Lee v Composite Cladding and Signage Manufacture and Installations Limited
[2013] NZHC 354
•28 February 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-5491 [2013] NZHC 354
UNDER s 72 of the District Court Act 1947
IN THE MATTER OF an appeal from the decision of the District
Court dated 16 August 2012
BETWEEN OLIVIA LEE Appellant
ANDCOMPOSITE CLADDING AND SIGNAGE MANUFACTURE AND INSTALLATIONS LIMITED Respondent
Hearing: 18-20 February 2013
Counsel: G J Beresford and A Gormack for the Appellant
D L Marriott and R G Espie for the Respondent
Judgment: 28 February 2013
JUDGMENT OF WOODHOUSE J
This judgment was delivered by me on 28 February 2013 at 3:00 p.m. pursuant to r 11.5 of the High Court Rules 1985.
Registrar/Deputy Registrar
……………………………………
Counsel / Solicitors:
Mr G J Beresford and Mr A Gormack, Grimshaws, Solicitors, Auckland
Mr D L Marriott, Barrister, AucklandMr R G Espie, Solicitor, Whangaparaoa
LEE V COMPOSITE CLADDING AND SIGNAGE MANUFACTURE AND INSTALLATIONS LIMITED HC AK CIV-2012-404-5491 [28 February 2013]
[1] In 2007-2008 the appellant, Ms Lee, had a house built for herself and her family at Ruakaka. The external walls are clad in aluminium panels which are fixed to what is called pre-cladding. The pre-cladding for Ms Lee’s house is plywood fixed to timber framing. The cladding was installed by the respondent, to whom I will refer as CCS. CCS also manufactured the individual aluminium panels by cutting them to appropriate dimensions and folding them. The aluminium itself was supplied to CCS by Ms Lee who had purchased aluminium sheets from a manufacturer in China.
[2] In proceedings in the District Court Ms Lee claimed that CCS had carried out its work in breach of various obligations owed to her, that these breaches required the complete recladding of the house, together with other remedial work, and she was entitled to damages in excess of $520,000.
[3] By judgment dated 16 August 2012 Ms Lee’s claim was dismissed.[1] Ms Lee appeals against that judgment.
The issues
[1] Composite Cladding and Signage Manufacture and Installations Ltd v Lee DC Auckland CIV-2008-
088-000562, 16 August 2012.
[4] In her District Court claim Ms Lee alleged 21 different “defects” in the work carried out by CCS. The hearing in the District Court took eight days. A total of 28 grounds of appeal were advanced in the notice of appeal. Although these matters, and the written submissions on appeal, indicated that a large number of issues might require consideration, I was materially assisted by the oral submissions of Mr Beresford for Ms Lee in which a small number of issues were identified as the central issues.
[5] The pivotal issue is whether Ms Lee established her primary contention that CCS is liable for the cost of removing all of the aluminium cladding, the cost of manufacturing and reinstalling new cladding, and various associated costs. If
liability for the cost of complete recladding is not established on the evidence Ms
Lee cannot succeed to any lesser extent. This is because there is no evidence enabling a conclusion as to the cost of any remedial work for which CCS may be liable short of complete recladding and, for reasons I will come to, it is not appropriate in this case to provide Ms Lee with an opportunity to adduce further evidence.
[6] With the pivotal issue defined in this way, the approach to the issues on appeal is further assisted by Mr Beresford’s identification of one defect, out of the original total of 21, as being largely determinative of the ultimate issue whether there was breach by CCS which would make CCS liable for complete recladding. This defect is known as “defect Q”. It concerns the fact that CCS used plywood packers as part of the installation of the cladding. Packers sit between the aluminium cladding and the pre-cladding. Ms Lee contends that a different type of packer should have been used by CCS. If CCS is not liable for using plywood packers, Ms Lee’s ultimate contention that CCS is in turn liable to meet the cost of complete recladding would not be made out.
Conclusion in summary
[7] I am satisfied that the Judge was correct in her conclusion that CCS does not have any liability for using plywood packers. The essential reasons for that conclusion are that plywood packers were approved by the District Council, there was no design fault on the part of CCS, and it was not established that plywood packers result in moisture getting into the framing of the house.
[8] Some other defects were established to the extent that the work was not adequately done by CCS, but these matters were relatively minor and could not justify complete recladding.
[9] Ms Lee failed to establish any cost associated with the relatively minor work required to rectify the defective work on the part of CCS.
[10] It is not appropriate in this case to provide Ms Lee with an opportunity to adduce further evidence of quantum related to the limited liability of CCS, or in
some other way rectify the failure to prove damages. There are a number of reasons discussed below. These include the procedural history, with two full hearings in the District Court, the way in which quantification was approached on the basis that CCS must be responsible for all failures, and the fact that Ms Lee has proceedings against other parties including the builder and the District Council.
[11] Given these conclusions, the focus of this judgment is on defect Q – the packers – and then on the reasons why quantum for any liability on the part of CCS has not been made out and why a further opportunity should not be given to Ms Lee to prove the quantum.
The background facts
[12] In August 2006 Ms Lee applied to the Whangarei District Council for a building consent for construction of the house at Ruakaka. This was accompanied by drawings of the proposed house which had been prepared by a designer engaged directly by Ms Lee. The drawings specified aluminium cladding with the notation “install to manufacturer’s specifications”.
[13] In September 2006 the Council advised Ms Lee that the consent application had been suspended pending the supply of a range of information. The Council’s notice included the following:
Cladding proposed requires designing by an engineer for Wind
Loadings and fixing of the sub-frame to the wall.
Provide NZ approvals for Alucobond Cladding.
Alucobond is a brand name for aluminium cladding manufactured by Alcan
Composites USA, Inc.
[14] Ms Lee addressed the various matters specified in the Council’s notice. This included providing the Council with advice from an engineer who was engaged directly by Ms Lee.
[15] The Council issued consent for the construction on 26 October 2006. The consent has a number of conditions. One is for Ms Lee to provide the Council with details of an “approved cladding installer before installation” of the cladding.
[16] On 28 October 2006 Ms Lee contacted a director of CCS, Mr Leigh Coffman. Ms Lee gave Mr Coffman a copy of the consent drawings to enable Mr Coffman to calculate quantities. The drawings were not provided as a form of specification for the cladding work. She did not provide him with a copy of the advice from the engineer given to the Council.
[17] CCS provided a quote and its proposed terms of contract on 15 November
2006. The quoted price for manufacturing the aluminium panels and for installation was $97,280 (excluding GST). The manufacturing to be done by CCS was as described in the introduction: the aluminium sheets were supplied by Ms Lee to CCS; CCS was required to cut these sheets into panels of appropriate dimensions and to fold the edges of the panels.
[18] Ms Lee accepted the quote and the terms proposed. There are exclusions. Matters excluded include:
Supply and installation of the substructure and/or building paper [a reference to the pre-cladding].
Manufacture, supply or installation of flashings.
Scope of work not indicated on the information supplied to us.
[19] In November 2006 Ms Lee entered into a contract with a builder for the main construction work. This was on a labour only basis. The builder presumably had contractual responsibility for the installation of the pre-cladding. In any event, it is clear that CCS did not have responsibility for the pre-cladding. Ms Lee contracted directly with other companies or individuals for other aspects of the total works, including the supply and fixing of window and door joinery.
[20] The main building work started in January 2007. In May 2007 CCS supplied the builder with CCS’s own drawings for the installation of the cladding. The supply of these drawings had been discussed at a site meeting on 7 May 2007 attended by
Ms Lee, the builder, Mr Coffman of CCS, and others. The builder then submitted CCS’s drawings to the Council for approval. The Council approved these drawings on 27 June 2007. There is a Council notation recording the approval of the drawings as “amended plans”. This was consistent with the notation “install to manufacturer’s specification” on the original consent drawings and the Council’s consent condition requiring details of the cladding installer before installation.
[21] CCS completed installation of the cladding at the end of January 2008. Following this CCS acknowledged that there was some remedial work to be done. In the event this was not done as Ms Lee would not allow CCS to return to the site.
[22] The balance owing to CCS for its work, including two agreed variations totalling $24,640, was just under $54,000. Ms Lee declined to pay this sum. CCS issued proceedings in the District Court. Ms Lee counterclaimed. There were two hearings leading to substantive judgments in the District Court. The second hearing and judgment have given rise to this appeal. The first hearing led to a judgment in October 2009.[2] Judgment was entered for CCS on its claim, plus interest and costs. Ms Lee’s counterclaim was for the cost of removing and replacing the cladding that had been installed by CCS, with some associated costs. She claimed a total of just under $230,000. This counterclaim was dismissed.
[2] Composite Cladding and Signage Manufacture and Installations Ltd v Lee DC Whangarei CIV-
2008-088-000562, 27 October 2009.
[23] Ms Lee appealed against the District Court decision. She succeeded to the extent that judgment on the counterclaim was quashed and the counterclaim was remitted to the District Court for rehearing.[3]
[3] Lee v Composite Cladding and Signage Manufacture and Installations Ltd HC Whangarei CIV-
2009-488-828, 16 December 2010.
[24] On the rehearing Ms Lee advanced three causes of action: under s 397 of the Building Act 2004 for breach of warranties for building work implied in contracts for “household units”; negligence; and breach of s 28 of the Consumer Guarantees Act
1993. The claim under the Consumer Guarantees Act is limited to allegations of breach relating to installation. The claims under the Building Act and in negligence
are pleaded as generalised allegations of breaches by CCS relating to the
manufacture and design of the cladding as well as the installation. However, the particulars of breach, contained in a schedule to the statement of counterclaim under the heading “Defects”, are directed to installation only.[4] Ms Lee claimed $442,796 for the recladding cost, just over $49,000 for consequential losses and $30,000 for general damages.
The District Court judgment and the submissions on appeal
[4] Aspects of some of the contentions relating to installation could be described as contentions of defective design. For example, the word “design” could be defined to extend to the choice of plywood packers, as opposed to an alternative product. To the extent that that might be regarded as “design” the issue is addressed. What is excluded from consideration, because of an absence of any particularised contention, is the general design of the panels, in relation to the material used and the method of folding, together with the general design of the means of fixing the panels to the pre- cladding.
[25] The Judge held that CCS was not liable to Ms Lee for using plywood packers. She did find that there had been breach by CCS of obligations to Ms Lee in respect of some other work. However, in this regard she found that there was no reliable or satisfactory evidence before the Court of the cost of remedying these matters. She found that a revised assessment from a quantity surveyor who gave evidence for Ms Lee did not help to identify specific costs for the few defects where there was liability. She noted that the expert called for CCS, Mr Beran, described the quantity surveyor’s revised assessment as “illogical” and recorded her agreement with that opinion.
[26] My conclusions that the Judge was correct in finding that CCS was not liable in respect of defect Q, the plywood packers, and that there is no proof of cost short of complete recladding, dispose of the appeal. Therefore it is unnecessary to provide a fuller summary of the District Court judgment in respect of other issues. I will simply touch on some of these in the course of the discussion which follows.
[27] For broadly similar reasons it is unnecessary to summarise the detailed submissions of counsel on the wide range of issues on the appeal. I have taken those submissions into account to the extent necessary in respect of the central issues on
the appeal.
Discussion: Defect Q: Plywood packers
[28] As indicated in the introduction to this judgment, the aluminium cladding panels are fixed to what is called pre-cladding. There is a cavity between the aluminium cladding and the pre-cladding. The cavity is maintained between the cladding and the pre-cladding by the installation of packers which sit between the cladding and the pre-cladding.
[29] The aluminium pre-cladding is intended to be a rain screen only. It is not intended to be impermeable to all water. It is accepted that some water will get behind the cladding. I am satisfied from the evidence in this case, as was the Judge in the District Court, that the pre-cladding may be described as the primary line of defence against water ingress which might cause damage to the structure of the house. Water that could penetrate the pre-cladding does get into the cavity. The pre- cladding for this house was required to be impermeable to water. The pre-cladding is plywood panels. The pre-cladding specifications to ensure impermeability to water ingress are that, amongst other things, the panels are to be treated and sealed plywood and the joints between the pre-cladding panels are to be sealed with tape. The evidence is that the joints between pre-cladding panels are not sealed and there is some suggestion of other defects. As earlier recorded CCS had no responsibility for the pre-cladding. The design of the pre-cladding, as just described, is intended to prevent ingress of water that gets into the cavity before it drains away or evaporates. The aluminium cladding is also required to be designed and installed in ways which will enable water that does get into the cavity to drain away.
[30] Ms Lee’s claim, at its broadest, is that breaches by CCS of obligations CCS owed to her mean that her house is not weathertight. Defect Q is central to this contention. The contentions for Ms Lee relating to the packers may be considered in relation to two questions. The first is whether there was breach by CCS in using plywood as the packing material as opposed to some other material. The second is whether the way in which the packers were fixed to the pre-cladding is a cause of moisture ingress through the pre-cladding into the timber framing and beyond.
[31] The particularised allegation for defect Q was that “incorrect materials have been used for panel packing”. What this amounted to, when put into the context of the evidence as a whole, is a contention that CCS should have used what are known as plastic shims as packers, rather than plywood. Mr Barry Gill, an expert retained on Ms Lee’s behalf, placed particular emphasis on this matter in his report dated 6
April 2011. The report was prepared for the rehearing in the District Court in response to instructions to Mr Gill from Grimshaw & Co., solicitors who by then were acting for Ms Lee. Ms Lee had acted on her own behalf in the proceeding leading up to the first District Court judgment in 2009.
[32] Mr Gill did suggest in his report that the fixings of the plywood packers was a “point of moisture penetration behind the building wrap”, being building wrap over the pre-cladding. However, in relation to moisture ingress, this was not noted in the executive summary to the report either as a cause of current moisture ingress or a possible cause of future moisture ingress. Nor was it suggested in a table summarising what Mr Gill considered were defects discovered during his inspection following removal of aluminium panels, and his opinion as to remedial action. The remedial action was to replace plywood packers with “high impact plastic packers”. The criticism of plywood packers was not that they did or might result in penetration of moisture, but that they were insufficiently rigid or inert and, because of this, there was a risk of failure of the sealant between the aluminium panels. In other words, it was not concerned with moisture ingress through the pre-cladding. This aspect was repeated in Mr Gill’s brief of evidence, but he did also record an opinion relating to moisture penetration into the framing from the packers, as noted below.
[33] I am not persuaded that there was any breach by CCS, whether described as a breach in relation to design, or in relation to installation, in using plywood packers rather than plastic shims. The original consent drawings did specify plastic shims. This appears to be the reason for, or at least origin of, Mr Gill’s recommendation. And there was the notice from the Council to Ms Lee, before the original consent was issued, requiring her to provide “NZ approvals for Alucobond cladding”. But the original consent drawings for the cladding were replaced by the drawings produced by CCS. The CCS system for fixing the cladding to the pre-cladding is materially different from the Alucobond system. The CCS drawings received the
Council’s consent. The original drawings, and references to systems of other
manufacturers or installers, are not relevant.
[34] Although the original drawings, and references to systems of other manufacturers or installers, are not relevant, they nevertheless were relied on in Mr Gill’s report and evidence, and some other expert evidence for Ms Lee, and in numbers of submissions on her behalf relating to defect Q and other defects. This amounted to a general error in the approach to liability on behalf of Ms Lee.
[35] There was conflicting evidence between Mr Gill and the expert for CCS, Mr Peter Beran. The Judge preferred the evidence of Mr Beran to that of Mr Gill on all of the main points of contention. She did so for reasons of expertise. This was a finding contested on the appeal. I am not persuaded that there was material error by the Judge in her general conclusion. One reason is the point noted in the preceding paragraph about reliance on drawings and other material not relevant to the obligations of CCS to Ms Lee. However, it is unnecessary to review the Judge’s conclusion, and my reasons for agreeing with her conclusion, to dispose of the issue relating to the packers. This is because I am satisfied that the evidence did not justify a conclusion that there was breach by CCS of its obligations, on any of the causes of action, by selecting plywood rather than plastic shims as the material for the packer. Apart from the issue of moisture ingress, to which I will come, the reasons advanced by Mr Gill for preferring plastic shims to plywood packers are not related to any problem with the cladding that was causative of loss. On the more focussed question as to the suitability of the material, Mr Beran’s evidence was that it is perfectly adequate and this was consistent with Mr Coffman’s evidence as to trade practice.
[36] The separate issue in relation to the use of plywood packers was whether they were a cause of moisture ingress through the pre-cladding into the timber framing. Although this contention was not recorded in Mr Gill’s summary of building defects which he said had caused, or in the future might cause, moisture ingress, it became the subject of considerable contention at the hearing in the District Court. The issues were dealt with fully in the judgment under appeal. For a number of reasons the Judge rejected Mr Gill’s theory that, assuming the packers could become saturated
(in itself a matter of contention and not adequately proved), the moisture in the packers would then travel, into the pre-cladding and then into the framing and beyond, along the screws which fixed the aluminium cladding panels and the packers to the pre-cladding. Mr Beran forcefully disputed Mr Gill’s theory. The Judge preferred Mr Beran’s opinion. I am satisfied that the Judge was justified in preferring Mr Beran’s opinion and Mr Beran’s associated and more general opinion that the use of plywood as packers did not create a source of moisture which could penetrate beyond the pre-cladding and cause damage. I am satisfied that the Judge’s conclusion on this point was correct for the reasons she gave.
[37] In coming to this conclusion I have not overlooked Mr Beresford’s submission that Ms Lee’s case is not confined to proof of actual damage from moisture penetration, but includes a claim founded on the obligation of CCS to provide a durable cladding system. In this context I am also satisfied that liability on the part of CCS was not established. The requirement in relation to durability would be to provide packers which would perform their function for a minimum of 15 years. The evidence does not justify a conclusion that the packers will not last for 15 years or that the packers will not perform their function, as part of the fixing of the cladding in a suitable way, for a minimum of 15 years.
[38] For these reasons I am satisfied that the use and installation of plywood packers by CCS was not and is not causative of any damage for which CCS has liability to Ms Lee pursuant to any of the causes of action advanced.
Discussion: Absence of proof of quantum of proved breach
[39] Ms Lee did establish breach by CCS in relation to a few of the other particularised defects. However, these were relatively minor in nature, some did not require remedial work, and where remedial work was required it was limited in scope. There was no proved breach which was in turn causative of damage which required complete recladding. In respect of these matters the Judge found that Ms Lee had provided no evidence of the cost of remedying these minor defects that required remedial work. The Judge further held that it was not appropriate to refer
the case to an assessor to determine the particular costs and awarded damages in a nominal sum of $100.
[40] I am satisfied that the Judge was correct, for the reasons she gave, in her conclusion that the established defects in the work by CCS were minor in nature and did not require complete recladding. I am satisfied that, to the extent that any remedial work was required at all in respect of matters for which CCS would be responsible it is minor in nature and does not require complete recladding.
[41] The Judge’s further finding that the quantum of the loss from proved breach requiring remedial work had in itself not been proved was inevitable. The quantification of the cost of remedial work was not itemised in respect of each of the defects alleged against CCS. Rather, it was itemised under very broad headings. The heading of most direct relevance was “cladding”. Under this heading there was itemisation, but it was itemisation related to the removal of all of the aluminium cladding installed by CCS and the cost of recladding. What is more, this generalised claim did not involve recladding using the aluminium panels installed by CCS. All of the aluminium cladding installed by CCS was to be discarded and there was to be new cladding using Alucobond cladding and the Alucobond installation system. There was then a global claim, of $224,091.50 for this. The breakdown of that sum contained no detail enabling an assessment of damages for minor items of remedial work.
[42] This broad brush approach to the claim against CCS, and the inclusion in the quantification of remedial costs of items for which CCS could have no possible liability, illustrates the overall approach in the formulation and presentation of Ms Lee’s claim against CCS. There was no reasonable foundation for a contention that CCS should meet the cost of the installation of a completely different type of cladding from that which it had been asked by Ms Lee to install. Ms Lee had, amongst other things, required CCS to use the aluminium that Ms Lee had imported from China. When looking at the itemisation of the recladding claim, there are further matters which plainly were not the responsibility of CCS. Flashings are an example.
Should Ms Lee have a further opportunity to try to prove damages
[43] One of the grounds of appeal is that the Judge was in error in “declining to call for further evidence about the quantum of the cost to repair the defects that were found to be proved”. On a general appeal, such as the present, I am bound to reach my own conclusion on the point.
[44] I am satisfied that the Judge came to the correct conclusion. The evidence for Ms Lee in this case indicates that, if there are significant weathertightness problems with Ms Lee’s house, they arise from matters unrelated to any of the work undertaken by CCS. There is evidence of possible problems with, amongst other things, the joinery, the roof, the decks and the pre-cladding. Claims in this regard were in fact included in the remedial estimate which formed part of Mr Gill’s original report. At some point in the formulation or reformulation of Ms Lee’s claim against CCS for the rehearing these items were deleted. Two points follow from this which are relevant to the conclusion on the present question. Ms Lee has had ample opportunity carefully to examine quantification and to present appropriate evidence. Secondly, and quite separately, if others do have liability to Ms Lee in respect of major remedial works, the very minor remedial works in relation to the CCS contract can be attended to. The expense, to the extent that it can be separated from the cost of the major works, may have to be borne by Ms Lee, but I am satisfied that there is no injustice in that sufficient to grant to Ms Lee what would amount to yet another rehearing of her claim against CCS. There is a point at which litigation must come to an end. It is also relevant that Ms Lee does have two extant claims arising out of the construction of her home, one against the builder and one against the District Council.
[45] One of the matters taken into account by the Judge, and given some emphasis, was a conclusion that Ms Lee had in substantial measure contributed to her own losses. This was a conclusion directed in considerable measure to Ms Lee’s direct involvement in the building project as a whole, rather than an assessment of her responsibility for contributing to any loss arising from defective work by CCS. However, there was conduct by Ms Lee, under this general heading, directly connected with the CCS contract. There was, for example, Ms Lee’s failure to
provide CCS with the engineer’s calculations which related to the particularly high wind zone for this building. There is the fact that CCS did offer to return to undertake some remedial work, but Ms Lee refused to let them return. More broadly, I am satisfied that the Judge was correct in her finding that Ms Lee was, in substance if not in name, the project manager for the construction of her home and a person who was fully involved in and directing many aspects of the construction. This finding was one of the matters contested on this appeal but which does not require any detailed consideration. I would simply note that the evidence of another expert called to give evidence for Ms Lee positively establishes the extent of Ms Lee’s involvement. This is the evidence of Mr John Dalton, a registered building surveyor who is employed as an assessor under the Weathertight Homes Resolution Services Act 2006. Mr Dalton completed a report in October 2008, and therefore prior to the first District Court hearing. He records, in a report produced in evidence for Ms Lee, that Ms Lee was the developer, the project manager and the head contractor.
Result
[46] The appeal is dismissed.
[47] The respondent is entitled to costs. If the parties are unable to agree a memorandum for the respondent should be filed and served within four weeks and any response on behalf of the appellant within a further two weeks.
[48] Ms Lee paid into the Whangarei Registry of the High Court a sum of
$105,847.91 being the amount due to CCS on the original District Court judgment. This was to be held pending the rehearing and determination of Ms Lee’s counterclaim in the District Court. In accordance with a decision of the Court of Appeal that sum has continued to be held with a direction that it not to be paid out pending any further order of this Court on determination of this appeal.5 The appeal having been determined in favour of CCS the sum paid into Court, and all accrued interest, should in the normal course be paid out to CCS. However, Ms Lee should
be given an opportunity to discuss this with her solicitors. The order in this regard is
5 Lee v Composite Cladding and Signage Manufacture and Installations Ltd [2012] NZCA 579.
that the sum paid into Court, and all accrued interest, is to be paid to the respondent, or as directed by the respondent, unless, no later than 3:00 pm on Friday, 15 March
2013, Ms Lee files an application, with all necessary supporting affidavit evidence, for an order that payment not be made to the respondent. If such an application is filed and served the sum paid into Court and accrued interest is not to be paid out
pending further order of this Court.
Woodhouse J
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