Hsu v Mahoney
[2021] NZHC 2708
•11 October 2021
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2017-409-000100
[2021] NZHC 2708
BETWEEN PI-HUI BEATRICE TSAI HSU
First Plaintiff
AND
KENNETH TSAI
Second Plaintiff
AND
MARGARET ANN MAHONEY and GRAHAM PAUL MCQUEEN
First Defendants (Discontinued)
AND
BUSHNELL INVESTMENTS LIMITED
(formerly named BUSHNELL BUILDERS LIMITED)
Second DefendantAND
CHRISTCHURCH CITY COUNCIL
Third Defendant (Discontinued)
AND
LANCE PHILIP AUSTIN
Fourth Defendant
AND
BUSHNELL BUILDERS LIMITED
Fifth Defendant
Hearing: 6 October 2021 Appearances:
R G Smedley for Plaintiffs
Judgment:
11 October 2021
JUDGMENT OF JUSTICE DOOGUE
(Quantum)
HSU v MAHONEY [2021] NZHC 2708 [11 October 2021]
This judgment was delivered by me on 11 October 2021 at 2.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Introduction
[1] On 1 July 2021, I delivered a judgment in which I found Bushnell Investments Ltd (BIL) liable in contract and negligence for the failure to construct a tanking system to the standard of compliance with the Building Code for the plaintiffs’ home situated at 2 Clearview Lane, Mt Pleasant, Christchurch.
[2] I found BIL and Mr Austin, a director of BIL, to be concurrently liable for general damages of $25,000 to each of Ms Hsu and Mr Tsai.
[3] I reserved leave to the parties to revert to the Court for determination of the quantum for the remediation of the tanking system.
Background
[4] At the hearing in April, the expert quantity surveyor for the plaintiffs, Mr Webber, calculated the cost of remediating the retaining wall at $133,955.00 (excluding GST) broken down as follows:
1
Construction
98,297 Subtotal
98,297
2
Preliminary & General
8
%
7,864
3
Margin
10
%
10,616
Subtotal
116,777
4
Professional Fees
5,000
Subtotal
121,777
5
Contingency
10
%
12,178
Total
133,955
[5] The expert quantity surveyor for BIL and Mr Austin, Mr Eggleton, estimated the remediation cost as $66,654.65. His breakdown was as follows:
Total
46,465.10
Preliminary and General
8%
3,717.21
50,182.31 Contractors margin – 10%
10%
5,018.23
55,200.54 Contingency
5%
2,760.03
Total
excluding GST
$57,960.57
GST
8,694.08
Total including
GST
$66,654.65
[6] In the liability decision I observed that I had reservations about each of the experts’ evidence. I suggested they confer in light of the comments I had made to see if they were able to reach agreement on the cost of remediating the tanking system.
[7] I also invited both experts to consider what efficiencies could be made in the general costings to reflect that remediation of the tanking system on the south retaining wall will need to take place at the same time as the remediation of the tanking system on the east and west elevations of the house.
[8] The experts did not reach an agreed position for consideration by the Court. The plaintiffs therefore now apply for determination of quantum. They filed revised and updated evidence from Mr Webber who gave further evidence at the hearing. The defendants did not file any further evidence nor appear at the hearing. The matter proceeded by way of formal proof.
Discussion
[9] There were numerous construction cost items disputed between the experts, the most significant of which were the following:
(a)the excavation of the south elevation;
(b)the cost of moving and reinstating a lamppost;
(c)the cost of supplying and installing Swelltite tanking;
(d)supply and installation of an overflow pipe;
(e)the cost of removing and relaying the asphalt path;
(f)associated landscaping; and
(g)the cost of the plaintiffs relocating to temporary accommodation during the remediation.
[10] In addition, there was dispute as to the appropriate preliminary and general costs allowance, the appropriate contingency allowance and whether professional fees were required.
[11] In the liability decision, I found that Mr Eggleton’s evidence suffered from certain underlying deficiencies. In fact, it suffered from more deficiencies than those I identified in that judgment.
[12] Mr Eggleton did not attend the site at any point. He relied purely on photographs supplied to him by Bushnell Builders Ltd (BBL). He relied upon BBL to provide accurate measurements for the costs of the works. He also relied upon BBL’s rates for labour on the assumption that they, rather than an independent builder, would be carrying out the remediation.
[13] In addition, his evidence in relation to other construction costs was less forensically reliable because none of the subcontractors who provided quotes to him visited the site, but rather relied upon photographs that he had sent them to calculate their estimates. Those estimates were never produced in evidence.
[14] All of these factors left me with the impression that Mr Eggleton may not have been sufficiently at arm’s length from BIL’s position on the matters at hand and that he was less meticulous and therefore less accurate than Mr Webber.
[15] Having said that, I was concerned at the April hearing that Mr Webber was excessive in some of his calculations and that they necessitated further scrutiny. Mr Webber has filed a fresh affidavit in which he deals with the contentious matters and revises some of his earlier costings.
[16] I have approached the issue of quantum by reviewing and assessing the following:
(a)the expert’s reports;
(b)the transcript of the experts’ evidence at the hearing in April;
(c)Mr Webber’s recent affidavit; and
(d)the transcript of his answers to the Court’s questions from this hearing.
[17] Having reviewed that evidence, I accept Mr Webber’s bona fides. I also accept his general methodology. I use the line-by-line costings in Mr Webber’s most recent affidavit as the schema for the order of my discussion and findings on the matters that have been controversial between the experts. Where I do not specifically discuss a line estimate, I have adopted the estimate as calculated by Mr Webber.
Swelltite tanking
[18] The difference between the experts here was that Mr Eggleton’s measurements (which were undertaken by BBL) resulted in a cost of $6,460.00, whereas
Mr Webber’s resulted in a cost of $9,095.00. The difference was in the square meterage. BBL’s estimate was that only 76 square metres of tanking is required whereas Mr Webber’s evidence was that 107 square metres is required. At the hearing Mr Webber reviewed the measurements by reference to the plans and demonstrated to my satisfaction that he was correct.
[19] This difference in square meterage also accounts for a relatively small difference in the cost of the Aquadrain 15X, including an allowance for skim plaster to create a flush surface for the Swelltite tanking.
Removal and reinstatement of a lamppost
[20] There was dispute over whether a lamppost needs to be removed as part of the remediation work. Mr Webber said it did. Mr Eggleton said it did not.
[21] It seems readily apparent that the lamppost had to be removed for the construction of the original tanking system on the south elevation. I do not understand, nor did Mr Eggleton properly explain, why removal would not be required for the remediation, involving apparently similar excavation.
[22] There was also dispute over how much removal would cost. Mr Webber initially costed the removal at $10,984.90. Mr Eggleton, in cross-examination, gave an estimated figure of $3,000.00 plus GST.
[23] Mr Webber has revised the costing he gave in evidence at the initial hearing. He now estimates it will cost $10,000.00 to remove the lamppost. In his affidavit he itemises the subparts and their cost. They include:
(a)engineering advice to provide a plan which must be approved by the Council;
(b)Council fees;
(c)disconnection and storage of the lamppost and cables;
(d)removal and replacement of the foundation;
(e)reinstallation; and
(f)an allowance for temporary lighting on the street.
[24] On the basis of this new and comprehensive explanation I am satisfied that Mr Webber’s costing is to be preferred.
Remove and dispose of bushes
[25] Mr Webber initially estimated $2,500.00 for the removal and disposal of various bushes. Mr Eggleton argued this was an inflated sum. After questions by me at the hearing, Mr Webber explained that he had conflated aspects of the landscaping associated with remediation of the tanking system to the south, east and west walls. He advised that the figure to take into account the south wall alone was “around half” that which he had initially ascribed. He revised this figure downwards to “around
$1,200.00”.
Breakout, remove and dispose of existing concrete paving, concrete steps and tiles at the south side of the building
[26] The difference between the experts related to labour rates. Because of the reasons set out in paragraphs [12]-[13] I consider Mr Webber’s evidence to be more independent and reliable on rates for the labour.
Excavation of the south elevation
[27] The cost of the excavation was extensively discussed in evidence adduced by the experts.
[28] At the hearing, Mr Webber estimated it would cost $15,045 to excavate to the bottom of the foundation on the south elevation using diggers/mechanical excavators, remove spoil from the site and taper excavations in line with marked-up sections that require the removal of existing pavement. This included a quote from Austin Asphalt. He estimates $12,240 in his current revised quote, based on a slightly reduced scope.
[29] Mr Eggleton argued Mr Webber’s cubic meterage was vastly inflated. As it turns out, it was inflated. Mr Webber’s original estimate of the excavation required was 177 cubic metres. Mr Eggleton’s was 57 cubic metres. However, during cross-examination Mr Eggleton considered that the quantity could be as much as 100 cubic metres “absolutely max”, but refused to concede the point that he had underestimated the meterage required.
[30] Mr Webber has since recalculated the cubic meterage using the original plans. His recalculation is that the quantity to be excavated is 144 cubic metres. I am satisfied that by reference to the plans 144 cubic metres is the accurate amount.
[31] Mr Webber consistently emphasised at both hearings that shoring or tapering was required under Health and Safety Regulations. Shoring refers to stabilising the hill behind the excavation site using struts or planks whereas tapering refers to excavating at an angle rather than straight down. Tapering will necessarily require the excavation of more cubic metres. Mr Webber provided for a tapered excavation in his calculations, explaining part of the difference in cubic meterage.
[32] Mr Webber was cognisant of “under runners, waters running through [the] hillside” and concluded he was not qualified to assess the stability of the hill where the necessary excavation will occur. That will be the subject of a geotechnical engineering assessment. Mr Eggleton did not provide for shoring or tapering as he did not think either was required. He was cross-examined on this, and notably he had not seen the geotechnical report on the site conditions. He accepted shoring would be required “if the Health and Safety Regulations require a rock face to be shored”.
[33] Mr Webber’s analysis is plainly more consistent with the other evidence, including the geotechnical advice, and demonstrates greater knowledge of the governing regulations. I accept his evidence that shoring or tapering is required.
[34] Mr Webber also provided for professional advice in his costing. He said this was for a structural engineer to advise whether, and how, to shore or taper the excavation. Mr Eggleton argued this was not required. Obtaining such professional advice appears prudent and completely reasonable.
[35] Finally, Mr Webber made provisional allowance for “making good the plaster & paint finish to external GF concrete blocks” that will likely be damaged during the excavation. Mr Eggleton did not make such an allowance. Again, I prefer Mr Webber’s evidence.
Cost to remove and relay the asphalt path
[36] Mr Webber provided a quote from an independent contractor, R A Shearing, to remove and relay the asphalt path. That quote relied on the necessity to remove and relay 50 metres of the asphalt path at a cost of $8,530 (excluding GST).
[37] Mr Webber has revised the quantity using the plan to 40 metres, which equates with the paved area in the front of the house shown on the plan (42.33 metres). He acknowledged that the car-turning and parking deck was not ultimately constructed but considered it reasonable to allow for a few metres on either side of the excavation, hence the 40 metres. His new estimate is $6,800.00.
[38] Mr Eggleton obtained a quote amounting to $3,290.00. For the reason expressed at [13] I prefer Mr Webber’s quote and associated estimate.
Cost to supply and lay drain chip to excavated areas
[39] The experts were relatively close in their assessment of the cost associated with this aspect of the remediation. Mr Webber has revised his costs based on a reduction in the cubic meterage to 144 cubic metres. For the reasons I have already explained that is an appropriate reduction.
Evergreen landscapes
[40]The difference between the experts here is approximately $2,300.
[41] Mr Webber’s original costing was based on a landscaping quote he obtained which included work that would have been undertaken had the eastern and western elevation of the retaining wall and vegetable garden been landscaped. With the deletion of that work from the quote, Mr Webber came to a revised figure of $5,881.80 for the landscaping.
[42] Mr Eggleton provided a quote amounting to $2,509.52. Neither Mr Eggleton nor the subcontractor attended the site, as a result I prefer Mr Webber’s estimate.
Preliminary and general
[43] This line item is for costs incurred associated with ancillary aspects to the actual construction. In other words, they are costs associated with the project management of the construction rather than any element of the construction itself. Examples of these include a full suite of measures to comply with the Health and Safety at Work Act 2015 and contract works insurance.
[44] They are calculated on a percentage basis. Industry wide these percentages are generally in the order of 5 to 15 per cent. Both experts estimated around the middle band for this project, Mr Eggleton at 8 per cent and Mr Webber at 10 per cent. This is an unusual site with complex features, as explained in my liability judgment. I am satisfied that 10 per cent, as assessed by Mr Webber, is the appropriate percentage to adopt.
Contingency
[45] Allowance is routinely made for unforeseen costs. The complexity of this remediation will undoubtedly risk unforeseen difficulties and likely additional costs. Mr Eggleton estimated a figure of 5 per cent as a contingency. Mr Webber preferred a 10 per cent contingency. Ten per cent is a common and appropriate contingency that I do not consider excessive in the circumstances of this case.
Allowances for inflation and escalation on previous estimate
[46] Mr Webber added percentage figures for inflation and escalation. He says that because of the current building boom and the effect of the COVID-19 pandemic on supply chains the cost of construction has escalated significantly. The current building boom has also meant that those wishing to contract the services of associated professionals (such as engineers) and trades persons (such as tanking experts and excavators) must now wait longer to secure those services. Accordingly, Mr Webber considers it is unlikely the remediation will be able to start before the second quarter
of 2022. His evidence was that prices are currently increasing at a rate of 4 per cent per annum (or 1 per cent per quarter).
[47] He therefore added 5 per cent to account for inflation from the second quarter of 2020 (when he obtained his quotes) to now, the third quarter of 2021, and 3 per cent to account for escalation from now to an estimated start date of quarter two of 2022.
[48] There is nothing novel or surprising about this evidence considering the recent publication of building industry reports of cost escalation and delays of the sort identified by Mr Webber. I accept his evidence in this regard.
Relocation costs
[49] Mr Eggleton made no allowance for the costs of temporary accommodation for the plaintiffs whilst the remediation is being undertaken. At the hearing in April, Mr Webber estimated approximately $23,000. He has adjusted that estimate to
$15,020.00 and provided supporting documentation. This estimate seems based on reliable evidence as to the cost of rental accommodation. I accept it is a more accurate assessment than his initial assessment given in the April hearing.
Identification of efficiencies
[50] At the April hearing I accepted that there may be efficiencies that could be identified in the estimates for the south wall because the design of the home and the remediation will necessitate contemporaneous remediation of the south, east and west retaining walls. At the recent hearing Mr Webber was unable to identify any. He said he had costed the scope of remediating the south wall only and did not see any direct crossover between that and the east and west elevations. Any additional work would be outside the scope he has costed. I accept that to be the case on the costings provided.
Conclusion
[51]As a result of the findings herein the calculation of quantum is as follows:
Construction $92,567 less
$1,250
$91,317.00
P&G
10% of $91,317
$9,131.70
$100,448.70
Margin
10% of $100,448
$10,044.87
$110,493.57
Professional Fees
$5,000.00
$115,493.57
Contingency
10% of $115,494
$11,549.36
$127,042.93
Inflation
5% of $127,043
$6,352.15
$133,395.07
Escalation
3% of $137,397
$4,001.85
$137,396.93
Total (excluding GST)
$137,396.93
GST
15% of $137,396
$20,609.54
$158,006.46
Total (including GST)
$158,006.46
Relocation costs
$15,020.00
$173,026.46
Remediation costs total
$173,026.46
Less EQC and retentions
($8,234.09) +
($24,067.95)
($32,302.04)
$140,724.42
Result
[52]The defendant BIL is ordered to pay to the plaintiffs $140,724.42 plus interest.
[53] The issue of legal and associated costs shall be dealt with on the papers by way of written submissions.
[54] The plaintiffs shall file their submissions within 21 working days (by 10 November 2021) and the defendants shall have 21 working days (by 10 December 2021) thereafter to file their submissions in reply.
Doogue J
Solicitors:
Anthony Harper, Christchurch
Rhodes & Co, Christchurch (S P Rennie and A Whalan) for Second, Fourth and Fifth Defendants
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