Lee v Whangarei District Council
[2018] NZHC 899
•30 April 2018
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
I TE KŌTI MATUA O AOTEAROA WHANGĀREI TERENGA PARĀOA ROHE
CIV-2014-488-94 [2018] NZHC 899
UNDER the Judicature Act 1908, the Building Act 1991 and the Building Act 2004 BETWEEN
WAI-YEE LEE (also known as OLIVIA LEE)
Plaintiff
AND
WHANGAREI DISTRICT COUNCIL
First Defendant
ROBIN FREDERICK LITTLEJOHN
First Third PartyCCS MANUFACTURING AND INSTALLATIONS LIMITED
Second Third Party
ALTHERM ALUMINIUM (NORTHLAND) LIMITED
Third Third Party
NORTHLAND WATERPROOFING SOLUTIONS LIMITED
Fourth Third Party
LAURIE WHITELAW
Fifth Third Party
Hearing: 30 April 2018 at 2:15pm Appearances:
T J Rainey for the Plaintiff
F Divich and C Harpur for the Defendant
J Skinner and K Lee for the Second Third Party A Holgate for the Third Third Party
No appearances for the First, Fourth and Fifth Third Parties
Judgment:
30 April 2018
WAI-YEE LEE (also known as OLIVIA LEE) v WHANGAREI DISTRICT COUNCIL [2018] NZHC 899 [30
April 2018]
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
[1] CCS Manufacturing and Installations Ltd, the second third party, applies for summary judgment and strike-out of the defendant’s statement of claim against it. The Whangarei District Council seeks contribution from CCS as a concurrent tortfeasor under s 17(1)(c) of the Law Reform Act 1936. CCS says that the District Council cannot claim contribution because CCS has already been found not liable in earlier proceedings that Ms Lee brought against it.
[2] This is another decision in Ms Lee’s leaky building litigation for her house at 183 Sandford Road, Raukaka. The house was built between 2006 and early 2008. The Whangarei District Council issued a building consent and made inspections during construction but it did not issue a code compliance certificate under the Building Act 2004. CCS, which used to be called ‘Composite Cladding and Signage Manufacture Installations Ltd’, was engaged as a contractor to manufacture and install cladding using aluminium supplied by Ms Lee.
[3] It is helpful to understand certain aspects of the cladding. There are two elements. There is “pre-cladding”, which is to protect the building from water ingress. Outside that there is aluminium cladding, which is a rain screen and is meant to be a moisture barrier between the pre-cladding and the aluminium cladding. CCS was responsible for the manufacture and installation of the aluminium cladding. It was not responsible for the pre-cladding.
[4] In early 2008, Ms Lee was aware that there were defects in the house. She has spent considerable time and effort since then litigating over the defects. That has included an adjudication under the Construction Contracts Act 2002, an arbitration, an attempted proceeding in the Weathertight Homes Tribunal, proceedings in the District Court as well as this case. In this proceeding, the District Council is the only defendant. It has joined third parties. CCS is the second third party. Mr R Littlejohn, the first third party, is a director of the company which supplied labour under contract to Ms Lee. Ms Lee succeeded in an arbitration against his company.
Altherm Aluminium (Northland) Ltd, supplied and installed joinery and the glass balustrade, is the third third party. Northland Waterproofing Solutions Ltd, which installed the membrane to the roof gutters and deck of the house, is the fourth third party. Mr Whitelaw, the fifth third party, worked on the house.
[5] Ms Lee did not pay CCS in full. It sued her in the District Court, claiming payment for the work it had carried out between June 2007 and February 2008. The outstanding balance claimed was $53,975.40. Ms Lee counterclaimed, alleging defects by CCS. She claimed close to $300,000 for proposed remedial works plus the cost of properly cladding the house, and general damages. CCS acknowledged some allegations of defective workmanship but raised affirmative defences:
(a)Ms Lee was responsible for supplying the scaffolding, but she removed the fixed scaffolding. Mobile scaffolding was used in its place and CCS could not carry out the work properly.
(b)Materials were Ms Lee’s responsibility. She supplied an inferior cladding product which did not have New Zealand certification.
(c)Ms Lee was responsible for project management, but she failed to operate a safe building site and did not comply with the house design plans for which the District Council had given its building consent. That included making amendments to the guttering design.
(d)She did not allow CCS back onto the site to carry out remedial work.
[6] District Court Judge David Harvey heard the case in October 2009.1 He found for CCS on its claim and against Ms Lee on her counterclaim. He considered her counterclaim under s 28 of the Consumer Guarantees Act 1993 and as a claim for breach of duty of care in tort. CCS had a lawyer. Ms Lee represented herself.
1 Composite Cladding & Signage Manufacture Installations Ltd v Lee DC Whangarei, CIV-2008- 088-562, 27 October 2009.
[7] Ms Lee appealed. On the appeal, she did have a lawyer. Rodney Hansen J upheld Judge Harvey’s decision on the claim for payment of the unpaid work but on procedural grounds he set aside the order dismissing the counterclaim.2 Judge Harvey had not allowed Ms Lee to rely on hearsay evidence in the form of reports by building consultants. Rodney Hansen J considered that in fairness to an unrepresented litigant he should have given Ms Lee the opportunity to call the authors of those reports. A rehearing was ordered.
[8] District Court Judge Sharp heard the case for eight days from October 2011 to July 2012. The amount of Ms Lee’s counterclaim had increased markedly. This time the counterclaim was for breach of warranty under s 397 of the Building Act 2004, under s 28 of the Consumer Guarantees Act 1993 and for breach of duty of care in negligence. Judge Sharp found that there were breaches of warranty under s 397 of the Building Act, but any damage was minimal.3 She ordered $100 in nominal damages. She found against Ms Lee for the alleged breach under the Consumer Guarantees Act and for the claim in negligence. She also found that Ms Lee had contributed to her own losses. If she had to allocate responsibility between CCS and Ms Lee, she would have placed Ms Lee’s contribution at 99 per cent and CCS’s at less than 1 per cent. Significantly, she found that the claim in negligence was not proved because any defects in workmanship owed by CCS had not caused any damage to the house. Responsibility for the damage lay with other people, not CCS.
[9] Ms Lee appealed. She sought leave to adduce further evidence, but that was refused.4 Woodhouse J dismissed her appeal.5 He upheld Judge Sharp’s findings that while there were a few particularised defects in the work by CCS, they were relatively minor in nature. Some did not require remedial work and other remedial work was limited in its scope. He upheld the finding that there was no proved breach of duty of care which caused damage and which required complete re-cladding.6
2 Lee v Composite Cladding & Signage Manufacture & Installations Ltd HC Whangarei CIV-2009- 488-828, 16 December 2010.
3 Composite Cladding & Signage Manufacture Installations Ltd v Lee DC Whangarei, CIV-2008- 088-562, 16 August 2012.
4 Lee v Composite Cladding & Signage Manufacture and Installations Ltd [2012] NZHC 3189.
5 Lee v Composite Cladding & Signage Manufacture & Installations Ltd [2013] NZHC 354.
6 At [39].
[10] Ms Lee began this proceeding against the District Council in May 2014 without legal assistance. Her statement of claim in ay 2014 made allegations about the pre- cladding, but did not allege any negligence relating to work carried out by CCS. She claimed damages of $726,000 for remedial work as well as general damages. In the early stages she did not have legal representation but did have a McKenzie friend. I and the Court of Appeal held that the proceeding was out of time under s 4(1)(a) of the Limitation Act 1950.7 She successfully appealed to the Supreme Court, this time having legal assistance, Mr Rainey.8
[11] In her amended statement of claim of 28 July 2017, her allegations against the District Council are expanded. She says that the Council was negligent in the grant of the building consent in October 2006, in approving amendments to the consent, and failing to identify defects when it made inspections, in not putting in place an adequate system of inspection, and not taking sufficient steps during construction to ensure that the building complied with the building consent and the performance requirements of the Building Code. A schedule to the new statement of claim alleges seven heads of defect. The significant ones for this decision are defects D and F:
Defect D
Poorly fabricated and installed composite cladding panels allow water entry and subsequent damage to internal linings.
Cause
Panels have been poorly fabricated and fitted to the building meaning that sealant joints between the panels cannot be adequately formed.
Damage
Water entry through panel joints, particularly at window sills, deck edges and parapets. Damage to internal linings and likely timber framing.
Defect F
Complex junctions between aluminium composite panel, glass balustrades and joinery are poorly formed and allow water ingress.
Cause
7 Lee v Whangarei District Council [2015] NZHC 2777 and Lee v Whangarei District Council
[2016] NZCA 258.
8 Lee v Whangarei District Council [2016] NZSC 173, [2017] 1 NZLR 401.
Change in design during construction has created a complex junction for which no detailed design was created. Similar details occur in three alternate locations. The formed junction is reliant on sealant that has not been able to accommodate differential movement of the materials.
Damage
Water entry into building causing damage to internal linings and other building elements. Defect concerns both decks.
Both matters are said to concern the cladding manufactured and installed by CCS.
[12] In its statement of claim against the second to fourth third parties the District Council claims contribution from CCS as a concurrent tortfeasor. It alleges a breach of duty by CCS for defects D and F in Schedule 2 to Ms Lee’s amended statement of claim. Contribution is claimed under s 17(1)(c) of the Law Reform Act 1936 and at common law.
[13] CCS’s statement of defence denies liability for contribution and includes affirmative defences of res judicata and issue estoppel. For those, it relies on Judge Sharp’s decision on Ms Lee’s counterclaim and Woodhouse J’s decision upholding her decision and dismissing the appeal. The res judicata is also said to be a plea of abuse of process.
[14] CCS filed its statement of defence on 7 December 2017. It applied for summary judgment and strike-out on 2 March 2018. It relies on the pleadings in this proceeding and in the judgments in the counterclaim proceeding between Ms Lee and CCS in the District Court and this court. It has not given any further evidence in support of its application. Under r 12.4(3), CCS requires leave to file its summary judgment application after it has filed its statement of defence. No party objected to leave being granted. I grant leave. CCS does not rely on any additional evidence for its summary judgment application. Its strike-out application can be determined simply by reading the pleadings and the judgments in the District Council proceeding. The applications appear to overlap each other almost entirely.
[15] The District Council has raised additional matters. It says that if CCS is successful in its strike-out application it would be unjust to require the Council to
respond to and be held liable for defects caused by CCS. I will not give any ruling in this hearing barring Ms Lee from maintaining allegations against the District Council in respect of defects D and F. The Council has not filed any formal application asking for those allegations against it to be struck out. I will come to these matters later, but I indicate now that the absence of any formal application for those matters is a preliminary bar to my considering them.
[16] The submissions for CCS relied mainly on abuse of process arguments. The matter can, however, be determined more directly by applying s 17(1) and (2) of the Law Reform Act 1936:
17 Proceedings against, and contribution between, joint and several tortfeasors
(1) Where damage is suffered by any person as a result of a tort (whether a crime or not)—
(a)judgment recovered against any tortfeasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tortfeasor in respect of the same damage:
(b)if more than 1 action is brought in respect of that damage by or on behalf of the person by whom it was suffered, or for the benefit of the estate, or of the wife, husband, civil union partner, de facto partner, parent, or child of that person, against tortfeasors liable in respect of the damage (whether as joint tortfeasors or otherwise), the sums recoverable under the judgments given in those actions by way of damages shall not in the aggregate exceed the amount of the damages awarded by the judgment first given; and in any of those actions, other than that in which judgment is first given, the plaintiff shall not be entitled to costs unless the court is of opinion that there was reasonable ground for bringing the action:
(c)any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued in time have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.
(2) In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage; and the court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.
…
[17] For its contribution claim the District Council will need to show that not only is it liable to Ms Lee (that is only likely to happen if there are findings against it at trial), but that CCS is liable to Ms Lee as a concurrent tortfeasor for the same damage. Section 17 applies only if there is the same damage. While I do not have the pleadings for the District Court counterclaim, it is clear from the judgments that the damage alleged in the District Court was defects in the work by CCS in manufacturing and installing the aluminium cladding that resulted in the house not being watertight. That is essentially the same allegation that the District Council makes against CCS in this proceeding. I find that defects D and F in the amended statement of claim are alleged to have caused the same damage as Ms Lee alleged against CCS in the counterclaim in the District Court.
[18] But there is the additional matter, that CCS can be liable for contribution only if it is a “tortfeasor who is, or would if sued in time have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise …” CCS can point to the fact that it has already been sued in the District Court and found not liable. It can rely on those findings of no liability to resist the District Council’s claim that it is liable to Ms Lee. There is strong authority to support that. It begins with the decision of the House of Lords in George Wimpey & Co Ltd v British Overseas Airways Corporation.9 That was a decision under s 6(1)(c) of the Law Reform (Married Women and Tortfeasors) Act 1935 which is in the same terms as s 17(1)(c) of the New Zealand Act, except that “in time” has been inserted in the New Zealand provision. In that case a Mr Littlewood, employed by BOAC as an aircraft cleaner, was injured when travelling on a BOAC forklift driven by another employee. He was injured in a collision with a truck driven by a Wimpey employee. Mr Littlewood sued Wimpey. Wimpey issued a third party notice to BOAC claiming contribution under the 1935 Act. Mr Littlewood joined BOAC as a co-defendant. BOAC successfully pleaded that Mr Littlewood’s claim against it was out of time under the relevant limitation statute. Wimpey failed in its contribution claim against BOAC because BOAC had been found not liable on Mr Littlewood’s claim against it. The majority in the House
9 George Wimpey & Co Ltd v British Overseas Airways Corporation [1955] AC 169 (HL)
of Lords ruled that Wimpey could not bring itself within s 6(1)(c). Viscount Simonds said:10
Contribution is recoverable from one who in actual suit by the injured man has been held liable by judgment: it is recoverable from one who, if sued, would in that hypothetical suit have been held liable. Is it also recoverable from one who has been actually sued by the injured man and held not liable? It happens in the case under appeal that the reason why the party from whom contribution was claimed was held not liable was because the Limitation Act was successfully pleaded. But this is irrelevant to the issue. The same question would arise if the claimant tortfeasor alleged that the defence, though it succeeded on the merits, was successful only because the case had been inadequately presented or even because the judge and jury had taken a wrong view of it. It appears to me that a construction leading to such a result should only be accepted if the language fairly admits of no other meaning. But, so far from this being the case, in my opinion the subsection plainly contemplates two classes only of persons from whom contribution can be claimed, viz: those who have been sued and those who have not been sued but would, if sued, be held liable. If the intention had been to include a third class of persons who, having been already sued and found not liable, might yet in hypothetical proceedings be sued a second time and then found liable (an extravagant intention, as it appears to me, to impute to the legislature) I should have expected to find it expressed in clear and appropriate language. Not only is it not so expressed, but on the contrary I find in the words actually used the clear indication that the class of persons who “if sued would have been liable” does not include persons who, having been sued have been held not liable. As Morris LJ aptly put it, the words “if sued … postulate the case of someone who has not been sued”.
[19] As mentioned, the only difference between the British provision and the New Zealand Act is the insertion of the words “in time”. Those were added to overcome the difficulty of the limitation bar which was decisive in the George Wimpey case. While New Zealand’s parliament has amended the New Zealand Act to deal with that issue, it appears to have accepted that in all other respects the George Wimpey decision continues to apply. I respectfully apply that interpretation. New Zealand courts have applied that decision in Waitapu v R H Tregoweth and Blair & Co Ltd v Queenstown Lakes District Council.11
[20] The District Council tried to distinguish the Blair decision. It submitted that, on the facts of that case, the party who had been found not liable had been in the same proceeding as the party seeking contribution. That is not a relevant ground for
10 George Wimpey & Co Ltd v BOAC [1955[ AC 169 at 178-179.
11 Waitapu v R H Tregoweth Ltd [1975] 2 NZLR 218 (SC) and Blair & Co Ltd v Queenstown Lakes District Council[2010] NZSC 44, [2010] 3 NZLR 17 – see in particular the judgment of Wilson J at [6].
distinguishing that decision. It is clear from the Wimpey decision that it is irrelevant to a contribution claim whether a party was found not liable in the same proceeding as the party claiming contribution, or in a separate proceeding. In Blair itself the local authority had been found not liable in the Court of Appeal on a strike out application opposed by the plaintiff and another defendant. The unsuccessful parties were given leave to appeal, but the plaintiff withdrew its appeal. The other defendant was barred from claiming contribution, even though it had no say in the plaintiff’s decision not to pursue the appeal.
[21] In this case, CCS has not been found liable in tort to Ms Lee. Specifically, while Judge Sharp found there were breaches of warranty, she found that those breaches had not caused the damage which was the basis for Ms Lee’s tort claim against it. The alleged defects by CCS had not resulted in watertightness damage to the house. That meant that while there were findings as to breach of warranty, there were no findings against CCS for liability in tort because of the absence of any damage caused by CCS. In the light of the Wimpey and Blair decisions, that means that CCS can point to the District Court decisions as barring any contribution claim against it for any liability in tort.
[22] In the pleadings, the Council has also alleged a contribution claim outside s 17 of the Law Reform Act. It has, however, alleged liability by CCS as a tortfeasor and not on any other basis. In my view, the statute covers the position. Contribution may be claimed in equity where there is a common obligation or coordinate liability. I base that on the Supreme Court’s decision in Marlborough District Council v Altimarach Joint Venture Ltd.12 That does not appear to be possible here because the breaches of duty alleged against CCS, as found by the District Court, did not cause damage. There is not an overlap of relevant damage. I do not see how a claim in equity can extend more widely than the statute itself in respect of the damage allegations.
[23] Because I find that the Council does not have a contribution claim under s 17(1)(c), it is not necessary to go into the arguments as to res judicata or abuse of
12 Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR 726.
process. Mr Skinner, for CCS, accepted that he would have difficulties arguing that he could claim res judicata because of the question of privies. There are difficulties in finding that the District Council as a local authority could be a privy of Ms Lee. There could not be any relevant privity of interest because they occupy entirely independent positions. While a contribution claim by the District Council would involve proving a claim in tort on the part of Ms Lee, something more is required to establish privity of interest. And that is lacking here.
[24] As to abuse of process, I decline to give a definite ruling, but indicate that there seem to be difficulties – again, because of the lack of privity. The authorities cited as to abuse of process involve one person seeking to litigate afresh a matter that has already been decided against them.13 In some cases, the courts have allowed privity arguments to bind others to prevent them re-litigating matters that have already been decided. The Court of Appeal’s decision in Shiels v Blakeley is an example.14 Another example is Johnson v Gore Wood & Co Ltd.15 In that case, a company had taken proceedings against a firm of solicitors. The company was under the directorship of a majority shareholder, a Mr Johnson. He also brought a proceeding for professional negligence against the solicitors. He had settled the proceeding brought by the company. The settlement was held to bar him because he was held to be a privy. Lord Bingham took care to establish that there was relevant privity. Because of the absence of privity here, I would be hesitant to rule on an abuse of process argument against the District Council.
[25] The District Council argues that it is now in an invidious position. It is being sued for defects D and F which it says were caused by CCS. It is now barred from claiming in this proceeding against CCS. It says that it is in a position of secondary liability. As a local authority responsible for issuing building consents and supervising building work for compliance with the Building Code and the Building Act, it can only incur a liability if someone else has not complied with a consent or the Building Code. That argument might have some traction if the Council is alleged to have accessory
13 Hunter v Chief Constable of the West Midlands Police [1982] AC 529 (HL), Collier v Butterworths of New Zealand Ltd (1997) 11 PRNZ 581 (HC), Reid v NZ Trotting Conference [1984] 1 NZLR 8 (CA).
14 Shiels v Blakeley [1986] 2 NZLR 262 (CA) at 268.
15 Johnson v Gore Wood & Co Ltd [2002] 2 AC 1 (HL) at 31.
liability – for example, as a joint tortfeasor, or someone who has conspired with another tortfeasor, or who induces another to breach a contract. Those are cases of accessory liability. If the person with principal liability is found not liable, there are strong reasons for thinking that the accessory also could not be liable.
[26] The Council has a different role. It is responsible for inspection as well as issuing building consents. There is no claim that it is an accessory to wrongdoing by others. In the District Court one reason for Judge Sharp finding for CCS was that the Council had approved a design change. That shows that questions of liability between the Council and Ms Lee are different from questions of liability between CCS and Ms Lee. A finding of non-liability in favour of CCS does not by itself mean that questions between Ms Lee and the Council have been determined, even in respect of the same damage.
[27] There is also the procedural point that the Council did not apply for a formal ruling to strike-out of any of Ms Lee’s claims. It is a matter for trial. A trial Judge may be able to determine whether Ms Lee is abusively trying to litigate against the Council matters on which she has already failed against CCS where there is an overlap of issues.
[28] I accept Mr Rainey’s submission that if I were to strike-out pleadings as to the aluminium cladding, the Council might focus its case on absence of any breach of duty of care and absence of damage in respect of the pre-cladding, whereas the court can determine the matter more comprehensively if all allegations are left at large for determination on their merits.
[29] I decline to give any ruling on issues between Ms Lee and the District Council. I grant the summary judgment application and I strike out the Council’s third party claim against CCS.
[30] CCS applies for costs on the application. I leave counsel to confer to on costs. If they cannot agree, memoranda may be filed and I will decide costs on the papers.
[31] There will be a telephone conference on Wednesday 1 May 2018 at 11:00am. The purpose of that conference is to check trial directions, especially with the third parties.
……………………………….
Associate Judge R M Bell
Solicitors
Rainey Law (T J Rainey/Mark Frogley), Auckland, for PlaintiffHeaney & Partners (Frana Divich/Charlotta Harpur), Auckland, for Defendant Perkinson Law (S W Perkinson), Glenbervie, Whangarei, for 1st Third Party Skinners Law (J Skinner), Albany, Auckland, for 2nd Third Party
The Conveyancing Shop Lawyers Limited (Thada-Anne Chapman) Henderson Reeves (Jeremy Browne), Whangarei, for 4th Third Party
MarsdenWoods Inskip Smith (Juliet Golightly), Whangarei, for 5th Third Party
Copy for:
Olivia Wai Yee Lee, 183 Sandford Road, Ruakaka, Whangarei, A G Jackson, Barrister, Whangarei, for 1st Third Party
Andrew Holgate, Barrister, Whangarei, for the 3rd Third Party