Henry v Auckland Council

[2015] NZHC 435

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-006420 [2015] NZHC 435

BETWEEN

TREVOR ERIC HENRY, HONG TAN

and SWL TRUSTEE COMPANY LIMITED (AS TRUSTEES OF THE THP TRUST)

Plaintiffs

AND

AUCKLAND COUNCIL Defendant

Hearing:	25-29 August and 2 & 4 September 2014
Appearances:	I J Thain and K R Pengelly for the Plaintiffs D J Heaney QC and K B Dillon for the Defendant
Judgment:	11 March 2015

JUDGMENT OF ELLIS J

This judgment was delivered by me on 11 March 2015 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date:………………………….

Counsel/Solicitors:

I J Thain, DLA Phillips Fox, Auckland

K R Pengelly, DLA Phillips Fox, Auckland
D J Heaney QC, Heaney and Partners, Auckland

K B Dillon, Heaney and Partners, Auckland

HENRY & ORS v AUCKLAND COUNCIL [2015] NZHC 435 [11 March 2015]

[1]      114A Clovelly Rd, Buckland’s Beach, Auckland, is a property located on the edge of a cliff, with spectacular eastern views over the Hauraki Gulf.   In August

2008, a catastrophic slip cut a swath across the bottom of the property.   It is now known that the slip originated from deep below the ground on the seaward side of the next-door property to the south.  As a result of the slip, the house located on the property, which had been completed just two years earlier, was subsequently demolished.

[2]      114A Clovelly Rd (114A) is owned by the plaintiffs in their capacity as trustees of the THP Trust.1    They say that the Council’s negligence in preparing a Land Information Memorandum (LIM) for the property is the cause of the economic loss they have suffered as a result of the slip.

[3]      Before turning to consider the legal aspects of the plaintiffs’ claim, it is necessary to set out the events leading to the drafting of the 114A LIM in some detail.   The detail is important because the nature and extent of the information known to the Council about the land, and the decisions that were then made about how that information was to be recorded on the LIM, have considerable bearing on whether the Council has been negligent here.

Background

[4]      In January 2002, Yvonne McCracken purchased 114 Clovelly Rd.   At that time  the  property  comprised  a  single  section  with  one  dwelling  on  it.     Ms McCracken had plans to demolish that dwelling, subdivide the property and build a new house on each of the resulting sections.

[5]      In July 2003 Ms McCracken received a report from Geotek Services Limited (Geotek) in relation to her proposed development.  In the introduction to the report Geotek noted that it was anticipated that the report would be submitted to Council in support of a building consent application and, more particularly, providing material relevant to the Council’s obligations under s 36 of the Building Act 1991.  In general

terms, and subject to limited exceptions, s 36 prohibits a territorial authority from

1      Buckland’s Beach  SWL Trustee  Company Ltd,  Mr  Trevor  Henry and  Ms  Hong Tan  (the plaintiffs) own the property in their capacity as the Trustees of the THP Trust.

granting a building consent where the land on which the building work is subject to, or is likely to be subject to erosion, evulsion, alluvion, falling debris, subsidence, or slippage.2

[6]      Geotek’s initial report contained the following useful description of the site at

114 Clovelly Rd:

… the subject site is typical of much of the Auckland metropolitan area, in that it contains strata of the East Coast Bays Formation (also known as Waitemata Formation), which are a part of the Waitemata Group sedimentary orthology (Miocene Epoch 20-30 million years ago).

According to Searle “City of Volcanoes” in those times the seas encroached upon the central Auckland area, and thick beds of sedimentary rocks were laid down in alternating sandstone, siltstone and mudstone sequences according to the prevailing eddies and currents at the time and place.

The Waitemata Group bed rock observed that this site is understood to have been deposited in a submarine basin some 22 million years ago, with deformation of these sediments occurring pericontemporaneously with deposition from the gravity sliding of pockets of sediments over more consolidated lower units.

This sliding of wet sediments has caused them to be buckled into folds of varying dimensions associated with small scale faults.

Thus, deformation occurred while the sediments were soft and plastic, before the final consolidation, dewatering and cementation processes, giving rise to the syncline/anticline features typical within this geological formation.

Often the failures that take place in Waitemata Group cliff faces are predominantly due to the oxidation of iron minerals in the many and varied fracture  plains  contained  within  the  sandstone  and  mudstone  structures, which leads to the formation of iron oxides (limonite).   The formation of these oxides (similar to rusting) is accompanied by an expansion or swelling which can have a hydraulic jacking effect on those masses above and beside the joints.

The dilation that takes place under these circumstances also permits the ingress of further water, which leads to additional hydraulic jacking effects.

Sliding along bedding plains on their own is understood to be rare but does take place in conjunction with movement on the fracture planes, as well as due to the removal of toe support brought about by wave action at the base of cliffs, together with cyclic variations in water content.

2      As will be discussed in more detail below, any potential “erosion, evulsion, alluvion, falling debris,  subsidence, or  slippage” is  also  specified in  s 44A(2)(a) of  the  Local  Government Official Information and Meetings Act 1987 as a “special feature” which a territorial authority is required to identify on any LIM relating to land that is affected by such a feature.   It is this requirement that is central to the plaintiffs’ case.

[7]      The report nonetheless concluded that the site was generally suitable for Ms McCracken’s proposed development subject to a number of requirements in relation to foundations, retaining walls, and so on.

[8]      In October 2003 Ms McCracken made an “integrated” application for a land use resource consent and for a freehold subdivision.  The following month, residents of the two neighbouring properties (112 and 2/116 Clovelly Road) wrote jointly to the Manukau City Council about the application. They said:

We understand one of these units is proposed to be located on the cliff edge. We  are  gravely  concerned  should  this  be  the  case  notwithstanding  the

existence of any geotech survey which might try to justify the proposal.

We have both lived in our properties for many years and are well aware of the erosion which has occurred on the cliff. About 10 years ago a significant slip occurred on the common boundary of numbers 114 and 116 which seriously threatened the stability of both those properties.  Remedial work, including drainage, was undertaken at the time at great expense by the then owners of 116 Clovelly Road.   We are greatly concerned about ongoing occurrence of slippage along the cliff top properties.

[9]      In  December  2003  the  Council  engaged  another  firm  of  geotechnical engineers, Beca Infrastructure Limited (Beca) to assess the resource consent application.

[10]     On 9 February 2004, Ms McCracken was granted the land use consent (with conditions), which permitted her to demolish the existing house and to build two new ones, which would become 114 and 114A. The 114A house was to be the nearer of the two to the cliff top.

[11]     In March 2004, the Council asked Beca to peer review the Geotek report that had been submitted in support of Ms McCracken’s applications.  Beca’s report was provided on 30 April 2004.  It included the recommendation that:

… the stability of the slope below the proposed Eastern dwelling be assessed in greater detail.  This assessment should include the geological mapping of the cliff face and evaluate the potential risks, the consequences of instability, the required scope of works to mitigate such risks and the residual risks that remain from each option considered.

[12]     The Beca report noted:

The GSL [Geotek] report has not addressed the basic mechanism that has caused the historical failure that is evident below the eastern part of the site. It is recommended that a more detailed geological assessment be carried out.

[13]     The Council referred the Beca report to Geotek.   Geotek then conducted further investigations and wrote a further report for Ms McCracken dated 4 June

2004.  Geotek reviewed its previous findings but confirmed its earlier conclusions that, subject to meeting certain (modified) recommendations made in the earlier report, the site was generally suitable for the proposed development.  It seems that this response from Geotek was not referred back to Beca for comment.

[14]     On  21  June  2004  an  application  for  building  consent  was  prepared  and lodged on behalf of Ms McCracken by Compass Building Certification Ltd (Compass),  a  private  building  certifier.     Compass  certified  that,  if  properly completed in accordance with the proposed plans and specifications, the building work would comply with the relevant provisions of the building code.  It seems that on this basis the building consent application was approved by the Council on 28

September 2004.

[15]     I interpolate at this point that the involvement of an independent building certifier means that the Council is effectively immune from suit in relation to the issuing of the building consent and the subsequent code compliance certificate.3

But, as I understand it, Compass did not and could not certify the matters contained in s 36 of the Building Act 1991 which (as Geotek’s first report indicated) were presumably on the table in this case.  No evidence was, however, called about any consideration by the Council of the 36 issues,  and there is certainly no s 36(2) notation on the certificate of title.

[16]     On  16  November  2004  the  Council  advised  Ms  McCracken  that  the subdivision resource consent (with conditions) had been granted. Work began on the site at around this time.

[17]     In March 2005, the then Mayor of Manukau City, Sir Barry Curtis, who was also the owner of Unit 3 at 116 Clovelly Road, applied for enforcement orders in

3      See s 50 of the Building Act 1991 and the majority decision of the Supreme Court in McNamara v Auckland City Council [2012] NZSC 34, [2012] 3 NZLR 701.

relation to the 114 development.  The respondents were named as Ms McCracken and the Manukau City Council.  That action had been prompted by cracks that had appeared in the southern side of his Unit which were thought to have been caused by the works at 114.

[18]     Sir Barry engaged the geotechnical engineering firm Riley Consultants Ltd for the purposes of that litigation.   The engineer (Mr Riley) swore an affidavit in which he noted that the end of the driveway at number 116 was sinking and moving toward the sea.  He said:

The direction of movement of the end driveway concrete slab is diagonally across the property, directly towards the steep slope below number 114. Movement  of about 20  mm has  occurred in the last six months, which coincides with excavation and removal of support on number 114.

[19]     In the course of preparing his evidence in support of Sir Barry’s application Mr  Riley  also  reviewed  the  Geotek  and  Beca  reports  to  which  I  have  already referred.  He noted that:

The conclusion of the Beca report is strongly worded, stating that “the GSL report  has  not  addressed  the  basic  mechanism  which  has  caused  the historical failure that is evident below the eastern part of the site”.

[20]     Then, he said:

I have seen no evidence that the review report recommendations have been followed up.  In my opinion the recommendations and conclusion are sound. The need for this further work is emphasised by what I have observed on the property at number 116 Clovelly Road and my inspection of the slope from the beach.

[21]     In early April 2005, Beca was again engaged by the Council to review the geotechnical design recommendations for the construction works.

[22]   On 11 May 2005 Geotek provided what was termed its “Geotechnical Completion Report” (the completion report) to Ms McCracken.   It referred to the earlier Geotek and Beca reports.  The author (Mr Simon Woodward) noted that on 29

September 2004 Geotek had undertaken a “photographic damage survey” in relation to 116 and had noted the presence of extensive cracking in the three units which appeared to be more severe closer to the foreshore and on the south-eastern side (the

side facing 118 Clovelly Rd).   He said that on the following day, following the clearance of vegetation, a significant tension crack skirting the 114/116 boundary was noted.  He said that this observation caused Geotek to notify the owners of 116 and to recommend that they engage another geotechnical consultant to carry out an appropriate assessment.

[23]     The report goes on to note that no action was taken by the owners of 116 at that point but that on 27 February 2005 an even more significant crack developed on the south-eastern side of Unit 3 at 116.  It was, no doubt, at this point that Sir Barry instructed Riley Consultants Ltd and, indeed, Mr Woodward refers to the fact that, by  the  time  of  writing  his  report,  the  firm  was  also  investigating  the  ground conditions at 116 but the full results were not yet available.  He said Geotek itself had undertaken a further photographic damage survey.  Mr Woodward then sets out in some detail the further investigations done by Geotek, although no firm conclusions are reached.

[24]     In  the  “Conclusions  and  Recommendations”  section  of  his  report  Mr Woodward  said  that  Geotek  was  satisfied  that  the  works  at  114  satisfied  the conditions of the Subdivision and Land Use Consent and the Building Consent.  He also said:

As discussed in the foregoing reporting, building development on this site has   been   carried   out   with   detailed   and   extensive   monitoring   and confirmation  of  expected ground  conditions.    However,  the  observations made are limited to the area of the works only.   Therefore, there remains, some residual possibility that future instability could occur beyond the extent of these works, at which time, immediate and appropriate Professional Geotechnical advice should be obtained.

In this regard, we also highlight the presence of dish shaped erosion feature at the foreshore, which will continue to be the subject of ongoing wave attack and erosion. As we understand that any riparian rights previously held under the prior title have been surrendered to Council, it obviously becomes difficult for the owner of Unit 2 to be proactive in armouring/protecting this erosion feature.  Notwithstanding that difficulty, we consider that all future owners of Unit 2 should actively monitor the condition and extent of that zone, and where or when appropriate, seek to have it stabilized.  Failure to do so, could remove support to the slopes above, in the longer term.

(emphasis added)

[25]     On the same day, a draft investigation report was also provided by Beca to Brookfields, the Council’s legal advisers.  The draft report (which was written by Mr Wayne Pooley and reviewed by Dr Do Van Toan) began by noting the legal proceedings initiated by Sir Barry in relation to the cracking that had occurred on the exterior of 3/116 Clovelly Rd.   Beca’s terms of reference were then set out in the draft report as follows:

(a)       Review Geotek Services Limited response to our review of their report carried out in April 2004.

(b)       Advise on the adequacy of further investigations being carried out in

April 2005 by Riley Consultants.

(c)       Comment on whether the property at 116 is stable and if not advise on what measure should be undertaken to protect the building from further damage.

[26]     In relation to 116, Mr Pooley said:

Bedding planes in the underlying bedrock appear to dip along the coastal inland.  So based on these bedding orientations above, the risk of losses in number 116 would appear to be moderate to low.  However this promontory is also the junction between two zones of very different bedding dips and may be sheared or disturbed.   Therefore the possibility exists that  deep seated movements could be taking place beneath the site.

[27]     The report went on:

The tension cracks that have been observed on the 114 and 116 properties would be indicative of sloped soil creep in the residual soils and evidence of the marginal state of stability.

[28]     As a result of this report, on 13 May 2005 the Manukau City Council issued a

Notice to Fix to Ms McCracken.  The Notice to Fix required (inter alia) that within

14  days  she was  to  carry out  sufficient  geotechnical  investigation  to  verify the geological model below 114A and

…  to  demonstrate  that  the  foundation  piles  supporting  House  2  have sufficient depth to be founded below the potential of any slip plain dipping out to sea, taking into account future erosion at sea level.

[29]     Ms  McCracken’s  lawyer,  Mr  Kit  Littlejohn,  responded  immediately  by querying whether the Council had “reasonable grounds” upon which to issue the notice  and  seeking  copies  of  Beca’s  recommendations.     Formal  steps  were

subsequently taken to challenge the Notice to Fix under s 178 of the Building Act

2004.

[30]     A further iteration of the draft Beca report was dated 25 May 2005.  In it, the author stated:

Because the bedding orientation beneath 114 is obscured, the actual dip of the bedding beneath the house platform is not observable.  There are three possible scenarios:

1.        The bedding exposed beneath 116 Clovelly Road extends beneath

114 Clovelly Road;

2.        Bedding exposed beneath 112 Clovelly Road extends beneath 114

Clovelly Road;

3.        Bedding has folded or faulted at a different orientation.

On balance, considering the extent of instability inherent in the evidence of past failure and tension scarp that extended below house 2 foot print scenario

2 or 3 is considered most likely.  However, as each of the different scenarios would  require  a  different  foundation  design  solution  for  114,  it  is

recommended that the actual orientation of bedding be confirmed by careful logging of either a series of three cored and carefully logged investigation

machine bores to allow identification of bedding dip angles and triangulation

of the bedding plain’s orientation or a large diameter observation shaft.

[31]     The report concluded that based on Beca’s work to date, the geological model upon which the Geotek report was based did not reflect the features observed on site. Mr Pooley said that, in turn, that conclusion put into doubt the adequacy of the house stabilisation measures (the piles).  He said substantial further work would likely be necessary   to   secure   the   land   below   114A  or,   alternatively,   more   detailed investigations were required to prove that the piles had been extended sufficiently into stable rock to resist further reactivation of the old slip.

[32]     On 1 August 2005 Mr Littlejohn wrote again to Brookfields about the Notice to Fix. The letter suggested that the Council was stuck somewhere between the devil and the deep blue Hauraki Gulf because (Mr Littlejohn said):

(a)      if the outcome of the Beca review confirmed that additional work was required to ensure compliance with the building code, then Ms McCracken would hold the Council liable for the additional costs of

those works, on the basis that the Council’s issue of the building consent must necessarily either have been in breach of s 34 of the Building Act 1991 or ultra vires, and Ms McCracken had relied on that consent to progress building works at some considerable cost; or

(b)if  the  outcome  of  the  Beca  review  was  that  the  114A works  did comply with the building code then Ms McCracken would hold the Council liable for the costs of the additional investigatory work on the basis that the Council had no reasonable grounds upon which to issue the Notice to Fix.

[33]     Attempts were then made to do the further investigatory work recommended by Beca and, in particular, to confirm the orientation of the bedding by drilling a series of cored and logged investigation machine bores down near the edge of the cliff at 114A.   As things transpired, however, there were difficulties getting the drilling rig that far down the driveway.   Geotek instead proposed to drill a shaft closer to the road.

[34]     On  21  September  2005  Mr  Pooley  from  Beca  advised  Council  that  the inability to bore nearer the cliff edge heightened the risk that the results would not reveal the cause of past instability but that he thought that the proposed position was “marginally OK”.  He concluded:

Unless [Geotek] carry out further investigation work of some nature to give us a plausible explanation of site stability that explains the past instability, then our previous advice to Council stands.

[35]     After completing its further investigatory work (drilling the bore) Geotek confirmed its earlier opinion that the bedding plain under the 114A property dipped towards the road, rather than towards the sea, as Beca had surmised.  On 14 October

2005 Beca again noted that Geotek had still not “analysed for the mechanism that explains  the  past  cliff  failure”.     Beca  nonetheless  advised  that  if  Geotek’s conclusions about the results of further investigatory works were correct, then it was agreed that the piles were adequately embedded.

[36]     On 20 October 2005 Brookfields (for the Council) wrote a letter to Beca/Dr

Toan stating:

The Council seeks clarification in respect of your comments regarding the stability of house 2:

1.The Council retains a residual concern because of the qualification to your advice in paragraph 1 of your letter of 14 October 2005.

2.The Council’s concern is that Geotek Services Limited believe that the further investigations have established with a necessary degree of certainty that instead of bisecting the site (114) at an angle, the faulting is parallel with the north west boundary of the site.  Instead of the bedding plane sloping towards the sea, it is, in fact, sloping back from the sea (as is the situation with 116 Clovelly Road).  In that regard it is noted that Geotek Services Limited consider that the bedding plane slopes away from the sea at an angle of 38 degrees, whereas your advice is the bedding plane slopes towards the sea at an angle of 20 degrees to 24 degrees.

3.Notwithstanding, the Council acknowledges that no evidence has been supplied to explain the slope failure that has historically occurred to the north east boundary towards the sea between 116 and

114.

4.For  this  reason,  the  Council  is  concerned  that  Geotek  Services Limited have not analysed the mechanism for past cliff failure because this could be significant.   However, your letter does not seem to express concern about this.

…

6.Recognising  the  fact  that  your  opinion  is  qualified,  the  Council considers that it is necessary to clarify the reasons for your reservations before expressing satisfaction with Geotek Services Limited’s position and accepting that no further geotechnical work is required.

[37]     On 25 October 2005 Dr Toan sent Brookfields a draft letter in which he outlined Beca’s historic areas of concern and reiterated the point about the absence of investigation by Geotek into previous cliff failures.  As regards the debate about the direction of the fault he concluded:

On  the  above  [sic]  we  concur  [with  Geotek]  that  loss  of  the  House  2 platform including the piles would be unlikely.  However we note that some movement of the pile and anchors would take place should failure plaintiff the slope seaward of the house platform occur.

[38]     On 26 October 2005 Mr Pooley emailed the Council in response to further queries it had raised in relation to the draft letter, in particular to the passage just quoted.  Mr Pooley said:

Our further comment is as follows:

Risk of failure of the slope below the house has been somewhat reduced by the addition of the piles and some unloading effect from the basement excavation, however, other factors that will increase the future risk of failure are:

·Wet weather; especially rain in late winter or a prolonged rain storm from the north east.

·    Manmade leakages, such as excessive watering or faulty drainage.

·    Loss of vegetation.

·    Increase in risk with time as tow erosion continues.

Our estimate of risk is an opinion based on experience, but we believe that the  risk  would  be  in  the  order  of  50%  over  the  design  lifetime  of  the structure (eg 50 years), increasing as toe erosion increases and probably to

80% once losses below house 2 occurred.

If the slope below the house slipped causing reduced support to the seaward piles, the movement to the piles and the house above would likely be in the order of 30 to 50 mm with associated cracking in the house probably taking place somewhere between the back of the basement and the rear of the garage.  The width in such cracking in the house would likely be in the range of hairline to millimetres.

If these paragraphs have clarified this issue, then we could include them in the letter and re-issue as a final copy unless you require such comments from [Geotek].

[39]     On 28 October 2005 another draft letter was sent to Brookfields by Beca recording the gist of Mr Pooley’s advice, but omitting the specific percentage risks of failure. The letter again referred to the fact that the mechanisms which had caused the existing slip scarp had not been identified.

[40]     At around this time, and in the context of a request by Council for a meeting, Mr  Littlejohn  (for  Ms  McCracken)  wrote  a  letter  to  the  Council  in  which  the wording of the LIM was raised.  More particularly, he said:

Ms McCracken will not agree to a LIM notation that in any way shape or form  leaves  a  ‘question  mark’ over  the  future  stability  of  the  seaward

property.  And any meeting that may be convened would be expressly premised on that basis.

[41]     On 9 November 2005 Geotek provided a further report to Ms McCracken in support of her application to have the Notice to Fix withdrawn and addressing the factors said by Mr Pooley to increase the risk of slippage below 114A.  On the issue of the likelihood of continued toe erosion Geotek’s report said:

…  the  current installation of a  stormwater  disposal system involves  the construction of a concrete outfall structure, imbedded in a natural erosion scallop cut into the steeply dipping bedrock just above mean high water level. As a part of that work, and to protect the outfall structure, that scallop is  being  filled  with  grout  and  armoured  with  mesh  reinforced  concrete, which is expected to minimise any threat to toe erosion.   Given that this lower portion of the site is expected to become esplanade reserve, but in doing  so  will  contain  private  drainage,  we  anticipate  that  it  might  be necessary for Council to provide an easement over portions of that land for access and maintenance purposes.   Given the critical importance of maintaining controlled stormwater discharges, we further perceive that it might also be prudent for some form of covenant on the unit 2 title to ensure that said maintenance is kept up.

[42]     As far as 116 was concerned, Geotek expressed the view that the promontory on the seaward side below the dwellings (which proved ultimately to be the locus of the slip in August 2008) was of significant resilience and was therefore unlikely to subside.

[43]     On  15  November  Mr  Pooley  advised  Brookfields  and  the  Council  that Geotek’s response still did not address Beca’s concerns.   This statement was somewhat at odds with the evidence given by Dr Toan at trial which was to the effect that the proposal dealing with the toe erosion issue did in fact address his key reservations.  In any event, a meeting of all the parties involved was planned in order to discuss what the Council’s lawyer described as the “geotechnical stalemate”.

[44]     That meeting occurred on 23 November 2005 and was attended by Paul Cavanagh QC (who was instructed for the Council), Council representatives, Mr Littlejohn (for Ms McCracken), Mr Woodward (Geotek) and Dr Toan (Beca).  Mr Cavanagh gave evidence at trial about what was discussed at the meeting.  He said:

It was a meeting that resolved how the LIM notation was to be arrived at for incorporation into the relevant documentation held by Manukau City and it was agreed that it would involve negotiations involving John Young, myself

and Linda Dickey of Brookfields with Dr Toan, Kit Littlejohn and Simon

Woodward for the developer…

…

So where the chronology that I read out makes reference to me approving a notation, it was on the understanding it had first been through that process and had the endorsement of Dr Toan because I was adamant we had to have Dr Toan’s complete acceptance of anything we did.

[45]     Mr Cavanagh’s file note of that meeting also notes that Mr Littlejohn raised the issue of the costs incurred by Ms McCracken as a result of the Notice to Fix and indicated that he expected some contribution from the Council.   Mr Cavanagh recorded that he made it clear to Mr Littlejohn that the Council would not accept any responsibility for those costs.  He said that, in his opinion, the Council had not acted carelessly and gave reasons for that view.  He made it clear that the Council would not resolve outstanding issues with the LIM “negotiation” until it was clear there would be no claim for costs against it.

[46]     On 29 November 2005 Dr Toan provided a further iteration of Beca’s draft report to Brookfields. The letter began by saying:

We have been commissioned to provide a peer review on the two housing units developed at 114 Clovelly Road.  During our review we raised some points of concern with the following remaining:

1.The connection of the shotcrete skin to the retaining piles along the driveway (114/116 boundary).

2.        The security of the house to foundations. (emphasis added)

[47]     In relation to the latter issue, Dr Toan repeated the view expressed earlier as to the matters which would increase the risk to the house at 114A, and concluded that in the event of slippage on the slope below:

The  part  of  the  house  on  shallow  footings  would  experience  some differential movements hence some damage to the house could occur.  This damage would likely be evidenced as cracking that would be repairable.

[48]     This draft report was copied to Mr Cavanagh who discussed it with Mr Young from Brookfields.  Mr Cavanagh expressed the view that this was “as good as we  are  going  to  get”  and  said  that,  in  relation  to  the security of the  house to

foundations,  the  report  reinforced  the  opinions  expressed  at  the  meeting  on  23

November.   Mr Cavanagh suggested that Mr Young prepare a first draft of the notation to go on the LIM and that he should send it to him (Mr Cavanagh) for comment before sending it to Mr Littlejohn.

[49]     Beca’s advice was finalised (in materially identical terms to the draft of 29

November) on 8 December 2005.  It said:

We have been commissioned to provide a peer review on the two housing units developed at 114 Clovelly Road.  During our review, we raised some points of concern with the following remaining:

…

(2)       Security of the house to foundations

The geology of this site is comprised of Waitemata group soils and rock which is the basement formation of the Auckland region.  The regional coastline is composed of steep cliffs formed of interbedded silt stone and sand stone such as can be seen below 116 Clovelly Road.   At 112 and 114 Clovelly Road, the cliff is absent and the seaside slopes showed evidence of slippages with arcuate scarps and tension cracks.  Site inspections and investigations infer that the rock bedding beneath house two is dipping back towards the road, while the bedding further down slope has been observed to be dipping out towards the sea.  This sharp change in bedding direction is likely to be delineated by a fault zone just below house two tending an approximate east west direction.  The cliff slopes have been lost in the past by failures along the bedding planes dipping out to sea, and the  remaining ground  has then  slumped  and  eroded  to  form the present profile. This mechanism means that materials seaward of the fault zone could fail in the future, removing the sloping support below the pile house platform.  The piles appear to be embedded in the rock mass that dips back towards the road and, on this basis, would not be subject to major instability as the piles and anchors would restrain the upper soils from slipping seaward.  Risk of failure of the slope below the house has been somewhat reduced by the addition of the piles and some unloading effect from the basement excavation, however, other factors will still subject the site to the future risk of failure:

·Wet weather, especially wet winters or prolonged rainstorms from the north east;

·Manmade  leakages,  such  as  excessive  watering  or  faulty drainage;

·         Loss of vegetation;

·         Increase in risk with time as toe erosion continues;

·        Seismic events.

(3)       The seaward part of house two is founded on piles embedded down into the rock while the other part is founded on shallow footings at a higher  level.    The  piles  are  in  a  neutral  lateral  loading  state  at present, however if ground is lost in front of the piles, the piles will experience lateral push from the soils behind.  This lateral loading would be expected to result in some elastic lateral movement of the piles.  The part of the house on shallow footings would experience some differential movements hence some damage to the house could occur.   This damage would likely be evidenced as cracking that would be repairable.

[50]     At that point it seems that the Council regarded the geotechnical issues in relation to the property as having been satisfactorily resolved.  Dr Toan’s evidence was that this was, indeed, his position.

The “negotiation” of the LIM wording

[51]     A first draft of the proposed notation was circulated towards the end  of

January 2006.  It read:

The dwelling is situated on a cliff top formation of Waitemata Group soils. Investigations have satisfied the Manukau City Council that there is little risk  of  significant  structural  failure  of  the  dwelling.    The  Council  has received advice, that in the unlikely event that the cliff top formations that provide support are removed, this could result in movement of the piles under the dwelling and may result in some surface cracking.  Such surface cracking would only require cosmetic repair.   Geotechnical reports have been prepared by Beca Infrastructure and Geotek Services Limited.   The geotechnical reports are available for inspection.

[52]     A variant of this was then proposed by Mr Littlejohn, who also advised that:

In consideration for my client’s indication of not pursuing any further legal proceedings against the Council, the Council will co-operate as to content of a notation to be placed on this particular property.

[53]     Mr Littlejohn’s version read:

The site is elevated coastal land comprised of Waitemata Series ground. After substantial assessment the Manukau City Council is satisfied that the deep piling and retention work installed on the site has secured the building platform, so as to avoid any significant structural failure of the dwelling. However the Council has been advised that in the unlikely event of slippage on  the  slopes  below  the  retention  works,  then  some  minor  stressing movement in the foundations could occur which might cause cosmetic damage, albeit repairable, to the fixtures in the dwelling.  Notwithstanding

the minor nature of such cosmetic damage, in the event of such down slope movement,  expert  geotechnical  advice  should  be  obtained.     Persons interested in the property are advised to refer to the several geotechnical engineering assessments included in the full property files.

[54]     On 31 January 2006 Beca wrote to Brookfields commenting on the proposed notation.  The letter (which was written by Mr Pooley) stated that Beca had reviewed both drafts and considered that, subject to some minor proposed amendments, Mr Littlejohn’s was preferred.  Beca’s proposed revision principally involved simply the substitution of the words “surface cracking in” for the words “cosmetic damage to”.

[55]     There were yet further iterations of the draft, culminating in a version in which the “advice” that persons interested in the property obtain the geotechnical reports was removed, as was the reference to the Council being “satisfied” as to the security of the building platform. As well, the reference to the existence of “several” geotechnical reports was modified so that only the final two Beca and Geotek reports were mentioned.

[56]     On receipt of that draft Mr Pooley sent an email in which he took issue with that change, noting that there had been “several engineering parties involved with geotechnical aspects of 114 Clovelly Road such as Riley Consultants, John Syme, Peter Goldsmith”.  He said that his preference was that the final line read:

Persons interested in the property are advised to refer to the several engineering assessments included in the full property file.

[57]     It seems that, for whatever reason, that recommendation was not adopted. The final notation was signed off by both Mr Cavanagh QC and Mr Littlejohn.  It read:

The site is situated on a cliff top formation comprised of Waitemata series ground.   Deep piling and retention work has been installed on the site to secure the building platform, so as to avoid any significant structural failing of the dwelling. The geotechnical reports referred to below address the work undertaken.   However, the council has been advised that in the unlikely event of slippage of the slopes below the retention works, then some minor stressing movement in the foundations could occur.  This might cause some surface cracking in  the dwelling,  albeit repairable.   Notwithstanding the minor nature of such surface cracking, in the event of such down slope movement, expert geotechnical advice should be obtained.   Geotechnical reports prepared by Geotek Services Limited (…dated 17 February 2006)

and  Beca  Infrastructure  (…  dated  8  December  2005)  are  available  for

inspection.

[58]     Although there was no evidence of written approval of this notation by Dr Toan, he said in evidence before me that from his perspective, this notation was an accurate reflection of the geotechnical position as it was then understood to be.

[59]     The notice to fix was withdrawn.  A final code compliance certificate for the works was issued by Council on 17 August 2006.

[60]     Later in 2006 Ms McCracken put 114 and 114A on the market.  The plaintiffs saw the advertisement on 4 October 2006.  They visited 114A and Ms McCracken’s real estate agent gave them a copy of a “geotechnical completion report” that had been prepared by Geotek for Ms McCracken in May 2005 (see [22] and following above).   The plaintiffs say they read the report and were reassured that extensive geotechnical analysis had been done on the site.  Ms Tan (who is herself a roading engineer) also said that she rang the author of the report, Simon Woodward, who told her that while there might be problems with other houses in Clovelly Rd the one at

114A would be the last one to “fall off the cliff” because of all the work that had been done to secure it.

[61]     On 25 October 2006 the plaintiffs entered into a sale and purchase agreement for 114A.   The sale and purchase agreement was conditional on the plaintiffs obtaining, and being satisfied by, a LIM from the Council.

[62]     On 30 October 2006 the Council provided the LIM to the plaintiffs’ solicitor.

The letter accompanying it stated:

This land information memorandum has been prepared for the purposes of s 44A of the Local Government Official Information and Meetings Act 1987, and contains all the information known to the Manukau City Council to be relevant to the land as described in ss 2.  It is based on a search of Council records only and there may be other information relating to the land which is unknown to the Council.  The records may not show illegal or unauthorised building works on the property.

The Council has not undertaken any inspection of the land or any building on it for the purpose of preparing this LIM.   The applicant is solely responsible for ensuring that the land is suitable for a particular purpose. Please consult the Council if you have any questions.

…   Council   will,   upon   request,   provide   additional   information   and inspections on the above property.  There will generally be an additional fee payable, based on the amount of time required to provide the requested information.

[63] Section 4 of the LIM is entitled “Land Information Register Report” and contains three notations. It is the third notation (reproduced at [57] above) that is critical for present purposes.

[64]     The LIM also advised that a code compliance certificate had not yet been issued for a new storm water drain and that the resource consent for the development had not yet been complied with.  The plaintiffs’ solicitor queried this and the Council signed off on both these matters on 3 November 2006.

[65]     It seems that the plaintiffs did not specifically consult with their solicitor about the (now) critical notation on the LIM and nor did she advise them on it.  The plaintiffs’ evidence was that they themselves read the document and, based on the “reassurance” it contained, instructed their solicitor to advise Ms McCracken that the LIM condition was satisfied.  They went unconditional on 22 November 2006.  Title was transferred about three weeks later.

[66]     Some 18 months later, on 31 August 2008, following heavy rain, a significant landslip occurred underneath the bluff of 116.  The 116 land moved north-east across the front of 114A, damaging the house.  The south eastern pile, which (it is accepted) had been negligently anchored, failed.

[67]     After  continuing  land  movements  during  2009,  and  on  the  basis  of professional advice, the house at 114A was later demolished down to the foundation/slab level.

The geotechnical experts’ evidence

[68]     As a result of a pre-trial conference between the various geotechnical expert witnesses, agreement was reached on a number of important matters.  The experts were relevantly ad idem that:

(a)      the causes of the 2008 slip were deep-seated defects and weakness below  the  promontory  rock  located  on  the  seaward  side  of  116

Clovelly Rd.   These defects and weakness extended (probably at a shallower  depth)  below  114A;  but  to  what  extent  is  presently unknown.   The trigger for the slip was excessive inundation by rainwater;

(b)from the information available to the Council at the time the LIM was issued (30 October 2006) it was not in a position to predict the deep seated failure at 116 and/or the cause of the slip;

(c)      the possibility of such a slip/deep seated failure was not identified in the Geotek completion report or the Geotek and Beca reports referred to on the LIM;

(d)the damage to the plaintiffs’ house was not (therefore) attributable to the specific matters identified in the Geotek completion report, or the Geotek and Beca reports referred to in the LIM;

(e)      the   reinforcing   in   the   southern-most   pile   was   not   adequately constructed but that inadequate construction, and its failure at the time of the slip, was only a minor cause (at best) of the damage to the house;

(f)      the  broken  pile  could  have  been  repaired  and  provided  ongoing support for the house at 114A but significantly more remedial work would also be required to render the house structurally sound;

(g)the work needed to repair the pile and the cost of doing so is unknown as   those   matters   would   be   dependent   on   further   structural investigation, design and permitting;

(h)had the plaintiffs sought advice at the time of purchase from a geotechnical engineer who was aware of the LIM notation and had

copies of the Geotek and Beca reports the engineer would, in all likelihood, have advised them about the instabilities along Clovelly Road and noted that the house was built on tied-back piles;

(i)the causes of the historic cliff failures in the immediate vicinity of 114 were sea level erosion, convoluted bedding, seaward dipping bedding planes, slumping of the residual soil mantle and ground water;

(j)from the information available to the Council at the time the LIM was issued (namely the historic instability and the matters referred to at (i) above) the Council was on notice of the risk of future instability of the

114 land or in the immediate vicinity of it; and

(k)the wording on the LIM was unclear and obtuse in relation to these matters.  There was a disconnect between the general land instability risk and the risk expressed in LIM.

The plaintiffs’ claim

[69] As I have said, the plaintiffs now sue the Council in negligence. In essence they say that the notation on the LIM (set out at [57] above) was misleading and gave them false assurance as to the stability of 114A. More particularly, they plead that:

(a)      the advice received from Beca put the Council on notice of the risk of instability on 114A and the surrounding area but the Council only partially disclosed that advice and materially misstated aspects of it, giving the plaintiffs an inaccurate impression;

(b)the Council knew or ought to have known about these instability issues and should have provided “adequate” as opposed to “partial” information about these to the plaintiffs;

(c)       the Council misstated/understated the potential risk of slippage and

the “likely characteristics of any resulting damage”;

(d)the Council materially misdirected the plaintiffs by referring to only two geotechnical reports in the LIM, as those reports did not reference “all material and outstanding issues and risks” relating to the property and its surrounds; and

(e)      the Council materially misdirected the plaintiffs and misstated the position by “in effect directing” that geotechnical expertise should be sought only in the event of slippage.

[70]     The plaintiffs then plead that they reasonably relied on the LIM and that doing so caused them loss. The relevant causation pleading is as follows:

29.      But for the Council’s breach of duty these losses would not have

been suffered as:

29.1     the  plaintiffs  would  not  have  confirmed  purchase  of  the property on an unconditional basis had the risk of instability of the property been properly disclosed; or

29.2     alternatively the plaintiffs would have taken steps to mitigate potential losses prior to settling purchase of the property on an unconditional basis

Particulars

29.2.1  The plaintiffs would have been put on enquiry by a full disclosure by Council of the true position and could have then obtained their own expert geotechnical advice as to the stability of the land, the likelihood of any slip or subsidence occurring in the vicinity of the property and the likely extent of any damage to the property if a slip or subsidence was to occur.

29.2.2  The plaintiffs would have sought a reduction in the sale and purchase price for the Property to mitigate potential losses in the event that a slip or subsidence was to occur, for example by requiring additional site works to stabilise the land

[71]     The losses for which damages are claimed are as follows:

(a)      the $1,240,000 purchase price of the house and land, less the post- demolition residual value of $25,000; and

(b)      consequential losses as follows:

(i)       $176,516.38 demolition and removal costs;

(ii)      alternative accommodation costs of $30,328.28;

(iii)$88,302.80  paid  to  Tonkin  &  Taylor  for  monitoring  and compliance; and

(iv)     legal fees for work associated with the demolition.

[72]     There is an alternative claim for breach of statutory duty but, in my view, it adds nothing to the claim in negligence and I do not propose to consider it further. In Vining Realty Group Ltd v Moorhouse (also a negligence case where a breach of s 44A was pleaded as a separate cause of action) William Young P said:4

...The second cause of action (breach of statutory duty) is problematic. There is nothing in the statutory context to suggest an absolute and indefeasible duty to provide information. Such a duty is seldom imposed except where personal safety is involved. Further, if such a duty had been intended, we would have expected its metes and bounds to have been clearly defined along with a detailed specification of the consequences. Indeed at trial, counsel for AJVL maintained that the statutory duty relied on was merely “a statutory duty to take care”.   On this basis, the second cause of action is simply the first cause of action with its fingers crossed. It does not warrant separate consideration.

The Council’s defences

[73]     In denying the claim the Council avers that:

(a)      it relied on professional geotechnical and legal advisors in preparing and drafting the LIM notation, which adequately summarised the position at the time;

(b)the LIM expressly states that the recipient is solely responsible for ensuring that the land is suitable for a particular purpose;

4      Vining Realty Group Ltd v Moorhouse [2010] NZCA 104 (2011) 11 NZCPR 879 at [70]. On appeal to the Supreme Court the case became known as Altimarloch.

(c)      following receipt of the LIM the plaintiffs did not (until after the slip had occurred) request a copy of the geotechnical reports referenced in it;

(d)the plaintiffs could have requested a copy of the Council file which contained all the geotechnical reports; and

(e)      the house did not need to be demolished and the broken pile could have been repaired.

[74]     The Council also pleads (affirmatively or otherwise):

(a)      contributory negligence by the plaintiffs themselves in failing either to request  copies  of  the  geotechnical  reports  from  the Council  or to obtain their own geotechnical advice;

(b)that, in the event the Council was negligent, that negligence did not cause the relevant loss (or the loss was too remote).  More particularly there  were  a  number  of  intervening  causes  of  the  plaintiffs’ loss, namely:

(i)inadequate steel reinforcing of the deck pile which was not properly anchored; and/or

(ii)the negligence of the plaintiffs’ lawyer in failing adequately to advise them to obtain the geotechnical reports or to obtain their own geotechnical advice; and/or

(iii)     the slip itself;

(c)      that in light of the knowledge the plaintiffs had or had access to at the time of purchase they either did not rely on the LIM or they did not do so reasonably;

(d)      the claim is statute barred; and

(e)      the Council was required by the terms of the Building Act 1991 to accept the building consent and/or code compliance certificate issued by a building certifier and a producer statement by a registered engineer.

[75]     These last two defences were not, however, pursued at trial and I do not consider them further. And although not formally conceded by the Council it is clear to me that a defence of contributory negligence is otiose in a negligent misstatement case.   That is because in order to succeed the plaintiff must establish that he reasonably relied on the impugned statement.   If he does so then that necessarily precludes (contributory) negligence on his part.  The issues raised by the Council in relation to this aspect of its defence are therefore appropriately dealt with as part of the reliance inquiry.

Road map for the remainder of this judgment

[76]     In my view the following issues arise for determination:

(a)      Did the Council owe a duty of care to the plaintiffs in relation to the advice/information contained on the LIM?

(b)What standard of care was required of the Council (what information in all the circumstances should a normally competent Council have included on the 114A LIM)?

(c)      Did  the  notation  included  on  the  114A  LIM  meet  the  standard required?

(d)      Did the plaintiffs rely on the information contained in the LIM? (e)    Was that reliance reasonable?

(f)      Have the plaintiffs established (on the balance of probabilities) that they would have acted in a way that would have avoided the loss, had the LIM not been negligent?

(g)Did the losses suffered by the plaintiffs fall within the scope of the duty owed to them by the Council?

(h)      Were there any material intervening causes of the plaintiffs’ losses?

(i)       How should the plaintiffs’ losses be quantified?

[77]     These questions will form the basis for the structure of the remainder of this judgment.

Duty of care

[78]    The pleaded duty of care owed by a territorial authority to prospective purchasers  in  relation  to  the  issue  of  a  LIM  is  founded  in  s 44A of  the  Local Government Official Information and Meetings Act 1987 (LGOIMA), which relevantly provides:

44A      Land Information Memorandum

(1)       A person may apply to a territorial authority for the issue, within 10 working days, of a land information memorandum in relation to matters affecting any land in the district of the authority.

(2)       The matters which shall be included in that memorandum are -

(a)      information identifying each (if any) special feature or characteristic of the land concerned, including but not limited to potential erosion, avulsion, falling debris, subsidence, slippage, alluvion,  or  inundation,  or  likely  presence  of  hazardous contaminants, being a feature or characteristic that—

(i)        is known to the territorial authority; but

(ii)      is not apparent from the district scheme under the Town  and  Country  Planning  Act  1977  or  a  district  plan under the Resource Management Act 1991:

(b)       information on private and public stormwater and sewerage drains as shown in the territorial authority's records:

(ba)      any  information  that  has  been  notified  to  the  territorial authority by a drinking-water supplier under section 69ZH of the Health Act 1956:

(bb)      information on -

(i)        whether the land is supplied with drinking water and if so, whether the supplier is the owner of the land or a networked supplier:

(ii)      if the land is supplied with drinking water by a networked supplier, any conditions that are applicable to that supply:

(iii)      if the land is supplied with water by the owner of the land, any information the territorial authority has about the supply:

(c)        information relating to any rates owing in relation to the land:

(d)        information  concerning  any  consent,  certificate,  notice, order, or requisition affecting the land or any building on the land previously issued by the territorial authority (whether under the Building Act 1991, the Building Act 2004, or any other Act):

(da) the information required to be provided to a territorial authority under section 362T(2) of the Building Act 2004:

(e)       information concerning any certificate issued by a building certifier pursuant to the Building Act 1991 or the Building Act 2004:

(ea)      information notified to the territorial authority under section

124 of the Weathertight Homes Resolution Services Act 2006:

(f)       information relating to the use to which that land may be put and conditions attached to that use:

(g)       information  which,  in  terms  of  any  other Act,  has  been notified to the territorial authority by any statutory organisation having the power to classify land or buildings for any purpose:

(h)       any information which has been notified to the territorial authority by any network utility operator pursuant to the Building Act 1991 or the Building Act 2004.

(3)       In addition to the information provided for under subsection (2) of this section, a territorial authority may provide in the memorandum such other information concerning the land as the authority considers, at its discretion, to be relevant.

…

(6)       Notwithstanding anything to the contrary in this Act, there shall be no grounds for the territorial authority to withhold information specified in terms of subsection (2) of this section or to refuse to provide a land information memorandum where this has been requested.

[79]     It was not disputed that the obligations imposed by s 44A(2) give rise to a tortious duty of care.   As Tipping J said in Marlborough District Council v Altimarloch Joint Venture Ltd:5

… both proximity and policy considerations favour the imposition of a duty of care on territorial authorities so that if they negligently give erroneous information in a LIM and the recipient relies on that information to its detriment, they will be liable for the loss their negligence has caused, save possibly when the information is given under subs (3).

[80]     The distinction drawn here between the duty arising under s 44A(2) and that which may (or may not) arise under s 44A(3) is possibly important.  That is because in the Sunset Terraces case the Supreme Court said:6

[80]      The legal background pertaining to LIMs is that under s 44A of the Local Government Official Information and Meetings Act 1987, councils must issue, on request, a Land Information Memorandum about the property concerned. The memorandum is designed to advise of “matters affecting any land [in the Council’s area]”. The section specifies (in subs (2)) matters which must be included in the memorandum and then says (in subs (3)) that a Council may provide in the memorandum “such other information concerning the land as the [Council] considers, at its discretion, to be relevant”.

[81]     Relevance must include what is relevant to an intending purchaser and, in context, land must include buildings on the land. Hence s 44A authorises councils to include in a LIM such information as the council has concerning the presence or possible presence of leaky buildings on the land. This is effectively the only way councils can warn intending purchasers and thereby seek to absolve themselves from any earlier negligence on their part. By means of a LIM the council is metaphorically saying to potential purchasers who choose to look that they should be careful, because there is (or may be) a snail in this bottle. …

[81]     As a matter of purposive interpretation, it is not difficult to see why the word “land” in s 44A(3) should include buildings upon the land.  But the need for such an inclusive  interpretation  is  less  obvious  in  relation  to  the  word  as  it  appears  in s 44A(2)(a)  and,  for  myself,  I would  not  regard  the  above  dictum  from  Sunset

Terraces as necessarily mandating that.   More particularly, the “special features”

5      Marlborough District Council v Altimarloch Joint Venture Ltd [2012] 2 NZSC 11, [2012] 2

NZLR 726 at [98].

6      North Shore City Council v Body Corporate 188529 (Sunset Terraces) [2010] NZSC 158, [2011]

2 NZLR 289.

listed in s 44A(2)(a) all appear to me to relate directly to the condition of the land itself; they are not readily transposable into a “building” context”.7

[82]     The  relevance  of  this  distinction  is  that  a  considerable  portion  of  the information contained on the 114A LIM related to the building rather than to the land itself.  It seems to me to be at least arguable that that information is properly to be regarded as having been provided pursuant to s 44A(3).  If that is so, the existence or not of a relevant duty of care (in relation to the provision of that information) appears to have been left open by the Supreme Court.

[83]     That said, however, Mr Heaney did not seek to mount the Council’s defence on that basis and, of course, even if some of the information was disclosed under s 44A(3),  a  question  would  remain  about  whether  the  Council  had  met  its (mandatory)   s 44A(2)(a)   obligation.      Nonetheless   the   distinction   between information required to be provided under s 44A(2)(a) and information that may be provided under s 44A(3) assumes some importance later in this judgment.

[84]     As far as s 44A(2) is concerned, I was referred to two High Court decisions in which the ambit of the disclosure required (and the duty imposed) by that subsection has been discussed.

[85]     The first is Resource Planning and Management Ltd v Marlborough District Council in which Ellen France J (as she then was) proceeded on the basis that s 44A could give rise to a duty of care and said:8

[161]     In terms of s 44A(2)(a), the information to be disclosed is that which "identifies" any special feature or characteristic of the land. That information must be known to the authority but not be apparent from the district plan. "Identify" in this context has its dictionary meaning of "establishing who or what a given … thing is" (New Shorter Oxford English Dictionary, 5th ed).

[162]    Then, in relation to s 44A(2)(f), the authority is required to disclose information relating to the use to which that land may be put and conditions attached.  The  local  authority  has  a  discretion  to  include  any  other information considered pertinent.

7      Nor do the other paragraphs of s 44A(2) suggest   that “land” includes buildings.   In fact a

number of them expressly refer to both.

8      Resource Planning and Management Ltd v Marlborough District Council HC Blenheim CIV

2001-485-814, 10 October 2003.

[163]    It  is  relevant that the  obligation on the Council under s  44A is different from that for other requests for information under LGOIMA. That probably reflects the fact that s 44A was introduced as part of the package of building law reforms in the Building Bill. The Explanatory Note to the Bill said of what became s 44A, that the LIM,

"will contain information held by a territorial authority in relation to a particular area of land, for instance whether the land is subject to subsidence or whether there are orders or consents affecting the land,

.." (p vii).

…

[165]    In addition to the requirement that the information is such as to "identify", the obligation is expressed in terms of information. The contrast is  with  the  requirement,  for  example,  in  s  10  of  LGOIMA  to  provide "official information" upon request. "Official information" is defined in s

2(1) of the Act as "any" information held by a local authority.

[166]    Obviously, the obligation in s 44A is to be interpreted in light of the purposes   of   the   Act   with   its   focus   on   improving   and   promoting accountability (see the Long Title and s 4 of LGOIMA). However, on its face, the disclosure is a limited one in the sense that the authority is not required to provide all of the information on its files. The width in terms of s 44A(2)(a) comes from the fact that the information must not be apparent from the district scheme. This means some level of inquiry is to be undertaken. However, where the requirement is not simply one of disclosing all information on the files, there has to be some cut off point. Is what was included here sufficient or did the other matters raised by the plaintiffs have to be disclosed?

[167]    The  process  of  preparation  of  the  LIM  is  relevant  here.  In  that respect, Mr Olliver gave evidence that the LIM was prepared in the Resource Management and Registry Department. Christine Ford, who signed the LIM on behalf of Mr Olliver, would assemble the LIM. The usual process would be for the LIM to go to each department within the Council depending on what information was required.  For example, information about rates would be sought from the Finance Department. Essentially, the exercise undertaken was one of compiling the information from that on the Council file.

[168]    That process seems appropriate. In this case, the important factor is that the plaintiffs would have been properly and fairly informed about the relevant  features  or  characteristics  of  the  land  and  its  uses  from  the disclosure they received.

[86]     In that case Ellen France J held that there was no requirement to disclose a view  held  by  a  Council  employee  that  had  not  been  formally  adopted  by  the

Council.9

9 At [171].

[87]   Secondly, in Weir v Kapiti Coast District Council (which involved an application for judicial review, not a claim in negligence) the District Council had commissioned reports to undertake a coastal hazard erosion assessment (the Shand reports).10   The Council then placed hazard prediction lines based on the findings in the reports on its cadastral maps.  Various properties were implicated by the lines, which (for obvious reasons) potentially had an effect on land value.   The Council

was of the view that the existence of the reports/lines was information that was required to be disclosed in any LIM issued in relation to the affected properties.

[88]     In their application for review the landowners’ principal argument was that the  information  did  not  have  to  be  disclosed  because  it  was  too  contingent; disclosure was required only in relation to matters that could be said to be “known” by the Council with a reasonable degree of certainty.  Joseph Williams J rejected that submission on the basis of the wording of 44A.11    He therefore concluded that the Shand Reports contained information that related to “potential” erosion and that such information:

(a)      was a special feature or characteristic of the applicants’ land; and

(b)      was known to the Council and not evident on the District Plan. [89]   He went on to say:

[66]     Some reference to that information must therefore be included on LIMs in relation to affected titles if there is to be compliance with s 44A(6) [sic]. For what it is worth, these findings seem to be consistent with the spirit and intendment of the purposes and principles of the Act set out in ss 4 and

5.

[67]      But that is not an end to the matter. There is still the question of how that information should be rendered on the actual LIM. That information is required to be included in the LIM by the introductory words of subsection (2), but this can only be by way of reference and summary. Obviously LIMs cannot and do not include both of the reports in their entirety. Rather, they contain, as I have said, brief summaries of those reports and conclusions together with the coastal erosion hazard prediction lines.

10     Weir v Kapiti Coast District Council [2013] NZHC 3522; (2013) 15 NZCPR 28.

11 At [64].

[68]      Council has a very broad discretion as to how it represents the Shand information on its LIM. The information on the LIM must of course be accurate, state the position fairly, and it must not mislead.

[90]     I respectfully agree with the thrust of both these decisions.   In short, the information  required  to  be  disclosed  by  s 44A(2)(a)  must  identify  the  relevant special feature or characteristic of the land and must, within the parameters of what is actually known by the Council, be accurate and not misleading.   Provided the disclosure meets the basic standards just mentioned, the Council need not include all the information about the subject property that is in the Council’s possession and it has a wide discretion as to how the information is disclosed.

[91]     To these comments I would add that it does not seem to me that it is the function of s 44A(2)(a) disclosure to be advisory, in the sense of suggesting that potential purchasers take a particular course of action, such as obtaining further advice, or not to purchase.   Nor does it seem necessary (or wise) to state that the Council is “satisfied” as to any particular matter (and presumably in most cases the relevant resource consent, building consent or code compliance certificate would speak separately for themselves in that respect).

[92]     Rather, s 44A(2)(a) is centrally concerned with putting the recipient of a LIM on notice of particular facts that are within the Council’s knowledge (the existence of any special characteristic of the land concerned) and which might affect the physical state, and potentially the value, of the land.  The purpose is not to warrant that the land is good or safe, but simply to provide information on the basis of which the recipient can decide for him or herself whether to make further inquiries, obtain expert advice, negotiate on price or simply walk away.  To the extent the Council has detailed information about a special feature on its file, it is not required to record all of it on the LIM.   But reference to its existence and availability should also, no doubt, be made.

[93]     Lastly, although no (potentially competing) duty is owed by the Council to the existing landowner when preparing a LIM, there remains I think a public law obligation of fairness to such persons.  Accordingly, in terms of the exercise of the Council’s discretion  as  to  how relevant  information  was  to  be disclosed  in  the

present case, I consider that it was entitled (and possibly required) to consult with Ms McCracken and to take her interests into account, provided that in doing so it did not breach the legal obligations owed to those in the position of the plaintiffs.

Standard of care and breach

[94]     While the existence of a duty of care is clear cut, I have found the next stage of the inquiry more difficult.   As indicated earlier in this judgment, two related matters now arise for consideration. They are:

(a)       what information would a normally competent Council have included on the 114A LIM in all the circumstance of this case?

(b)did the notation that was in fact included on the 114A LIM fall below the required standard?

[95]     Each will be considered in turn.

What advice should have been contained on the LIM?

[96]     The starting point in terms of the standard of care appears to me to be simply that the Council was required to take reasonable care to ensure that the LIM fairly and accurately informed potential purchasers about any “special feature” of the 114A land as required by s 44A(2)(a).  In the present case, the relevant “special feature” was, indisputably, its general potential for slippage. It is the potential for slippage that is the (geological) snail in the bottle if which the Council was required to give notice on the LIM.

[97]     A statement in these  general  terms would,  I think, suffice adequately to inform potential purchasers of the general risk arising from similar land on either side of 114A.  It is self-evident that geology is no respecter of legal boundaries and, accordingly, that (provided it is clear that all the land on the cliff top shares the same special feature) such a risk exists.

[98]     Once  such  a  “special  feature”  has  been  identified,  however,  there  is  a subsequent question about the extent of what further disclosure (if any) a reasonable Council would make in light of all the information about that feature possessed by the Council.  In my view, what was required in the present case was disclosure of sufficient  information to put potential purchasers on notice of:

(a)      any  more  specific,  identifiable,  risk  posed  to  the  subject  land  by slippage that was known to the Council; and

(b)the existence of further relevant information about the risk contained on the Council files that might be of interest to a purchaser and how it could be accessed.

Did the notation included on the 114A LIM fall below the required standard?

[99]     The plaintiffs’ central submission was that the 114A LIM was in breach of

s 44A(2)(a)/the Council’s duty because:

(a)      it omitted any reference to the “unresolved 116 issues”; and

(b)the information it did contain was misleading in that it invited the inference that the only risk of slippage arose from the land below

114A, and that that risk was small and any damage to the dwelling would be minor.

[100]   For ease of reference, I set out the critical LIM wording again, as follows:

… The site is situated on a cliff top formation comprised of Waitemata series ground.   Deep piling and retention work has been installed on the site to secure the building platform, so as to avoid any significant structural failing of the dwelling. The geotechnical reports referred to below address the work undertaken.   However, the council has been advised that in the unlikely event of slippage of the slopes below the retention works, then some minor stressing movement in the foundations could occur.  This might cause some surface cracking in the [d]welling, albeit repairable.   Notwithstanding the minor nature of such surface cracking, in the event of such down slope movement, expert geotechnical advice should be obtained.   Geotechnical reports prepared by Geotek Services Limited (…dated 17 February 2006) and Beca Infrastructure (… dated 8 December 2005) are available for inspection.

[101]  For the purposes of analysis this notation can be broken down into the following propositions:

(a)      the site is situated on a cliff top formation comprised of Waitemata series ground;

(b)deep piling and retention work has been installed on the site to secure the building platform, so as to avoid any significant structural failing of the dwelling;

(c)      the two geotechnical reports to which the LIM refers address the work undertaken;

(d)the Council has been advised that in the unlikely event of slippage of the slopes below the retention works, then some minor stressing movement in the foundations could occur;

(e)       such stressing movement might cause some surface cracking in the

[d]welling, albeit repairable;

(f)      notwithstanding the minor nature of such surface cracking, in the event of such down slope movement, expert geotechnical advice should be obtained;

(g)      the geotechnical reports prepared by Geotek Services Limited (dated

17 February 2006) and Beca Infrastructure (dated 8 December 2005)

are available for inspection.

[102]   None of these statements can fairly be said to be incorrect by and of itself. Rather, the notation accurately identifies the kind of land concerned (Waitemata Series, or sedimentary) and (implicitly) a specific, potential, risk of slippage on the subject property, which is said to be “unlikely”.  As things transpired, that particular risk (the risk of slippage of the slopes below the retention works) has not eventuated; there can therefore be no real quibble with the “unlikely” assessment in that, very specific, context.

[103]   I reject any suggestion that the LIM was deficient because it specifically referred to only two of the geotechnical reports.  As the narrative above makes clear, the interaction between Geotek and Beca over the geotechnical aspects of 114A was a lengthy and highly iterative one.  The two reports mentioned in the LIM were the final results of that process and I accept Dr Toan’s evidence that the important areas of disagreement were ultimately resolved to his satisfaction.  Moreover, anyone who read the two final reports would immediately become aware that there had been previous reports and could, no doubt, ask to see them if they wished.  The essential information the Council was required to impart was that the two final geotechnical reports existed and could be accessed on request.

[104]   I also reject the contention that the LIM can reasonably be interpreted as implying that a slip on the slopes below is the “only” risk of slippage although it is certainly the only risk to which reference is made.  Equally, I reject the contention that the LIM can reasonably be interpreted as implying that it is “only” in the event of such slippage that independent geotechnical advice should be obtained.  But the wording nonetheless leaves both those issues (the existence of other risks and the need for advice) hanging.

[105]   All the experts who gave evidence at trial were agreed that the wording on the LIM was unusual and “obtuse”.  Although each had a slightly different reason for that view, the most straightforward explanation came from the plaintiffs’ expert, Mr Luxford, who simply said:

The obtuseness in the LIM is due to the word “unlikely” when we all know

that movement on cliff edges is likely.

[106]   Mr Luxford also said that the focus in the LIM on potential damage to the structure on the site rather than on the existence of the geotechnical reports about the land was, in his opinion, unusual.  That opinion is consistent with my view that:

(a)       s 44A(2)(a) is centrally concerned with the condition of the land itself rather than the buildings on it; and

(b)most of the information contained on the 114A LIM appears to be of a kind contemplated by s 44A(3) rather than s 44A(2).

[107]   Although the answer does not appear to me to be clear-cut, I have concluded, on balance, that the Council failed in its duty here.  I say that principally because the LIM does not clearly and directly refer to (and, indeed, somewhat obfuscates) the relevant special feature or characteristic of all the land along the Clovelly Rd cliff top, namely its tendency to slip.

[108]   I accept that it might be argued that the LIM does this impliedly, by way of the “Waitemata Series” description and by its reference to the measures taken to mitigate the “unlikely” but specific, risk of slippage on the slopes immediately below the dwelling.  But the reason that that risk was “unlikely” was because of the work that had been done to  stabilise  that particular piece of land.    I consider that  a reasonable Council would at least have included a statement along the lines of that contained in the Geotek Completion Report, namely that “there remains some residual possibility that future instability could occur beyond the extent of these works”.

[109]   So although, as I have said, the notation was not in itself inaccurate, it was, in my view, materially incomplete and poorly focussed (or, rather, overly focussed on the specific risk of slippage on the lower slopes).  I consider that the use in s 44A(2) of the word “identifies”, together with a purposive reading of the section as a whole requires something altogether clearer and less oblique.

[110]   In light of this finding it is strictly unnecessary to consider whether the Council’s failure to mention the ongoing “issues” with 116 and/or the historic slippages on the boundary with 114 also constituted a breach of its duty.   For completeness, however, I briefly address that question below.

[111]   At [98] above I concluded that a reasonable Council would have disclosed on the LIM any specific, identifiable, risk of slippage on the subject land that was known to it.   But while the evidence establishes that the Council did know of the nearby  historic  slips,  all  the  experts  agreed  that  the  risk  of  the  2008  slip  that

emanated from 116 Clovelly Rd could not have been predicted.   Moreover, the Council’s inquiries in relation to 116 concentrated on whether the works at 114 had adversely affected the land at 116, not vice versa.   And although Beca had, in its earlier reports expressed concern over unexplained historic slips, the correspondence shows and Dr Toan’s evidence was, that by December 2006, that concern was no longer “live”.  Accordingly, and by a narrow margin, I consider that the omission of the 116 issues does not constitute a further and separate breach of duty by the Council.

[146]   On the basis of that analysis he submitted:

Applying that principle, the question for the Court in the current case is whether the damage to 114A would still have happened even if the advice provided by Council had been true.  In other words, would the damage still have occurred if the only risk of slippage of subsidence had been the one disclosed in the LIM and had the deep piling and retention works on the site secured the building platform so as to avoid any structural failing.

The answer is clearly no.  Therefore the plaintiffs’ losses are a consequence of Council’s breach.

[147]   But I reject that submission.   The SAAMCO decision was concerned with scope of duty issues and, in particular, the distinction for causation purposes between cases  where  there  is  a  duty  to  inform  and  a  duty  to  advise.    Its  import  was summarised by the Court of Appeal in Bank of New Zealand v Guardian Trust Company Ltd where, Gault J (speaking for the plurality of four) said:19

Recent cases show a trend in favour of analysis by reference to the scope of the duty, and enquire as to the risks against which there was a duty to protect the plaintiff. In South Australia Asset Management Corporation v York Montague Ltd [1997] AC 191 the House of Lords approached in this way a case of breach of a contractual duty of care while noting that the concurrent duty in tort was of the same scope. In the speech of Lord Hoffmann, with whom the other members agreed, it was said that the real question in such a case is the kind of loss in respect of which the duty is owed. To some extent this is merely to restate the question asking what losses is it reasonable that the law should require the wrongdoer to compensate, but it is a helpful analytical approach as illustrated in the instructive treatment in Todd, The Law of Torts (2ed 1997) para 20.3.

The scope of a duty to inform, or inform correctly, has not commonly been found to extend to protect against losses arising from some independent cause   where   breach   of   the   duty   merely   creates   or   preserves   the circumstances in which that loss can be incurred. The South Australia Asset Management case concerned a negligent valuation of a property, the plaintiff

19     Bank of New Zealand v Guardian Trust Company Ltd [1999] 1 NZLR 664 (CA) at 683.

having lent money on the security of that property in reliance on that valuation. Lord Hoffman pointed out that the scope and purpose of a duty to advise or inform may be either to provide information for the purpose of enabling someone else to decide on a course of action, or to advise someone on what course of action to take. Only in the second case would the adviser be responsible and liable for all the consequences flowing from that course of action, such as the fall in the property market which affected the value of the security in that case. It was held that the valuer's duty was of the first kind, and accordingly liability extended only to the consequences of the valuation being wrong.

[148]   On occasion, therefore, the law precludes recovery for losses which may, on a “but for”, factual, causation analysis, be linked to the relevant negligence.   In SAAMCO it did so by focussing on (and limiting) the scope of the relevant duty by determining for what purpose and in what circumstances the information or advice in question was to be given.

[149]   The mountaineer example can properly be understood in that context.  There, the doctor’s purpose was to inform the patient about the health of his knee, not to advise him whether to climb the mountain.  So even although the mountaineer would not have climbed the mountain “but for” the doctors advice, the doctor’s liability is limited to the consequences of the information being wrong, not the consequences of climbing the mountain.

[150]   I  acknowledge  that  some  commentators  have  criticised  the  SAAMCO decision on the basis that the distinction between the provision or information and the provision or advice may often be a matter of sophistry rather than reality.  But the potential validity of the distinction has been recognised by the Court of Appeal not only in the passage from Bank of New Zealand v Guardian Trust Company Ltd quoted above but in its later decision in Benton v Miller & Poulgrain.20 There, the Court said at [99]:

… there is an important distinction to be drawn between a duty to provide information, and a duty to give advice. If it is the former, then liability is limited to those losses properly attributable to the information being inaccurate. On the other hand, if the duty was to advise, liability is much wider and extends to all the foreseeable consequences of reliance upon the advice.

20     Benton v Miller & Poulgrain, above n 15.

[151]   In my view this “important” distinction is both meaningful and useful in the present case.   As I have said, it seems to me that the purpose of s 44A(2) (and therefore the scope of the Council’s duty) is, quite clearly, informative rather than advisory.  More particularly, the relevant purpose of s 44A(2)(a) is to give potential purchasers notice of any special features pertaining to the land in order that they can take them into account when deciding whether to make further inquiries, to negotiate on price or (indeed) whether to purchase at all.  It is not the purpose of the provision to give advice about what course of action a potential purchaser should take in response to the existence of any such special feature and it is not its purpose either to encourage a recipient to buy the property or to warn him not to.  And it is certainly not the purpose to offer some form of warranty to purchasers in relation to losses subsequently arising as a result of acts of god or geology over which the Council has no control.

[152]   Analysed in this way it becomes clear, I think, that the losses for which the plaintiffs now claim are not within the scope of the Council’s duty and, accordingly, cannot in law be said to have been caused by the Council’s negligence.  Such losses would necessarily be limited to any economic loss to the plaintiffs flowing from the purchase of a property with an unknown defect, namely the omitted special feature. Presumably the quantum of such loss would be measured by the difference between the price paid and the true value of the land.

[153]   Conversely,  losses  flowing  from  the  physical  damage  to  the  plaintiffs’ property caused by a catastrophic unforeseen natural event subsequent to purchase are not recoverable, notwithstanding that the event constitutes the realisation of the risk associated with the relevant special feature.  That is because the breach of duty by the Council here merely created the circumstances in which those losses were incurred by the plaintiffs; the breach did not, as a matter of law, cause those losses. Or put another way, the consequences of the information contained in the notation being wrong cannot, conceivably, include the slip.

Intervening causes?

[154]   As  noted  at  [74](b)  above  the  Council  contended  that  there  were  three relevant intervening factual causes of the losses for which the plaintiffs now claim, namely:

(a)       the faulty pile;

(b)      the alleged negligence of the plaintiffs’ solicitor; and

(c)       the slip itself. [155]   I address each in turn.

The faulty pile

[156]   The causative potency of the faulty pile was not an issue that was pursued with any vigour before me.  That is because the experts could not agree about the extent to which it caused damage to the house over and above what might have been expected in the event of a slip of the kind that occurred in 2008.  For this reason, and in light of my other conclusions it is not necessary to address this aspect of the Council’s defence further.

The solicitor’s alleged negligence

[157]   As far as the alleged negligence of the plaintiffs’ solicitor is concerned, I heard competing evidence from expert conveyancing lawyers about what a prudent solicitor would have done on reading the impugned notation on the 114A LIM.  Were I required to determine the issue (which I would be reluctant to do without the joinder of the solicitor in question) I would be inclined to prefer the views expressed by Ms Keam, who was called by the Council.   Her evidence was that the unusal

wording on the LIM would have put a prudent legal adviser on inquiry.21     The

relevant exchange was as follows:

Q        You wouldn't ring the town planner, would you, or would you?

21     There seems to be no doubt that the plaintiffs’ solicitor did receive and read the LIM.

A        I would have rung the duty planner with this LIM.

QAll right, may be I’ll ask you this.  Do you, do you think that every conveyancing solicitor in Auckland if given this job would have rung the duty planner?

AI think that every prudent conveyancing solicitor when they looked at the notations on the LIM and the special features map would have been under a duty to have rung the Council to ascertain what were the nature of those notations to obtain copies of those reports and to have been able to advise their clients as to the nature of the characteristics of this property.

Q… is it your view that a prudent conveyancing lawyer is to disregard with the Council says here, is that what you say?  You don’t read it and believe it, you disregard it, you assume it’s wrong?

AUm, no, it’s not a matter of believing it is wrong, but it is a matter of saying, “Well, why is this here?” that ordinarily if there was a soil report or a geotechnical report, the notation would simply say that a geotechnical report is held and is available on request.  Here, there is wording which is somewhat strange and I believe that you’re put on enquiry because there are two reports, why are there two reports? That would suggest that there’s something odd, so I believe that this would put anyone who was experienced in looking at LIM reports on enquiry  to  investigate  the  background  as  to  why  this  unusual notation is here and why it is there.

Q        So I’ll ask it again then, so you think that the words can't be relied

on?

A        Well, which words are you saying that we should rely on?

QOkay.   “Deep piling and retention work has been installed on the site”, do you reckon that might true, can you assume that that’s true?

A        Well, in terms of -

…

what would put me on enquiry is looking at that it’s a cliff, a cliff- top formation that it’s Waitemata series ground which is sedimentary rock so that you’re concerned about that and why are there two reports there.

QOkay,  “So  as  to  avoid  any  significant  structure  or  failing  of dwelling,” you can't, what, you wouldn't believe that either?

AWell, it’s, why is this notation here that it is unusual and ordinarily there wouldn't be a notation there so I would want to know the background as to why this has been put here.  It’s as though someone came  into  a  room  wearing  a  yellow  jacket  or  a  red  flag,  it’s something that would put you on enquiry that you need to look into this in more detail.

QIf the Council had said, “This house is fine.”  You would have said, “Crikey, that’s a red flag, the Council says it’s fine, it can’t be,” is that right?

AWell it’s in terms of the geotechnical reports are not about the house they’re about the land.

QSo  if  the  words  were,  “The  house  is  fine,  and  here  are  two geotechnical reports,” you wouldn’t believe it, you’d look behind it?

AI would look at the geotechnical reports because the house could be fine but if the land’s not then it’s not fine, the property’s not fine. The property – the land has to be stable land that you need to enquire about the land upon which the house is constructed.

Q        What does retention work mean to you, doesn’t that mean retaining

the land?

AYes but when you look at the special features map and you see that there’s flags put over all of the cliff, that these works weren’t retaining all of the cliff, they’re not in relation to all of Clovelly Road.    Yet  the  retention  works  can  only  be  in  relation  to  this particular site, you can’t –

Q        Well it’s that site isn’t it that you’re buying?

A        No but you’re buying a site which is affected by adjoining sites, such

as exactly this case here.

QIf the LIM had said, “All prospective purchasers are advised to read the reports,” that would support your view wouldn’t it some more?

AWell I don’t know why those words would be required because it’s not as though people go and read LIM reports on a Sunday, it’s only people who are interested in the property and who have either picked up a LIM report at an open home or have paid $250 of their own good money to get a LIM report who are going to read it.   So whoever’s reading that LIM report is going to be interested in it.

QIs the flag any redder for you between these two LIMs, one that says, “The site and the house are fine.”   And the other one that says, “We’ve built a house, there is a disagreement amongst the geotechnical engineers about exactly what the soil conditions are underneath.”  Is the flag any redder on this side or not?

AIt is redder but it is common in LIM reports with a notation when there is a geotechnical report, just to say that there’s a geotechnical report, regardless of whether there’s a disagreement and regardless of whether there are issues.

[158]   In the event, however, I consider that it is not necessary to make a firm

negligence finding against the plaintiffs’ solicitor, for the reasons that follow.

[159]   It seems that the reason that the plaintiffs’ solicitor was not joined as a party was because the Council do not seek a contribution from her as a joint tortfeasor but, rather, contend that she was acting as the plaintiffs’ agent and, accordingly, her negligence  could  be  attributed  to  them.    Although  mounted  in  terms  of  an intervening cause, the argument was thus similar (and possibly indistinguishable from) a contributory negligence claim.

[160]   As I understood it, the Council’s position in relation to this, agency, issue was

principally based on the Court of Appeal’s decision in O’Hagan v Body Corporate

189855 (Byron Avenue), in which the Court held that the failure by the purchaser’s solicitor  to  request  a  copy  of  the  LIM  constituted  negligence  which  could  be attributed to the purchaser herself.22     Mr Heaney submitted that where, in a transaction, a solicitor is acting as the client’s agent, it is reasonable as a matter of policy that the client should be responsible for the solicitor’s default (but could seek recovery of any loss from the solicitor).   He said that was the case here.  And he submitted that the Council’s position in this respect was further supported by the more recent High Court decision in Body Corporate 90247 v Wellington City Council.23

[161]   But that submission does not accord with my reading of Body Corporate

90247.   Indeed, in the course of that judgment, Ronald Young J drew an express distinction between a case such as Byron Avenue (which concerned a solicitor’s failure to obtain a LIM at all) and the one before him (which, like the present, involved a solicitor’s failure properly to interpret such a document).24   At [282] his Honour makes it clear that the Council in that cases was advancing essentially the same argument as Mr Heaney made before me, namely that the plaintiffs are vicariously liable for the actions of their solicitors and (accordingly) under s 3(1) of

the Contributory Negligence Act 1947, the damage the plaintiffs have suffered is partly the result of their own fault. Then, he said:

[283]   Conventionally a litigant is not vicariously liable for an independent

contractor’s negligence.

22     O’Hagan v Body Corporate 189855 (Byron Avenue) [2010] NZCA 65, [2010] 3 NZLR 486 at

[186].

23     Body Corporate 90247 v Wellington City Council [2014] NZHC 295.

24     The document at issue in that case was not in fact a LIM but a code compliance certificate.

[162]  In a footnote he observes that exceptions are typically where there are foreseeable damages or non delegable duties.25    At [284] the Judge noted that solicitors  are  typically  regarded  as  independent  contractors  and  that  whether  a plaintiff is contributorily negligent as a result of their own solicitor’s negligence is a matter that is ordinarily determined by the “both ways” or “identification” rule.  The footnote for that proposition is a reference to the Court of Appeal’s decision in Byron Avenue at [186]. He explains that the “both ways” rule is that a solicitors’ negligence can only be attributed to a purchasing plaintiff if that plaintiff (sued in tort as a

defendant) would be liable to another for its solicitor’s negligence.

[163]   After observing that it was difficult to think of any credible circumstance where any of the purchasers in the case before him could be liable to another for the negligence of the purchaser’s solicitor he noted that there are, however, exceptions to the “both ways” rule which the Council relied upon.   Those exceptions were discussed by the Court of Appeal in Byron Avenue, which the Judge summarised in the following way:

[288]     In Byron Avenue one of the plaintiffs, Mrs Kim, did not request a LIM  before  she  bought  a unit  in  a  defective  building.  She  instructed  a solicitor but the solicitor negligently failed to advise her to obtain a LIM. The Court held unanimously that while the “both ways” rule applied, Mrs Kim was contributorily negligent by identification with the negligence of her solicitor.

[289]    Arnold J and William Young P took much the same view on the matter. William Young P’s reasoning turned on a policy exception to the “both ways” rule. He considered that to follow the both ways rule in the circumstances would produce an arbitrary result. The local authority would be worse off simply because it was the solicitor and not the purchaser who failed to obtain a LIM. He considered that it was no answer to say that the Council could seek a contribution from the solicitor because privilege would make that impractical.

[290]    Arnold J stressed that in this transaction the solicitor was essentially the client’s agent. And in those circumstances it was reasonable as a matter of policy that the client should be responsible for the solicitor’s default. The client, in turn, could therefore seek recovery of the loss from the solicitor.

25     Citing Cashfield House Ltd v David & Heather Sinclair Ltd [1995] 1 NZLR 452 (HC) at 461; Stephen Todd (ed) The Law of Torts in New Zealand (6th ed, Brookers, Wellington, 2013) at [22.5.01].

[291]    Baragwanath J took a rather different approach. He considered that the LIM procedure had been introduced by Parliament to protect purchasers. Purchasers  therefore   had  an  obligation  to  obtain  a  LIM  to  protect themselves. Accordingly, Mrs Kim could not protect herself by delegating the responsibility to her solicitor.

[292]    Baragwanath J’s approach is therefore based on the proposition that the purchaser owes the Council a non delegable duty to obtain a LIM report. The fact that she delegated that responsibility to her solicitor did not absolve her from responsibility.

[164]   In applying those principles to the case before him, Ronald Young J said:

[293]     … I consider that interpreting the content of a CCC is in a different category than the obligation to obtain a LIM. Here the solicitors obtained a copy of the CCC. The negligence was alleged to be a failure of interpretation of the CCC and/or a failure to enquire further after seeing an ambiguous CCC. While obtaining a CCC could be seen as the equivalent of obtaining a LIM (and both are designed to provide consumer protection), the interpretative task could not be seen as typically that of a purchaser. Interpretation of such a “technical” document as a CCC or carrying out research as to the scope of a CCC is lawyerly work.

[294]     Here, I am satisfied the solicitors were performing an independent and  expert  function  in  interpreting  a  CCC.  The  solicitors  were  not,  in contrast  with  obtaining  a  LIM  or  indeed  merely  obtaining  a  CCC, performing an agent’s function.

[295]    On this assessment the plaintiffs would not be vicariously liable were they sued for the tort of their solicitors. They should not therefore be vicariously liable on a contributory negligence basis as claimed here.

[296]    I am therefore satisfied that in the circumstances of this case, the plaintiffs are not identified with their solicitors’ negligence, and that their solicitors’ conduct cannot amount to contributory negligence on the part of the plaintiffs.

[165]   Precisely the same analysis is apt here. This is not a case where the plaintiffs’ solicitor failed to request a LIM but a case where she has arguably failed to use her expertise to interpret, and act upon, it.  There is, in my judgment, no tenable question of agency and there can therefore be no vicarious liability or contributory negligence on the plaintiffs’ part.

The slip

[166]   It follows from my conclusions in relation to “causation in law” above that,

were it necessary to do so, I would hold that the slip was a relevant intervening cause

of the plaintiffs’ loss.    However in my view the preferable analysis is simply to

regard the risk of such slippage as falling outside the scope of the Council’s duty.

Loss

[167]   In light of the conclusions I have reached I do not propose to address the competing submissions on the appropriate quantification of loss.

Conclusions

[168]   In summary:

(a)      It was not disputed that the Council owes potential purchasers a duty to  be  careful  when  preparing  a  LIM  notation  under  s 44A(2)  of LGOIMA.

(b)The Council was in breach of its duty in the present case.   More particularly, the LIM prepared in relation to 114A Clovelly Rd failed clearly and equivocally to inform potential purchasers of a “special feature” of the land, namely its potential for slippage.

(c)      Even assuming that the plaintiffs relevantly relied upon the LIM when deciding whether to purchase 114A (which is unclear) any such reliance was not in all the circumstances reasonable.

(d)On the evidence, the plaintiffs have failed to establish the necessary hypothetical causal link between any reliance by them and the losses claimed.  More particularly, they have not proved on the balance of probabilities that, had the LIM not been negligent, they would have acted in a way that would have avoided their loss.

(e)      The losses suffered by the plaintiffs (the economic losses flowing from the damage to the house) were in any event, not as a matter of law caused by the Council.   The scope of the Council’s duty was limited to the provision of information about the existence of a special

feature.  It was not to provide potential purchasers with advice or to warrant the condition of the land.

(f)       As  far  as  the  intervening  causes  pleaded  by  the  Council  are concerned:

(i)The expert evidence did not support the conclusion that the faulty  pile  was  an  operative  and  substantial  cause  of  the damage to the plaintiff house.

(ii)Any negligence by the plaintiffs’ solicitor cannot be attributed to the plaintiffs.

(iii)Consistent with the conclusion summarised at (e) above, the slip could also properly be regarded as an operative and substantial intervening cause of the plaintiffs’ loss.

[169]   For  the  reasons  summarised  at  [168](c),  (d),  (e)  and  (f)(iii)  above  the plaintiffs’ claim against the Council must fail.  Costs should follow the event in the usual way.  I certify for second counsel.  Memoranda may be submitted if agreement

cannot be reached.

Rebecca Ellis J