ed] their cards close to their chest because they were worried about litigation”. At around this time WCC hosted a forum to discuss issues with monolithic claddings. By 2002 there was a legislative response in the form of the enactment of the Weathertight Homes Resolution Services Act 2002. Following the enactment of this Act Mr Cody says that WCC received their first leaky building claim in 2003. In 2004 there was a further legislative response to the problem in the form of the Building Act 2004, which provided a new regulatory scheme to replace that under the Building Act 2001. By this time WCC had a “leaky building team” which kept itself informed of leaky building issues. Mr Cody’s evidence was that knowledge continued to emerge over the years. For example, in 2005 a number of councils took the view that targeted repairs could be undertaken whereas today it is accepted that this will not work where the system is fundamentally flawed.
6 Some of the practices mentioned in Body Corporate 200200 at [27].
7 It is a three storey house clad in texture coated Harditex fibre cement sheet, direct fixed to timber framing. The aluminium windows and ranch sliders are face fixed. There are decks with
a liquid applied membrane (upper level deck) and butyl membrane with tiles (mid level deck).
The roof is long run colour steel. There are flat topped parapets on the deck and roof areas.
8 Strong winds create a risk that water and other materials may, for example, blow in between a window and its head flashing. The wind load designation therefore necessitated some degree of caution with regard to construction materials and their risk. The Building Code was modified to include features such as air seals to remedy the risks posed by greater exposure to wind.
[9] It is accepted that the dwelling is a leaky home. It is also accepted that the causes are:9
(a) balustrade fixed vertically through top of parapet;
(b) unprotected flat topped texture painted parapets (roof and deck); (c) window and door flashing failure;
(d)insufficient cladding clearance to deck, roof flashings and window head flashings;
(e) insufficient ground clearance between concrete steps and cladding at the northwest corner on level 3;
(f) roof to cladding apron flashings permitting water ingress at corners due to lack of turnout and poorly fitted folds leaving gaps;
(g) insufficient movement control of the cladding system; and
(h)insufficient external finishing and stopping of cladding sheet joints and junctions.
Kingdom
[10] Mr Dallas qualified as a builder in 1975. He formed Kingdom in the early
1990s following an injury that prevented him from continuing to work as a builder. He was its sole director and shareholder. Kingdom was set up to market fixed price house and land packages in a subdivision in Newlands. Kingdom’s first house in that subdivision was built in 1991 and the last house was built around 2004 and
2005.
[11] Mr Dallas explains Kingdom’s operation as follows:
9 As identified by the WHRS assessor following the plaintiffs referral to the WHRS in February
2012.
[Kingdom] was divided into two parts, a construction side and an administration side. The administration side had the greater number of staff including sales and marketing reps, a contracted draughtsperson, an employed quantity surveyor, an office administrator and myself as general manager. The construction side of the business consisted of an employed building supervisor who carried out the role of construction manager.
When a client purchased [a house] and land package from [Kingdom] they would first work with the contracted draughtsperson to get the design they wanted. [Kingdom’s] quantity surveyor would then price up the job including liaising with the relevant trades who would confirm they would do the job at set prices.
The building supervisor would take over the job when building consent was granted by WCC and would manage the build process through to completion. When the building was finished, it would be handed back to the administration side to complete the formalities, such as, the handover of keys and receive final payments.
The building supervisor would have a list of trades who would be contracted to carry out the building work No [Kingdom] employees did any physical work constructing houses. [Kingdom] used a number of different contractors at any given time. Contractors were usually quite small operations, normally with a couple of builders or tradesmen on their staff, or even one man operations.
[12] Mr Dallas’ role at Kingdom was managing the administration side of the
business. Examples of the kinds of things Mr Dallas did were: (a) to liaise with a Kingdom client when issues arose; (b) marketing and selling house and land packages;
(c) negotiating building contracts; and
(d)acting as a contact point for banks who contacted Kingdom regarding packages for their customers.
The Craig home
[13] Mr and Mrs Craig owned a home across the road from the Kingdom show home in the subdivision. Mr Craig approached Kingdom about building a house on a section neighbouring his own. A written contract was entered into between Mr and
Mrs Craig and Kingdom.10 Mr and Mrs Craig liaised with Kingdom’s contract
draughtsperson over the design of the house. Mr Dallas was not involved in this.
[14] Kingdom applied for building consent to construct the house on 25 July 2001. The application was signed by an employee of Kingdom (Darren Jordan). The application named Kingdom as the designer and builder. WCC issued the building consent on 7 September 2001. Amongst other things, the consent set out various stages at which inspections were required.
[15] Construction of the house began in about September 2001. The house was completed in early 2002. Mr Dallas was not involved in the construction process and does not recall ever going on site. Mr Craig does not recall ever seeing Mr Dallas on site either. On 21 March 2002 WCC issued an interim CCC. The CCC excluded insulation to ceilings, the driveway and storm water control. It also specified that the owner was to apply for a building consent for retaining walls and that the handrail/toe hold was to be at 60 degrees. On 23 March 2002 Mr and Mrs Craig took possession of the house.
[16] It seems that a storm on 9 June 2003 caused damage to the house. The only information about this is from an email from Mr Craig to his insurer dated 10 June
2003 which was copied to Kingdom’s general manager (Maria Hilling). This email sets out “a list of damage caused by last night’s storm”. This referred to water damage to various rooms through “the top of sliding door (came out through the bottom of the architrave?)”. This email included the following:
Have arranged meeting of builders (from the building company) and aluminium joinery personnel on site for Thursday morning to identify what needs to be done.
[17] It is not known what occurred at this meeting and what work was done in response at this time. Mr Dallas was not involved and Mr Craig does not discuss this
in his evidence.11 Mr Dallas’ evidence is that he was unaware that the property had
10 I was not referred to the terms of that contract.
11 WCC says that Mr Dallas ought to have called evidence about this. However Mr Craig prepared a brief of evidence for Mr Dallas. WCC could have required him to attend for cross examination. It did not. Furthermore, WCC did not call Mr Geraghty who was the principal WCC officer involved in deciding that the final CCC should be issued.
sustained storm damage or that any remedial work had been carried out until he saw the correspondence during the discovery process for this claim. From that correspondence, however, Mr Dallas understands that once Mr Craig’s insurance proceeds came through, Kingdom’s building supervisor (Gary Ledbury) contacted Mr Craig about the work that was required and arranged for it to be carried out.12.
[18] It was not until early 2004 that Mr Craig followed up with WCC to obtain a final CCC. Mr Dallas was unaware whether there was any particular reason that Mr Craig wished to have the CCC finalised at this time. Mr Craig does not say in his evidence what precipitated it, although correspondence indicates that by this time Mr Craig had attended to the matters raised in relation to the interim CCC and was therefore in a position to seek a final CCC.
[19] Mr Craig’s contact with WCC led to a site visit on 22 January 2004. It was attended by John Drysdale on behalf of WCC. It is not clear whether anyone from Kingdom attended the meeting (Mr Dallas did not). Mr Drysdale’s note of the visit records the following:
Cannot sign off until
a)There is a lawn or paved area at the rear to platform also recommend a storm water yard sump to the area.
b)Leaking windows on the south facing side to be rectified. This may nessessitate (sic) sealing between reveal & frames to stop wind (water) entry.
c) Verify batt insulation to top ceiling. d) Storm water to drive – o/k.
e) Building consent for retaining walls.
[20] There was some suggestion that a WCC officer may have observed dehumidifiers on the property in early 2004. Whether that was the case or not is not known. However it is consistent with information later provided to WCC that water
dampness after the storm had been dried out with commercial equipment.13
12 See below at [21] and [22].
13 Refer [28](e) below.
[21] Following the site visit there was a discussion between the Craigs and Gary Ledbury. This is confirmed by a letter from Kingdom (signed by Maria Hilling as general manager) dated 27 February 2004 which said:
Further to your conversation with Gary today I would like to confirm that the following work is to be undertaken on your house:
1) Gary will be sealing up all of the windows today,
2) The touch up of the exterior texturing will be done next week, please note however this is weather dependant and should the weather not allow us to finish the texturing next week it will be completed as soon as possible,
3) The interior painting and plastering will be completed next week.
If you have any queries regarding any of the above please don’t hesitate to
contact Gary at the office or on his mobile.
[22] Mr Dallas understands that this was the work that was outstanding from the
June 2003 storm. That work was carried out is confirmed by a letter dated 11 May
2004 from Mr Ledbury of Kingdom to the Craigs which said:
The following work has been completed at your house since the storm:
1) The leak to the ranch slider in the dining room has been fixed
2) All flashings to the South side have been re sealed
3) All cracks and repairs to the exterior cladding for the whole house have been re-painted
4) Painted the foundation
5) All windows checked and repaired where necessary
If you have any queries regarding any of the above please don’t hesitate to
contact me at the office or on [my cell phone].
[23] So far as the documents show, WCC’s next involvement was on 8 July 2004. On that day there is a letter from WCC to Mr Craig noting that, according to WCC’s file, following the 22 January 2004 site inspection there were outstanding issues to be resolved before a CCC could be issued.
[24] On 24 September 2004 WCC building officers (Pete Geraghty and Alistair
Tily) carried out a site inspection. The WCC note of this visit records that, as well as
Mr Craig, on site were “Kingdom Residential representatives Colin Dallas and Gary Ledbury”. This seems to be the first time Mr Dallas became involved in the CCC issues. The note also records that there were a number of items to be addressed and that these would be documented in a letter to Mr Craig.
[25] On 28 September 2004 WCC (Peter Geraghty) wrote to Mr Craig referring to the site visit on 22 January 2004 and set out 14 items as to which “remedial work and documentation will be required.” WCC’s letter said that these items needed to be “completed to the Council’s satisfaction” and that WCC needed to be satisfied on reasonable grounds that all building work complied with the Building Act 1991 and Building Code 1992 at the time the CCC is requested. For present purposes the most relevant items were as follows:
[Item 2:] Where roofs end within adjacent walls, a “kick out” is required at the end of the apron flashing to direct water out on to the roof away from the wall cladding.
[item 3:] During the inspection, it was noted that the top surfaces of the items listed below do not have a minimum slope of 1 in 10 as required by the manufacturer:
- the roof parapets.
- the deck safety barriers enclosed with harditex.
- the deck upstands that provide fixing for the glazed safety barriers.
It was also noted that the glazed safety barrier fixing base plates have been fixed through the top and side of the deck surface, and a storage container has been built on the mid level deck outside the dining room.
Provide details for the Council, outlining the method of achieving weathertightness to these areas.
...
[Item 6:] It has been noted that there was a moisture ingress problem with the aluminium window joinery. Provide the Council with a report from the joinery manufacturer detailing the cause of the moisture ingress, and the remedial work that was undertaken to rectify it.
[Item 7:] Provide a written statement from a suitably qualified person commenting on the impact the leaking windows had on the structural integrity and durability of the timber framing supporting these windows.
...
[26] Mr Craig considered that WCC’s list was unfair because it went well beyond what was left outstanding at the time the interim CCC was issued in March 2002. He obtained legal advice to the effect that WCC should issue a CCC so long as the outstanding matters, as identified when the interim CCC was issued, had been attended to. That advice was forwarded to WCC. WCC replied that a CCC is not given unless all the work complies with the Building Code at the time the certificate is requested. WCC’s response noted that building knowledge had significantly changed since the building consent was given. WCC noted that if windows were leaking, it meant that they were failing to meet the requirements of the Building Code. WCC concluded that it was unable to issue a CCC until the items noted in its
28 September 2004 letter were attended to.
[27] Mr Craig contacted Mr Dallas, as the manager of Kingdom, to see how Kingdom could help to organise the resolution of the outstanding issues. Mr Dallas contacted contractors, suppliers or manufacturers to request producer statements. He also asked Mr Ledbury about the leaking windows. Following this, Kingdom sent a letter dated 21 February 2005 (signed by Mr Dallas as managing director) to WCC (Mr Cody and Mr Geraghty) as follows:
In response to your letter dated the 28th of September 2004 we have now obtained the relevant information needed to proceed with the issuing of a C.C.C for the Craig residence...
I would like to arrange a time on site ... to meet with you to go over this matter. It would be greatly appreciated if you could get back to me with a suitable time.
I have worked through your letter and have numbered your points along with the information needed as follows:
1. Completed by KRH Plumber
2. Completed by KRH Plumber
3. Information provided by Fosroc
4. Council has this information which was provided by owner
5. Council has this information which was provided by owner
6. Information provided by First Windows
7. No rotting was visible nor does it show any signs now, including a moisture test that was taken.
8. Carters written timber quote (chemical free as per all other jobs)
accepted by the building industry at the time of construction and consent
9. Completed by KRH
10. Fosroc durability statements (see attached)
11. Builders Plastics statement
12. Butyl statement (see attached)
13. Fosroc durability statement (see attached)
14. KRH to remove this bead
It should also be noted that although we have not complied with the manufacturers specifications, we have complied with the building act where by preventing the penetration of water could cause under dampness or damage to the building elements. This has been achieved by the liquid moisture barrier that is visible, and can be seen by on site inspection.
Please also note that the major problem which occurred with this house was a result of the hundred year storms of which we had three or four during
2004, along with almost every other house in the Wellington region to have suffered water ingress during that difficult period.
Thank you for your time taken over this matter, should you have any queries
please don’t hesitate to contact me at the office
[28] There were a number of attachments with the letter, although none specifically in relation to item 2 of the 28 September 2004 list. In relation to item 3 producer statements were provided. In relation to the windows (items 6 and 7) the relevant attachments were:
(a) A Fosroc coating compliance form dated 30 January 2002 which recorded in relation to a “pre-installation inspection” that the windows were correctly installed, and in relation to a “final inspection” that “windows & flashings sealed to specifications”.
(b)An extract from the Building Code which included E2.3.2 which provided that “[r]oofs and exterior walls shall prevent the penetration of water that could cause undue dampness, or damage to building elements”.
(c) A letter from the window joiners (First Windows & Doors) dated 16
February 2005 which stated:
This note is to confirm that all aluminium extrusion, components, glass and glazing supplied and incorporated in the aluminium joinery units for the above contract comply with the requirements of a very high wind load rating and with all the relevant codes and Local Authority requirements, in particular NZS 4223:Part 3 – Human Impact Safety Requirements.
Remedial work undertaken on this site was done to good trade practice in accordance with all the abovementioned requirements.
(d) A performance warranty from First Window & Doors dated 14
February 2005 relating to the supply of its product. This stated that “[o]ur windows comply with the building code”. It certified that all its products meet or exceed the requirements of the Building Code and that “[t]his means that our windows have been designed and tested to perform under the most diverse New Zealand weather conditions, and
... meet stringent requirements for waterproofing and air leakage.”
(e) A letter dated 17 February 2005 on Kingdom letterhead, and signed by Mr Dallas as managing director, which said:
This letter is to confirm that as a qualified Registered Master Builder I am commenting on the impact of a leaking window at the above address.
As far as I am aware, structural integrity, and durability has not been impaired, nor has there been any signs that would indicate that this is likely to cause concern in the future. The water damage during this flood was dried out with commercial equipment and all materials were moisture tested prior to reinstatement of wall linings etc. This area was no more than half a square metre in total.
I trust this satisfies your concern, should you have any queries please
don’t hesitate to contact me at the office
[29] Mr Dallas says that the above letter (at (e)) was written on the basis of a discussion with Mr Ledbury. Mr Dallas understood that the moisture test was done when internal linings were removed under a window which leaked after the storm(s). Mr Dallas was unaware of any other leaks.
[30] There seems to have been a telephone conversation between Kingdom and WCC about the top surfaces, parapets and upstands. There are no details about this except that it is referred to in a letter from Kingdom (signed by Mr Dallas as managing director) to WCC dated 28 February 2005 as follows:
Further to our telephone conversation, I confirm that as provided in drawings A and B attached, that a liquid moisture barrier is shown and has been installed along with the Fosroc durability statements. Confirmation of this can be made once you have undertaken you’re (sic) on site inspection.
Regarding item seven of my letter, this states that no visible rotting of timber was evident both at the time of repair and now, we moisture tested the timber before any linings were reinstated and our readings showed that we were below the acceptable level of the building code, and these readings were between 10 and 14%.
I trust that this satisfies your concern and look forward to meeting with you this Thursday the 3rd of March 2005 at 1pm.
Should you have any queries please don’t hesitate to contact me at the office
[31] Mr Dallas’ evidence was that he relied on Mr Ledbury for the information he provided to WCC. He emphasised the division of responsibilities in Kingdom’s organisational structure, noting that it was the role of the building supervisor, as part of the construction team, to inspect properties on site. Mr Dallas did not regard this as part of his role as general manager.
[32] Mr Cody, who was WCC’s manager of building compliance at the relevant
time, gave evidence for WCC.14 His evidence was that there was a site meeting on 3
March 2005 attended by Mr Cody and Mr Geraghty for WCC, Mr Dallas and Mr
Craig. Neither Mr Cody nor Mr Dallas recalled any specific information about the 3
March meeting. There does not appear to be any site meeting record, although a letter that day from Kingdom (signed by Mr Dallas as managing director) to Builders Plastics Ltd confirms that a meeting did take place. That letter asks Builders Plastics, pursuant to a request by WCC made at that meeting, to amend its warranty to correctly record the date of completion of the work. Builders Plastic made the requested amendment.
[33] On 4 March 2005 Kingdom (attention to Mr Dallas) received a revised durability statement and a maintenance data sheet from Fosroc. It seems that this too was in response to a request from WCC. In a letter dated 8 March 2005 Kingdom (signed by Mr Dallas as managing director) forwarded this on to WCC. On 10
March 2005 a WCC report signed by Mr Geraghty recorded:
Amended documents provided by Mr Craig include:
14 His position was “Manager Compliance (Building) in the Building Consents and Licensing Services Department.” At the time of the trial he was WCC’s acting manager of Weathertight claims.
1) The butynol applicator has confirmed that the product has been laid in accordance with the manufacturer’s specifications.
2) The traffigard workmanship & applicator’s warranty has been amended
to commence from 17th February 05.
3) The statement provided by the internal wet area tiling applicator has been signed.
4) The SR79407 has been included on the durability statement for the
Esterno product.
5) The SR79407 has been included on the DekClad System durability statement and the flexipaste jointing system.
6) The maintenance of coatings technical information has been provided by Fosroc.
Following a recent site visit, it appears that the remedial work, and documentation identified in Councils letter to Mr Craig dated 28th September 04 have been completed. When all outstanding fees have been paid, the CCC can be issued.
[34] WCC issued a final CCC on 14 March 2005.15
Sale to Derwin and Diar
[35] Around the time that the final CCC was being signed off, the plaintiffs were looking at purchasing the property. They instructed a building inspector (Phil Redican) to carry out a pre-purchase inspection. Mr Redican prepared a written report for them. This report recorded that Mr Redican carried out two site visits on
16 February and 17 March 2005 and that he also corresponded with WCC at around this time. The report included the following:
The information in this report is based on my initial two visits to the dwelling on the 16th February and the 17th March 2005 and correspondence with the City Council around this time.
The aim of this report is to inform you of the type of construction, condition of materials and maintenance requirements with this house.
The information gathered is based on a visual, non-invasive inspection of the property.
The exterior of the house has been evaluated for weathertightness and the interior has been non-invasively moisture tested.
15 WCC did not seek an independent report to verify any particular issues. Mr Saul gave evidence that WCC did not routinely require independent assessment in 2005 unless it was sure a house was a leaky building.
...
I have paid special attention in evaluating the weathertightness.
...
There are some elements of the design and material used in this dwelling that have been identified as having some “risk element” due to the design and material use.
...
Although I have identified known risk areas, no higher moisture readings were taken from within the interior.
...
Although there are shortcomings regarding the design I have paid special attention in moisture testing the internal walls below and around the balcony and I did not detect any high or raised moisture readings to the interior.
[36] On 19 July 2005 the plaintiffs became the registered proprietors of the property.
Subsequent events
[37] On 21 February 2012 the plaintiffs lodged a claim with Weathertight Homes Resolution Service (“WHRS”).16 On 15 March 2012 the plaintiffs commenced this proceeding. On 26 March 2012 the WHRS issued an eligibility report for the dwelling, confirming it was a “leaky building” under the Weathertight Homes Resolution Services Act 2006. On 14 August 2012 the WHRS issued a full report for the dwelling. On 23 November 2012 WCC filed its claim against Mr Dallas, Alchemy and Builders Plastics. As mentioned, following settlements the only remaining claim is WCC’s claim against Mr Dallas.
The Building Act and Code
[38] The relevant legislation is the Building Act 1991.17 Under this Act:
16 A body initially set up under the Weathertight Homes Resolution Services Act 2002. (This Act is now repealed, and has been replaced by the Weathertight Homes Resolution Service Act
2006.) Under this legislation a homeowner can make a request for an “eligibility report”. An assessor then determines whether the home meets the “eligibility criteria”. If it does, the owner can seek mediation or adjudication of its claim. Alternatively it can do neither and instead it can pursue its claim through the courts.
17 That Act was in force at the time the building consent was issued. It continued to apply to this house by reason of the Building Act 2004, s 436.
(a) building work must “comply with the building code to the extent required by this Act ...”;18
(b)building work is to be carried out in accordance with a building consent;19
(c) the Council must issue a CCC “if it is satisfied on reasonable grounds that the building work complies with the building code”.20
[39] The Building Code is found at Schedule 1 to the Building Regulations 1992. It sets functional and performance requirements which building work must meet. All the experts who gave evidence at the trial agreed that moisture had entered the dwelling. This was a breach of E2 of the Building Code. The subsequent damage caused as a result of the defects has resulted in non-compliance with B2: durability in respect of the cladding and the timber framing elements.
Claim as concurrent tortfeasor
Outline of claim
[40] Where damage is suffered by a person as a result of a tort, any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is liable in respect of that same damage.21 The amount of contribution is that found by the Court to be just and equitable having regard to that person’s responsibility for the damage.22 WCC claims that it was a tortfeasor liable to the plaintiffs, that Mr Dallas was also a tortfeasor liable for the same damage and that a
fair contribution would be 85% of WCC’s loss of $546,000, namely $464,100.
18 Building Act 1991, s 7(1).
19 Section 32.
20 Section 43(3)(a).
21 Section 17(1)(c) of the Law Reform Act 1936.
22 Section 17(2) of the Law Reform Act 1936. The court also has power to exempt any person from liability to make a contribution, or to direct that the contribution to be recovered from any person is to be a full indemnity.
WCC’s liability
[41] To claim contribution, a tortfeasor must be liable to the person who has suffered damage. This means that WCC must establish that it was liable in tort to the plaintiffs. To be “liable” for the purposes of a contribution claim, it is enough that WCC were “responsible in law”.23 This means that WCC can claim contribution even though it settled the claim (which meant that WCC was not found liable by a court). It also means that contribution can be claimed even if the settlement did not
specifically identify the wrongdoing accepted by WCC and even if WCC expressly disclaimed responsibility.24
[42] WCC says that it was a tortfeasor liable to the plaintiffs because it admitted liability in its statement of defence.25 In that statement of defence WCC admits that it owed the plaintiffs a duty to be satisfied on reasonable grounds that a building consent should be issued, to take reasonable steps in carrying out inspections, and to be satisfied on reasonable grounds that code compliance should be certified. WCC also admits that it breached its duties “by failing to detect the lack of kick outs or
diverters to the ends of apron flashings or other means of diverting water away from the cladding at the dwelling.” WCC admits that this breach caused water ingress and required repairs including a complete reclad.
[43] Mr Dallas accepts that WCC is a tortfeasor in this respect. He says that this is the bounds of WCC’s claim for contribution unless there is any other proven liability. WCC does not seek to establish any additional liability on its part.
Mr Dallas’ liability
[44] It is now well established that a builder of a residential house owes a duty of care to a subsequent purchaser in respect of hidden defects.26 That duty arises where
the builder has carried out the defective work. It will also arise where a builder
23 Stephen Todd and others The Law of Torts in New Zealand (6th ed, Thomson Reuters, Wellington, 2013) at 24.3.02.
24 At 24.3.02.
25 Defendant’s statement of defence to plaintiffs’ second amended statement of claim, dated 13
September 2013.
26 Bowen and Another v Paramount Builders (Hamilton) Ltd and Another [1977] 1 NZLR 394 (CA); Body Corporate No 207624 v North Shore City Council [Spencer on Byron] [2012] NZSC
83, [2013] 2 NZLR 297.
carries out work to repair a defective building.27 I accept that potentially it might also arise where a builder agrees to investigate issues raised by a local authority about defects (eg weather tightness issues) and negligently reports that there are no defects. However in that scenario it is the report (ie a negligent misstatement) that gives rise to liability. Assumption of responsibility by a builder to a subsequent purchaser for that negligent misstatement, and reliance by that subsequent purchaser on that misstatement, would need to be pleaded and proven.28
[45] WCC pleaded that:
(a) Mr Dallas, as the person responsible for coordinating the construction of the dwelling, owed duties to the plaintiffs to exercise due skill and care when making representations and attending site visits.
(b)Mr Dallas made representations to WCC between 28 September 2004 and 21 February 2005 when coordinating the building work and documentation required to respond to WCC’s letter dated
28 September 2004.
(c) In providing this information to WCC Mr Dallas represented that the house was built in a sound and workmanlike manner, in accordance with the Building Code and relevant manufacturer’s technical specifications, and that it was free from defects and weathertight.
(d)Mr Dallas breached his duties to the plaintiffs because, contrary to his representations to WCC, the house had defects and was not weathertight, and Mr Dallas failed to identify, draw attention to, or rectify the defects during site visits.
[46] As pleaded the allegations are focussed on representations said to have been made by Mr Dallas, or information said to have been provided by him, to WCC.
Those representations and information supplied relate to the period between
27 Johnson v Watson [2003] 1 NZLR 626.
28 There must be a special relationship for liability to arise for negligent misstatement which causes economic loss. Todd and others, above n 23, at 5.8.
September 2004 and March 2005 when Mr Dallas became involved in obtaining the final CCC. There is no pleading that the purchasers were aware of Mr Dallas’ representations to WCC and that they relied upon them.
[47] To endeavour to distinguish this cause of action from the WCC’s second cause of action (negligent misstatements made to it) WCC says that this claim is about Mr Dallas’ actions in failing to undertake reasonable and proper enquiries before making representations to WCC (ie before the representations in the letter of
17 February 2005 to WCC). WCC submits that Mr Dallas breached his duty to the plaintiffs because he was in control of addressing the concerns WCC raised in its 28
September 2004 letter. It submits that Mr Dallas did not make proper enquiries. It says that, had he done so, he would have identified the defects with the windows and kick outs in particular. It says that proper repairs would have then occurred prior to the issue of the final CCC. The plaintiffs’ loss would therefore not have occurred.
[48] In considering whether Mr Dallas owed such a duty it must be remembered that Kingdom was the party with whom Mr Craig had the contract and Mr Dallas responded to WCC’s concerns as managing director of Kingdom. In setting up Kingdom and in responding to WCC on behalf of Kingdom, Mr Dallas made it plain that Kingdom, with its limited liability, was the party with whom they were dealing. That, however, does not necessarily mean that a duty of care on Mr Dallas’ part did not arise. As it is put in The Law of Torts in New Zealand, whether a director acting
on behalf of a company owes a duty of care is “a matter of some controversy.”29 The
controversy is reviewed in Body Corporate 202254 v Taylor but not resolved.30
[49] As Gower and Davies’ Principles of Modern Company Law explains, the general position is different in contract and tort where a director acts on behalf of a company.31 If a company enters into a contract, then ordinarily the person who entered into the contract on behalf of the company is not liable. He or she does not
become a guarantor of the contract. In contrast there is no general rule shielding a
29 At 376.
30 Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17 [Taylor], per Wiiliam Young P and Arnold J at [16] and [46], with whom Glazebrook and Ellen France JJ agreed on this point, at [116].
31 Paul L Davies and Sarah Worthington Gower & Davies’ Principles of Modern Company Law (9th
ed, Sweet and Maxwell, London, 2012) at 7.37.
person who acts on behalf of a company from wrong-doing. Accordingly a director who commits torts (or crimes) whilst acting in the company’s business is routinely personally liable. The company will also be liable through the doctrine of vicarious liability.32 In some situations, however, the director’s actions are regarded as the “directing mind and will” of the company. In that case the company’s liability is direct and the director does not have personal liability.33
[50] The leading case in New Zealand on whether a director may be personally liable for negligence is Trevor Ivory v Anderson.34 The case concerned negligent advice by a director/owner of a “one-man” company which caused a crop to die. Concerns that imposing a duty of care on the director/owner would erode the limited liability and separate identity principles of company law led the Court of Appeal to find that the director did not owe a duty of care. The Court held that the basic premise is that a director’s actions are identified with the company and “clear
evidence [is] needed to displace it with a finding that a director is acting not as the company but as the company’s agent or servant in a way that renders him personally liable.”35 In the case of negligent misstatements causing economic loss, the director must have “assumed responsibility” in order to impose upon him or her a personal duty of care.36
[51] The House of Lords considered the issue in Williams v Natural Health Life Foods Ltd.37 The case was concerned with negligent statements in a brochure and in other information provided by a franchisor company to a prospective franchisee. Relying on the brochure and the other information, the franchisee entered into a
franchise agreement and suffered loss. As the claim was one for negligent
32 At 7.36.
33 At 7.35.
34 Trevor Ivory v Anderson [1992] 2 NZLR 517. This authority may be revisited at some point: see
Body Corporate 202254 v Taylor, above n 30, per William Young P at [44] and Chambers J at
[122].
35 Per Hardie Boys J at 527; see also Cooke P at 524, holding that “something special” is required to impose a personal duty on a director who has made it plain to all the world that limited liability was intended; and McGechan J at 532. Cooke P also commented at 523 that Morton v Douglas Homes Ltd [1984] 2 NZLR 548 (HC) did not lay down a general principle that in
building negligence cases the director would owe a personal liability. On the facts in Morton
there was an assumption of responsibility by the directors.36 Per Cooke P at 524, Hardie Boys at 528, McGechan J at 532. See also Williams v Natural Life Health Foods Ltd [1998] 2 All ER 577 (HL) holding that in claims for economic loss from negligent misstatements, a special relationship is required.
37 Williams v Natural Health Life Foods Ltd, above n 36.
misstatement for economic loss, a duty of care would arise if a special relationship existed.38 For personal liability against the director, the franchisee needed to establish that there was a special relationship between the franchisee and the director (not a special relationship between the franchisee and the company). The House of Lords held that no such special relationship arose. Although it was clear that the franchisor company’s expertise was derived from the director this was insufficient to
show that the director had assumed responsibility to the franchisee. There were no personal dealings between the director and the franchisee and nothing to show that the franchisee understood the director was undertaking personal responsibility to them.
[52] In Taylor the Court of Appeal reviewed these authorities in a claim by the owners and subsequent purchasers of villas in a residential development affected by leaky building syndrome. The Court of Appeal refused to strike out negligence and Fair Trading Act claims brought against the principal (Mr Taylor) of the companies responsible for the development. In respect of the negligence cause of action, the majority considered that liability might arise if Mr Taylor had assumed personal responsibility to eventual purchasers of the villas. On the facts, so far as they were indicated at that stage of the proceeding, that potentially arose in respect of representations made in a brochure which marketed the development or if Mr Taylor
had adopted a hands-on role in the development exercise.39 However the majority
was sceptical as to whether a duty of care would be imposed once the facts were determined at trial. This was because of the clear attempt by Mr Taylor to distance himself from liability through the legal structures he put in place for the development
and the limited direct role that he had in the development.40
38 At 581. It noted that the requirement for a special relationship was the technique adopted by English law to provide a remedy for the recovery of damages in respect of economic loss caused by negligent statements or the negligent performance of services.
39 As in Morton, above n 35, and as re-explained in Trevor Ivory, above n 34, directors who had actual control over particular building operations might justify the imputation of assumption of
responsibility.
40 Taylor, above n 30, at [39] to [44]. The parties in the present case cited a number of High Court decisions where personal liability of directors was considered. The important point is that control over the building operations or assumption of responsibility for statements made is fact dependent.
[53] In this case the alleged duty to the subsequent purchaser (the plaintiff) relates not to the building work carried out41 but to Mr Dallas’ actions at the time that Mr Craig was seeking the final CCC. Mr Craig did not instruct Mr Dallas to investigate whether there were defects in the house. Nor did he instruct Mr Dallas to rectify any defects. In fact Mr Craig was annoyed at WCC for raising new matters when it had earlier given an interim CCC which was subject to just a few minor matters. Mr
Dallas became involved, at Mr Craig’s request, to help resolve matters with the WCC so that a final CCC could be given. That was consistent with his role at Kingdom to liaise with or on behalf of Kingdom’s clients.
[54] I consider that, if Mr Dallas assumed responsibility so as to incur personal liability to the plaintiffs for economic loss arising from his actions, that was only in respect of any representations he made when responding to WCC’s questions. He was not asked by Mr Craig or WCC to look for any defects in the building and to
rectify them if he found them.42 The WCC asked for specific information before
issuing a CCC. Mr Dallas, as managing director of Kingdom, responded to those requests. If a duty arose in respect of those responses, it was a duty owed to WCC, and not the subsequent purchasers in the absence of any pleading or evidence that the subsequent purchasers relied upon them.43
[55] For these reasons I consider that WCC’s claim for contribution cannot succeed against Mr Dallas. Mr Dallas did not owe a personal duty of care to the subsequent purchasers (the plaintiffs) as alleged. In the absence of liability to the
plaintiffs a claim for contribution is not available.
41 Which is how Chambers J viewed the case in Taylor, above n 30, at [144].
42 Much of WCC’s evidence and submissions were directed to what enquiries Mr Dallas could have made. He assumed no duty of care in respect of those enquiries. To the extent he owed any personal duty of care for representations he made, if they were wrong or misleading then they may have been negligently so because of inadequate enquiries made.
43 The plaintiffs’ claim for the defective building work (whether against Kingdom or Kingdom’s
agents or servants who carried out the work) may have been statute barred. A defendant can claim contribution against a tortfeasor even if the tortfeasor’s liability to the plaintiff is statute barred (s 17(1)(c) of the Law Reform Act 1936 permits a claim against a tortfeasor who “is, or would if sued in time have been, liable” ). WCC did not seek to claim contribution from Kingdom or those who carried out the work on this basis. The evidence is that Mr Dallas was not directly involved in the building.
Same damage
[56] Whether WCC and Mr Dallas were tortfeasors “liable for the same damage” does not arise on the view I have taken in respect of Mr Dallas’ liability. However, had it been necessary to reach a view on this, the expert evidence is that there were a number of key defects which necessitated the repairs. The evidence so far as I was directed to it by counsel does not suggest that any one defect caused damage different from another. I would therefore have found that, if Mr Dallas as personally liable in respect of his actions in relation to the kick outs and/or the windows, he would have been liable to the plaintiffs for the same damages as that for which WCC was liable.
Just and equitable
[57] Had it been necessary to decide this issue I would not see this as a case where a contribution of 85 per cent of WCC’s loss (as WCC sought) would be appropriate. This is for the same reasons discussed below in relation to the negligent misstatement claim.44
Negligent misstatement
WCC’s claim
[58] WCC pleads that:
(a) Mr Dallas made representations during the period between 28
September 2004 and 21 February 2005 that the house was built in a sound and workmanlike manner and in accordance with the Building Code and relevant manufacturer’s technical specifications, and was free from defects and weathertight.
(b)As the person responsible for coordinating the construction of the dwelling Mr Dallas assumed responsibility for the representations.
(c) It was reasonably foreseeable that WCC would rely on the representations in deciding whether to issue a CCC for the dwelling.
(d)Mr Dallas owed WCC a duty of care to exercise due care and skill when making the representations.
(e) Mr Dallas breached his duty of care because the dwelling was not built in a sound and workmanlike manner in accordance with the Building Code and relevant manufacturer’s technical specifications, and was not free from defects or watertight.
(f) WCC relied on the representations when deciding to issue a final CCC
for the dwelling.
(g) As a result of the defects in the dwelling the plaintiffs suffered loss.
WCC owed a duty of care to the plaintiffs for the loss they suffered and was liable to the plaintiff for the loss suffered. WCC seeks contribution from Mr Dallas for its loss.
[59] As discussed above, whether Mr Dallas owed a personal duty of care depends on whether there was a special relationship between Mr Dallas (as distinct from Kingdom) and WCC. That depends on an objective assessment of whether Mr Dallas assumed responsibility for the representations.45 As set out above the pleading was that he did so because he was responsible for the construction of the dwelling. If that pleading was intended to convey that Mr Dallas has responsibility
for the construction of the house at the time it was built, this was not borne out by the evidence. Mr Dallas was not directly involved in building the house. He was not involved in the plans, he did not do any of the building nor was he involved in its supervision, he was never on site and he did not direct how the house was to be built. His direct involvement did not come until after the house was built and Mr Craig asked him to assist with queries raised by WCC before it would issue the final CCC.
Representation that the building was weathertight
[60] As developed at the hearing and in submissions, WCC contended that WCC’s letter of 28 September 2004 was a “black mark against the dwelling, a statement WCC was not satisfied that the dwelling complied with the Building Act or Code”. It was said that Mr Dallas was personally liable to WCC because he took it upon himself to personally respond to WCC’s list of questions, his direct control influenced WCC to change its mind and issue a final CCC, and the plaintiffs’ claim followed. WCC says that Mr Dallas’ personal involvement and responsibility is evident in the 21 February 2005 response. In that response he said “I” would like to arrange a meeting, it would greatly assist if you could get back to “me” with a suitable time, “I” have worked through your letter, and should you have any queries please don’t hesitate to contact “me” at the office. It is also evident in the 17
February 2005 letter where Mr Dallas says that he is commenting “as a registered master builder”
[61] WCC contended that a reasonable person in Mr Dallas’ position owed a duty of care to investigate the matters raised by WCC and to have taken steps to have the defects properly rectified rather than provide the assurances he gave. In effect, WCC contends that Mr Dallas’ responses misled WCC as to whether the building was weathertight.
[62] The difficulty with the claim put in this way is that WCC did not ask Mr Dallas to investigate whether the building was weathertight. Nor did it ask him whether the building was weathertight and Mr Dallas did not say that it was. WCC was required by statute to issue a CCC if “satisfied on reasonable grounds that ... [t]he building work ... complies with the building code.”46 Consistent with that duty, WCC identified specific issues about which it needed information before it could be satisfied on reasonable ground that the building work complied with the Building Code. Those issues were raised with Mr Craig and he in turn contacted Mr Dallas to
assist. If Mr Dallas owed a personal duty of care in respect of representations made to WCC, the scope of that duty depended on what information WCC was seeking and what information was provided in response.
[63] The only part of Mr Dallas’ response that might be viewed as providing an assurance of compliance with the Building Act is found in the third to last paragraph of the 21 February 2005 letter. There Mr Dallas advises that “although we have not complied with the manufacturers specifications, we have complied with the Building Act”. Mr Dallas goes on to explain that prevention of water penetration (that could cause dampness or damage to the building elements) has been achieved “by the liquid moisture barrier that is visible, and can be seen by on site inspection”. The liquid moisture barrier related to the parapets (both roof and deck). This response therefore related to item 3 of WCC’s letter. It was not a general assurance of weathertightness and WCC could not assume that it was.
[93] In light of these limitations with Mr Dallas’ response, it may be that WCC ought to have made further enquiries. Mr Tidd considered that it ought to have done so. Mr Saul considered that WCC ought to have asked for comment from a registered building surveyor, who would have the independence and expertise that Mr Dallas did not, on how the framing would perform in the future. I note that the evidence is unclear as to what further enquiries WCC made at the final site meeting. It may have made reasonable enquiries and, in respect of the windows, it may have
had a proper basis on which to issue a CCC. WCC has not accepted that it was not negligent in this respect and it may be that it was not.
[94] But the important point from Mr Dallas’ perspective is that it has not been shown that the responses that he gave were incorrect. Mr Tidd, Mr Saul and Mr Paykel all agreed that Mr Dallas’ response may have been entirely correct at the time it was given. As Mr Saul explains, moisture present in timber framing varies depending on a number of factors including its proximity to a leak, whether there had been recent rain and where the moisture reading is taken. Mr Cody agreed that he had no information to indicate that Mr Dallas’ response was incorrect either.
[95] In this case the evidence indicates that there was water damage from a storm in 2003 and possibly also from storms in 2004. Commercial equipment was used to dry out the damage. Remedial work was carried out in February 2004. It would appear that if moisture testing was done (and there is no reason to think it was not), it would have been when the remedial work was carried out. In light of Mr Saul’s evidence, it may well have been that no problem was identified at the time the moisture testing was carried out. That is also supported by the report from Mr Redican for the plaintiffs. He made site visits in February and March 2005. He did not detect any high or raised moisture readings in the interior.
Representation as to parapets
[96] It appeared to Mr Dallas’ counsel that WCC contended that Mr Dallas was liable for a misstatement in respect of item 3 (which concerned parapets). This was not, however, identified in the closing submissions filed by WCC as an area where Mr Dallas’ liabilities arose. For completeness I note that Mr Dallas’ response to that was that no negligent misstatement occurred. The response from Kingdom (through Mr Dallas) was that the moisture barrier was visible and could be inspected. That moisture barrier was further described in drawings which were provided to WCC. The correct information had therefore been provided to WCC. It was for WCC to consider whether it was satisfied that the CCC could be issued. I also note that it may be that WCC was not negligent in this respect. It has not accepted that it was.
Conclusion
[97] I therefore conclude that WCC has not made out its claim for negligent misstatement against Mr Dallas personally because:
(a) Mr Dallas did not assume personal responsibility to investigate whether the building was weathertight and he made no assurances that it was.
(b)He may have assumed personal responsibility for specific parts of the response provided to WCC’s specific queries. As to those specific parts:
(i)it was not reasonable for WCC to rely on Mr Dallas’ statement “Completed by KRH Plumber” in relation to the presence of kick outs. This was something for WCC to inspect at the proposed site meeting.
(ii)WCC could place some reliance on Mr Dallas’ statements about the windows, but it should have recognised their limits. It has not been shown that any of those (limited) statements were wrong.
[98] For completeness I note that, if I were wrong in these conclusions, it would not follow that Mr Dallas should contribute to WCC’s loss on the 85% (Mr Dallas)/15% (WCC) proportions that WCC proposed. WCC submitted that
85%/15% was appropriate “given Mr Dallas’ high level of control over the compliance matters in 2004/2005 and representations about windows and kick out flashings that proved to be incorrect”.
[99] An 80%/20% apportionment is typically appropriate in negligent building cases, as between the builder and the local authority.51 Here, however, Mr Dallas was not the builder. Kingdom contracted with Mr Craig and in turn employed
independent contractors. If, contrary to my findings, Mr Dallas has any liability to
51 Todd and others, above n 23, at 24.3.05.
WCC then it is because of statements he made some years after the building was constructed. His statements were limited. They lacked detail or supporting information. WCC was in a position to note those limitations and make further enquiries of Mr Dallas or others. Certainly what Mr Dallas said could not be relied on as providing an assurance that the building was weathertight. In these circumstances any contribution from Mr Dallas would be considerably less than the
85% sought by WCC.52
Fair Trading Act
[100] WCC’s pleading under this head relies on the same representations that are pleaded in the first two causes of action. WCC says these were misrepresentations, that WCC was misled by them, that it was reasonable it was misled by them, that it issued the CCC relying on them, and that it suffered loss (the settlement paid to the plaintiffs less the contributions from the other parties) as a result.
[101] In written submissions, WCC particularised the misleading conduct as being:
(a) Mr Dallas’ advice that kick outs had been installed when they were
not;
(b) Mr Dallas’ advice that the dwelling complied with the Building Act
and Code when it did not;
(c) Mr Dallas’ advice that the problems with the dwelling were the result of “hundred year storms” when they were not; and
(d)Mr Dallas’ advice that “structural integrity, and durability has not been impaired, nor has there been any signs that would indicate that this is likely to cause concern in the future”, when he had not
performed adequate investigations to make such a statement.
52 Alternatively WCC’s contributory negligence was significant and would reduce the amount for
what Mr Dallas was responsible.
[102] This claim against Mr Dallas fails for similar reasons as the negligent misstatement claim:
(a) It was not reasonable for WCC to rely on the information provided by Mr Dallas about the kick outs. The response was ambiguous and lacked detail and a site meeting (at which the kick outs would be visible) was proposed.
(b)Mr Dallas’ assertion that the building code was met related to the parapets. He provided the basis on which that assertion was made. It has not been shown that there was anything misleading in this response.
(c) The problems arose with the storms. Mr Dallas did not purport to assert how, during those storms, the water gained entry into the house.
(d)Mr Dallas made it clear that he personally was not aware of any structural integrity or durability impairment. He also explained that the water damage was dried with commercial equipment and moisture tests were carried out. None of that information has been shown to be wrong or misleading.
[103] Additionally Mr Dallas’ conduct was not a material cause of WCC’s loss. WCC accepted liability in respect of the kick outs. Mr Dallas did not assert that he had installed the kick outs. He said that the work was done by Kingdom’s plumber. He anticipated WCC would inspect the work. WCC did so.
[104] Mr Dallas submits that WCC’s Fair Trading Act claim is statute barred in any event. Section 43(5) of the Fair Trading Act permits an application to be made at any time within three years “after the date on which the loss or damage, was discovered or ought reasonably to have been discovered.” For Mr Dallas it is said that WCC ought to have discovered that Mr Dallas had mislead it when the final site meeting took place. At that time WCC ought to have discovered that the kick outs were not present.
[105] This is not the correct analysis. The earliest WCC ought to have been aware of its loss was when the plaintiffs lodged their claim with WHRS in February 2012. WCC brought its claim against Mr Dallas in November 2012 (well within the three year limitation period).
Conclusion
[106] WCC’s claim against Mr Dallas fails and is dismissed. That may seem an odd outcome in that in a negligent building case the builder is typically primarily liable, with the local authority having lesser responsibility. WCC commenced its closing submissions with a quote from Morton v Douglas Homes:53
[A] Council cannot be required to spell out every detail of commonly employed procedures but must be entitled to assume that a builder and his contractors are familiar with and will apply the normal skills and techniques of their respective crafts. It is not the local authority’s duty to instruct a tradesman in his own work.
[107] The difference here, however, is that this claim was not about the original construction of the house (in respect of which Mr Dallas was not directly involved). Had the claim been against Kingdom or the building supervisor Kingdom engaged, the position may have been different. WCC’s claim was against Mr Dallas personally for the information he provided when WCC was considering whether to issue a CCC. The information Mr Dallas provided was intended to be the subject of further discussion and inspection and/or has not been shown to be wrong.
[108] Mr Dallas is entitled to costs. I can indicate that 2B seems appropriate. If the parties wish to be heard on costs they will need to submit (brief) memoranda within two weeks.
Mallon J
53 Morton v Douglas Homes [1984] 2 NZLR 548 (HC) at p 613
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