Lee v Auckland Council
[2015] NZHC 1196
•29 May 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-556 [2015] NZHC 1196
BETWEEN BU-RYE LEE AND JEOM-YOUL LEE
Appellants
AND
AUCKLAND COUNCIL First Respondent
GOODLAND INVESTMENTS LIMITED Second Respondent
LAI FOOK CHOY Third Respondent
Hearing: 26 May 2015 Appearances:
GR Grant for Appellants
SB Knight and SB Fellows for First Respondent
No appearance for Second Respondent
No appearance by or for Third RespondentJudgment:
29 May 2015
JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie
On 29 May 2015 at 4.30pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:………………………………
Solicitors:
Rainey Law, Auckland
Simpson Grierson, Auckland
LEE v AUCKLAND COUNCIL & ORS [2015] NZHC 1196
Introduction
[1] The appellants, Mr and Mrs Lee, appeal a procedural decision of the Weathertight Homes Tribunal made on 16 February 2015.1 The Tribunal ordered that the first respondent, Auckland Council, should be removed from the proceedings pursuant to s 112 of the Weathertight Homes Resolution Services Act 2006 (“the Act”).
[2] Auckland Council supports the Tribunal’s decision. The developer, Goodland Investments Limited (“GIL”) abides the decision of the Court. The third respondent, Mr Choy, was added to the proceedings by GIL. It is unclear whether he has yet been served. If he has been served, he has taken no steps to date and he did not appear.
Background
[3] Mr and Mrs Lee own a residential property in Albany Heights. Their house leaks, and in September 2014 they commenced adjudication proceedings in the Weathertight Homes Tribunal against Auckland Council and GIL, seeking to recover the estimated cost of repairing the house - $344,228 – plus consequential losses and general damages.
[4] The property was initially owned by GIL. On 24 December 2003 it was transferred by GIL to a Ms Ratcliffe. On the same day Ms Ratcliffe transferred the property to Jung Jin Kim, and, also on the same day, he transferred the property to Jong Ho Choi and Hyo Ja Woun. A little under a year later, on 15 December 2004, the property was transferred to Mr and Mrs Lee. The property was sold to Mr and Mrs Lee by private treaty. They knew the vendors.
[5] Auckland Council’s involvement in the construction of the house and the key events and dates are summarised as follows:
1 Lee v Auckland Council, TRI-2014-100-026, 16 February 2015.
DATE EVENT
21 March 2002
GIL applied to Auckland Council for building consent to build the house on the property.
28 March 2002
Auckland Council issued building consent. The cladding specified was 21mm solid plaster on battens.
May 2002
Building work started.
18 October 2002
Auckland Council carried out a pre-line inspection. The house failed the inspection for lack of insulation. The inspector noted that the exterior cladding had been changed from that shown on the approved building plans. He issued field memorandum
41222 which recorded that the owner was to provide amended drawings for the changed cladding for approval by Auckland Council.
25 October 2002
GIL lodged amended plans with Auckland Council showing a change to the cladding from solid plaster on battens to a product known as Insulclad. The change was a note added to the existing plans which read “wall cladding changed to Insulclad”. No further detail or drawings were provided. Auckland Council approved the amended plans on the same day.
31 October 2002
A cladding inspection was requested. An Auckland Council inspector attended the site but he declined to carry out the inspection – apparently at the direction of the Council’s Chief Building Officer. The inspector recorded that he informed the cladding installer that a Producer Statement – known as a PS3 - and a certificate from Plaster Systems Limited would be required.
18 November 2002 The first floor of the house passed a “post-line” inspection by
Auckland Council.
29 November 2002
The ground floor of the house passed a “post-line” inspection
by Auckland Council.
22 April 2003
The house failed a final inspection by Auckland Council. The inspector approved the ground clearance between the cladding and the adjacent ground and the installation of all window flashings. The inspector issued field memorandum 43401 noting 10 items which required completion. Cladding was not included in the list of outstanding items.
5 June 2003
The house failed a first final inspection re-check by Auckland Council. The inspector issued field memorandum 43070 noting nine items still requiring completion. Again cladding was not among the list of outstanding items.
20 June 2003
Auckland Council approved further amendments to the consented plans. None of the amendments related to the cladding.
13 November 2003
The house failed a second final inspection re-check by Auckland Council. There was no reference to cladding in the resulting report.
16 December 2003
Auckland Council sent a letter to GIL advising that the house was being assessed by the Council’s Code Compliance Certificate Resolution Team to determine whether it met Building Code requirements.
24 December 2003
Property transferred three times (see para 4 above).
19 February 2004 Auckland Council received a further application from GIL seeking to amend the building consent. The amended plans showed a change from Insulclad to Styroplast cladding. The application was accompanied by a producer statement from CFK Plasterers Limited dated 29 November 2002. It stated that the third respondent, Mr Choy, was an experienced plasterer and Styroplast applicator, that the cladding system installed on the house had been installed in accordance with manufacturer’s specifications and that it met Building Code requirements.
20 February 2004
Auckland Council advised GIL that the change to the cladding system would not be approved and that the application for a code compliance certificate would be referred to the relevant committee.
4 March 2004
A letter was sent by Auckland Council’s Code Compliance Certificate Resolution Team to Mr Kim (who did not then own the house) advising that a code compliance certificate would not be issued because Auckland Council was unable to verify that the cladding complied with relevant Building Code requirements.
15 December 2004
The property was transferred to Mr and Mrs Lee.
[6] Mr and Mrs Lee suspected leaking in their house, and on 3 August 2012, they applied to the Department of Building and Housing to have their house assessed. As noted in [3], they subsequently commenced the adjudication proceedings in the Weathertight Homes Tribunal in September 2014.
[7] On 21 November 2014 Auckland Council applied to be removed from the proceedings. Mr and Mrs Lee opposed the application for removal and the matter came on for hearing. The hearing proceeded on affidavits which had been filed. There was an affidavit from a Mr Logan, who is a senior technical specialist claims
officer employed by Auckland Council. Mr and Mrs Lee filed affidavits from a Mr Gill, who is a building surveyor and certified weathertight homes surveyor, and a Mr Gray, who is a licensed builder and a registered building surveyor. There was no oral evidence or cross-examination.
The Weathertight Homes Tribunal’s decision
[8] The Tribunal summarised the legal approach which has been taken to removal applications under s 112 of the Act. It accepted the applicable law as stated by this Court in Saffioti v Jim Stephenson Architect Ltd.2 It observed that whether a claim is capable of succeeding based on the information provided is an important factor and noted that where there are genuinely disputed issues of fact or novel legal issues which cannot be resolved in the context of a removal application, such applications should be dismissed.3
[9] The Tribunal then summarised the allegations of breach of duty by Auckland Council set out in Mr and Mrs Lee’s amended statement of claim. It focussed its analysis principally on paragraph 31(a)(iii) of that claim.4 Paragraph 31(a)(iii) is set out below. It alleges that Auckland Council ought to have stopped the cladding work until an amended application for consent had been made and approved.
[10] The Tribunal concluded:
(a) That Auckland Council had not been negligent.5
(b)That even if Auckland Council had been negligent, there was insufficient causal link between its alleged failures and the
appellants’ loss.6
2 Saffioti v Jim Stephenson Architect Ltd [2012] NZHC 2519 at [43].
3 Lee v Auckland Council, above n 1, at [5].
(c) That Auckland Council had taken appropriate steps to notify the owner and to warn prospective purchasers of the problems with the cladding.7
(d)That Mr and Mrs Lee did not obtain a Land Information Memorandum (“LIM”) at the time they purchased the property. If they had obtained a LIM, they would have been notified of the weathertightness issues with the house.8
(e) That the Lees’ contributory negligence in failing to obtain a LIM was at such a high level that it “may” be the real and effective cause of their loss.9
[11] The Tribunal in effect, although not expressly, concluded that Mr and Mrs Lee’s case against the Council was untenable. It observed that Mr and Mrs Lee had not pointed to evidence capable of establishing a causative link between Auckland Council’s actions and their loss. It considered that this was not a case where further evidence might become available and that it was therefore fair and appropriate to remove Auckland Council from the proceedings.
Submissions
[12] Ms Grant, on behalf of Mr and Mrs Lee, submitted that the Tribunal’s
decision was in error on several counts. She argued that:
(a) The Tribunal paid little more than lip service to the prior decisions of this Court which set out the tests which are to be applied to removal applications under s 112 of the Act;
(b)The appellants have an arguable claim in negligence against Auckland Council, which can only be determined at trial after hearing all available evidence. She put it to me that Mr and Mrs Lee
have pleaded facts which support a tenable claim against Auckland Council, and that they have supported that pleading with credible expert evidence; and
(c) The Tribunal’s finding that Auckland Council did not cause any loss
to Mr and Mrs Lee ignored:
(i) The evidence adduced before the Tribunal; (ii) The pleaded allegations, and
(iii)Authorities which have held that a failure to obtain a LIM is not an absolute bar to an owner’s claim, but is rather relevant to contributory negligence.
[13] Ms Grant submitted that the appeal should be allowed and that Auckland
Council should remain a party to the proceedings.
[14] Ms Knight for Auckland Council referred to the amended statement of claim filed by Mr and Mrs Lee. She submitted that:
(a) Auckland Council did not issue a building consent for the installation of the Styroplast cladding that was ultimately used on the house and that it did not inspect the cladding or pass it;
(b)Auckland Council identified, at its first inspection, that the wrong cladding had been installed. It refused to inspect the cladding thereafter until there was a building consent that matched the cladding that had been installed, and it ultimately refused to issue a code compliance certificate because of its concern about the durability of the cladding which had been installed;
(c) Auckland Council recorded the refusal to issue a building consent, and the reasons for it, in writing. It did not issue a code compliance certificate for the house;
(d)Auckland Council had done everything a reasonable Council should have done, and that it had fulfilled its duty to the developer and every subsequent owner, including Mr and Mrs Lee.
(e) Mr and Mrs Lee have bought their losses upon themselves, because they failed to obtain a LIM, which would have revealed that there was no code compliance certificate, and/or that they failed to inspect the Council file, which would have revealed the reason why there was no code compliance certificate.
[15] Ms Knight argued that the Tribunal was correct to remove the Council from
the Lees’ adjudication proceedings.
Analysis
[16] The appeal is brought pursuant to s 93 of the Act. It provides that a party to a claim that has been determined by the Tribunal may appeal on a question of law or fact which arises from the determination.
[17] A decision to remove a party under s 112 of the Act is a determination of the claim in respect of that party. Such decisions can be appealed either to this Court, or the District Court, depending on the amount in issue.10
[18] An appeal to this Court falls to be determined in accordance with part 20 of the High Court Rules. Rule 20.18 provides that such appeals are by way of re- hearing. The principles espoused by the Supreme Court in Austin, Nichols & Co Inc v Stichting Lodestar apply.11 This Court must carry out its own assessment of the facts, and it should not hesitate to substitute its own findings of fact where it is appropriate to do so. While this Court must apply an independent judgment to the
conclusions reached by the Tribunal at first instance, the onus is still on the appellant
to show that the Tribunal was wrong.
10 Auckland City Council v Unit owners in Stonemason Apartment 27 Falcon Street, Parnell HC Auckland CIV-2009-404-3118, 11 December 2009 at [18]; Fenton v Building Code Consultants Ltd HC Auckland CIV-2009-404-6348, 15 March 2010 at [2]; Yun v Waitakere City Council HC Auckland CIV-2010-404-5944, 15 February 2011 at [3].
11 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
[19] Relevantly s 112 of the Act provides as follows:
112 Removal of party from proceedings
(1) The tribunal may, on the application of any party or on its own initiative, order that a person be struck out as a party to adjudication proceedings if the tribunal considers it fair and appropriate in all the circumstances to do so.
…
[20] There was no dispute between counsel as to the way in which applications pursuant to the section should be approached.
[21] Section 112 provides the Tribunal, and this Court on appeal, with a wider jurisdiction than does r 15.1 of the High Court Rules dealing with the power to strike out.12 Nevertheless the principles applicable to strike-out applications applied in the High Court, and in the District Court, can assist in considering applications to remove a party from proceedings.13 Cases in which it will be fair and appropriate to remove a party where the relevant causes of action are not to be struck out, will be few and far between.14
[22] The correct approach is summarised by Katz J in Saffioti v Jim Stephenson
Architect Ltd and I adopt her analysis. She observed as follows:15
… Section 112 should not be seen as providing carte blanche to strike out parties at a preliminary stage in circumstances where the claims asserted against them are tenable, but weak. Often in litigation claims which appear weak at an early stage may gain momentum at trial, whereas other claims which appeared strong at the outset are later revealed to be fatally flawed.
It is necessary to be cautious when approaching applications under s
112 in order to prevent injustice to claimants who may in fact have a good claim once all the evidence is before the Tribunal, including
through cross-examination in appropriate cases. Too broad an
approach to the jurisdiction under s 112 would involve a risk of injustice to claimants. It is important that claims which may
12 North Shore City Council v Wightman HC Auckland CIV-2010-404-3942, 30 November 2010 at [12]; Saffioti v Jim Stephenson Architect Ltd, above n 2, at [43]; Yun v Waitakere City Council, above n 10, at [33]-[39].
13 Burns v Argon Construction Ltd HC Auckland CIV-2008-404-7316, 18 May 2009 at [17]; Auckland City Council, above n 10, at [24] and [30]; Vero Insurance NZ Ltd v Weathertight Homes Tribunal [2014] NZHC 342 at [19].
14 Saffioti v Jim Stephenson Architect Ltd, above n 2, at [44].
15 At [44] and [45].
ultimately prove to be meritorious not be prematurely struck out at an interlocutory stage.
[23] It needs to be acknowledged that the Tribunal has an inquisitorial role. Its processes ensure that a claimant’s eligibility is first determined by an assessor who undertakes a threshold factual enquiry. Once a claim is commenced, the Tribunal will have the assessor’s determination as well as other factual material. In considering an application for removal, the Tribunal may be better informed as to the
relevant facts than this Court is when it is hearing an application to strike-out.16 As
Ellis J noted in Yun, leaky homes cases frequently involve numerous defendants because of the rush to spread, share or avoid liability. She observed that the Tribunal has been given an extra gate-keeping role to ensure that adjudication proceedings progress in an expeditious and cost effective way.17 I agree with this observation subject to the caveat that this Court must always be alive to the risk of injustice if a party is too readily removed from proceedings. In my judgment the discretion
conferred by s 112 needs to be exercised with caution. The consequences of a removal order may be catastrophic for a claimant, and, if there is any doubt, the discretion should be exercised in a claimant’s favour.
[24] The question on this appeal is whether the Tribunal properly applied the relevant tests to facts of the present case.
[25] As I have already noted, the Tribunal removed Auckland Council from the proceeding because it found that the Lees’ claim against Auckland Council could not succeed. It considered that Auckland Council had not been negligent, but that even if it had been, any negligence was not causative of Mr and Mr Lee’s loss. It also took the view that the Lees’ negligence in failing to obtain a LIM was at such a high level that it might be the real and effective cause of their loss.
[26] I consider each of these conclusions in turn.
Did the Tribunal err when it found that Auckland Council was not negligent?
16 Vero Insurance NZ Ltd v Weathertight Homes Tribunal, above n 13, at [20]; Yun v Waitakere City
Council, above n 10, at [57]-[70].
17 Yun v Waitakere City Council at [70].
[27] Mr and Mrs Lee plead that Auckland Council breached duties of care it owed to them, as subsequent owners of the house, to exercise reasonable skill and care in performing its building control functions under the then operative Building Act
1991. The relevant paragraphs in their statement of claim read as follows:
31.The negligent acts and/or omissions of the Council are, but are not limited to the following:
(a) When the Council identified that the incorrect cladding system was being installed on the Dwelling it should have:
(i) Issued a field memorandum noting that a cladding system was being installed on the Dwelling which was different to the cladding system specified in the approved plans;
(ii) It should have required GIL to apply, within a reasonable time frame for an amendment to be made to the amended building consent;
(iii) In the meantime it should have stopped all the cladding installation work on the Dwelling until GIL had submitted an application for an amendment to the Amended Building Consent together with a set of amended plans and specifications; and
(iv) If GIL had not submitted an application to it, the Council should have stopped the cladding installation works on the Dwelling by issuing a Notice to Rectify on GIL requiring it to provide the Council with amended details prior to the completion of the installation of the cladding system.
32.As a result of the failure of the Council to stop the installation of the Styroplast cladding system on the Dwelling and identify the Defects in the building work at the Dwelling which failed to meet the performance requirements of the Code in particular:
(a) Clause B2.2.1; (b) Clause E2.3.1; (c) Clause E2.3.2; (d) Clause E.2.3.4; (e) Clause E2.3.5
Defects that would have been apparent to a reasonably skilled and prudent building inspector carrying out inspections under the Amended Building Consent.
[28] Although these paragraphs set out the pleaded negligence, I do not consider that the Lees are at this stage, necessarily confined to their pleadings. It is still open to them to amend the same.
[29] It is clear from the affidavits filed that Auckland Council issued the initial building consent for the construction of the house. Further, it carried out inspections of the works being undertaken pursuant to that building consent during the course of construction. Auckland Council at an early stage identified that the cladding being installed on the house did not match the cladding identified in the building consent issued. It required GIL as the developer to apply for an amended consent. GIL did so. The amendment however was only a brief narration in a box on the side of the existing plans. No further detail was provided by GIL. The amended plans were approved by Auckland Council on the same day as they were filed.
[30] It was Mr Gill’s view that, after Auckland Council noted that a non-consented cladding system was being installed, it should have required GIL not only to apply for an amendment to the building consent, but also, and at the same time, to lodge amended drawings showing the cladding system which was being installed, together with suitable technical installation details, so that Auckland Council could properly consider whether it should consent to the change in the cladding.
[31] Auckland Council’s deponent, Mr Logan, did not take issue with this assertion by Mr Gill.
[32] It is arguable that Auckland Council was negligent in processing and approving the amended plans. It may be arguable that if detailed drawings and installation details had been sought, inspectors might have been able to more readily identify deficiencies in the cladding installation. It may also have been more obvious that the cladding ultimately installed was not the cladding consented to, either initially or following the October 2002 amendment to the building consent.
[33] When inspecting the building works on 31 October 2002, Auckland Council’s inspector did not carry out an inspection of the exterior cladding. Rather he called for a producer statement from the cladding installer and a certificate from Plasterer
Systems Ltd. It seems that the requested certificate from Plasterer Systems Ltd was never provided. A producer statement from the cladding installer, Mr Choy, was ultimately provided, but this did not occur until February 2004. Auckland Council does not seem to have followed up on the requests made in the course of the inspection on 31 October 2002.
[34] Auckland Council carried out further inspections of the house. While its inspections did not expressly extend to the exterior cladding, its inspectors must have observed the cladding in the course of the inspections undertaken. The inspectors did pass the clearance between the exterior cladding which had been installed and the adjacent ground. Further, they approved all window flashings which had been installed. They cannot have been unaware of the cladding.
[35] Nevertheless it seems that Auckland Council inspectors either failed to identify that the cladding which was being installed (Styroplast) did not match the cladding which had been approved in the amended building consent (Insulclad), or, if they noticed the difference, failed to do anything about it.
[36] Both Mr Gill and Mr Gray in their affidavits expressed the view that the building inspector, when he inspected the house on 31 October 2002, would and should have been able to tell that Insulclad cladding had not been installed in accordance with the amended plans, and that another cladding system had been installed in its place. It was asserted that Insulclad and Styroplast have completely different flashing profiles. Mr Gray also asserted in his affidavit that there must have been visible deficiencies in the way that PVC flashing had been installed, and that a competent building inspector would have issued a field memorandum requiring that all work stop, and requested amendments to the building consent.
[37] Mr Logan accepted that an inspector might have been able to identify the differences between the cladding approved and the cladding used, but noted that Auckland Council did not inspect or pass the cladding used.
[38] To my mind Mr Logan’s response rather misses the point.
[39] If Auckland Council’s inspectors failed to observe the mismatch between the cladding being installed and the cladding approved, then arguably the Council was negligent and that negligence has contributed to cladding being installed which should never have been installed.
[40] If Auckland Council’s inspectors were aware of the mismatch and if they knew that the building work on the house was non-compliant, then Auckland Council was required to then issue a notice to rectify under the then applicable legislation - s 43(6) of the Building Act 1991. It did not do so. Further if Auckland Council knew that the house did not comply with the building code, then it should have immediately issued a notice to rectify under s 42 of that Act requiring the consent holder to rectify the non-compliance. Again it did not do so.
[41] Auckland Council failed the house on three separate occasions when it was presented for final inspection. However none of the failures raised any deficiencies with the cladding installation. It was not mentioned as being an outstanding or non- compliant item and there was no suggestion that the cladding on the house was problematic.
[42] The letter sent out by Auckland Council on 16 December 2003 was a standard letter, sent to GIL as the holder of the building consent. The letter advised that the house was being assessed by the Code Compliance Certificate Resolution Team at the Council, and indicated that this was because the house had been built with monolithic cladding without a cavity. It recorded that there had been no final inspection to deal with weather tightness issues.
[43] Amended plans seeking approval for Styroplast cladding were only filed on
19 February 2004. It seems from a handwritten note at the bottom of the application form that the Council’s senior planning officer spoke to a Mr Schenker of GIL, and told him that the Styroplast system would not be approved, and that the application for amendment would be referred to the Council’s Code of Compliance Certificate Review Committee.
[44] Clearly Auckland Council then became aware that the cladding installed did not match the cladding approved. It did not then issue a notice to rectify under s
43(6) of the Building Act 1991.
[45] The letter which the Council sent to Mr Kim on 4 March 2004 referred to a request which Mr Kim had apparently made for a code compliance certificate for the house. It advised Mr Kim that a code compliance certificate would not be issued, because the Council could not be satisfied that the cladding installed met the function or requirements contained in the Building Code. It suggested that if Mr Kim wished to obtain a code compliance certificate, he should request a determination from the building industry authority. Again it did not issue a notice to rectify under s 43(6) of the 1991 Act.
[46] Mr and Mrs Lee’s position advanced at the hearing of the appeal, which is broadly consistent with their pleading, is that Auckland Council breached its duty of care to them in one or more of the following respects:
(a) By not having in place an adequate system of inspection so as to ensure that the cladding installed on the house complied with the approved plans and specifications and with building code requirements;
(b) By failing to stop any further work on the cladding after 18 October
2002, until an application to amend the building consent had been lodged;
(c) By approving an inadequate application to amend the building consent;
(d) By failing to detect at either its cladding inspection on 31 October
2002, or subsequently, that the cladding installed was not Insulclad as approved by the Council, but was Styroplast;
(e) By failing to require GIL to further apply for the building consent to be amended, or to require GIL to lodge amended drawings for Styroplast cladding, together with suitable technical installation details, when it did become aware that what had been installed was Styroplast cladding;
(f) By failing to pick up on the defects in the installation of the
Styroplast cladding in any of its inspections of the house; and
(g)By failing to issue a notice to rectify to GIL, or to any subsequent owners, requiring the Styroplast cladding on the house to be properly designed, installed and approved.
[47] Each of the alleged failings by Auckland Council is supported in the evidence of Messrs Gill and Gray. Mr Logan’s two affidavits do not provide a comprehensive answer to these various allegations.
[48] The Lees argue that it is the culmination of these various failures on the part of Auckland Council during construction, which has resulted in the house being built with defects, and which have caused damage such that the house now needs to be completely re-clad.
[49] I agree with Ms Grant that in the circumstances, the Tribunal erred when it concluded, on the limited materials before it, that Auckland Council was not negligent. For the reasons which I have identified there is a tenable case that Auckland Council was negligent. Certainly that issue should not have been decided prematurely in the context of hearing a s 112 application, without all available evidence being heard, tested and considered in full.
Did the Tribunal err when it found that there was no causal link?
[50] I now turn to whether or not there is arguably a causal link between the
Council’s alleged failures, and Mr and Mrs Lee’s loss.
[51] The Tribunal concluded that the Council had taken appropriate steps to notify the owner of the house and to warn prospective purchasers of the potential problems with the cladding, and that Mr and Mrs Lee had not pointed to anything capable of establishing a causative link between the actions and/or omissions of the Council and their loss.
[52] Again, I consider that the Tribunal erred.
[53] First, the affidavits disclosed that Auckland Council did not, in fact, convey to the owner of the property that there were any problems with the Styroplast cladding:
(a) On 19 February 2004 Auckland Council received the application to amend the consented plans, which sought to change the cladding from Insulclad to Styroplast. That application was submitted by GIL
- purportedly as the “owner’s agent”. At that stage GIL had on-sold the property to Mrs Ratcliffe. GIL was no longer the owner. As noted above, a Council officer spoke to a Mr Schenker from GIL. There was however no evidence before the Tribunal suggesting that Mr Schenker had any connection to the then owners of the property, Jong Ho Choi and Hyo Ja Woun.
(b) Auckland Council subsequently wrote to Mr Kim on 4 March 2004.
However Mr Kim was not then the owner of the property. Jong Ho
Choi and Hyo Ja Woun then owned the house.
There is nothing to suggest Auckland Council ever contacted the registered owner to put him or her on notice.
[54] Secondly, the Tribunal’s finding that Auckland Council took appropriate steps to notify the owner and warn prospective purchasers of the problems with the cladding, assumes that Auckland Council was aware of the problems with the cladding. As I have noted above, the evidence in this regard is far from clear.
[55] Thirdly, before the Tribunal, there was no evidence from the three building inspectors who conducted the various inspections of the house. There was no evidence from GIL, or the installers. It will only become apparent at the substantive hearing how much Auckland Council knew about the installation of the Styroplast cladding. It may be that some or all of the building inspectors will be available. There may be other witnesses who can shed light on Auckland Council’s role and knowledge at relevant times. These matters are untested. The Tribunal made no allowance for this in its decision.
[56] Fourthly, there was direct evidence adduced by the Lees asserting a causative link between Auckland Council’s alleged negligence, and their loss. Mr Gill’s evidence was that Auckland Council should have stopped the Styroplast cladding system being installed, and that because it did not, it allowed a defective cladding system to be installed which in turn allowed moisture ingress and that this has caused the need for the house to be completely clad. Mr Logan in his affidavit stated that Auckland Council could not have stopped the cladding installation. Mr Gray in his evidence disagreed with Mr Logan’s assertion.
[57] Again, it may be that there could be further evidence relevant to this issue. Whether or not there is further evidence, the conflict between Messrs Gill and Gray on the one hand, and Mr Logan on the other, will need to be resolved. It suffices for present purposes to say that Mr and Mrs Lee did put forward expert evidence capable of establishing a causative link between Auckland Council’s alleged failures and their loss.
[58] In my view the Tribunal erred when it dismissed that evidence, and held that there was no causative link between Auckland Council’s alleged actions or omissions and the Lees’ loss.
Did the Tribunal err when it concluded that the Lees’ failure to obtain a LIM might
be the real and effective cause of their loss?
[59] Finally, I turn to whether or not Mr and Mrs Lee’s failure to obtain a LIM
might have been the real and effective cause of their loss.
[60] I accept that the Tribunal’s conclusion in this regard was tentative. It expressed the view that the failure to obtain a LIM might be determinative. It is clear however that this conclusion, albeit expressed in conditional terms, played a part in the Tribunal’s reasoning.
[61] First, I note that the Tribunal did not have before it any evidence from an experienced property lawyer regarding the practice of obtaining LIM reports as at December 2004 when Mr and Mrs Lee purchased the house.
[62] Further, and in any event, a failure to obtain a LIM report when purchasing a property does not provide an absolute defence to claims of this nature made against Councils.
[63] This is clear from the decision in the Byron Avenue case.18 In that case the Council did not issue a code compliance certificate for a multi unit apartment complex. It had concerns about the weather tightness of the building. Some unit owners did not obtain LIM reports when they purchased their apartments in the complex. The Court had to consider whether the failure to obtain a LIM report amounted to contributory negligence on the part of those purchasers.
[64] In the High Court, Venning J considered that there was contributory negligence by one purchaser, RCA Investments Limited. It had failed to make any enquiry of the Council or the body corporate when it purchased its apartment. The Judge found that a LIM request, or other enquiry of the Council, would have alerted RCA to the Council’s decision to decline a code compliance certificate for the units. He reduced the award of damages in RCA’s favour by 25 per cent to allow for its contributory negligence.
[65] Venning J’s findings in this regard were upheld by the Court of Appeal.
Baragwanath J held as follows:19
The failure to seek a LIM is not in my view a deficiency of such magnitude as to constitute a bar to the claim. Parliament did not so state despite
18 Body Corporate No 189855 v North Shore City Council HC Auckland CIV-2005-404-5561, 25
July 2008; O'Hagan v Body Corporate 189855 [2010] NZCA 65, [2010] 3 NZLR 445 (CA).
19 Court of Appeal decision at [39]; See also paras [60], [73], [136], [169], [170] and [173].
affording by s 41 protection as to a LIM’s contents. In my view the failure
goes to contributory negligence to which I will return.
[66] It is also noteworthy that in the Supreme Court, in the Sunset Terraces case,20
Tipping J observed as follows:
If a prospective purchaser obtains a LIM which discloses a moisture problem before becoming committed to the purchase, it is unlikely that any proceedings could ever be taken against the council. A prospective purchaser may, however, fail to request a LIM in circumstances where the LIM, if requested, would probably have given notice of actual or potential problems. If, as is likely to be the case, the purchaser’s failure amounts to negligence, a question may arise as to whether that negligence amounts only to contributory negligence, albeit probably at a high level, or whether the prospective purchaser’s negligent omission amounts to a new and independent cause of the loss which removes all causal potency from the council’s original negligence at the inspection stage.
[67] Whether in the circumstances of this case, the Lees’ failure to obtain a LIM amounts to contributory negligence, or amounts to a new and independent cause of their loss, which breaks such causative link as may be found to exist, is a question which can only be determined at trial. The Lees’ evidence may include details of other steps taken by them to check the condition of the house before they bought it. For example, it may be that they inspected the property themselves, or that they received assurances or representations direct from the vendors regarding the condition of the house, or that they arranged for a pre-purchase report on the house. Such evidence was not before the Tribunal on the removal application, and in my view it was premature for the Tribunal to consider that the Lees’ negligence, if that is what it was, removed all causal potency from the alleged negligence by Auckland Council.
[68] In my judgment, the Tribunal was wrong when it concluded that this was not a case where further evidence might strengthen the Lees’ claim against Auckland Council.
Summary
[69] In my judgment, the Tribunal erred in fact and in law when it ordered the removal of Auckland Council from these proceedings. The Lees’ have a tenable
20 North Shore Council v Body Corporate 188529 [2010] NZSC 158, [2011] 2 NZLR 289 at [79].
cause of action against Auckland Council. The strength or weakness of their claim, and whether Auckland Council’s actions or omissions are causative, either in whole or in part for their loss, can only be determined following a full hearing.
[70] The appeal is allowed. Auckland Council is reinstated as the first respondent in the proceedings before the Weathertight Homes Tribunal.
Costs
[71] The appellants are entitled to their costs on a 2B basis against Auckland
Council, together with their reasonable disbursements.
[72] I expect counsel to agree on quantum. In the event of any dispute, counsel may file memoranda. Any memorandum by the appellants is to be filed within five working days from the date of release of this decision. It is not to exceed five pages. Any memorandum in response from Auckland Council is to be filed within a further five working days. Again, it is not to exceed five pages. I will then deal with the
issue of costs on the papers, unless I require the assistance of counsel.
Wylie J
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