Lee, Kim and Beveridge v North Shore City Council HC Auckland CIV 2009-404-2091
[2010] NZHC 498
•12 April 2010
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2009-404-002091
BETWEEN ALICE EUNG SOON LEE, JONG HO
KIM AND MARCUS BEVERIDGE AS TRUSTEES OF THE ROY FAMILY TRUST
Plaintiffs
ANDNORTH SHORE CITY COUNCIL First Defendant
ANDRODNEY DAY RUNDSTROM AND DIANE ELIZABETH RUNDSTROM Second Defendants
Hearing: 22 February 2010
Appearances: C Cato for Plaintiffs
M A Cavanaugh for First Defendant
J M Holland for Second Defendants
Judgment: 12 April 2010 at 11:00 am
JUDGMENT OF ASSOCIATE JUDGE BELL
This judgment was delivered by me on 12 April 2010 at 11:00 am
pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………….
Solicitors/Counsel:
Hayden Tate Ltd, PO Box 47640, Ponsonby, Auckland
Heaney & Co., PO Box 105391, AucklandRoger Donnell, PO Box 334 050, Sunnynook, Auckland
J M Holland, PO Box 7204, Wellesley Street, Auckland
A E S LEE, J H KIM AND M BEVERIDGE AS TRUSTEES OF THE ROY FAMILY TRUST V NORTH
SHORE CITY COUNCIL AND ANOR HC AK CIV-2009-404-002091 12 April 2010
[1] In this leaky home litigation the second defendants, former owners of the property in question, apply for summary judgment against the plaintiffs and the first defendant’s cross-notice. At the end of the hearing, I indicated the orders I proposed
to make. The second defendants’ summary judgment application against the plaintiffs would be dismissed because the plaintiffs’ cause of action in tort against the second defendants was tenable, although the second cause of action in tort was out of time under the Building Act 2004. Summary judgment would not be given on the second defendants’ cross-claim against the first defendant. While the first defendant’s cross-claim for contribution under the Law Reform Act 1936 was statute-barred as being out of time under the Building Act, the pleading could be amended to show a proper claim for equitable contribution. Counsel for the first defendant then asked for time to file further submissions on the matter of the first defendant’s cross-claim for contribution under the law Reform Act being statute- barred, that not being a matter that had been developed extensively in argument. I accordingly gave directions for the first defendant to file further submissions and allowed time for the second defendants to file submissions in reply.
[2] On 1 March 2010, the first defendant filed a brief memorandum. The first defendant discontinued its cross-claim for contribution under the Law Reform Act
1936 against the second defendants. The memorandum also advised that the first defendant intended to file a cross-claim against the second defendants seeking contribution in equity.
[3] I now give my reasons.
[4] The dates of filing of pleadings in this proceeding are as follows:
9 April 2009 Statement of claim
18 May 2009 Second defendants’ statement of defence
21 May 2009 First defendant’s statement of defence and first defendant’s cross-notice against second defendants
24 July 2009 Second defendants’ application for summary judgment against plaintiff and first defendant
30 September 2009 Plaintiffs’ amended statement of claim
19 October 2009 First defendant’s notice of opposition to second defendants’ application for summary judgment
18 February 2010 Plaintiffs’ notice of opposition to application for summary judgment application
[5] The first and second defendants also filed supplementary affidavits. Both defendants have also filed affidavits of documents. There was no submission that discovery was incomplete or that further discovery was required.
[6] There are two preliminary procedural issues. The first is that the application
for summary judgment was filed out of time. Neither the first defendant nor the plaintiff opposed the grant of leave. They were not prejudiced by the application having been filed out of time. Indeed, the second defendants’ discovery of documents provided the first defendant with material it raised in opposition to the application. Leave to apply is granted accordingly under r 12.4(3).
[7] The second issue is that whereas r 12.2(2) of the High Court Rules allows a defendant to apply for summary judgment against a plaintiff, the rules do not expressly provide for one defendant to apply for summary judgment against another defendant. Had the second defendants been joined as a third party, they could have applied for summary judgment against the party joining them, as r 4.7(2) gives a third, fourth and subsequent parties the same rights as a defendant. Those rights include the right to apply for summary judgment.
[8] Initially, I considered that the right of a defendant to bring a summary judgment application against another defendant might be allowed by resort to r 1.6 of the High Court Rules. On further consideration, the omission of summary judgment applications between defendants appears to be deliberate. A successful summary judgment application enters judgment against the unsuccessful party and that judgment operates as an estoppel. Under r 4.22, the court retains the power to give a judgment and relief as between defendants, even in the absence of a cross-notice. As the court retains this power to apportion liabilities between defendants, even in the absence of pleaded cross-claims, the entry of summary judgment by one defendant against the other before the court has made its determination of liabilities between
the defendants is pre-emptive. Accordingly, the second defendants’ application for summary judgment can at best achieve no more than a strike out of the first defendant’s cross notice.
Principles applied on summary judgment applications by defendants against plaintiffs
[9] In Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2
NZLR 298 (CA), the Court of Appeal said:
[58] The applications for summary judgment were made under R 136(2)
of the High Court Rules which permits the Court to give judgment against the plaintiff “if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed”.
[59] Since R 136(2) permits summary judgment only where a defendant satisfies the Court that the plaintiff cannot succeed on any of its causes of action, the procedure is not directly equivalent to the plaintiff’s summary judgment provided by R 136(1).
[60] Where a claim is untenable on the pleadings as a matter of law, it will not usually be necessary to have recourse to the summary judgment procedure because a defendant can apply to strike out the claim under R 186. Rather R 136(2) permits a defendant who has a clear answer to the plaintiff which cannot be contradicted to put up the evidence which constitutes the answer so that the proceedings can be summarily dismissed. The difference between an application to strike out the claim and summary judgment is that strike-out is usually determined on the pleadings alone whereas summary judgment requires evidence. Summary judgment is a judgment between the parties on the dispute which operates as issue estoppel, whereas if a pleading is struck out as untenable as a matter of law the plaintiff is not precluded from bringing a further properly constituted claim.
[61] The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim. Examples, cited in McGechan on Procedure at HR 136.09A, are where the wrong party has proceeded or where the claim is clearly met by qualified privilege.
[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence. Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and the legal issues. Although a legal point may be as well decided on summary judgment application as at trial if sufficiently clear (Pemberton v Chappell
[1987] 1 NZLR 1), novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.
[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff’s claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit), to force on the plaintiff’s case prematurely before completion of discovery or other interlocutory steps and before the plaintiff’s evidence can reasonably be assembled.
[64] The defendant bears the onus of satisfying the Court that none of the claims can succeed. It is not necessary for the plaintiff to put up evidence at all although, if the defendant supplies evidence which would satisfy the Court that the claim cannot succeed, a plaintiff will usually have to respond with credible evidence of his own. Even then it is perhaps unhelpful to describe the effect as one where an onus is transferred. At the end of the day, the Court must be satisfied that none of the claims can succeed. It is not enough that they are shown to have weaknesses. The assessment made by the Court on interlocutory application is not one to be arrived at on a fine balance of the available evidence, such as is appropriate at trial.
[10] The present application involves limitation issues. There are similarities between the approach taken to limitation on strike-out applications and an application for summary judgment based on limitation issues. Accordingly, the strike-out authorities are helpful. The leading New Zealand decision is Matai Industries Ltd v Jensen [1989] 1 NZLR 525. Tipping J referred to English authorities. At 532 he said:
If the plaintiff in opposition to the defendant’s proposition can show that it has a fair argument that the claim is not statute barred or that the limitation period does not apply or is extended for any reason, then of course the matter must go to trial. To hold the interests of plaintiffs and defendants in fair balance in this context the Court should in my view be slow to strike out a claim or cause of action altogether in limine but against that, if the position is quite clear, then a defendant should not be vexed by having to go to full trial when the answer is obvious and inevitable.
Background
[11] The plaintiffs are the owners of a property at 41 Aberdeen Road, Castor Bay, Auckland. They are the trustees of the Roy Family Trust. Two of the plaintiffs live
at the property. On 27 October 2003, they entered into an agreement for the purchase of the property. The vendors in the agreement are described as Rodney
Day Rundstrom and Diane Elizabeth Rundstrom. The agreement was unconditional and settled in December 2003.
[12] The agreement used the seventh edition of the Auckland District Law Society/Real Estate Institute of New Zealand Agreement for Sale and Purchase. The general conditions contained this warranty:
6.2(5) Where the vendor has done or caused or permitted to be done on the property any works for which a permit or building consent was required by law:
(a) the required permit or consent was obtained; and
(b) the works were completed in compliance with that permit or consent; and
(c)where appropriate, a code of compliance certificate was issued for those works; and
(d)all obligations imposed under the Building Act 1991 were fully complied with.
[13] The second defendants say that they bought the property at 41 Aberdeen
Road, Castor Bay in about 1989. From 1996 onwards, there was a building project
at the property. The Rundstroms instructed an architectural draftsman to prepare plans to extend and renovate the property. The plans were prepared by November 2006.
[14] In December 1996, the Rundstroms applied to the North Shore City Council
for a building consent to undertake alterations to the living areas and decks of the property. The North Shore City Council issued a building consent in April 1997. There was construction work on the property during 1997. The Rundstroms say that the last builder was off site before the end of 1997. A painting contractor completed the painting of the property in January 1998 and they were able to use the extension to the house in January 1998 when they returned home from holiday.
[15] North Shore City Council building inspectors inspected the project during
1997. The first inspection was on 3 July 1997 and the last on 4 November 1997. There was a further “final building inspection” on 18 May 1999. The Council issued
a code of compliance certificate under s 43 of the Building Act 1991 on 28 January
2000. The date of completion of particular work is relevant to limitation issues and
is considered later.
[16] Mr Rundstrom attached to his affidavit the first page of an agreement for sale and purchase dated 27 March 2000. This showed the sale by him and his wife of their respective shares as tenants in common in the property to Rodney Day Rundstrom and Diane Elizabeth Rundstrom as trustees of the R D Rundstrom Family Trust and to Diane Elizabeth Rundstrom and Rodney Day Rundstrom as trustees of the D E Rundstrom Family Trust. The second defendants did not produce copies of the trust deeds for these family trusts. The Court was invited to accept that these trusts existed. That is not satisfactory. To prove that the Aberdeen Road property was held on express written trusts, the trust deeds ought to have been produced. The second defendants did not give any evidence who the beneficiaries of these alleged family trusts were. Their counsel accepted that there was no change in the ownership of the legal estates in 41 Aberdeen Road, whatever the position might have been as regards beneficial interests.
[17] The plaintiffs’ case is that in November 2008, they became concerned that the house was a leaky building. They arranged for the property to be inspected and a report written by consultants. The defects in the plaintiffs’ pleadings are:
No Non-Compliant Building Work/Building Defects
1.Harditex exterior wall cladding taken down hard onto tiled deck surfaces allowing moisture to penetrate exterior wall cladding
2.Doorframe installed and taken down hard against tiled deck surfaces allowing moisture to penetrate cladding
3.Penetrations through Harditex wall cladding have not been sealed or have been inadequately sealed
4.Handrail stanchions affixed directly to deck balustrades and inadequately sealed allowing moisture ingress
5. No cap flashings or membrane to deck balustrades
6.Membrane to the mid-level deck has been laid in front of the cladding allowing moisture to penetrate membrane
7.Awning (above mid-level deck) on north elevation fixed directly onto exterior cladding
8.Doors to decks have been installed onto the deck surface without a proper threshold allowing ingress of water into wall frame
9.Window sill flashings on the south elevation are unsealed and wrongly lapped sill flashings
10.Aluminium windows have been installed without head flashings
11. No fascia board installed to lean-to-roof on southern elevation
12.Membrane wrapping outlets to roof above kitchen (facings east) not sealed
13.Membrane in internal gutter to main roof inadequately bonded with lapping tape at joint locations
14.Inadequate sealing of windows and glass blocks permitting moisture to enter the structure of the dwelling
[18] The statement of claim and the amended statement of claim plead one cause
of action in tort against the North Shore City Council for alleged negligence in the issue of the building consent, inspections of building work, and failure to identify defects. The same pleadings set out two causes of action against the second defendants. The first is for breach of the warranty under general condition 6.2(5). The second is for negligence in carrying out the building work. For all causes of action in both pleadings, the plaintiffs seek damages of $430,000 for repair costs, a further unstated sum for diminution in value said to arise from the stigma of having a leaking building, judgment for other consequential costs, interest and costs.
[19] Paragraph 3 of the original statement of claim said:
The second defendants were the vendors from whom the plaintiffs purchased the property in October 2003.
[20] Paragraph 3 of the amended statement of claim now says:
The second defendants are the trustees of the R D Rundstrom Family Trust and the D E Rundstrom Family Trust, which were the vendors from whom the plaintiffs purchased the property by private treaty pursuant to an agreement for sale and purchase dated 27 October 2003.
[21] The other differences between the statement of claim and the amended statement of claim are inconsequential for the present application.
[22] In their application for summary judgment, the second defendants say that the plaintiffs’ claim against them for breach of vendors’ warranty is dependent upon there being a sale and purchase contract between the plaintiffs and the second defendants. The second defendants allege that there was no such contract, because they say the plaintiffs purchased 41 Aberdeen Road from the R D Rundstrom Family Trust and the D E Rundstrom Family Trust, not from then personally. They say that
as they were not the vendors who sold 41 Aberdeen Road in October 2003, the plaintiffs have no cause of action in contract against them.
[23] For the plaintiffs’ cause of action against them in negligence, the second defendants say that the claim is statute-barred under s 91 of the Building Act 1991 or
s 393 of the Building Act 2004. In support of that they say that the building work complained of was completed in December 1997 but certainly no later than 28
February 1998. They say that that is outside the 10 year long-stop period under the Building Acts. They also say that the same limitation provision applies to the first defendant’s cross-notice against them.
[24] Further, in the course of the hearing, Mr Holland, counsel for the second defendants, developed an argument that the plaintiffs’ claim in contract under the vendors’ warranty was also statute-barred, both under the Limitation Act 1950 and under the Building Acts.
[25] The applicable Building Act is the Building Act 2004. Section 415 of that
Act repealed the Building Act 1991. There is no saving provision for s 91 of the
1991 Act. Section 393 of the Building Act 2004 is the limitation provision that must
be considered:
393 Limitation defences
(1) The provisions of the Limitation Act 1950 apply 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, civil proceedings relating to building work may not be 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
(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.
[26] One matter in issue in the proceedings that was not raised in the summary judgment application is whether the defendants owed a duty of care to the plaintiffs
for having actively undertaken building work, as in Gardiner v Howley (1995) ANZ ConvR 521 (HC) or whether they were simply owners of the property who employed contractors but did not actively engage in the building process themselves (as in Riddell v Porteous [1999] 1 NZLR 1 (CA)). The second defendants recognise that that is a trial issue.
[27] The second defendants’ summary judgment application raises these issues:
a) What is the relevance of the alleged trusteeship for the plaintiffs’
claim against the second defendants in contract?
b)Is the plaintiffs’ claim against the second defendants in contract statute-barred under either the Limitation Act 1950 or the Building Act 2004?
c) What is the relevance of the alleged trusteeship for the plaintiffs’
claim against the second defendants in tort?
d)Is the plaintiffs’ claim against the second defendants in tort statute- barred under the Building Act 2004?
e) If the plaintiffs’ claim against the second defendants is statute-barred under the Building Act 2004, can the first defendant claim contribution against the second defendants under s 17(1)(c) of the Law Reform Act 1936?
f) If the first defendant’s claim under the Law Reform Act for contribution is statute-barred, does the first defendant have any other remedy against the second defendants?
What is the relevance of the alleged trusteeship for the plaintiffs’ claim against the second defendants in tort?
[28] The pleading of the plaintiffs’ cause of action for breach of vendor warranty
is that the second defendants are personally liable for the breaches of warranty. That
is the position in law. A trustee who enters into a contract is personally liable under the contract, unless the contract contains a provision that the trustee will not be personally liable: see HAJ Ford and W A Lee Principles of the Law of Trusts (2nd
ed. Law Book Company, Sydney, 1990) at [14.010]. One of the special features of liabilities incurred by trustees is that the creditor may be subrogated to any rights of the trustee to be indemnified out of the assets of the trust. That is an additional remedy for creditors, but in the absence of any contractual provisions to the contrary, it does not in any way reduce a trustee’s personal liability.
[29] The plaintiffs’ original statement of claim did not refer to the second defendants’ trusteeship. No doubt that was because the agreement for sale and purchase did not identify the second defendants as trustees. That statement of claim still effectively pleaded that the second defendants were personally liable on the vendors’ warranty.
[30] Paragraph 3 of the amended statement of claim, refers to the second defendants’ trusteeship. The heading of the amended statement of claim also refers
to them as trustees. Notwithstanding these references to the trusteeship, the pleading seeks judgment against the second defendants as being personally liable under the vendors’ warranty. That is a competent pleading.
[31] Mr Holland suggested that the plaintiffs’ amended pleading meant that the plaintiffs should have discontinued their claim against the second defendants personally before refiling their amended statement of claim against the second defendants as trustees. That is unnecessary. Common to both statements of claim
and to the plaintiffs’ position in this proceeding is that the second defendants are personally liable to them.
Is the plaintiffs’ claim against the second defendants in contract statute-barred under either the Limitation Act 1950 or the Building Act 2004?
[32] While limitation issues in respect of the warranty claim had not been raised in the application for summary judgment, Mr Holland raised them in argument. Under
s 4(1)(a) of the Limitation Act 1950, the six year limitation period runs from when the cause of action first arose. The earliest date on which the cause of action could have arisen is 27 October 2003, when the plaintiffs and the second defendants entered into the unconditional agreement for sale and purchase. The plaintiffs issued this proceeding against the second defendants in April 2009 and that was within the six year period. Mr Holland argued that the date of filing of the amended statement of claim (30 September 2009) is the correct date. I reject that because the personal liability of the second defendants is common to both pleadings. But even if the later date is taken, the proceeding is still within time.
[33] As to limitation under the Building Act 2004, there is divided authority. In Hamilton City Council v Rogers HC Hamilton 92/97, 23 April 1998, Robertson J held that the 10 year limitation period under s 91 of the Building Act applied even though there had been an agreement for sale and purchase that was within the six year period under the Limitation Act. That was a case where the building work in question had been carried out more than 10 years before the proceedings were brought. On the other hand, in Klinac v Lehmann (2002) 4 NZ ConvC 193,594, Glazebrook J held that in a claim for misrepresentation by a purchaser, relying on an agreement for sale and purchase entered into within six years of a counterclaim being filed, that the limitation period under the Building Act 1991 did not apply, even though the building work had been carried out some decades before. She held that the same approach would apply to a claim for a breach of contract under the agreement for sale and purchase. The essence of her decision is that a claim for misrepresentation inducing an agreement for sale and purchase of a property or based on a warranty in an agreement for sale and purchase is not a claim arising from the construction, alteration, demolition or removal of a building under s 91 of the
Building Act 1991 but is independent of the building work. I prefer the approach of Glazebrook J in Klinac v Lehmann. I note that Associate Judge Sargisson also followed Klinac v Lehmann in preference to Hamilton City Council v Rogers in South v Auckland City Council HC Auckland CIV-2008-404-5116, 20 August 2009. Applying Klinac v Lehmann, the vendor’s warranty under clause 6.2(5) of the agreement for sale and purchase is not for a proceeding arising from building work associated with the design, construction, alteration, demolition or removal of any building under s 393 of the Building Act 2004. Accordingly, the plaintiffs’ claim in contract is within time under both the Limitation Act 1950 and the Building Act 2004.
What is the relevance of the alleged trusteeship for the plaintiffs’ claim against the second defendants in tort?
[34] The second defendants’ position is that any liability of the second defendants
in tort to the plaintiffs is a personal liability, as they did not hold the property at 41
Aberdeen Road on trust at the time of the building work.
[35] While paragraph 3 of the amended statement of claim refers to the second defendants as trustees, the plaintiffs’ pleading against the second defendants seeks judgment against them personally. If it is thought that the plaintiffs’ pleading does not make this clear enough, it can be amended, and accordingly is not a proper case for striking out the plaintiffs’ claim against the second defendants, let alone summary judgment.
Can the second defendants establish that the plaintiffs’ claim against them is statute-barred under the Building Act 2004?
[36] It is helpful to consider how the limitation period under s 393(2) of the Building Act 2004 operates when a contractor comes onto a work site. The relevant acts or omissions of the contractor that may give rise to liability are typically the contractor’s acts or omissions while the contractor is working on site. In most cases, time will run, at the latest, from the date when the contractor completes his work. Often it will be possible to establish the date when the contractor left the site. Once
he has left the site, he is no longer engaged in contract work and time will have started to run under s 393(2). For sub-contractors, time might start running from an earlier date (for example, earthworks, foundation and structural contractors) than it would for the head contractor or for later trades, such as electricians, painters and interior decorators.
[37] The present case is different in that it is alleged that the former owners are subject to tortious liability as builders. What distinguishes them is that they did not leave the site. However, the approach above to determining when a building contractor is on or off duty points the way to determining when an owner, alleged to be a builder, is also on or off duty. The second defendants are said to be liable for having project managed the building work. Their liability is said to arise from their having engaged a number of contractors to carry out work and because they purchased materials for the job directly themselves. Mr Rundstrom has deposed that he did not personally carry out any building work, is not a tradesman, has no building experience and no qualifications in any construction trade. Nothing put forward by the plaintiffs or the first defendant suggests that that cannot be accepted. Accordingly, it is possible to determine when the second defendants were on or off duty as alleged builders by examining the evidence when they engaged contractors and when they paid for materials.
[38] In this regard, the second defendants’ discovery of documents has been useful as it has allowed the first defendant to place before the Court documents, in addition to those put in evidence by Mr Rundstrom, showing the periods when contractors were engaged and materials were purchased. The foundations contractor sent invoices in June and July 1997. The first builder’s last invoice was in September 1997. The second builder’s last invoice was in December 1997. The roofing contractor submitted a quote in August 1997 and a final invoice in September 1997. A waterproofing contractor submitted a quote in August 1997. The plasterer did his work in November 1997. Painting work was carried out in December and January 1997. The plumbing contractor sent in invoices over the period December 1997 to March 1998. Tiles for decks were invoiced in March 1998. There is no invoice from any contractor or materials supplier later than March 1998. All the defects in paragraph 11 of each statement of claim are for matters that
arise out of work undertaken by builders, joiners, plumbers and waterproofing contractors. All that work had been completed no later than March 1998.
[39] The latest date on which any acts or omissions could give rise to any liability
on the part of the Rundstroms as alleged builders is the end of March 1998. That is more than 10 years before the plaintiffs issued their proceeding in April 2009. The plaintiffs’ claim in tort against the second defendants is accordingly out of time under the Building Act.
[40] Against this, the Council raised these points:
a) The code of compliance certificate was issued only in 2000 and accordingly the Rundstroms were still on duty until then.
b)In any event, the date of completion is a trial issue and it would be unsafe to make findings of fact as to completion in the context of an application for summary judgment.
[41] On the code of compliance certificate, the evidence shows that when building inspectors of the Council inspected the Rundstrom property in 1999, there was a plumbing issue – specifically, the need for a tempering valve on a hot water cylinder, which they required the Rundstroms to attend to. The code of compliance certificate was issued only after this matter had been attended to. Whether the hot water cylinder had a tempering valve or not has nothing to do with the building defects the plaintiffs allege the second defendants are liable for. It is a relatively insignificant item which is outside the scope of the work said to give rise to the defects in issue in this case.
[42] The Council also argued that the Rundstroms were still on duty as builders up until the time of issue of the code of compliance certificate. It is understandable that the local authority would wish to extend the building owners’ liability up until that period, because the local authority itself can be liable up to that period of time under
s 393(3)(a). However, a builder’s liability is not necessarily co-terminous with a local authority’s. Clearly, some building contractors will come off duty far earlier
than others and far earlier than a local authority, which may remain on duty all the way through to the issue of a code of compliance certificate. Each case will turn on
its own facts.
[43] In this case, it is the Rundstrom’s alleged liability as builders during the construction phase that is in issue. While they did later obtain a code of compliance certificate, that was their responsibility as owner under s 43 of the Building Act 1991. That section does not require a building contractor to obtain a code of compliance certificate. An owner does not become a builder because he has applied for a code of compliance certificate.
[44] The documents put in evidence establish a clear position that all construction work which could give rise to any liability on the part of Mr and Mrs Rundstrom had finished by the end of March 1998 and it is unnecessary to leave this matter for trial.
Is the first defendant’s cross-notice against the second defendants statute- barred under the Building Act 2004?
[45] As the plaintiffs’ claim against the first defendant in tort is statute-barred under s 393(2) of the Building Act, the second defendants argue that the first defendant’s cross-notice is also statute-barred. The first defendant contends that its claim for contribution under s 17(1)(c) of the Law Reform Act 1936 is not subject to the 10 year limitation under s 393(2).
[46] A claim for contribution under s 17(1)(c) of the Law Reform Act by one tortfeasor against another tortfeasor is a civil proceeding relating to building work under s 393(2) of the Building Act. The difference between a primary claim and a contribution claim is that under a primary claim the claimant is the victim, whereas under a contribution claim the claimant is another tortfeasor, but both claims arise out of building work. The policy considerations for the limitation period under s 393(2) apply as much to contribution claims as to primary claims. Courtney J recognised this in Dustin v Weathertight Homes Resolution Service HC Auckland CIV-2006-404-276, 25 May 2006 at [23]:
The objective of a long stop period is to create finality by preventing claims being brought outside it. The inevitable result is that some, otherwise valid, claims will be precluded. However, that result is inherent in the concept and operation of the long stop period. Its purpose is to ensure fairness to all parties, given the effect of time on the freshness of memories and availability of witnesses. Further, it gives certainty for intended defendants so that they can plan such things as document destruction and liability insurance. These issues are just as relevant in the context of a claim for contribution as in a primary claim.
[47] In a claim for contribution under s 17(1)(c) of the Law Reform Act 1936,
s 14 of the Limitation Act 1950 fixes when the cause of action accrues:
14 Accrual of cause of action on claim for contribution or indemnity
For the purposes of any claim for a sum of money by way of contribution or indemnity, however the right to contribution or indemnity arises, the cause of action in respect of the claim shall be deemed to have accrued at the first point of time when everything has happened which would have to be proved to enable judgment to be obtained for a sum of money in respect of the claim.
[48] Effectively, this means that time runs from the earlier of a tortfeasor admitting a claim or judgment being entered. Where a tortfeasor is sued within time under s 4(1)(a) of the Limitation Act, that is, within six years of the cause of action accruing, the time when judgment is entered against the tortfeasor may be more than six years after the plaintiff’s cause of action in tort first accrued. In that case, time for a contribution claim under the Law Reform Act runs only from the date of entry of judgment.
[49] Under s 14 of the Limitation Act, the period during which a tortfeasor could bring a contribution claim could be more than 10 years after the original plaintiff’s cause of action first accrued. Section 17(1)(c) of the Law Reform Act makes it clear that a concurrent tortfeasor who is the subject of a contribution claim under
s 17(1)(c) cannot raise as a defence the fact that the tort for which he is alleged to be liable is now statute-barred. That is established by the words “in time” in s 17(1)(c). Without those words, the concurrent tortfeasor would have a defence that time had already run under s 4(1)(a) in respect of the tort for which he is sued. This was the position in England: George Wimpey & Co Ltd v BOAC [1955] AC 169 (HL). Accordingly, in a building case, if only s 393(1) applied (which preserves the provisions of the Limitation Act 1950, subject to s 393(2)), it is possible that someone who has carried out building work could be the subject of a claim for
contribution many years after the building work was completed. As an example, suppose a building owner brings proceedings in tort within five years of having suffered damage arising from building work. That building work may itself have happened some years before the damage occurred. The plaintiff obtains judgment against the defendant two years after issuing proceedings, that is, seven years after the accrual of the cause of action. Under s 14 of the Limitation Act, the defendant has a further six years to issue proceedings against a concurrent tortfeasor under s 4(1)(a) and (d) of the Limitation Act 1950.
[50] But this application of s 393(1) is overridden by the long-stop provision of
s 393(2). The long-stop defence under s 393(2) is available to those alleged to be liable on a contribution claim under the Law Reform Act 1936 in just the same way
as if sued directly by a building owner. Section 393(2) is clearly intended to override the application of the provisions of the Limitation Act 1950 under s 393(1). Among the provisions of the Limitation Act 1950 are s 35(2) and the Second Schedule, which inserted “in time” into s 17(1)(c) of the Law Reform Act 1936.
[51] In any event, s 393(2) prevails over the limitation provisions for contribution claims under the Law Reform Act and the Limitation Act under the principle of implied repeal, as described by Richardson J in Stewart v Grey County Council [1978] 2 NZLR 577 (CA) at 583.
[52] In Dustin v Weathertight Homes Resolution Service, Courtney J came to a similar conclusion and I gratefully adopt paragraphs [15] to [35] of her judgment. Like her, I respectfully disagree with John Hansen J’s decision in Cromwell Plumbing Drainage & Services Ltd v De Geest Brothers Construction Ltd (1995) 9 PRNZ 218 (HC).
[53] The second defendants completed their building work no later than the end of March 1998. The first defendant issued its cross-claim against the second defendants on 20 May 2009, approximately 14 months after the 10 year period under
s 393(2) of the Building Act 2004 expired. Accordingly, the cross-claim by the first defendant against the second defendants under the Law Reform Act 1936 is also statute-barred.
If the first defendant’s claim under the Law Reform Act 1936 is statute-barred, does the second defendant have some other claim for contribution?
[54] The position reached now is that the plaintiffs have an arguable case against the second defendants in contract, but not in tort because of the 10 year limitation under the Building Act 2004. The plaintiffs also have a cause of action in tort against the first defendant which is, on the face of it, within time under the Building Act. The effect of s 393(3) of the Building Act is that the relevant act or omission of the first defendant may be the issue of a code of compliance certificate occurred within 10 years of the commencement of the proceeding against the first defendant.
[55] As an alleged tortfeasor, the first defendant cannot claim contribution under the Law Reform Act 1936 against the second defendants, because the plaintiffs’ and the first defendant’s claim against them is out of time under the Building Act. In the past, the usual approach has been that the Law Reform Act only allows for claims for contribution among concurrent tortfeasors, but not among concurrent wrongdoers (that is, those sued in respect of different obligations, say, one sued in tort and another sued in contract). In McLaren Maycroft v Fletcher Development Co Ltd [1973] 2 NZLR 100 (CA), Richmond J noted at 117 that this was a very difficult question.
[56] Proposals to extend contribution claims to cover breaches of obligations arising both in tort or otherwise have not been enacted: see Stephen Todd (ed) The Law of Torts in New Zealand, (5th ed, Brooker, Wellington, 2009) at [24.402]. I doubt that I can find that at common law the first defendant as alleged tortfeasor can claim contribution from the second defendants as alleged contract breakers.
[57] In an early leaky building case, Karori Properties Ltd v Jelicich Austin Smith
& Davies [1969] NZLR 698 at 703, Speight J considered whether contribution was available at equity. He recognised that equitable contribution only arises when both parties are liable on a common demand, citing Smith v Cock [1911] AC 317 at 326. He held that in that case there was no common obligation of architects and builder towards the employer which would allow equitable contribution to be granted.
[58] There has been an advance on this approach in the second judgment of Wild J
in Altimarloch Joint Venture Ltd v Moorhouse HC Blenheim CIV-2005-406-91,
23 March 2009. In that case, purchasers of a property had succeeded in a misrepresentation claim (a contractual claim under the Contractual Remedies Act
1979) against the vendors and in tort against the local authority. Both the vendors and the local authority were defendants. Wild J held that there could be equitable contribution between the vendors and the local authority. The approach of Wild J was that although the vendors and the local authority have different types of liability, there is nevertheless a “common” liability that justifies the imposition of equitable contribution.
[59] In my judgment, the common liability which the first and second defendants may face is that they may be both found liable for the same damage under the plaintiffs’ claims against them in this proceedings in which they are both defendant. Goff and Jones, The Law of Restitution (7th ed) at [14–001] notes the potential scope for contribution claims:
It has long been held that at law and in equity, sureties, joint contractors, trustees, directors, partners, insurers, mortgagors and co-owners can as a general rule claim contribution from their co-obligors if they satisfy more than their proper share of the common debt. But contribution claims were and are not limited to these familiar situations. Any obligor who owes with another a duty to a third party and is liable with that other to a common demand should be able to claim contribution.
[60] It is the judgment of the Court finding both defendants liable for the damage suffered by the plaintiff that gives rise to the common demand referred to by Goff and Jones. On this basis, it is open to the first defendant to claim contribution in equity so that the Court can determine how any common liability for damages under the judgment is to be apportioned between the first defendant and the second defendants. This approach is consistent with that taken by Wild J in the Altimarloch case. However, it does not extend to allowing a defendant to have another person joined into the proceedings when they are not already a party. Joinder is not possible
if the parties are not under a common liability at the time of joinder. This approach applies only when common liability to a common demand is established under the judgment and the parties are already defendants to the proceedings.
[61] I summarise:
a) The second defendants’ application for summary judgment against the plaintiffs is dismissed because the plaintiffs’ cause of action in contract for breach of vendor warranty is not statute-barred. However, their second cause of action against the second defendants
is out of time under s 393(2) of the Building Act 2004.
b)Summary judgment cannot be given on the second defendants’ application against the first defendant. The first defendant’s cross- claim, relying on the Law Reform Act 1936, is out of time under s 393(2) of the Building Act 2004 and has now been discontinued. The first defendant is entitled to file and serve a cross-notice seeking equitable contribution for any common liability for damages under a judgment in this case.
[62] No party sought costs and I make no order as to costs.
R M Bell
Associate Judge
0
0
1