Far North District Council v Rightside Properties Limited

[2013] NZHC 2

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2012-488-881 [2013] NZHC 2

UNDER the Building Act 2004

IN THE MATTER OF     an application for an injunction under the

Judicature Act 1908

BETWEEN  FAR NORTH DISTRICT COUNCIL Applicant

ANDRIGHTSIDE PROPERTIES LIMITED First Respondent

ANDNEAL ALAN SUMMERS Second Respondent

ANDCAMERON ENTERPRISES LIMITED Third Respondent

ANDFRANCES ROSE MACCULLOCH Fourth Respondent

Hearing:         7 January 2013 (at Auckland)

Appearances: J F Verry and B E McDonald for the Applicant

No appearance for First or Second Respondent

Fourth Respondent (F R MacCulloch) in person and informally on behalf of the Third Respondent

Results Judgment: 7 January 2013

Reasons:         8 January 2013

REASONS JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 8 January 2013 at 5.00 p.m.

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Counsel:

J F Verry, Email: [email protected]

B E McDonald. Email: [email protected]

Copy to:
F R MacCulloch. Email: [email protected]

Introduction

[1]      The  Kaikohe  Hotel,  situated  at  67  Broadway,  Kaikohe,  is  a  wooden  two-storey building occupied by a business which operates a pub and poker machines and provides accommodation services for permanent and temporary residents.  It is in a state of significant disrepair, partial demolition, and renovation.

[2]      The applicant (the plaintiff in the substantive proceeding) says the hotel is a fire hazard which represents a significant risk to the safety of pub patrons, on-site management, permanent residents, and backpackers who use it for temporary accommodation.   The applicant applies for interim orders directing the immediate closure of the building and the taking of steps to ensure no person has access to it until the further order of the Court.

[3]      After an urgent hearing at which one of the respondents appeared in person, I issued interim orders, including one requiring the respondents to prevent access to the building until further order of the Court  (a mandatory rather  than prohibitory order).1     These are my reasons.

Background

[4]      The first respondent occupies the building and is the licence holder under the Sale of Liquor Act 1989.  The second respondent is a director of that company and the holder of the manager’s certificate under the Sale of Liquor Act.  The third respondent owns the property and the fourth respondent, Ms MacCulloch, is a director of that company.

[5]      Affidavit evidence filed by the applicant indicates that the hotel has had compliance issues since at least 2008, including unauthorised building work, unconsented demolition work, and a failure to obtain valid building warrants of fitness.

[6]      A routine inspection report in respect of the automatic fire sprinkler system of 7

November 2012 revealed that issues with the sprinkler system dated back to August 2010. The report noted the following significant deficiencies which, in the opinion of the report

writer, would lead to a significant probability of system failure and required urgent attention:

1 Far North District Council v Rightside Properties Limited [2013] NZHC 1.

[a]      Sprinkler protection was required beneath the canopy adjacent to the stairs in the front reception area.

[b]      A canopy on the front of the building was deemed to have been an exposure hazard requiring sprinkler protection.  This was one of the matters previously reported on in 2010.

[c]       Additional  sprinkler  protection  was  required  within  the  lounge  of  the

owner/manager’s residence, also previously reported in 2010. [d]  Sprinkler protection was required within the kitchen hood.

[7]      The sprinklers generally are said to be in a poor state with some showing evidence of significant rusting, including in all accommodation areas, toilet areas, kitchen and lounge areas, and in the part of the building containing the bar and poker machines.

[8] On 23 November 2012, the fire risk management officer for the Auckland City Fire Area of the New Zealand Fire Service reported to the applicant, following a visit to the premises the previous day, that the building was a ‘dangerous building’ under s 121 of the Building Act 2004. It was said that the installed sprinkler system does not comply with current regulations and, consequently, does not have a current or existing Certificate of Compliance from a sprinkler system certifier. The deficiencies were said to include the following:

[a]      Rusted  external  sprinkler  pipes  and  sprinkler  heads,  indicating  that  when under running pressure the system may not remain intact and may not operate as intended as a life-safety system.

[b]      A number of areas of the building do not have any sprinkler cover, including in areas near the main entrance and the single means of escape from the upper level  of  the  building.    This  creates  a  particular  danger  for  the  residents sleeping in the upper storey.

[c]      The accommodation area in the central wing of the building is connected to a partially deconstructed wing, the building work apparently having been undertaken without authority.  The accommodation area is exposed to and not

fire-separated from the wing which is under deconstruction.  That area does not have any wall, ceiling linings, or windows intact to help contain the heat required for sprinklers to operate at an early stage.  As this area is open and has insufficient fire separation, fire and smoke are likely to spread to the means of escape, therefore endangering occupants.

[d]      The building lacks a smoke detection system which might otherwise act as an early warning.  This means that occupants would have to rely for warning on a non-compliant sprinkler system.  There is said to be a strong possibility that the system would fail in the event of a rapidly building fire.

[e]      At the time of the inspection, various labelled fire doors in the accommodation area were either wedged open or had catches holding the doors open, preventing  them  from  providing  appropriate  barriers  to  fire  or  smoke travelling throughout the building.

[9]      While  these  latter  faults  could  easily  be  addressed,  they  indicate  a  dangerously cavalier attitude to fire safety on the part of the persons responsible for the management of the building and scant regard for the wellbeing of the occupants, particularly those accommodated overnight.

A “dangerous building”

[10] Section 121 of the Building Act provides:

121     Meaning of dangerous building

(1)       A building is dangerous for the purposes of this Act if,—

(a)       in the ordinary course of events (excluding the occurrence of an earthquake), the building is likely to cause—

(i)        injury or death (whether by collapse or otherwise) to any persons in it or to persons on other property; or

(ii)       damage to other property; or

(b)       in the event of fire, injury or death to any persons in the building or to

persons on other property is likely ….

[11]     For present purposes, I accept the conclusion of the fire service officer that “in the

event of fire, injury or death to any persons in the building, or to persons on other property, is

likely due to the deficiencies in the sprinkler system; the lack of fire separations; the lack of an early warning smoke detection system; and the open fire-rated doors.”

[12] On 30 June 2012, in breach of s 108(5)(aa) of the Building Act, the third and fourth respondents failed to provide a building warrant of fitness for the hotel. On 12 July 2012 the applicant issued a notice to fix under s 164 of the Building Act requiring, among other things, that the third and fourth respondents should;

[a]      Cease all building works which had been undertaken without building consent; namely, the demolition of internal partitions, the construction of four lower bedrooms and lower ensuites adjacent to the bottle store, and related works.

[b]      Apply for and obtain a certificate of acceptance for the unconsented building works.

[c]       Apply for and obtain a building consent for the remainder of the work. [d]           Provide a fire safety report from a suitably qualified engineer.

[e]       Obtain appropriate certification that the hotel complied with the building code.

[13]     The third respondent was subsequently convicted for failing to comply with the notice to fix and fined $8,000.  In respect of the failure to provide the building warrant of fitness the third respondent was convicted and fined $3,000.  The fourth respondent was also convicted and fined $2,000 on that charge.

[14] Being satisfied that the building is dangerous, the applicant, as the relevant territorial authority, was authorised by s 124(1) of the Building Act to take a number of remedial steps including, relevantly, giving written notice requiring work to be carried out to reduce or remove the danger under s 124(1)(c). The Council issued a s 124 notice on 29 November

2012.  It served three of the respondents by mail and Mr Summers by hand, and also attached the notice to the building.

[15]     The notice required the building owner to address the concerns stated within an annexed fire safety report and to provide a current warrant of fitness pursuant to s 108.  The work required by the notice was required to be carried out by 5:00pm on 14 December 2012. There  is  no  argument  as  to  the  validity  of  the  notice  in  terms  of  s  125’s  procedural

requirements.   The owner’s  failure to carry out  this work is the  genesis of the present

application for injunctive relief.

The causes of action

[16] In the substantive proceeding, the applicant’s claim is brought first in negligence arising from an alleged breach of a duty of care to it and to temporary and long term residents, patrons, guests, and members of the public using the hotel facilities to take reasonable care and skill to ensure that the hotel is not in a dangerous state and is able to be used and occupied safely. It is suggested that, having regard to its statutory responsibilities under the Building Act to ensure public safety, the Council has sufficient standing to bring these proceedings, at least initially, in a representative capacity.

[17]     For its second cause of action, the applicant relies on the Court’s inherent jurisdiction to intervene in circumstances where it is necessary to protect potentially vulnerable persons from injury or fatality in circumstances where there has been a failure by the respondents to comply with statutory obligations.

The hearing of the application for urgent interim relief

[18]     The first and second respondents did not appear at the hearing.   Ms MacCulloch appeared in person and, I assumed, on behalf of the third respondent.  I was grateful for her attendance.  She told the Court that she had not had an opportunity since the proceeding was served on her two weeks ago to obtain legal advice or legal representation.   She frankly conceded, however, that she was not in a position to take or authorise immediate remedial steps which would eliminate the serious risks to public safety represented by the current state of the building.

The applicable principles for issuing an interim injunction

[19]     The High Court may grant an interim injunction (a form of temporary equitable relief) in its discretion to protect an applicant’s position or to secure the status quo pending the outcome of a proceeding (which may be some time away).  In order to succeed, the applicant must satisfy the Court that an infringement of her rights has occurred or is imminent.  The

House of Lords in American Cyanamid Co v Ethicon Ltd2 laid down a twofold test to assess

2 American Cyanamid Co v Ethicon Ltd [1975] AC 396 (HL).

this question. First, the applicant must show that there is a serious question to be tried in respect of her claim. The Court will then decide whether the balance of convenience lies in favour of granting the injunction.

[20]     This position has been adopted in New Zealand in principle, although the courts have stressed that the ultimate question is what the interests of justice require.   In Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd3 the Court of Appeal confirmed that a two- stage test, whilst helpful, was not exhaustive: the final stage of the analysis is to stand back and consider where the overall justice of the case lies.

[21]     Whether there is a serious question to be tried will depend on whether there is a tenable resolution of issues of law and of issues fact on which the applicant could succeed. The claim must not be “frivolous or vexatious”.4 It is insufficient for an applicant to say there is a tenable cause of action from a legal point of view, and a conflict of evidence on the facts.5 The case, as a whole, must be seriously arguable.

[22]     Where, as here, an applicant seeks a mandatory interim injunction the Court will usually require her to establish a “powerfully arguable”6 or “strong case”.7 This is because an interim mandatory injunction creates a greater potential for injustice to a defendant than an interim prohibitory injunction,8 and as such the courts are more reluctant to issue them.9

[23]     A mandatory injunction ought to be granted on an interlocutory application only in special circumstances, and then only in clear cases either where the Court thinks that the matter ought to be decided immediately or where the injunction is directed at a simple and summary act which could be easily remedied or where the respondent has attempted to steal a march on the applicant. Before granting a mandatory interlocutory injunction the Court must have a high degree of assurance that at trial it would appear that the injunction had rightly been granted, that being a different and higher standard than is required for a prohibitory

injunction.10

3 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (CA).

4 American Cyanamid Co at 407.

5 Cunningham v Butterfield HC Timaru CIV-2011-476-400, 7 October 2011; Ansell v New Zealand Insurance

Finance Ltd HC Wellington A 434/83, 30 November 1983.

6 Oggi Advertising Ltd v McKenzie [1999] 1 NZLR 631 (HC) at 638.

7 Weddel NZ Ltd v Taylor Preston Ltd [1993] 2 NZLR 104 (HC) at 9; Acernus Aero Limited v Vincent Aviation

Limited [2012] NZHC 295 at [9].

8  Acernus Aero Limited v Vincent Aviation Limited [2012] NZHC 295 at [9] citing Andrew Barker “Interim

Injunctions” Civil Remedies in New Zealand, (2nd ed, Thomson Reuters, Wellington, 2011) at 294.

9 UMCP Ltd v Pope HC Nelson CIV-2007-442-553, 3 December 2007 at [79].

10 Locabail International Finance Ltd v Agroexport [1986] 1 All ER 901 (CA).

[24]     The balance of convenience involves a decision as to whether granting or refusing an injunction is the course which, after the action itself has been tried and the issues between the parties determined, would fairly allow the adjustment of the rights of the parties in a way that accords with fairness and justice.11 In Wellington International Airport Ltd v Air New Zealand Ltd12 Wild J considered the phrase “the balance of the risk of doing an injustice”, as used by

May LJ in Kane v Global Natural Resources Plc13 better describes the process involved.  The

Court usually undertakes an inquiry whether damages would adequately compensate the plaintiff if an interim injunction were denied and it succeeded at trial, or whether damages would adequately compensate the defendant — if an interim injunction were granted — and the plaintiff failed at trial.  Other relevant considerations include the consequences for third parties; the public interest; whether the interim relief will have the effect of final judgment; the conduct of the parties; and whether the injunction is in the nature of a mandatory interim injunction.

Discussion and conclusions

[25]     The evidence persuaded me that the hotel represents a serious risk to public health and safety and that urgent action to avoid such risk was required.  I was not, however, persuaded that there is a strong case that the Council has standing to bring a claim in negligence, as building owners or occupiers do not owe a duty of care to territorial authorities at large. Further, while the applicant’s evidence provides a strongly arguable case of breach of any duty owed to users and occupants and members of the public, there is no evidence at all of actual loss or damage (fortuitously, no fire has yet occurred).  Accordingly, there can be no “powerfully arguable” case on this cause of action. The applicant failed on this ground.

[26] For its second cause of action the applicant relies on the Court’s inherent jurisdiction to intervene in order to protect the public from fatality or injury caused from the respondents’ failure to comply with statutory obligations. I am satisfied that there is a strong case in respect of this cause of action, the respondents having patently failed to comply with the s 124(1)(c) notice requiring repair work to be carried out.

[27]     In terms of inherent jurisdiction, the High Court may exercise its powers even in respect  of  matters  that  are  regulated  by  statute.    However,  such  an  exercise  must  not

11 Congoleum Corp Ltd v Poly-Flor Products (NZ) Ltd [1979] 2 NZLR 560 (CA) at 571.

12  Wellington International Airport Ltd v Air New Zealand Ltd HC Wellington CIV-2007-485-1756, 30 July

2008 at [4].

13 Kane v Global Natural Resources Plc [1984] 1 All ER 225 (CA) at 237.

contravene any statutory provision,14  Parliament being New Zealand’s supreme law-making body.  Section 124(1)(d) makes it an offence to fail to comply with a notice given under s

124(1)(c). Section 124(1)(e) provides that a person who commits such an offence is liable to a fine of not more than $200,000. Therefore, while the Building Act regulates the criminal sanction of contravening conduct, it is silent on civil relief. Further, criminal proceedings against the respondents here would not in and of themselves remedy the real danger to public safety. There is nothing to suggest that an exercise of inherent jurisdiction to grant an interim injunction would offend the provisions of the Building Act. In my view, this course in fact upholds that Act’s s 3(a)(i) purpose to promote the safe use of buildings.

[28] Given the applicant’s enforcement duties under the Building Act as the relevant territorial authority, I considered it to be undeniable that the applicant had standing to advance the second cause of action.

[29]     This approach also accords with two decisions made in the course of a proceeding with similar facts to the present; for a summary of the lengthy litigation history see French J’s discussion in The Wanaka Gym Ltd v Queenstown Lakes District Council.15 In that case, there was a long-standing animus between the Council and the owner of a commercial gymnasium who wished to convert the building into residential accommodation.  The Council was of the view that the use of plastic tarpaulins to separate sleeping areas was dangerous in the event of fire.   It required the immediate vacating of the property and for the building to remain unoccupied.   It successfully sought an injunction in the District Court on those terms in September 2003.   A 2008 inspection revealed further compliance issues, and the Council

again successfully obtained an injunction in the District Court after issuing two notices to fix. Later, in December 2008, it initiated a criminal prosecution laying fourteen informations under the Building Act. This case illustrates the utility of interim relief for the purposes of community protection.

[30]     In all these circumstances I considered that the applicant had a strong case on its second cause of action.

[31]     Turning  to  the  balance  of  convenience,  a  damages  inquiry does  not  address  the principle of public safety at the heart of this application.

14Taylor v Attorney-General [1975] 2 NZLR 675 (CA).

15 The Wanaka Gym Ltd v Queenstown Lakes District Council [2012] NZHC 284 at [5]-[20].

[32]     In terms of third party interests, I was mindful that the immediate eviction from the premises of those who wish to use them, particularly those who have permanent accommodation, would be likely to result in serious inconvenience.  I gave that aspect careful consideration.  However, safety concerns far outweigh any concern about disruption and it is highly likely that none of those persons fully appreciate the serious hazards described in the various reports provided to the Court.

[33]     In the past, when notifying relevant persons of the dangerous state of the building, the Council took steps to inform persons adversely affected about available agencies which might assist  them  to  find  alternative  accommodation.    I  understood  from  Mr Verry  that  the applicant, with the assistance of the police, would take similar steps in the event of the interim orders sought being made.   I considered that course would ameliorate some of the disruptive consequences of making the orders sought by the applicant.

[34]     Furthermore,  the  building  represents  a  substantial  risk  to  members of  the public generally, so the public interest is served by the orders made.

[35]     Having regard to these considerations I had no doubt that the balance weighed heavily in favour of making the orders sought, particularly in view of the reservation of leave to the respondents to apply to set aside or vary any orders made.

[36] For these reasons, I was satisfied that the overall justice of the case required the making of the orders. Mr Verry acknowledged that in view of the poor history of the respondents in complying with Council and statutory requirements, and the failure of the first and second respondents to appear at the hearing, there was a real risk that an order requiring the respondents to take immediate steps to evict the occupants, vacate the present premises, and erect hoardings would not be complied with in a timely manner which addressed the necessary element of public safety. In those circumstances, he said, the Council would exercise its powers under s 124(1)(a) of the Building Act once the Court’s orders were made.

[37]     On these grounds, therefore, I made the following orders:

[a]      That the respondents ensure that the building known as the Kaikohe Hotel, located at 67 Broadway Kaikohe, legally described as PT DP 8216 is not accessible to any person through the use of locked entrances, hoardings, fencing, or similar, to prevent access until further order of the court.

[b] The order in paragraph [a] does not apply to persons who are undertaking remedial works authorised by the Far North District Council and authorised by an independent qualified person to ensure compliance with the Building Act

2004.

[c]      Leave is reserved to all parties to apply to set aside or vary the first order made in [a] on three days’ notice to the other parties.

[38]     I recognised that costs on interlocutory applications should usually be made at the time the application is disposed of.  Since Ms MacCulloch had taken the time to appear at Court, but without representation, and the other respondents had not appeared at all, I did not consider it appropriate to make any order for costs at this stage and costs were reserved.

.............................

Toogood J