Kwak v Park
[2016] NZHC 530
•24 March 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-001559 [2016] NZHC 530
UNDER the Weathertight Homes Resolution
Services Act 2006
IN THE MATTER
of an appeal from the Weathertight Homes
TribunalBETWEEN
JOONG SONG KWAK AND HYE SOOK KWAK
Appellants
AND
HYUN SU (MARIO) PARK Respondent
Hearing: 8 December 2015 Appearances:
T R Rainey and J P Wood for appellants
R Hesketh and T Soong for respondentJudgment:
24 March 2016
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Thursday, 24 March 2016 at 11:45 am pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors: Rainey Law, Auckland, for Appellants
WJ Spring, Solicitor, Takapuna, for Respondent
Counsel: RM Hesketh, Barrister, Devonport, for Respondent
KWAK & ANOR v PARK [2016] NZHC 530 [24 March 2016]
Introduction
[1] Joong Song Kwak and his wife, Hye Sook Kwak, appeal against a determination of the Weathertight Homes Tribunal dated 16 June 2015, which dismissed their claim against Hyun Su (Mario) Park, the builder of their leaky home. Although he was found not liable, Mr Park cross-appeals against the Tribunal’s finding that, in addition to being the builder, he was also the developer of the house.
Factual background
[2] The respondent, Mr Park, and his wife emigrated from Korea in 1995. Unable to find work in his previous field as a researcher for a chemical company, Mr Park retrained first in computing and then as a pilot. He did not find work in either of these fields. He worked installing blinds for approximately 15 months before becoming self-employed as a handyman. Mr Park has no qualifications as a builder, nor did he have any building experience apart from his handyman work.
[3] In August 1998, Mr Park and his wife bought a bare section of land at 27 Ian Marwick Place, Birkenhead, Auckland. They decided to build themselves a house on the land. They engaged Ross Bell of Future Plans Limited to design a three-level house on the steeply sloping section.
[4] On 27 July 1999, Mr Bell applied for a building consent on behalf of
Mr Park. A building consent was issued by the North Shore City Council on
22 October 1999. Mr Park and his wife lived in rental accommodation while Mr Park then worked full-time building the house. Mr Park had never built a house before.
[5] Mr Park also engaged a private building certifier, A1 Building Certifiers Limited, to inspect and certify the building work he undertook in accordance with the building consent. Various inspections of the building work were carried out by A1 Building Certifiers Limited between November 1999 and June 2000. Following a pre-lining inspection on 28 June 2000, Mr Park and his family moved into the house in July 2000. Mr Park continued work on the house, which was completed
before the end of the year, although a code compliance certificate was not obtained at that time. He says that he and his wife decided to sell the house in July 2001.
[6] After an initial sale fell through, Mr Park and his wife sold the house to Mi Cha Kim with settlement on 30 November 2001. The sum of $10,000 was retained by Ms Kim until such time as Mr Park was able to obtain a code compliance certificate for the house. Between October 18 October 2001 and 18 December 2001, Mr Park signed at least four producer statements at the request of A1 Building Certifiers Limited, certifying that he had properly completed certain aspects of the building work. On 8 February 2002, A1 Building Certifiers Limited undertook a final inspection of the property.
[7] A1 Building Certifiers Limited then wrote to the North Shore City Council on 8 February 2002 advising the Council of the completion of building work and the issuance by them of a code compliance certificate, also dated 8 February 2002. The sale to Ms Kim was accordingly completed on 19 February 2012.
[8] The appellants, Mr and Mrs Kwak, bought 27 Ian Marwick Place from Ms Kim by agreement dated 10 July 2003. The sale was conditional on Mr and Mrs Kwak obtaining a satisfactory builder’s report on the property. The report from Future Safe Building Inspections Limited was generally satisfactory, although some maintenance issues were identified and a recommendation made that minor roof repairs be carried out by an experienced roofing contractor. The purchase by Mr and Mrs Kwak therefore proceeded and Mr and Mrs Kwak were registered as owners of the property on 21 August 2003.
[9] After living in the house for about four or five years, Mr and Mrs Kwak began to notice leaks, which Mr Kwak attempted to repair. However, the leaks continued. Following discussions with various individuals, Mr Kwak learnt of the Weathertight Homes Resolution Service and the availability of an assessor to investigate the property.
[10] On 17 January 2011, Mr and Kwak brought a claim under the Weathertight
Homes Resolution Services Act 2006 (WHRS Act) in respect of the property by
applying for an assessor’s report. Following an inspection of the property on 4 May
2012, an assessor, John Dalton, issued a report on 7 May 2012 concluding that the house met the criteria set out in the WHRS Act. Accordingly, on 28 May 2012 the Department of Building and Housing confirmed that the claim by Mr and Mrs Kwak was eligible to use the resolution process under the WHRS Act.
[11] On 27 September 2012, another assessor, Stephen Ford, issued a follow-up report to the original assessor’s report on eligibility. Mr Ford found that the property had widespread weathertightness failure due to poor installation of all cladding systems and waterproof membranes, which had caused significant decay to framing timbers. His conclusion was that, considering the deficiencies that existed with the insulation of the cladding systems, including the roofing and the damage found to the property, along with the risk of future likely damage, the recommended repair option to achieve watertightness in compliance with the Building Code was a full reclad to all exterior walls of all levels and complete replacement of roofing and decking materials.
[12] A further report was obtained by the lawyers now acting for Mr and Mrs Kwak from Richard Maiden of Prendos New Zealand Ltd. Mr Maiden found that cladding was in contact with the ground and was causing damage to building elements and that parapets to the roofs were of insufficient upstand. He also found that unconsented sections or projections from the cladding were causing water ingress and decay to the timber structure, while window flashings were causing water ingress. Roof membranes were also failing, causing timber decay and damage to building elements. Finally, he also found that the balustrades were likely to be causing water ingress.
[13] Mr Maiden’s conclusion was similar to that of Mr Ford. He found that the building required extensive remediation involving the cladding, replacement of decayed timber, replacement of internal walls and ceiling linings, along with the required adjustment of services. In his opinion, the house was close to requiring a total rebuild because of the extent of the damage.
[14] Mr and Mrs Kwak’s claim proceeded to a hearing before the Weathertight Homes Tribunal on 13 and 14 April 2015. A1 Building Certifiers Limited was not a party to the claim as it had been struck off the Companies Register on 13 February
2004. Prior to the Tribunal hearing, Mr and Mrs Kwak withdrew their claim against Rose McLaughlan, the director of A1 Building Certifiers Limited who had signed the code compliance certificate, in accordance with a settlement agreement they made with her that did not involve any payment. During the hearing, the Tribunal also removed Mr Park’s wife as a party because it became clear that she did not control or carry out any building work nor did she sign the producer statements that were in issue at the hearing. The sole remaining respondent to the claim was therefore Mr Park. The Tribunal reserved its decision and issued its final determination on 16
June 2015.
Weathertight Homes Tribunal Determination
[15] After some introductory remarks, the adjudicator, Ms M Roche, noted the importance of the date Mr and Mrs Kwak applied for an assessor’s report because building work completed more than ten years before that date could not be the subject of a successful claim. She stated:
On 17 January 2011, the Kwaks applied for an assessor’s report. This means
that any action in respect of building work carried out prior to 17 January
2001 is limitation barred.1 There is no evidence of any relevant building work being carried out after 17 January 2001. The only events that are not limitation barred are therefore the inspections carried out by [A1 Building
Certifiers Limited] after 17 January 2001, the issue of producer statements by Mr Park and the issue of the CCC [Code Compliance Certificate].
[16] Ms Roche then set out the issues she needed to address as:
(a) Was Mr Park acting as a developer when he constructed the house?
(b)If Mr Park was acting as a developer, did his duty of care extend to responsibility for the actions of the private certifier?
(c) Did Mr Park owe a duty of care to the Kwaks when he issued the producer statements in October 2001?
1 Weathertight Homes Resolution Services Act 2006, s 37.
(d) What are the defects causing leaks and damage?
(e) Was there contributory negligence on the part of the Kwaks that contributed to their loss?
(f) What is the quantum of damages that should be awarded?
Was Mr Park acting as a developer when he constructed the house?
[17] Ms Roche held that the test for determining whether a person is a developer has two components — one is control over the building process; the second is the profit motivation. There was no doubt that Mr Park controlled the building process. Whether or not he was a developer depended on whether he built the house for the purpose of sale. Mr Park claimed that this was not the case, and that the house was built to be their “dream home” which they had to sell because of their difficult financial circumstances. Mr and Mrs Kwak’s position was that, although Mr Park was not a developer in the usual sense, by foregoing an income while he built the house and taking out a mortgage, he staked his fortune on the profit expected from the development and sale of the house and was therefore a developer for the purpose of this single project.
[18] Ms Roche found that the purpose of building the house was to on-sell and attain a profit to enable Mr Park to move up the property ladder more quickly than would otherwise be the case. She was not persuaded that they intended to live in the house for anything other than a short time, or that it was their dream home. She therefore found that Mr Park was the developer of the house in addition to being the builder of the house.
Did Mr Park’s duty of care extend to responsibility for the actions of the private certifier?
[19] Ms Roche concluded that the duty of a developer is to ensure that proper care and skill are exercised in the building of houses and that the ambit of the developer’s duty is related to construction and not to inspection and certification, which are regulatory functions. Ms Roche therefore found that Mr Park was not liable for the
actions of the private certifier and it was therefore unnecessary for her to consider whether the certifier, A1 Building Certifiers Limited, was negligent in carrying out the final inspection on 8 February 2002.
Did Mr Park owe a duty of care to the Kwaks when he issued the producer statements in October 2001?
[20] Between October and December 2001, Mr Park signed four producer statements. The director of A1 Building Certifiers Limited, Ms McLaughlan, gave evidence that she would not have issued the code completion certificate for the house without these producer statements and that she relied on them when doing so. Ms Roche found that the primary question was whether the issue of producer statements by Mr Park gave rise to an action in negligence simpliciter or in negligent misstatement. This required consideration of whether Mr Park’s producer statements were building work or simply statements.
[21] Ms Roche held that a claim in negligent misstatement in respect of the producer statements could not succeed as there was no evidence of reliance by Mr and Mrs Kwak on them. To have any chance of success, she was of the view that it was necessary for Mr and Mrs Kwak to frame the issue of Mr Park’s producer statements as negligent actions rather than negligent misstatements. Accordingly, she noted that in his submissions, counsel for the appellants argued that the issuing of a producer statement is an aspect of building work and is not to be treated as a negligent misstatement. Ms Roche held that the difficulty with this argument was that the producer statements are indeed statements and relate to acts (the application of waterproofing membranes) that are limitation barred having occurred ten years prior to the claim being brought.
[22] Ms Roche held that the producer statements were negligent misstatements made to A1 Building Certifiers Limited and not building work. She went on to comment that, even if she were to find that a duty of care was owed by Mr Park to Mr and Mrs Kwak when signing the producer statements, the issue of causation would be problematic. Of the four producer statements, only two were linked to defects in the house. Membrane related defects were a significant component of the damage, but not the sole cause of the damage.
What are the defects causing leaks and damage?
[23] Ms Roche referred to the evidence of Mr Maiden who had identified a number of construction defects in the house that allowed moisture ingress and required remediation. These were:
(a) Wall cladding issues:
(i) Insufficient clearances between cladding and ground level.
(ii)Minimal upstand at the apex of the main roof causing cracking on the eaves at roof level.
(iii) Windows unsealed along sills.
(iv) Cladding hard to the top of head flashings. (b) Roof:
(i) The liquid applied membrane was poorly sealed.
(ii) There was insufficient fall to the gutters to allow drainage. (iii) The membrane on the main upper roof had failed.
(c) Decks:
(i) The liquid applied membrane had failed.
(ii)There was insufficient fall and drainage, so water pooled on the deck.
(d) Balustrades and parapets:
(i)There was insufficient fall to the tops of the balustrades and parapets.
(ii)There was insufficient or non-existent waterproofing to the balustrades and parapets.
[24] Mr Maiden stated that the level of decay indicated water was gaining access to the jamb of the windows and running down the inside, ponding on the bottom of the framing and causing decay. Ms Roche accepted that the defects in the house were those identified by Mr Maiden and that these gave rise to the need for a full reclad of the house.
Was there contributing negligence on the part of the Kwaks that contributed to their loss?
[25] Mr Park had alleged that Mr and Mrs Kwak were partly responsible for the damage to the house because of their failure to properly maintain it and their failure
to carry out recommendations in the building inspection report they had obtained prior to purchasing the house. These failures were specifically identified as:
(a) Failure to add a slope to the parapet as recommended in the building inspection report;
(b)Failure to have an experienced roofing professional carry out repairs to the roof as recommended in the building inspection report; and
(c) Failure to paint the house as part of the maintenance cycle.
[26] After considering the evidence concerning the three issues raised by Mr Park, Ms Roche found that there was no contributory negligence on the part of Mr and Mrs Kwak that contributed to damage to the property.
What is the quantum of damage?
[27] Ms Roche found that Mr Park was the builder and developer of the house, but that the building work was limitation barred. She also found that Mr Park was not liable for the actions of A1 Building Certifiers Limited, nor was he liable in negligence to Mr and Mrs Kwak for the producer statements. Mr Park was not liable for damages because of the limitation issues and the lack of liability. However, Ms Roche determined the quantum that would have been awarded had Mr Park been found to be liable for all of Mr and Mrs Kwak’s losses. The evidence concerning quantum consisted of an estimate for the remedial work prepared by Prendos NZ Limited, an estimate of costs by a quantity surveyor annexed to the assessor’s report and Mr Kwak’s evidence about the consequential losses he and Ms Kwak claimed.
[28] Ms Roche found that the claim had been established to the amount of
$737,286.80 which was calculated as follows:
Remedial work $685,371.00 Consequential damages
$ 26,915.80
General Damages
$ 25,000.00
Total
$737,286.80
Conclusion
[29] Ms Roche found that the claim against Mr Park in respect of his work as a builder was limitation barred. She also found that as a developer he was not liable for the actions of Ms McLaughlan as the private certifier and that he was not liable in negligence for the issue of producer statements. Accordingly, no damages were awarded.
Producer statements
[30] As the builder of the house, Mr Park personally applied the waterproofing on the deck floor. He personally undertook the gib-nailing and bracing on the top floor. He personally laid the membrane to the roof, deck, gutters and parapets. He personally laid the floor tiles in the bathroom and en-suite. Much later and within the ten year limitation period, Mr Park signed producer statements in respect of this work.
[31] On 18 October 2001, Mr Park signed a producer statement in relation to the waterproofing on the deck floor in the following terms:
I have done the water proofing for deck floor by using the P/U Rubber waterproofing membrane.
I applied two coat (3 mm each coat) main resin membrane (6 mm in total)
over the Primer.
The job has Complete [sic]with my best knowledge and technique.
[32] On 29 October 2001, Mr Park signed a producer statement in relation to the gib-nailing and bracing on the top floor in the following terms:
I, Mario Park, being the Tradesperson/Owner responsible for the work identified above, hereby acknowledge that an inspection was not called, but declare that:
All proprietary products have been installed and construction is in accordance with the requirements of the NZ Building Code, Approved Documents, Manufacturer’s Specifications and the approved drawings for the building consent issued for the above property.
[33] On 23 November 2001, Mr Park signed a producer statement in relation to the membrane to the roof, deck, gutters and parapets in the following terms:
I, Mario Parks, being the Tradesperson responsible for the work identified above, declare that:
All proprietary products have been installed in accordance with the requirements of the NZ Building Code, Approved Documents, Manufacture’s [sic] Specifications and the approved drawings for the building consent issued for the above property.
[34] On 18 December 2001, Mr Park signed a producer statement in relation to the floor tiles in the bathroom and en-suite in the following terms:
I have done the floor tile in bathroom and ensuit [sic] area with tile underlay over the particleboard floor.
I have nailed tile underlay and seal it fiber grass [sic] resin. The job has Complete by standard method and material.
[35] He may well have signed other producer statements which now cannot be located. The letter from Ms McLaughlan, the director of A1 Building Certifiers Limited, to the North Shore City Council dated 8 February 2002 advising the Council of the completion of building work at 27 Ian Marwick Place, Birkenhead, states that it attaches, in addition to other producer statements, a cladding producer statement. In her witness statement Ms McLaughlan states that she is certain that A1
Building Certifiers Limited would have requested a producer statement for cladding before issuing the code compliance certificate and the letter dated 8 February 2002 to the Council is evidence of that.
[36] Mr Park says he did not understand the meaning of the producer statements at the time he signed them. An employee of the private certifier, A1 Building Certifiers Limited, prepared one of the producer statements in its entirety and gave it to Mr Park to sign (Mr Park’s name is misspelt). The other three were drafted by Mr Park on the basis of examples given to him by A1 Building Certifiers Limited and signed by him at their specific request. Mr Park acknowledges that the producer statements were drafted and/or signed by him in order to obtain a code compliance certificate for the house. Ms McLaughlan, the director of A1 Building Certifiers Limited who signed the code compliance certificate, said in evidence that she relied on the producer statements and would not have issued the code compliance certificate on 8 February 2002 without them.
[37] Mr Park maintained that all the damage to the house was caused by faulty design or lack of maintenance by Mr and Mrs Kwak. However, in one of the producer statements that are still available, Mr Park has certified that he installed the roof membrane “in accordance with the requirements of the NZ Building Code, Approved Documents, Manufacture’s [sic] Specifications and the approved drawings for the building consent issued for the above property”.
[38] In contrast to that assertion, Mr Maiden states in his report under the heading
“ROOF MEMBRANE ISSUES”:
At the front of the house, immediately above the garage opening, is an opening which has previously been cut out, showing timber which is wet and obviously decayed, which can be seen in Photograph 2.1. On the north elevation we cut out a section of timber below the deck; refer Photograph
2.2. In this area, as seen in Photographs 2.3 and 2.4, the decay of timber is extreme, free water can be seen around the outlet pipe A and timber decay to the area around the pipe is saturated. It is my opinion that water is gaining access in and around the pipe due to poor sealing of the liquid applied membrane, which can be seen in Photograph 2.4. The liquid applied membrane seen on the timber Photograph 2.3, at position C, indicates that the membrane or substrate was not sealed, so that the membrane merely poured through the gaps in the substrate at the time of insulation.
[39] Mr Park did not call any expert evidence to contradict Mr Maiden’s evidence. Mr Maiden’s evidence was therefore accepted by Ms Roche. Mr Park’s installation of the roof membrane was clearly substandard. The producer statement he signed in respect of the roof membrane was incorrect and yet it was relied on by A1 Building Certifiers Limited in issuing the code compliance certificate. In fact, it clearly states at the bottom of the producer statement:
A1 Building Certifiers Limited in accepting this Producer Statement do so in order to establish compliance with the requirements of the Building Act 1991 and the Building Regulations 1992.
Discussion
[40] The crucial issue in this case is the proper characterisation and effect of the producer statements drafted and/or signed by Mr Park. Under the Building Act
1991, producer statements were a defined means of helping provide evidence of
compliance with the Building Code.2 However, over-reliance on these statements
2 Building Act 1991, sub 43(8).
without sufficient scrutiny of the author or accuracy of the contents meant that many decisions based on them were not robust.3 Producer statements are not specifically referred to in the Building Act 2004, but remain in wide use for helping establish compliance with the Building Code despite having no specific status under the Act.
[41] The Auckland Council has now produced its own policy for the acceptance of producer statements.4 It breaks down producer statements into two categories – design and construction. Within the design category there are two types of statements issued; producer statement design and producer statement design review. Within the construction category, there are also two types of statement issued; producer statement construction and producer statement construction review.
[42] Although two of Mr Park’s producer statements are headed “Producer Statement - Construction Review”, they are better categorised as producer statements construction, being statements issued by a person who has performed the building work as confirmation that the building work is in accordance with the consented plans and the Building Code. These statements are issued when the Council have had limited or no involvement with specific elements of construction, such as pile driving, application of waterproofing membranes, specialist coating and cladding systems etc.
[43] The Council sets out a large number of conditions of acceptance of such producer statements. Mr Park’s producer statements would not now be accepted by the Council as they do not meet several of the conditions. For example, a person who applies a waterproof membrane, such as Mr Park, must be on a register of approved persons if he wishes to provide a producer statement in relation to it.
[44] Two questions arise in the present case. First, can the producer statements drafted and/or signed by Mr Park amount to building work so Mr and Mr Kwak’s claim is not time-barred? Second, is the relationship between Mr Park, as the author of the statements, and Mr and Mrs Kwak, as a subsequent purchaser, sufficiently
proximate for a duty of care to arise?
3 Ministry of Business, Innovation and Employment, Guidance on the acceptance of producer statements.
4 Auckland Council AC 2301 Producer Statement Policy.
Time Bar
[45] The first question arises because of statutory criteria set out in the WHRS Act and the Building Act 2004. To be an eligible claim under the WHRS Act, s 14 sets out several criteria for affected dwelling houses. The first is that it must have been
‘built’ before 1 January 2012 and within the period of 10 years immediately before the day on which the claim is brought.5
[46] The Supreme Court considered the meaning of ‘built’ in Osborne v Auckland Council.6 It held that the intention in s 14(a) of the WHRS Act was to align the eligibility criteria with s 393 of the Building Act 2004.7 The word ‘built’ in s 14(a) must have been intended to be construed by reference to the expression ‘building work’ in s 393.8
[47] Section 393 provides:
393 Limitation defences
(1) The Limitation Act 2010 applies to civil proceedings against any person if those proceedings arise from—
(a) building work associated with the design, construction, alteration, demolition, or removal of any building; or
(b) the performance of a function under this Act or a previous enactment relating to the construction, alteration, demolition, or removal of the building.
(2) However, no relief may be granted in respect of civil proceedings relating to building work if those proceedings are brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.
(3) For the purposes of subsection (2), the date of the act or omission is,—
(a) in the case of civil proceedings that are brought against a territorial authority, a building consent authority, a regional authority, or the chief executive in relation to the issue of a building consent or a code compliance certificate under Part
2 or a determination under Part 3, the date of issue of the consent, certificate, or determination, as the case may be; and
5 Weathertight Homes Resolution Service Act 2006, s 14(a).
6 Osborne v Auckland Council [2014] NZSC 67, [2014] 1 NZLR 766.
7 At [26]–[27].
8 At [26]–[27].
(b) in the case of civil proceedings that are brought against a person in relation to the issue of an energy work certificate, the date of the issue of the certificate.
[48] Building work is in turn defined in s 7 of the Building Act 2004 as follows:
7 Interpretation
In this Act, unless the context otherwise requires,—
building work—
(a) means work—
(i) for, or in connection with, the construction, alteration, demolition, or removal of a building; and
(ii) on an allotment that is likely to affect the extent to which an existing building on that allotment complies with the building code; and
(b) includes sitework; and
(c) includes design work (relating to building work) that is design work of a kind declared by the Governor-General by Order in Council to be restricted building work for the purposes of this Act; and
(d) in Part 4, and the definition in this section of supervise, also includes design work (relating to building work) of a kind declared by the Governor-General by Order in Council to be building work for the purposes of Part 4
[49] The essential question is therefore – was the completion of the producer statements by Mr Park “work for, or in connection with, the construction of a building”?
[50] In my view, it was. First, the completion of producer statements is work, which can be defined as exertion or effort directed to produce or accomplish something. There is no logical reason why the ordinary meaning of work should not apply or the definition be restricted to physical work. Second, the work of completing a producer statement is in connection with the construction of a building, just as much as the physical work of applying a waterproof membrane.
[51] I note that the earlier definition of building work in the Building Act 1991 did not specifically include design work. The fact that the definition of building work was expanded in the Building Act 2004 to specifically include design work does not mean, however, that the completion of producer statements does not fall within the
definition. Design work in general has been held to be within the meaning of construct.9
[52] There is no reference to certification in s 14(a) of the WHRS Act, but as the
Supreme Court commented in Osborne:10
The apparent omission in relation to certification is, however, remedied once it is realised that the word “built” [in s 14(a)] must have been intended to be construed by reference to the expression “building work” in s 393 of the Building Act, which does encompass certification.
[53] So we now have both design and certification falling within the statutory definition of building work. It would be anomalous if the definition of building work was interpreted to exclude the completion of producer statements, which, in my view, are just as much building work as design and certification.
[54] Ms Roche had difficulty accepting that the producer statements signed by Mr Park fell within the definition of building work because they were indeed statements and related to acts such as the application of waterproofing membranes that were limitation barred having occurred more than ten years prior to the claim being brought. Although they are indeed statements, producer statements are properly viewed as an integral part of the building process. A building is unlikely to receive a code compliance certificate without them.
[55] The Auckland Council notes that producer statements construction are generally issued at the time of construction.11 In the present case, however, Mr Park only drafted and signed the producer statements because he wanted a code compliance certificate when he came to sell the house. Because he did so within the ten years prior to Mr and Mrs Kwak’s application for an assessor’s report, the claim by Mr and Mrs Kwak is, in my view, not time barred. However, only Mr Park’s drafting and signature of the producer statements fall within the ambit of the claim as
the actual application of the waterproof membrane and the other work specified in
the producer statements occurred more than ten years previously.
9 Carter Holt Harvey Ltd v Genesis Power Ltd (No 8) HC Auckland CIV-2001-404-1974, 29
August 2008.
10 Osborne v Auckland Council, n 5 at [27].
11 Auckland Council AC2301, Producer Statement Policy at 4.1(e).
Duty of care
[56] The second question arises because I have found that Mr and Mrs Kwak’s claim is not time barred. The second question is whether the relationship between Mr Park, as author of the statements, and Mr and Mrs Kwak, as the subsequent purchasers, is sufficiently proximate for a duty of care to arise. There is some case law on the issue.
[57] In Pacific Independent Insurance Ltd v Webber & Ors, the managing director of Mineral Plaster Technologies Limited signed a producer statement in relation to the coating applied to the cladding of a building after it had been inspected by an employee of the company.12 The coating had earlier been applied by another person.
[58] Lang J noted that the Courts have imposed a duty on Councils in relation to the issue of code compliance certificates, which extends to intending purchasers of the property, but that the community does not rely in the same way upon the issuer of a producer statement, although the person to whom the statement is addressed may rely upon it for a particular purpose, and the Council may rely upon it in deciding to issue a code compliance certificate. Lang J held that in the case before him, the relationship between the plaintiff, a subsequent purchaser of the property, and the managing director of Mineral Plaster Technologies Limited was not sufficiently proximate for a duty of care to arise. Lang J also held that the plaintiff did not rely in any way on the inspection by Mineral Plaster Technologies Limited or the producer statement when it acquired the property. There was no causal nexus between the allegedly negligent acts of Mineral Plaster Technologies Limited and any loss that the plaintiff may have suffered. Summary judgment was given in favour of Mineral Plaster Technologies Limited.
[59] I am, however, of the view that this case can be distinguished from the present case not only because the person who signed the producer statement did not undertake the work, but also because a code compliance certificate was never issued
for the building.
12 Pacific Independent Insurance Ltd v Webber HC Auckland CIV-2009-404-4168, 24 November
2010.
[60] In Judge v Dempsey & Ors, MSC Consulting Group Limited acted as engineers for the design and construction of two adjoining properties.13 It later issued a producer statement addressed to Auckland City Council, which certified that the specified work complied with the Building Code. Code compliance certificates were then issued by a private certifier. All the work undertaken by MSC Consulting Group Limited, except the issue of the producer statement, was undertaken more
than ten years before the proceedings were filed. Osborne AJ refused an application for summary judgment by MSC Consulting Group Limited on the basis that he was unable to conclude that there was incontrovertibly no duty of care and that the plaintiffs had not relied on the producer statement.
[61] This case has more parallels with the present case, in my view, as the person who signed the producer statement undertook the work which was the subject matter of the statement.
[62] I start with the principle enunciated by the Court of Appeal as long ago as
1976 in Bowen v Paramount Builders that a builder is liable for the negligent creation of a hidden defect, which is a source of danger to third persons whom he ought reasonably to foresee are likely to suffer damage either in the form of personal injury or injury to property.14 This includes subsequent purchasers.15 Where a latent defect created by the builder’s negligence caused damage to the structure, an action for damages will lie on the ground of it being physical damage.
[63] Lang J in Pacific Independent Insurance Ltd v Webber referred to the lack of reliance by a subsequent purchaser on a producer statement issued in relation to the coating applied to the cladding of a building. However, as emphasised by Chambers J in the Spencer on Byron case, reliance has only a limited role to play in the tort of negligence.16
[199] We also consider the linkage between alleged vulnerability and reliance to be misplaced. Reliance has only a limited role to play in the tort of negligence, as opposed to the tort of negligent misstatement, where
13 Judge v Dempsey [2014] NZHC 2864.
14 Bowen v Paramount Builders (Hamilton) Ltd and Another [1977] 1 NZLR 394 (CA).
15 At 418.
16 Body Corporate No 207624 v North Shore City Council [Spencer on Byron] [2012] NZSC 83, [2013] 2 NZLR 297 at [199].
(specific) reliance is an essential feature in the chain of causation … Some have since interpreted Hamlin as if, in some vague way, it introduced an element of reliance into the tort. It did not.
[64] I accept that the hidden or latent defects, such as the substandard waterproofing membrane, were all first negligently created more than ten years before Mr and Mrs Kwak lodged their claim, but those hidden or latent defects were able to remain hidden or latent because of the producer statements drafted and/or signed by Mr Park within the ten year period. The two events are inextricably linked because in drafting and/or signing the producer statements it is to be inferred that Mr Park drew on his own records and/or memory of the work he had earlier undertaken.
[65] Although there is no requirement to show reliance by Mr and Mrs Kwak on the producer statements, there is, in my view, a sufficient causal connection between the loss suffered by Mr and Mrs Kwak and the drafting and/or signing of the producer statements. The property had been initially sold without a code compliance certificate. A substantial sum of money was withheld by the initial purchaser until it was obtained. The code compliance certificate was only obtained because Mr Park drafted and/or signed the producer statements.
[66] Mr and Mrs Kwak as subsequent purchasers would not have bought the property unless it had a code compliance certificate, backed as necessary by the producer statements. The building report obtained by Mr and Mrs Kwak referred to the code compliance certificate, giving it real weight. It stated in part:
The roofing membrane is of an unknown type however appears to be adequate for its intended use. The dwelling has been issued with a final Code Compliance Certificate by the council and appears to generally be in good condition. I did note however a small section of localised deterioration where the surface of the membrane has been penetrated. The penetration does not extend through the thick membrane and there are no indications of any leaks or moisture ingress. I would recommend that a roofing contractor experienced with this type of roofing membrane be engaged to affect [sic] the required repairs.
[67] Mr Kwak attempted repairs himself after he and his wife had bought the property, but all to no avail as the hidden or latent defects became obvious over time.
[68] There are, in my view, no policy reasons why liability in negligence should not attach to the producer statements in this case. In saying so, I intend no rule of general application. However, in this case Mr Kwak was the builder, he undertook the earlier negligent work himself, he drafted and/or signed the producer statements in order to obtain a code compliance certificate, he sold the house, the initial purchaser withheld a substantial sum of money until Mr Park obtained the code compliance certificate and any profit made on the sale went to Mr Park and his wife.
Causation
[69] Ms Roche found that even if she was to find that a duty of care was owed by Mr Park to Mr and Mrs Kwak, the issue of causation was problematic. This was because, of the four producer statements, only two were linked to defects. She did accept that membrane related defects were a significant component of the damage, but said they were not the sole cause of the damage.
[70] With respect, the damage to the house need not be solely caused by failures in the waterproofing of the roof, decks, gutters and parapets, which are the subject of two of the producer statements. It is enough, in my view, if the failure of the waterproofing is a cause, which is substantial and material:17
Substantial in this sense means more than trivial or de minimis. Material means that the alleged cause must have been a real influence on the occurrence of the loss or damage in suit.
[71] One of the expert witnesses, Mr Ford, found that the roof membrane had been failing for years and causing significant damage to the ceiling lines and likely damage to the framing directly below. There were faults in the cladding as well, but it would be impossible to apportion the damage to the framing between water damage caused by the negligent application of the waterproofing membrane to the roof and the water damage caused by the negligent application of the cladding. The roofs, decks, gutters and parapets covered the whole of the house. The house had
flat roofs and water could pond or travel anywhere, depending on wind and rain.
17 Johnson v Watson [2003] 1 NZLR 626 (CA) at [18].
[72] There are also three decks, one on the first floor and two on the second floor. The other expert witness, Mr Maiden, cut out a section of timber below one of the decks. The decay of timber was extreme, free water could be seen around an outlet pipe and timber decay to the area around the pipe was saturated. It was Mr Maiden’s opinion that water was gaining access in and around the pipe due to the poor sealing of the liquid applied membrane to the deck.
[73] Mr Ford also investigated the balustrades and parapets. He removed a section of the top of one balustrade to determine the construction detail. There was only one layer of fibreglass mat imbedded in the plaster. There was no sign of any other membrane which should have been installed to prevent water entry. There were several cracks in the top surface of this balustrade. Mr Ford, therefore, opened another small section of cladding, which revealed decayed framing directly below the cracks in the balustrade.
[74] All in all, I am of the view that the failure of the waterproofing of the roof, decks, gutters and parapets, which was the subject of two of the producer statements drafted and/or signed by Mr Park, was a substantial and material cause of all the damage identified. The producer statements certifying that the waterproofing complied with the requirements of the Building Code are, in my view, sufficient to find Mr Park liable in negligence for the damage to the house.
[75] In considering causation, I have also reviewed the Tribunal’s finding on contributory negligence, but I see no reason to depart from the Tribunal’s view on that issue.
Was Mr Park a developer?
[76] The question of whether Mr Park was a developer is, in my view, immaterial because the acts or omissions relied upon by Mr and Mrs Kwak as establishing Mr Park’s liability are his own acts or omissions as the builder of the house in drafting and/or signing the producer statements. A developer may, in some circumstances, be liable for the building work undertaken by others because he or she has a non-delegable duty of care, but that is not the case here. Nonetheless, Mr Park has cross-appealed against the adjudicator’s finding that he was the developer.
[77] Counsel accepts that Ms Roche correctly identified the proper test for determining whether a person is a developer. That test has two components. One is control over the building process; the second is the profit motivation.18
[78] Ms Roche accepted that Mr Park was not a developer in the sense of being in the business of constructing multiple homes for profit. Nevertheless, she held that Mr Park was a developer when he built the house for the following reasons:
(a) Although Mr Park and his wife gave evidence of their difficult financial circumstances while the house was being built, neither claimed that these circumstances had been unexpected.
(b)The building project was commenced in the knowledge that Mr Park would have no other income while he was building the house and neither he nor his wife claimed unexpected cost over-runs.
(c) Mr Park chose to construct a large house rather than a more modest dwelling he claimed to have originally envisaged. This was a deliberate decision with cost implications that could not have been unexpected.
(d)Mr Park now sold real estate and his profile on the Ray White website stated that after working for Window Treatments [installing blinds], he spent seven years as a building contractor and developer.
[79] Counsel submits that the adjudicator was wrong to hold that he was a developer because he did no more than build a home for his family in which they subsequently lived. Counsel does accept that there is no single piece of evidence that is determinative of this issue. Rather, it is necessary to consider all of the evidence in total and its cumulative effect.
[80] Counsel points to Mr Park’s evidence that he sold his modest home in
Henderson in August 1998 in order to purchase the section at 27 Ian Marwick Place
18 Body Corporate 187820 v Auckland City Council (2005) 6 NZCPR 536 (HC) at [27]; Body
and build his family’s “dream home”. Even though Mr Park was GST registered there was no evidence that the funding, taxation or GST arrangements in relation to the construction of house were indicative of, or, consistent with a commercial purpose. Although Mr Park had originally planned to construct a three-bedroom house of approximately 120 square metres, he was persuaded by the designer to build a larger house because a smaller house would have a significant size to cost ratio.
[81] Counsel also submits that, at the time of building the house, Mr Park and his wife did not have any intention to sell the property. The house was completed by December 2000, although a final inspection and code compliance certificate had yet to be obtained and Mr Park was able to generate income from other activities from that time. The problem was that Mr Park’s income continued to be lower between December 2000 and July 2001 and this caused considerable financial strain on the family. Mr Park’s evidence is that he decided to sell the family home only after a long discussion with his wife in July 2001. Further, it is submitted that Mr Park’s profile on the Ray White website ought to be disregarded as he did work as a developer in 2002, but that it was Mr Park’s intention at the time of building the house that was relevant.
[82] Mr Park acknowledges that he did establish a building company, Mario Construction and Services Limited, on 24 April 2002 and built a house in Northcote for on-sale, but nevertheless, at the time of construction of the house at 27 Ian Marwick Place, Mr Park had no building qualifications nor did he have any building experience apart from his handyman work.
[83] The standard of review on a general appeal is that in Austin, Nichols.19 Being the appellant on this point, it is Mr Park who has the onus of satisfying this Court on appeal that it should differ from the finder of fact. Mr Park must show why Ms Roche, on facts that were not disputed and a legal standard that was agreed, was
wrong to come to the conclusion that she did.
19 Austin, Nichols & Co Inc v Stiching Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4] –[5]
[84] Mr Park is unable to satisfy me that Ms Roche got it wrong. I am of the view that her determination that Mr Park was a developer was one that was open to her on the evidence. Ms Roche held that Mr Park was a developer and made clear factual findings that rejected the evidence of Mr Park that he built the house as a personal residence for his family. There is no proper basis for this Court to overturn that factual finding on appeal. Mr Park’s cross-appeal is therefore dismissed.
Result
[85] The appeal by Mr and Mrs Kwak is allowed. The decision of the Weathertight Homes Tribunal, dated 16 June 2015, disallowing Mr and Mrs Kwak’s claim is quashed. Judgment is entered in favour of Mr and Mrs Kwak against Hyun Su Park (also known as Mario Park) for the full amount of the quantum of damages specified in the determination of the Tribunal. The cross-appeal by Mr Park against the Tribunal’s finding that he was a developer is dismissed.
[86] Mr and Mrs Kwak are entitled to costs. If these cannot be agreed, a memorandum should be filed by Mr Park by 14 April 2016 and a memorandum from Mr and Mrs Kwak by 28 April 2016. I will then determine the issue of costs on the papers.
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Woolford J
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