Lockwood v Boe
[2017] NZHC 982
•15 May 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-2921 [2017] NZHC 982
UNDER The Weathertight Homes Resolution
Services Act 2006, sections 93 to 96
IN THE MATTER OF
Procedural Order 7 in TRI 2015 100 22 dated 19 October 2016
BETWEEN
GARTH LOCKWOOD Appellant
AND
JOHN WILLIAM BOE First Respondent
ROBYN JEAN BOE Second Respondent
Hearing: 2 May 2017 Appearances:
R M Dillon for the Appellant
K I Bond and LHH Hunt for the RespondentsJudgment:
15 May 2017
JUDGMENT OF MUIR J
This judgment was delivered by me on Monday 15 May 2017 at 4pm
Pursuant to Rule 11.5 of the High court Rules.
Registrar/Deputy Registrar
Date:…………………………
Counsel/Solicitors:
R M Dillon, Queen City Law, Auckland
K I Bond, Whitfield Braun Limited, Hamilton
LHH Hunt, Whitfield Braun Limited, Hamilton
LOCKWOOD v BOE [2017] NZHC 982 [15 May 2017]
Introduction
[1] The appellant (Mr Lockwood) appeals from a decision by the Weathertight Homes Tribunal removing the respondents (Mr and Mrs Boe) from adjudication proceedings before the Tribunal.1 Such decision was made “with some hesitation” relying on the power conferred by s 112 of the Weathertight Homes Resolution Services Act 2006 (the Act) and on the principal grounds that there were no genuinely and reasonably disputed factual or credibility issues by reference to which a claim against Mr and Mrs Boe could succeed.
[2] It is accepted by all parties that the appeal appropriately proceeds on the well- known principles in Austin, Nichols & Co Inc v Stichting Lodestar.2
[3] The central issue in the appeal is whether what is acknowledged as being a conservative jurisdiction under s 112 was appropriately exercised having regard to the specific facts of the case. Although extensive authority was cited by both counsel I do not regard any of the relevant legal principles as materially in dispute and see the case in essentially factual terms.
Background
[4] Mr Lockwood is first respondent in proceedings brought before the Tribunal by the Robyn Boe Family Trust and John Boe Family Trust. The Trust owns a house at 1 Jackman Avenue, Whitianga which was built between 2003 and 2006. A Code Compliance Certificate was issued on 14 September 2006. The property on which the house was built was owned by JRB Limited (JRB), a company associated with Mr and Mrs Boe and of which they were directors.
[5] In September 2006, after completion of the construction, the property was transferred to the claimant trusts.
1 Robyn Boe Family Trust v Lockwood WHT Auckland TRI-2016-100-22, 19 October 2016 (Procedural Order 7).
2 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
[6] The claimants say the house was built defectively and suffered damage as a result. Remedial work was carried out during 2012 and a Code Compliance Certificate for that work issued in February 2013.
[7] The claimants applied to the Weathertight Homes Resolution Service (WHRS) in 2008. After the remedial works were completed they sought assistance under the Government’s Financial Assistance Package Scheme and received contributions from the Crown and Thames Coromandel District Counsel (TCDC) equating to approximately 50 per cent of their remedial costs.
[8] They then issued proceedings in the Tribunal against seven named respondents who were involved in the construction of the house. Their claims were for $353,621.76, being the balance of the repair costs, together with a claim for
$250,000 for alleged loss in value to the property and $30,000 by way of general damages for stress and anxiety.
[9] Mr Lockwood was named as first respondent in those proceedings. He had been contracted in 2003 by JRB to build the dwelling. The written contract was in simple form in which he agreed he would:
(a) construct the dwelling in accordance with plans supplied by JRB; (b) commence construction before 1 November 2003;
(c) ensure that all work was carried out in a tradesman-like fashion
(including specific reference to weatherproofness);
(d)in addition to his own labour, be assisted by two other suitably qualified tradespersons whose remuneration he would be responsible for;
(e) ensure that such additional builders worked a minimum of seven hours per day five days per week;
(f) attend weekly meetings, if requested, with representatives of JRB;
(g)when requested, provide JRB with a report showing work completed and construction work for the subsequent eight-week period; and
(h)adhere to all reasonable requests made by JRB and other tradespersons with respect to the construction of the dwelling.
[10] In consideration of those services JRB agreed to pay Mr Lockwood $30 per hour and to supply all materials.
[11] On its face it was a labour only contract but with the provision by Mr Lockwood of some additional services in the nature of forward planning and reporting. That inevitably involved him, at least in some degree, in co-ordinating other trades engaged on the site. Such other trades (at least those material for present purposes, including the cladding contractor and tiler) were not engaged on subcontract to Mr Lockwood. In each case they were employed directly by Mr and Mrs Boe who were invoiced in their own name. None of the relevant invoices, contracts, or producers' statements ultimately submitted by such contractors reference JRB. I will refer to these other trades throughout as the subtrades although that is not technically the case.
[12] On 12 July 2016 Mr Lockwood applied under s 111 of the Act to join Mr and Mrs Boe in their personal capacity as third parties. Such application was supported by an affidavit from Mr Lockwood in which he stated that Mr and Mrs Boe were in control of the site, arranged the contracts with the subtrades, organised the delivery of major building elements and arranged the attendance on site of other contractors as and when required. He said they would also negotiate any performance issues with the various contractors and that he had no control over them apart from advising Mr and Mrs Boe when other contractors or building materials were needed on site in relation to his own building work. He said that Mr and Mrs Boe would then arrange the attendance of those contractors but that he had no supervisory role in relation to their performance and was operating on a labour only contract paid hour by hour. He said he did not perform or invoice for supervision, only for labour, and that any failure of supervision must be laid at the door of Mr and Mrs Boe personally.
[13] Annexed to that affidavit were not only his building contract but what was described as a “sample only of documents indicating the types of control and supervision Mr and Mrs Boe had over the site”. Among those was a letter by Mrs Boe to Mr Lockwood dated 23 October 2003 which is instructive in terms of the level of involvement she had with at least some aspects of the build. In para 1 she said she had contacted “the window people” and sent them copies of the alterations and asked them to note these changes and revise their quotes and that she was still waiting to hear back from another company about a balustrade quote. In para 5 she said she had “ordered the unispan floor today from Stresscrete” and that it would be arriving the first week in December and that it was vital that “we are ready for it then”. She said that she was anxious therefore that the blocklayer was finished in plenty of time and with all temporary propping in place so that delivery could occur efficiently and without requirement to pay for any greater crane hireage time than necessary.
[14] In a further annexure to the application Mr Lockwood included a letter from Mrs Boe to Auckland Bricklayers and Plasterers commenting on the fact that they had instructed Mr Lockwood and his men to assist their blocklayers and that a deduction was therefore necessary from their quoted “all up price”.
[15] In response to that application the Tribunal issued its procedural order No 2.3
[16] It discussed the relevant evidence concluding that it was “desirable to join Mr and Mrs Boe as respondents on the grounds that among other things the evidence produced by them in part supported the allegation that they controlled or supervised the work”. It described the case against them as one in which:4
… there is tenable evidence to demonstrate that a claim alleging [Mr and Mrs Boe] in their capacities as directors and representatives of JRB Ltd personally owed and breached duties of care to the claimant trusts is capable of succeeding.
[17] The Tribunal therefore directed that Mrs Boe be joined in the claim as eighth and ninth respondents. It further directed that if either wished to apply to be
3 Robyn Boe Family Trust v Lockwood WHT Auckland TRI-2016-100-22, 29 July 2016 (Procedural Order 2).
4 At [27].
removed from the claim they were to make such application by 2 September 2016 and that in the event of such application that the Tribunal would issue separate further directions for determination.
[18] On 2 September 2016 the Boes filed an application for removal together with a lengthy supporting affidavit.
[19] They deposed that they had made it clear to Mr Lockwood from the outset that because they were resident in Hamilton and Mr Boe was often overseas, they would have very limited presence on site and that Mr Lockwood would accordingly be required to manage the build of the house “from start to finish”. They said that consistent with such understanding, Mr Lockwood was paid for his time and expertise in relation to all aspects of the build which he undertook including co- ordinating other trades, supervising others' work, ordering materials, liaising with other professionals if necessary, organising inspections of the building work, obtaining quotes from other contractors and providing them with advice along the way. They annexed as an example a diary entry by Mr Lockwood saying that on 5
December 2005 he had spent two hours at the site “looking over plus measuring for plasterer to charge” and a subsequent invoice for 34 hours' work in December.5
[20] Mrs Boe deposed that she was a teacher at Sacred Heart College and Mr Boe, that he was a rugby coach throughout the relevant period and that they had no expertise in project management. They deposed that their involvement was limited to obtaining a small number of quotes from tradesmen, most of whom were recommended by Mr Lockwood and, on occasions, dealing with suppliers for items like the bath and kitchen and paying bills. I note at this stage that such evidence appears inconsistent with the level of involvement exercised at least with regard to the unispan concrete floor.
[21] Despite the Tribunal’s observations in its procedural order No 2, it did not set
a timetable for filing of an opposition to Mr and Mrs Boe’s application. That is relevant because of the Tribunal’s observation in the decision under appeal that no
5 The same invoice records 38 hours in the period August to November for which there was no charge raised.
party, apart from Mr Lockwood, opposed the application. It made that comment in response to Mr Lockwood’s reliance on a memorandum filed on 4 September 2016 by counsel for the eleventh respondent, Mr Scott, who was the architect in relation to the project. In that memorandum counsel explained that his client was overseas for a period of two weeks and that counsel himself was fully engaged in a lengthy murder trial. The memorandum also stated:
Contrary to assertions made, Mr Scott was not employed to supervise the works. That role was taken on by the owner Mr Boe.
[22] On 16 September Mr Lockwood filed his opposition. He referred to his affidavit in support of joinder, to the memorandum from Mr Scott’s counsel and to a statement by the plasterer that it was his understanding Mr Boe was the project manager and supervisor. His counsel submitted that the respective sworn statements of the parties had to be tested and that the facts and documents were in issue and disputed. He suggested that when tested, the evidence may even establish that Mr and Mrs Boe were developers and thus subject to a nondelegable duty of care on the
principles set out in Keven Investments Ltd v Montgomery.6
The Tribunal’s decision
[23] In its detailed decision the Tribunal canvassed at length the principles applicable to an application under s 112. It compared earlier High Court decisions in which the jurisdiction was held to be analogous to the strike out jurisdiction under r 15.1 of the High Court Rules and later decisions including Yun v Waitakere City Council7 and Saffioti v Jim Stephenson Architect Ltd,8 which recognised that the Tribunal had an inquisitorial and gatekeeping role and was entitled to consider all evidential material before it and was not therefore bound to assume that factual allegations adverse to parties’ interests could be proved.9 It noted that it was constrained by the principles of access to justice and that if a party alleged that another was liable to it then it was entitled to have the Tribunal hear its case unless it
was fair and appropriate in all the circumstances that the other party be removed. It
6 Keven Investments Ltd v Montgomery [2012] NZHC 1596, [2013] NZAR 1113.
7 Yun v Waitakere City Council HC Auckland CIV-2010-404-5944, 15 February 2011.
8 Saffioti v Jim Stephenson Architect Ltd [2012] NZHC 2519.
9 Citing Auckland Council v Abraham [2015] NZHC 415 at [14].
said that the essential question for it was to determine whether the claim was tenable in fact and in law.
[24] In relation to factual issues it held that the Tribunal must first be satisfied that it had obtained all the evidence necessary to assessment of the case and then make a judgment about whether there were any genuinely and reasonably disputed factual issues or credibility issues. In doing so it acknowledged that it was required to exercise its discretion “carefully”. It then held, albeit “with some hesitation”, that:10
(a) There was no evidence to support an allegation that Mr and Mrs Boe were personally involved in the works in the sense of undertaking them themselves (a proposition that the appellant does not seriously challenge on appeal);
(b)Although there was a factual issue about the extent that the Boes' acknowledged involvement constituted supervision or control, there was “nothing to suggest that Mrs Boe supervised the works” and that, in relation to the observations by Mr Scott’s counsel about Mr Boe, they were “not sufficient to displace the evidence of Mr Boe that he was practically unable to and did not in fact supervise the works”.
(c) Mr Lockwood had not demonstrated how Mr and Mrs Boe’s acts, which were alleged to constitute supervision and control, could give rise to personal liability or were causative.
(d) No proper factual foundation had been laid for Mr and Mrs Boe’s
alleged potential liability as developers.
Mr Lockwood’s case
[25] The appellant’s notice of appeal identifies 16 different grounds but in oral argument Mr Dillon focused on the following:
10 At [49].
(a) In relation to the legal test under s 112, the Tribunal did not adopt a sufficiently cautious approach and should have been greater influenced by the jurisprudence under r 5.56 of the High Court Rules in relation to strike-out applications. In that respect Mr Dillon said that cases like Yun were distinguishable because there the Tribunal had asked for all relevant evidence to support the joinder and, in response, had simply received an amended statement of claim, the allegations in which the claimant said must be taken as established. The Court declined to adopt such an approach. Mr Dillon said that this could be contrasted with the current case where there was direct evidence in the form of statements by other relevant parties (architect and plasterer) that Mr Boe was directly involved in supervision and several correspondences from Mrs Boe indicating that she exercised the level of control typically associated with a project manager.
(b)That the Tribunal could not be satisfied that it had all relevant evidence before it. It had a statement by the architect’s counsel that Mr Boe was responsible for supervision, did not make any timetable order for opposition on his part and yet proceeded to decide the issue on the basis that non-opposition undermined either the veracity or weight of his position.
(c) Contrary to the Tribunal’s observations, there was a proper basis in law for the Boes' personal liability, either as directors of JRB or as parties who, in their personal capacity, contracted with subcontractors whose work was causally related to the defects (including the plasterer and tiler).
(d)That the authorities predicated a fact-specific analysis and that cases could potentially lie on a spectrum between active and day-to-day supervision of relevant trades by directors of the owner, through to a situation where, by contract, all supervisory functions were devolved on the builder. Mr Dillon suggested that on the established facts and documents this case rested somewhere on that continuum. From time
to time the builder had, in order to assist the efficient running of the project, engaged in various degrees of liaison with subcontractors but Mr and Mrs Boe were also very actively involved in that respect.
(e) The fact that Mr and Mrs Boe chose to contract in their personal names (whether on behalf of an undisclosed principal or not) with subtrades, although not of itself establishing the requisite level of supervision, re-enforced the fact that they were closely and personally involved in the project and to that extent supported the contentions made by Mr Lockwood, the architect and the plasterer.
(f) In relation to the absence of alleged causal link between matters supervised by Mr and Mrs Boe and the defects alleged in the statement of claim, Mr Dillon emphasised:
(i)The strong evidence of control and supervision in relation to items such as the unispan concrete floor could, in the absence of documents either way, form the basis of reasonable inferences that a similar level of supervision was assumed (albeit perhaps not undertaken) in relation to other contractors whose work had a causal connection to the defects (e.g. the cladder and tiler).
(ii)There was evidence before the Tribunal (albeit not specifically referenced in Mr Lockwood’s affidavit or his counsel’s memoranda) of a change (confirmed at the time by Mrs Boe) in the cladding system specified in the consent plans and a requirement that the plans be redrawn and submitted to the Council.
(iii)Mr Dillon submitted that the change in proprietary system to a product which he described as significantly thicker had inevitable downstream implications for the build, with particular reference to allegations in the statement of claim that
claddings were installed below the finished tile level and that window openings were not sealed before joinery was installed. I note, however, there was no evidence before the Tribunal at the time of its decision identifying how the change in proprietary system impacted these items.
(iv)Although again the document was not specifically drawn to the Tribunal’s attention, Mr Dillon also referenced the warranty provided by the membrane installer which he said was among the documents already filed with the Tribunal. He submitted that inadequacies in the membrane were among the alleged defects in the building and that the relevant warranty was addressed to Mr Boe personally. He said that this carried with it the strong inference of supervision in relation to a contractor whose work had a causative link to defects.
(v)To similar effect he referred to the fact that the tiler’s scope of works included “to make fall on concrete decks”; that inadequacies with this fall were among pleaded defects; that the contract entered into by the tiler was with Mr and Mrs Boe personally; and that they were likewise invoiced for the work. He said that this again raised a strong inference of control and supervision over a trade with causal connection to the defects.
(g)In relation to the allegation of potential liability as developers, Mr Dillon said this was arguable based on Mrs Boe’s letter of 23
October 2003 which identified a requirement to be able to “apply to have the building declared as two dwellings at a later date” and a letter of 20 March 2004 to the building certifiers saying that the Boes wished to use him again at a future time in relation to building “apartments behind the house”.
The Boes’ case
[26] In detailed submissions Mr Bond emphasised:
(a) The evidence of Mr and Mrs Boe that, on account of their residence distant from the construction site, Mrs Boe’s full time job as a teacher and Mr Boe’s commitments as a rugby coach, it was not physically possible for them to be engaged in supervision of the trades, nor were they qualified to do so and that this strongly supported their version of the facts that Mr Lockwood assumed and discharged that responsibility.
(b) The contract with Mr Lockwood supported that conclusion.
(c) Such involvement as Mr and Mrs Boe had was, as the Tribunal had found, consistent only with that of interested owners and confined to the selection of material and subcontractors.
(d)No adequate causal link had been established between alleged inadequacies of control or supervision of contractors and defects alleged in the statement of claim.
(e) There was no evidence to suggest that the change in cladding system by Mr and Mrs Boe from that specified in the plans and any failure to develop replacement plans was causative of the defects.
(f) At this stage any such links were speculative, and the Tribunal was entitled to confine itself to what was currently demonstrated as reasonably arguable.
(g)If further information were to emerge in the future, a renewed application to join could be made.
(h)The application by the Trusts to join the engineer on the grounds that he had responsibility for supervision of aspects of construction was not inconsistent with Mr Lockwood himself having like responsibilities, given that there could be both intersecting and overlapping supervision obligations.
(i)The test applicable under s 112 is different to that under s 111, so no inference was available from the Tribunal having earlier found that the claims against the Boe’s were sufficiently tenable to justify their joinder. In any event, it was open to Mr and Mrs Boe to produce, as counsel said they did, subsequent evidence exonerating them from any supervision role.
(j)There was no tenable evidence that the Boes constructed the home for the primary purpose of sale to other people which was identified in Keven Investments Ltd v Montgomery as a key ingredient of “developer” status.11
Discussion
The Tribunal's approach
[27] I do not consider the Tribunal can be appropriately criticised for any aspect of its discussion of legal principles applicable to an application under s 112 of the Act. It comprehensively set out the differences in approach between earlier and later High Court decisions and the significant authority which now exists for the proposition that the jurisdiction is wider under r 5.1 of the High Court Rules, with the result that the Tribunal may access all the material before it in reaching a conclusion as to whether the pleaded allegations against the relevant party are sufficiently tenable to justify such party’s ongoing inclusion in the proceedings.
[28] The Tribunal adopted the approach in the later decisions, as I also respectfully do, referring specifically to the decisions in Yun v Waitakere City Council, Saffioti v Jim Stephenson Architect Ltd, and Lee v Auckland Council.12 In Saffioti Katz J discussed the position as follows:
[40] The language of r 15.1 ... and s 112 ... is quite different. Under r 15.1 the main ground for striking out a pleading in High Court proceedings is that it “discloses no reasonably arguable cause of action”. Under s 112,
11 Keven Investments Ltd v Montgomery, above n 6, at [19].
12 Yun v Waitakere City Council, above n 7, Saffioti v Jim Stephenson Architect Ltd, above n 8, and
Lee v Auckland Council [2015] NZHC 1196.
the Tribunal may strike out a party to a claim if it “considers it fair and appropriate in all the circumstances”.
[41] The language in r 15.1 denotes a fairly strict objective standard in which the Court takes into account the pleaded facts and the relevant law and asks whether a “reasonably arguable cause of action” is disclosed. If not, the relevant pleading will be struck out.
[42] In contrast, the words “fair and appropriate” combined with “in all the circumstances” in s 112 have a somewhat broader focus. The Tribunal is required to consider “all the circumstances”, before deciding whether it is “fair and appropriate” for a party (as opposed to a cause of action) to be struck out.
[43] Taking into account the different wording and the different statutory context I agree with the conclusion reached by Ellis J in Yun & Phon that s 112 confers a somewhat wider jurisdiction than r 15.1, for the reasons set out in that decision, as summarised in [33]-[39] above.
[44] Nevertheless, it is my view that the cases where it will be “fair and appropriate” for the Tribunal to remove a party from a proceeding in circumstances where the relevant causes of action would not be struck out on a traditional strike out grounds will be relatively rare. 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.
[45] 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 ultimately prove to be meritorious not be prematurely
struck out at an interlocutory stage.
…
[48] Yun & Phon provides an illustration of particular circumstances where the High Court found that fairness allowed it (and the Tribunal) to consider evidence which was inconsistent with (or did not support) the pleading. However, even on a traditional strike out approach, the Court is not required to assume the truth of a pleaded allegation which is speculative and without foundation. In the High Court context that principle has applied only rarely and in the most clear-cut of cases. Yun & Phon represents a somewhat more liberal application of that principle, reflecting the different statutory test and the broader statutory context in which the Tribunal operates.
[29] The important caveats recognised by Katz J on the expanded jurisdiction were also recognised by the Tribunal, which emphasised that it was to approach its exercise with caution. The central issue in this appeal is whether it was indeed
sufficiently cautious. It is clear from procedural order that the Tribunal understandably found that judgment call a difficult one.
[30] Such inquiry is intensely fact specific. It is not necessary in the context of this case to review at length the authorities relating to potential director liability as joint tortfeasors in a construction context. As the judgments of William Young P (as he then was) and Arnold J in Body Corporate 202254 v Taylor record at [39]:13
A director may be held liable by adopting a “hands-on” role in the
development exercise.
[31] William Young P and Arnold J expressed that in terms of an assumption of responsibility which, in the same case, Chambers J rejected as importing an unnecessary qualification from the law of negligent misstatement. He held that on normal negligence principles a party with personal control over a building operation could be personally liable. He recognised that Mr Taylor did not “build” the relevant dwellings on his own and that others inevitably helped, but said that did not prevent
Mr Taylor being held liable and negligent because:14
It is enough if his conduct “is a contributory cause; [it does not need to be] in some sense a main or primary cause”.
[32] In the more recent decision of Body Corporate 183523 v Tony Tay & Associates Ltd, Priestley J said, in terms which I adopt:15
Although all these cases revolve around their individual facts, as a general rule directors facing claims in respect of leaky buildings would be exposed in situations where the companies involved are one person or single venture companies or in situations where there are factual findings the director was personally involved in site and building supervision or architectural and design detail.
[33] On the facts of that particular case the Judge held that the defendant was not personally involved to the necessary degree. This was despite the fact that the defendant was the company’s managing director and majority shareholder; that he
had liaised and negotiated the development contract; that he was responsible for
13 Body Corporate 202254 v Taylor [2008] NZCA 317, [2009] 2 NZLR 17.
14 At [128] citing from Stephen Todd (ed) The Law of Torts in New Zealand (4th ed, Brookers, Wellington, 2005) at [21.02.02]
15 Body Corporate 183523 v Tony Tay & Associates Ltd HC Auckland CIV-2004-404-4824, 30
March 2009, at [156].
filing documents with the Auckland Council, organising some contracts, and arranging master build guarantees; and the fact that he could “from an organisational standing point … if he so chose … control what happened on the site”.16 The evidence nevertheless did not establish personal involvement in site and building supervision.
[34] Significantly, his Honour was able to assess all such issues in the context of a full trial.
Was there a tenable claim against the Boes?
[35] I turn now to consider the facts of the present case (insofar as they can be currently established) and whether they give rise to a sufficiently tenable claim against Mr and Mrs Boe that the Tribunal should have rejected their application for removal. I do so conscious of the fact that in the interests of justice tenable but weak claims should be allowed to proceed and that my focus must be on whether the claim is “capable of succeeding” not whether it is proved.17
[36] In my view the Tribunal should have allowed the claims to be tested in the normal way. I do not consider them so weak as to be untenable. I reach that conclusion having regard to the following considerations.
[37] First, the contractual framework which was established for construction of the house was in my view one fraught with ambiguity from the outset. What is on the face of it a labour only contract was entered into by the Boe’s company and Mr Lockwood. The subtrades were engaged directly by Mr and Mrs Boe. The labour only contract did not contain an express provision placing responsibility for control and supervison of the subtrades on Mr Lockwood. To the extent the Tribunal inferred otherwise I respectfully disagree. Indeed, the provisions of cl 1(e) to the effect that Mr Lockwood was to “adhere to all reasonable requests made by JRB and other tradespersons with respect to the construction of the dwelling” pointed in the
contrary direction.
16 At [150].
17 See Auckland Council v Staley [2013] NZHC 2572 at [12] and [14].
[38] I note that Mr Lockwood was contractually obliged to liaise with the subtrades at least to the extent required to satisfy his obligation, when requested, to provide a forward plan for the construction work in any eight week period (cl 1(k)).
[39] Nevertheless, absent provision for Mr Lockwood to assume their control and supervision, the usual inference would be that this reposed with the employers of the subtrades. In each of the cases evidenced, such employers were Mr and Mrs Boe. Further, on the face of the relevant documents this was in their personal capacity. Although it may ultimately be established that they contracted on behalf of an undisclosed principal JRB, alternative analyses are available. They may, for example, have simply proceeded on the basis that they be indemnified by their company. They may, other than in respect of the contract with Mr Lockwood, have simply ignored the company’s existence altogether and have met the relevant liabilities without reimbursement. Possibly also no reimbursement was necessary because the company paid the relevant bills. None of that evidence is currently before me but what is significant is that, unlike many of the other cases which have been considered, Mr and Mrs Boe did not maintain a clear distinction between personal and company involvement in the project.
[40] It remains open on the facts to conclude therefore that all contractors (or at least those who had a causal connection with alleged defects, including the tiler and cladding installer) were employed by Mr and Mrs Boe personally and were prima facie under their personal control and supervision.
[41] Nevertheless, the Boes’ residence distant from the construction site and other commitments undoubtedly precluded control and supervision on a daily basis. In that context the contractors may have assumed that some form of de facto control reposed with Mr Lockwood. From time to time he undoubtedly assisted with the orderly progress of the build by undertaking and being paid for work other than construction. The diary entry of 5 December 2005 is an example. But such cannot be equated with control over the plasterer and any assumption to the contrary would in my view be misplaced. In the absence of direct evidence of Mr Lockwood’s control and supervision of the subtrades, and in the absence of a contractual
responsibility on his part to do so, Mr and Mrs Boe will inevitably face at least some difficulties in establishing an adequate foundation for any such assumption.
[42] There was before the Tribunal material supportive of Mr Lockwood’s
position in the form of:
(a) a statement by the fifth respondent Mr Baker to the effect that it was and is his understanding that Mr Boe was the project manager and supervisor for the construction of the dwelling; and
(b)memorandum of counsel for the architect Mr Scott (filed when his client was overseas but on instruction) that “Mr Scott was not employed to supervise the works. That role was taken on by the owner Mr Boe”.
[43] In my view the Tribunal unduly minimised the significance of this material in the context of the low threshold which applied for continued inclusion of the Boes in the proceedings. I accept that Mr Baker’s statement did not on its face set out the grounds for his understanding, but that must in my view be considered in the context of the fact that he had already provided discovery of his relevant documents to the Tribunal and that these included not only evidence that his company’s contract was with Mr and Mrs Boe personally but its requirement (apparently unsatisfied) that on the change of cladding from Monotek to Insulclad the plans were to be “redrawn and submitted to council”. Moreover, his discovery also included a note from Mr Boe directing which works he should complete first because of a desire to remove scaffolding as soon as possible (no doubt to save on associated costs).
[44] I accept that the Tribunal was correct in saying that because Mr Baker was only involved in respect of cladding and plastering he was unlikely to be able to depose to Mr Boe’s supervision of the entire construction. But that in my view ignores the fact that, having regard to the defects alleged, supervision of the cladding and plastering itself gives rise to at least an arguable causal connection with the losses alleged.
[45] Nor, unlike the Tribunal, do I place weight on the fact that Mr Baker did not oppose the Boe’s application. In the absence of any procedural order requiring such opposition by a particular date it was unsafe for the Tribunal to assume the absence of such opposition when it made the order removing Mr and Mrs Boe.
[46] In respect of the memorandum of counsel for Mr Scott, this was acknowledged by that Tribunal as “the strongest part of Mr Lockwood’s opposition”,18 but it again minimised its significance by reference to the fact that counsel had elsewhere said in the memorandum that he was “heavily engaged and unable to deal attentively with the matter”. There is not, however, any suggestion that counsel’s memorandum did not accurately reflect the instructions of his client.
[47] In addition the Tribunal made the same point in regard to Mr Scott having not filed in opposition to the s 112 application. Again too much was made of that fact.
[48] Nor in respect of Mr Scott’s position was this a case where, in my view, the Tribunal had before it all of the relevant information necessary for that position to be rejected. Given the circumstances outlined in the memorandum and the fact that, as recognised in Yun, the Tribunal has an investigative role entitling it to seek further information and evidence throughout the progress of the proceedings, it should not in my view have dismissed the stated position of Mr Scott without further inquiry.
[49] There was before the Tribunal at least one clear example of comprehensive control and supervision of an important subtrade by Mrs Boe. This was in relation to the Unispan floor, as referred to in Mrs Boe’s letter to Mr Lockwood dated
23 October 2003. Not only does this indicate ordering of the floor by Mrs Boe but her direct involvement in important issues around timetabling of the installation. This goes far beyond the role of “interested owners” which Mr Bond endeavoured to suggest marked the limits of Mr and Mrs Boe’s involvement. In respect of that aspect at least, Mrs Boe’s role was that of a fully fledged owner/project manager. Although I accept that there is no causal connection between her control and supervision of that particular subtrade and the defects alleged, it is open to Mr
Lockwood to assert, in the absence of evidence to the contrary, that control and
18 At [49](c)(iii)].
supervision exercised at one part of the contract was exercised (or at least assumed)
throughout.
[50] Moreover, the same correspondence indicates a large level of involvement by Mrs Boe in significant issues around revisions to window joinery and associated quotations. None of this can be described, as Mr Bond submits, as simply input into “cosmetic issues” and, given the fact that the list of defects includes allegations in relation to the window openings, a relevant causal connection cannot be ruled out at this stage.
[51] So too, documents before the Tribunal (although admittedly not specifically referenced in submissions) indicated that the tiler’s scope of works included “to make fall on concrete decks”, that his quotation was addressed to John and Robyn Boe, that Mrs Boe inserted her name after the words “Quotation accepted by” and that she personally signed it. Problems in relation to deck falls feature prominently in the alleged defects. It is at least arguable on the facts that control and supervision of the relevant trade was vested in Mrs Boe personally.
[52] I am unable to identify any material differences in the position of Mr and Mrs Boe such as would justify an order removing one but not the other from the proceedings. Contracts with the subtrades are invariably in both their names. There is direct evidence of Mrs Boe’s control and supervision at relevant stages. There is third party evidence of Mr Boe’s involvement also.
[53] For the above reasons, I consider that the Tribunal erred in removing Mr and Mrs Boe from the proceedings. In coming to that conclusion I do not overlook Mr and Mrs Boes’ affidavit evidence that they engaged Mr Lockwood on a basis that he “manage the site and build the house from start to finish” and that his responsibilities included supervision not only of the additional builders he was obliged to hire but “the other contractors”. However, I consider that in stating their position in such an unqualified fashion they do not appropriately recognise their several demonstrated instances of direct control and/or supervision of the subtrades. Against that background it is appropriate that their evidence be further tested. Moreover, it is directly contradicted by Mr Lockwood who deposes that he had “no control over the
contractors or the site and no supervisory role in relation to their performance”. In that he is supported by Mr Baker and Mr Scott. In my view there were sufficiently genuine and reasonably disputed factual issues as to render an order under s 112 inappropriate.
[54] I do not in that context need to express any final view on the quality of the “developer” claim. However, on the evidence before the Tribunal at the time I would have struggled to identify any tenable claim. I do not consider a requirement that the dwelling function as two separate accommodations adequate evidence of an intention to develop for the purposes of sale, and subsequent intentions with regard to development of the balance of the site cannot be regarded as indicia of developer status in respect of the subject dwelling.
Result
[55] I allow the appeal.
[56] I award costs to the appellant on a 2B basis. In the event of any disagreement as to quantum, memoranda may be filed on the following timetable.
(a) Memorandum of appellant to be filed and served within two weeks
(b) Memorandum of respondent to be filed and served within three weeks
(c) Memorandum of appellant in reply to be filed within four weeks.
Muir J
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