McNamara v Auckland City Council
[2012] NZSC 34
•9 May 2012
| For a Court ready (fee required) version please follow this link |
| IN THE SUPREME COURT OF NEW ZEALAND |
| SC 85/2010 [2012] NZSC 34 |
| BETWEEN PETER HARDIE MCNAMARA AND PATRICK STURGEON MCNAMARA AS TRUSTEES OF THE P H MCNAMARA FAMILY TRUST |
| AND AUCKLAND CITY COUNCIL |
| Hearing: 19 April 2011 |
| Court: Elias CJ, Blanchard, Tipping, McGrath and William Young JJ |
| Counsel: B O’Callahan and G S G Erskine for Appellants |
| Judgment: 9 May 2012 |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe appellants are to pay the respondent costs of $25,000 and reasonable disbursements in connection with this appeal, as fixed by the Registrar if necessary.
____________________________________________________________________
REASONS
Para No
Elias CJ [1]
Blanchard, McGrath and William Young JJ [110]
Tipping J [172]
ELIAS CJ
The appeal arises from summary dismissal of a claim before trial. The claim was brought by the appellants, as purchasers of a new house in Arney Crescent, Remuera, against the Auckland City Council for breach of duties of care said to have been owed to them by the Council in relation to non-compliance with the building code in the construction of the house. The house failed to meet the weather-tightness standard of the building code, standard E2. It required expensive work to prevent leaks and remedy damage caused by moisture. The statutory duties which provide the background to the claimed duty of care are ones imposed upon territorial authorities by the Building Act 1991. The Act has now been repealed,[1] but was in effect at all material times and its provisions are the context in which the question of duty of care falls to be considered.[2]
[1] By the Building Act 2004, s 415(1).
[2] The Act was repealed from 31 March 2005.
As the Act permitted, the developer of the property had chosen to use a private certifier authorised under the Act to certify that the plans and specifications conformed to the code, to inspect and certify building work as code compliant, and to provide a final certificate of code compliance on completion of the building work. In those circumstances, the territorial authority was relieved of the statutory responsibility of itself inspecting the property and certifying for code compliance (although if notified that a certifier could not carry out the functions of inspection and certification, it was required to take them over). The territorial authority was obliged to accept the certificate of the certifier that the work complied with the building code, and had immunity for liability for its own actions taken in reliance on such certificate.
The certifier engaged by the developer was Approved Building Certifiers Ltd, which is referred to throughout as “ABC”. It is not disputed that ABC was authorised under the Act to certify compliance with standard E2, the general weather-tightness standard under the code, when it certified in support of the application to the Council for a building consent that the house would comply with the code if constructed according to the plans and specifications which had been supplied to the Council. Under the Act, the Council was obliged to accept ABC’s certificate and grant the building consent.
Between the granting of the building consent and before final code compliance certification, however, ABC’s authority was limited by the Building Industry Authority. The limitation, which was noted on the publicly available register maintained by the Building Industry Authority and which was notified by newsletter to all territorial authorities, restricted ABC’s ability to certify for compliance with standard E2 to a single acceptable solution, E2/AS1. For the purposes of the summary application it was accepted that the Council knew of the limitation. Indeed, after it was imposed by the Building Industry Authority, the Council was obliged to take over a large number of building works in which ABC was the certifier, perhaps several hundred.
The limitation imposed on ABC seems to have been against a background of developing anxiety about failure to achieve standard E2 when monolithic cladding was fixed to untreated timber (the method of construction used in the Arney Crescent property). Such failure has come to be seen as entailing systemic regulatory defect. It has led to substantial litigation on an unprecedented scale. It is not clear what was known of the problem at the time of the events giving rise to the present proceedings. The knowledge of the Council might well be a circumstance to be investigated at trial, since appreciation of risk may be a pointer to the existence of a duty of care because “risk imports relation”.[3]
[3] Palsgraf v Long Island Railway Co 162 NE 99 (NY 1928) at 100 per Chief Judge Cardozo.
It is accepted that the design of the house did not permit conformity to acceptable solution E2/AS1 and that the final code compliance certificate was beyond the certifying authority of ABC when given and when received by the Council under the provisions of the Act. (It is not clear whether further certificates or inspection reports were provided to the Council by ABC after its authority was limited, but the claim extends to any such as well as to the final certificate of code compliance.)
The claimed duties of care in the present case do not arise out of inspection or certification of code compliance undertaken by the Council itself as was the case in Invercargill City Council v Hamlin[4] and North Shore City Council v Body Corporate 188529.[5] Rather, they are based upon the Council’s wider responsibilities under the Building Act. They are said to give rise to sufficient relationship of proximity between the Council and owners to cast upon the Council a duty of care to accept and act only on certificates which were within the authority specified for the certifier in the public register maintained by the Building Industry Authority. In addition, it is claimed that the Council’s advice to the appellant’s solicitors that a code compliance certificate had been issued amounted to negligent misstatement.
[4] Invercargill City Council v Hamlin [1996] 1 NZLR 513 (PC).
[5] North Shore City Council v Body Corporate 188529 [2010] NZSC 158, [2011] 2 NZLR 289.
Reversing the High Court,[6] the Court of Appeal struck out the claims and entered summary judgment for the Council. It considered that the Council did not owe the claimed duties of care to the owners because, having elected to use a private certifier instead of the Council to certify for code compliance, they could not “enliven” the statutory responsibilities of the Council (and its derivative duty of care in application of the approach in Hamlin) without giving notification to the Council under s 57 of the Act that the certifier was no longer able to act.[7] The Court of Appeal allowed that the policy of notification might be sufficiently served to revive the obligations of the territorial authority under the Act if the Council “well knew” that the certificates provided exceeded the authority of the certifier, but thought there was no such suggestion here (despite a pleading that the Council “knew or ought to have known” that the certificates exceeded authority).
[6] McNamara v Malcolm J Lusby Ltd HC Auckland CIV-2006-404-2967, 3 July 2009.
[7] Auckland City Council v McNamara [2010] NZCA 345, [2010] 3 NZLR 848.
Without notice under s 57 (or equivalent knowledge sufficient for the purposes of s 57 to revive the Council’s direct responsibilities of inspection and verification), the Court of Appeal considered that the effect of imposing a duty of care would be to make the Council a “long-stop guarantor” of the liability of the certifier, an outcome it thought contrary to the Act.[8] It also considered that the effect of accepting the claim would be to “create a liability for damages in public law” for failure to fulfil the “limited ... functions” of the Council under the Building Act.[9]
[8] At [25].
[9] At [28].
The claim based on negligent misstatement (which has not yet been pleaded but was foreshadowed in the Court of Appeal) was only addressed obliquely in that Court. It seems to have considered that any negligence by the Council was not actionable because of the effect of s 41 of the Local Government Official Information and Meetings Act 1987.[10] If so, such conclusion would be inconsistent with Marlborough District Council v Altimarloch Joint Venture Ltd.[11]
[10] At [23] (footnote 21).
[11]Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11. See the analysis of Tipping J at [92]–[98], with which all other Judges of the Supreme Court agreed.
On appeal, the other members of the Court would uphold the decision of the Court of Appeal on the first basis of claim, essentially for the reasons given by that Court. I differ from that conclusion. In my view the scheme of the legislation was to impose significant supervisory responsibilities on the territorial authority to ensure that the code was complied with, even where a private certifier was engaged. A point of distinction is that, unlike the Court of Appeal and the majority in this Court, I do not think that there was a fork in the regulatory road, which, if taken by the owner, removed the Council from having any responsibility except when given notice under s 57. Although by s 50 of the Act a territorial authority was not required or even entitled to question the substantive assessment of code compliance by an approved certifier (and had immunity from suit where it acted in reliance on such a certificate in good faith), I consider that its continuing statutory responsibilities are consistent with the claimed duty of care to check that a certificate was within the scope approved for the certifier. The Council’s liability for any breach of its own duties of care does not make it a guarantor for certifiers. It is responsible for its own carelessness in discharging its distinct duties of care.
Other members of the Court take the view that the terms of s 50 of the Act exclude any duty of care to check that the certificates provided were within the scope of the certifier’s responsibility. This is the basis on which they would also reject the cause of action based on negligent misstatement. I consider that s 50 properly read, textually and contextually, is concerned with the conclusiveness of the substantive assessment of code compliance. It is reliance on that assessment which is the basis of the immunity contained in s 50(3). Such conclusiveness is available only in respect of items not excluded by any limitation on the certifier’s approval. Nor do I accept that a certificate beyond the certifier’s authority is properly described as “valid on its face”.[12] Against the publicly available register of limitations, which the statute required the Building Industry Authority to maintain, the excess of authority may indeed be said to appear on the face of the certificate.
[12] Compare judgment of Tipping J at [179].
In my view the scheme of the Act and its legislative history indicate that territorial authorities may well be under a duty of care to check that certificates are within the scope of a certifier’s authority. Without such responsibility there is an unaccountable gap in the regulatory system. In the present case, it was acknowledged that the practice of the Council was to check limitations before granting building consents on a certificate. I see no statutory or other basis for drawing a distinction in the treatment of certificates during the course of or on completion of the building work.
In the appeal the Court is asked to determine without the security of findings of fact that a claim in negligence against a background of statutory duties is untenable. It should be unnecessary again to emphasise the dangers of determining that a cause of action cannot succeed before trial, when there is incomplete knowledge of the facts bearing on the existence of a duty of care.[13] For the reasons developed in what follows, I consider that the existence of a duty of care arising out of the relationship between owners and territorial authorities set up by the statutory scheme cannot be ruled out.
The Building Act 1991
[13]See Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [30]–[40]; X (Minors) v Bedfordshire City Council [1995] 2 AC 633 (HL) at 741; and Barrett v Enfield London Borough Council [2001] 2 AC 550 (HL) at 557–558.
In order to understand the claims and put the facts as known in context, it is necessary to describe the provisions of the Building Act 1991. Because the conclusion I come to is based on the scheme of the legislation, it is also necessary to describe the Act in some detail.
The responsibilities of territorial authorities
The Auckland City Council was the territorial authority responsible under the Act for the administration of the Building Act within its district. Within its district it had the function of ensuring code compliance.[14] All building work had to comply with the building code established by regulations under the Act.[15] No building within its district could be undertaken except under a building consent granted by the Council.[16] Within its district, the Council therefore oversaw the “[n]ecessary controls relating to building work”, which were the principal purpose of the Act.[17]
[14]Section 24(e). Although territorial authorities could transfer their functions under the Act to another territorial authority, they continued to be responsible under the Act for their discharge: s 25(2).
[15] Section 7.
[16] Section 32. Some building work is exempt under s 32(2).
[17] Section 6(1).
The “functions and duties” of territorial authorities under the Act were set out in s 24:
24 Functions and duties of territorial authorities
Every territorial authority shall have the following functions under this Act within its district:
(a)The administration of this Act and the regulations:
(b)To receive and consider applications for building consents:
(c)To approve or refuse any application for a building consent within the prescribed time limits:
(d)To determine whether an application for a waiver or modification of the building code, or any document for use in establishing compliance with the provisions of the building code, should be granted or refused:
(e)To enforce the provisions of the building code and regulations:
(f)To issue project information memoranda, code compliance certificates, and compliance schedules:
(g)Any other function specified in this Act.
In order to carry out their responsibilities, territorial authorities were empowered to fix charges for their work[18] and were under duties “to gather information and monitor”:[19]
26 Duty to gather information and monitor
Every territorial authority shall gather such information, and undertake or commission such research, as is necessary to carry out effectively its functions under the Act.
Territorial authorities were also under obligations to maintain information relating to plans and specifications, building consents, and code compliance certificates on a basis which made such information “reasonably available” to the public.[20]
[18] Section 28.
[19] Section 26.
[20] Section 27.
Applications for building consents were required to be made in the form prescribed by regulations and to be accompanied by “such plans and specifications and other information as the territorial authority reasonably requires”.[21] The “plans and specifications” required with any application for building consent (and in respect of which building was authorised by the consent) were defined to include “proposed procedures for inspection during construction” to ensure code and consent compliance.[22] The territorial authority had the ability to require “further reasonable information in respect of an application”.[23] A territorial authority was required to grant a building consent “[a]fter considering an application ... if it is satisfied on reasonable grounds that the provisions of the building code would be met if the building work was properly completed in accordance with the plans and specifications submitted with the application”.[24] (As is described at [30] the certification of a private certifier was required to be accepted by the Council as establishing code compliance under s 50.)
[21] Section 33(2).
[22] Section 2.
[23] Section 34(2).
[24] Section 34(3).
A “building consent” was defined under the Act to include “all conditions to which the consent is subject”.[25] Once consent was granted, proper completion in accordance with the plans and specifications was checked both through the “proposed procedures for inspection during construction”[26] (which had been approved as part of the plans and specifications in the building consent) and through eventual provision of a certificate of compliance with the building code under s 43 of the Act.
[25] Section 2.
[26] Ibid.
The territorial authority was empowered to take “all reasonable steps” to ensure compliance with the code and with any inspection procedure endorsed on any building consent for construction and for completed work.[27] It also had power to require rectification of “building work not done in accordance with this Act or the building code” during the currency of a building consent (before a code compliance certificate was given)[28] or, in default of such rectification, to undertake the work itself.[29] It was empowered to cancel a building consent “in whole or in part forthwith” if “[t]here has been a change of circumstances such that the territorial authority believes that the proposed building work may contravene any provision of the building code as in force at the time the work commenced”.[30] Completion of the work in that event would depend upon the owner obtaining a new building consent.[31]
Use of an approved certifier
[27] Section 76.
[28] Section 42.
[29] Section 74.
[30] Section 41(2)(a).
[31] Section 41(4) permitted the consent to be applied for as if for an alteration.
The Act permitted compliance with the code to be established either by the Council itself or, at the option of the owner, on certificate of compliance by a certifier authorised by the Building Industry Authority under Part 6 of the Act.[32] Building certifiers were approved by the Building Industry Authority in respect of specific provisions of the building code and their approval could be subject to limitations.[33]
[32] Section 50.
[33] Section 51: see especially s 51(3)(a)(ii).
Applicants were required to provide evidence that they had insurance in a scheme approved by the Authority “in respect of any insurable civil liability of the applicant that might arise out of the issuing by the applicant of a code compliance certificate under section 43 of this Act or a building certificate under section 56 of this Act”.[34]
[34] Section 51(3)(b).
The Building Industry Authority was required to maintain a “[r]egister of building certifiers” upon which it was obliged to note:[35]
(a)The date of approval; and
(b)The name and address of the person approved; and
(c)The specific provisions of the building code in respect of which the person is approved; and
(d)Any limitations on the matters in respect of or in connection with which the person may certify compliance with those provisions; and
(e)The date of expiry of approval, being the first anniversary of the date of approval or such other date as the Authority may direct, but not later than the second anniversary of the date of approval; and
(f)Such other matters relating to the approval as the Authority directs.
[35] Section 53(2).
The Authority’s register of certifiers was available on its website. In addition, changes to it were notified directly to territorial authorities by the Authority’s newsletter. It is significant that the register was required to contain the “specific provisions of the building code” in respect of which a certifier was approved and that it was required to record “[a]ny limitations on the matters in respect of or in connection with which the person may certify compliance with those provisions”. Section 53(3) permitted the register to identify the “specific provisions of the building code in respect of which the building certifier is approved” in a number of ways: “by reference to the numbering of the provisions, or to a description of the matters covered by the provisions, or to the areas of expertise concerned”.
Section 53(4) of the Act provided that certificates could be taken to be “sufficient evidence of the matters therein specified”, in the absence of proof to the contrary and without proof of the signature appended to the certificate if “purporting to be under the hand of a person duly authorised by the Authority to issue such a certificate”. The matters “therein specified”, which could be taken to be sufficient evidence in the absence of proof to the contrary in my view were the substantive statements of code compliance (in conformity with s 50). The fact that this presumption of validity did not extend to the authority of the certifier is indicated by the single presumption of validity provided for by s 53(4), which made it unnecessary to prove the signature attached, “provided it purported to be under the hand of a person duly authorised by the Authority to issue it”. Whether the person purportedly signing was authorised by the Authority to issue the certificate was ascertainable from the register.
The information required to be on the register was information those dealing with certifiers, notably territorial authorities, needed to have for their own purposes and in discharging their own statutory responsibilities – the fact of registration and the name and address of those approved, the expiry date of the approval, and the scope of the certifier’s authority. The evidence in the High Court was that changes to the approval of certifiers were not uncommon. The register was notice of such changes.
Under the Act authorised certifiers were able to certify:
·for the purpose of building consents under s 34(3), that work properly carried out in conformity with the plans and specifications (including the specified method of inspection) would comply with the code (the building certificate required before the territorial authority could grant a building consent);[36]
·for the purposes of demonstrating compliance with any particular provision of the code (which was required to be specified in the certificate), that at the date of the certificate the work complied (a building certificate given before final code compliance certificate);[37]
·for the purpose of s 43 of the Act, that the building work authorised by the consent had been completed in conformity with the code (a code compliance certificate).
[36] Section 56(2)(a).
[37] Section 56(2)(b).
Building certificates issued by a building certifier were required by s 56(1) to:
(a)Be in writing; and
(b)Identify the specific item or items that are the subject of the certificate, being items not excluded by any limitation on the building certifier’s approval; and
(c)Identify the specific provisions of the building code with respect to which those items are certified, being specific provisions in respect of which the building certifier is approved; and
(d)Be signed by the building certifier; and
(e)Be accompanied by any relevant project information memorandum.
Effect of building certificate provided by approved certifier
Section 50 of the Act provided that a territorial authority “shall accept” a building certificate or code compliance certificate issued by a building certifier “as establishing compliance with the provisions of the building code”.[38] For the purposes of granting a building consent, therefore, the territorial authority had no need (and had no business) to satisfy itself under s 34(3) that the plans and specifications, if properly carried out, would comply with the code. It was obliged to give effect to a certificate to that effect. Similarly, a certificate by a certifier that work carried out complied with a particular provision of the code could be relied upon by the territorial authority in discharge of its default responsibilities to inspect during the course of construction and in granting a code compliance certificate under s 43 on completion of the work authorised under a building consent. Where a certifier had provided a code compliance certificate under ss 43(3) and 56, the territorial authority was obliged to accept the certificate “already” provided and did not itself have to form an independent opinion as to code compliance. Section 50(3) provided “[f]or the avoidance of doubt” that “no civil proceedings may be brought against a territorial authority or a building certifier for anything done in good faith in reliance on [such certificates]”. Where a territorial authority accepted a building certificate (and was thereby relieved of the responsibility for making its own assessment of compliance with the code), it was required to reduce its charges “accordingly”.[39]
[38] Section 50(1)(a).
[39] Section 28(3).
Apart from excusing acts taken in good faith reliance on certificates given by building certifiers under s 50(3), the Act did not grant to territorial authorities or building certifiers in civil proceedings any immunity or partial immunity. By contrast, under the Act members or employees of the Building Industry Authority or members or employees of territorial authorities were immune from civil proceedings in respect of “an act done in good faith under this Act”.[40] Indeed, provisions of the Act specifically envisaged that territorial authorities and building certifiers could be liable in tort.[41]
[40] Section 89.
[41]Civil liability of building certifiers was assumed by the insurance requirements in authorising them and was explicitly recognised in s 90 (which provided that proceedings against a building certifier in respect of the “statutory function” of issuing a building certificate or code compliance certificate “are to be brought in tort and not in contract”). Section 91, dealing with “[l]imitation defences”, looked to civil proceedings being brought against a “territorial authority, building certifier, or the Authority” arising out of “the issue of a building consent, a building certificate, a code compliance certificate, or an Authority determination”.
The liability of territorial authorities which is referred to in these provisions is in its terms a corporate liability. Whether the information available to the corporate entity is properly treated as the sum of the information available to its officers is not a point that it is necessary for me to determine because of the view I take that the immunity contained in s 50(3) does not arise. I do not think however such aggregation can be excluded peremptorily, as other members of the Court would exclude it. The duty of care alleged is one owed by the territorial authority itself, on the terms of the statute. In the absence of any system for effective checking that certificates were within scope (such as might entail collection of material information known to its officers), I also think it well arguable that all knowledge held by its officers is properly treated as information available to the territorial authority for the purposes of considering whether it breached its duty of care. Any other result would provide immunity in cases where the Council simply shrugged off its responsibilities. I think it well arguable that the Council cannot claim to be acting in good faith in the absence of any system for checking that certificates accepted were within the scope of the certifier’s authority, as notified by the register. That was the view taken in Mid Density Developments Pty Ltd v Rockdale Municipal Council,[42] a case I do not think to be readily distinguishable.[43]
The responsibilities of a territorial authority after engagement of a building certifier
[42]Mid Density Developments Pty Ltd v Rockdale Municipal Council (1993) 44 FCR 290 (FCAFC) at 300.
[43]See also, on the meaning of “good faith”, the judgment of French J in Bropho v Human Rights and Equal Opportunity Commission [2004] FCAFC 16, (2004) 135 FCR 105 at [85]–[88].
The engagement of a building certifier did not release the territorial authority from its functions under ss 24 and 26 of the Act. Section 50 simply relieved the territorial authority of the need to form its own view as to code compliance when provided with a certificate of compliance with specific provisions of the building code, “being items not excluded by any limitation on the building certifier’s approval” and “being specific provisions in respect of which the building certifier is approved”.[44]
[44] Sections 56(1)(b) and 56(1)(c).
The engagement of a building certifier “to inspect specified items while building work is being undertaken” was subject to a statutory requirement to “report to the territorial authority in the prescribed manner”.[45] Regulation 8 of the Building Regulations made under the Act required building certifiers to make “inspection reports” to the territorial authority under s 57(3)(a) “at least once each calendar month from the date of the building certifier’s engagement”:[46]
... until either—
(a)The building certifier has issued, in respect of all of the building work in respect of which the building certifier was engaged, either a building certificate under section 56(2)(b) of the Act or a code compliance certificate under section 56(3) of the Act; or
(b)The building certifier has ceased to act as a building certifier in respect of that work, whereupon the building certifier shall make a final inspection report.
[45] Section 57(3)(a).
[46] Building Regulations 1992, reg 8(1).
Both the building certifier and the owner were under statutory obligations to notify the territorial authority if the certifier became or expected to become unable to inspect all or any of the specified items for any reason.[47] In that event, the territorial authority was required to “amend the building consent accordingly, and shall make such inspections and issue such notices to rectify as it considers necessary”.[48] Both the Court of Appeal and other members of this Court treat notice under s 57(3)(b) and (c) as the only way in which the obligations of the territorial authority would “enliven” again after the appointment of a certifier (although the Court of Appeal was prepared to consider that the purpose of s 57 would also be served if the territorial authority “well knew” that the certifier was unable to certify). I am unable to agree with this interpretation of s 57(3), for reasons it is necessary to explain.
[47] Sections 57(3)(b)(i) and 57(3)(c).
[48] Section 57(4).
First, s 57, as its heading makes clear, is concerned with the “terms of engagement of building certifiers”, not with the responsibilities of territorial authorities. Section 57(3) imposed standard obligations on building certifiers engaged “to inspect specified items while building work is being undertaken”. Paragraphs (b) and (c) imposed duties of notification, but para (a) also imposed a duty on the certifier to report to the territorial authority “in the prescribed manner”. While notification of incapacity under subss (3)(b) and (c) imposed a mandatory obligation on the territorial authority to amend the building consent and make “such inspections and issue such notices to rectify as it considers necessary” (as would inevitably be the case where there was incapacity),[49] it is not to be expected that a territorial authority was powerless in respect of any deficiency in the prescribed reporting. Self-reporting of incapacity by certifiers or owners was not the only way under s 57 to prompt the territorial authority to intervene despite the engagement of a certifier.
[49] Section 57(4).
More importantly, the functions of the territorial authority under s 24, including the function under s 24(e), within its district, “to enforce the provisions of the building code and regulations” and the duties under s 26 to “gather such information ... as is necessary to carry out effectively its functions under this Act” were affected by the appointment of a private certifier only to the extent provided by s 50. The provisions of s 41 of the Act, dealing with the lapse and cancellation of building consents, applied irrespective of the appointment of a certifier. Where building consents lapsed because of lack of commencement or reasonable progress, the territorial authority had discretion to allow further time. Under s 41(2) the territorial authority “may cancel a building consent in whole or in part forthwith if —”
(a)There has been a change of circumstances such that the territorial authority believes that the proposed building work may contravene any provision of the building code as in force at the time the work commenced; or
(b)The rectification work required to be done by a notice to rectify under section 42 of this Act has not been commenced within a reasonable time, or there has been a breach of a condition of any such notice.
Rectification notices were required by s 43(6) and (7) where a territorial authority “considers on reasonable grounds that it is unable to issue a code compliance certificate” or where a building certifier notified the territorial authority that particular building work did not comply.
Under the miscellaneous provisions in Part 9 of the Act, territorial authorities were empowered by s 76 to carry out inspections (the “taking of all reasonable steps to ensure ... [t]hat any building work is being done in accordance with a building consent” and that the inspection provisions of the compliance schedule were being complied with). Under s 76(2) the power of inspection by the territorial authority was deemed to be included in the compliance schedule on which the building consent had been granted. The building consent granted to ABC in respect of the Arney Crescent property limited its certification to items “not excluded by any limitation on the building certifier’s approval”.[50] Moreover, under s 76(3)(a)(ii) it was a statutory condition of every building consent “that the territorial authority’s authorised officers shall be entitled, at all times during normal working hours or while building work is being done ... to inspect any building work that has been or is being done on or off the building site”. Such powers of inspection were therefore available if notification of the limitation on ABC’s approval reasonably gave rise to doubt as to whether its certificates were within the scope of its authority and that the building work did not comply with the building consent. These powers confirm the continuing supervisory authority of the territorial authority during the course of construction and despite the engagement of a certifier.
[50] Section 56.
These continuing powers of territorial authorities were limited when a certifier was engaged only to the extent that s 50 required the territorial authority to accept a certificate of code compliance in respect of the items specified “being items not excluded by any limitation on the building certifier’s approval”.[51] In addition, under s 41(3)(a) of the Act the territorial authority was empowered “to cancel a building consent in whole or in part forthwith if ... [t]here has been a change of circumstances such that the territorial authority believes that the proposed building work may contravene any provision of the building code as in force at the time the work commenced”.
Charges by territorial authorities
[51] Section 56(1)(b).
By s 28 of the Act, territorial authorities were empowered to fix charges of a number of “kinds”. They included charges payable not only by applicants for building consents but also “holders of building consents” for “the carrying out by the territorial authority of its functions under this Act”. In addition to such fixed charges, the territorial authority was empowered by s 28(2) to “require” a person liable to pay a standard charge “to also pay an appropriate additional charge” where the fixed fee was “in any particular case, inadequate to enable a territorial authority to recover its actual and reasonable costs in respect of the matter concerned”. This provision is of significance because one of the reasons given for denying the existence of a duty of care to check that certificates are within scope is that it would impose costs which would be irrecoverable upon territorial authorities. Section 28(3) also makes it clear that when a private certifier’s certificate was accepted by the territorial authority, it was still entitled to charge a fee (consistently with its ongoing responsibilities) but the charge was “reduced accordingly”.
The ability of the territorial authority to obtain an authoritative determination in cases where scope of the certifier’s authority was a matter of doubt
It is suggested that whether a certifier was keeping within the limitations imposed by the Building Industry Authority and noted in the register may have been difficult to assess in particular cases from the plans and specifications (although that is not the case here). In that connection, it is relevant to refer to s 17 of the Act which set up a mechanism by which the territorial authority was entitled to refer a matter of doubt in respect of, among other things, the issuing of code compliance certificates or building certificates to the Building Industry Authority for an authoritative determination. The evidence of Mr de Leur acknowledged that this was a procedure the Council could have used if it had appreciated that the code compliance certificate might have been outside the limitation imposed on ABC.
The history of the litigation
The trustees of the McNamara Family Trust purchased the house property in Arney Crescent, Remuera, from the developer, Carmel Properties Limited, under an agreement for sale and purchase entered into on 7 April 2004. The purchase price of the property was $3.65 million. The purchase was settled on 29 April 2004 after the purchasers had obtained a land information memorandum from the Council (which said that no certificate of code compliance had then been received) and subsequent correction by an officer of the Council to advise that in fact ABC had certified compliance with the code in a certificate provided to the Council on 16 April. Before settlement, the purchaser’s solicitors were sent a copy of the certificate of code compliance completed by ABC by the solicitors for the vendor.
The house turned out to leak and had suffered consequential damage. It is claimed that it did not comply with the provisions of the building code. Both Carmel and ABC were in liquidation.
The trustees issued proceedings against the Auckland City Council as the relevant territorial authority, claiming breach of a duty of care owed to them, arising out of its statutory responsibilities and powers to ensure compliance with the building code in its district. Such duties are said to have been breached by the Council in a number of ways all of which depend on the trustees succeeding at trial in their contention that the Council knew or should have known that ABC became unable in accordance with the Act to certify compliance with the building code in respect of moisture-proofing before the certifier’s final code compliance certificate was accepted by the Council. In particular, it is pleaded that:[52]
The Council knew, or in all circumstances was on sufficient notice or should have known:
(a)of the limitations imposed on ABC’s approval to certify items of the building works as complying with the building code, including further to notice given on the register of building certifiers; and accordingly
(b)that ABC issued one or more building certificates and the code compliance certificate without approval to do so, further to the limitations imposed.
[52] Third Amended Statement of Claim, dated 16 February 2009, at [5.10].
Once ABC no longer had approval to certify part of the building works, the Council is said in the pleadings to have been in breach of a duty of care owed to the plaintiffs in failing to refuse the certificates received from ABC, in failing to “advise or warn” the owners that ABC no longer had approval, in failing to take such steps as were reasonably necessary to establish that the building works complied with the code, and in “wrongfully” accepting one or more of the building certificates and the code compliance certificates as establishing compliance with the Act.
The Council applied to the High Court for orders striking out the claims against it and for summary judgment upon the grounds that:[53]
The amended statement of claim does not disclose any cause of action against the [Council] that might succeed; and/or
None of the causes of action in the plaintiff’s statement of claim can succeed.
[53] Notice of Application by the Fourth Defendant for Orders, dated 14 November 2008, at [7]–[8].
The application was opposed on a number of bases. It was said that relevant and material facts or evidence had not been the subject of disclosure through discovery and that procedural requirements had not been complied with.[54] More substantively, it was said:
4. The [Council] cannot show that the plaintiffs’ claim does not disclose any cause of action that might succeed:
The claim against the [Council], in summary, is that it was negligent in circumstances when it knew or was on sufficient notice that the private building certifier, “ABC”, no longer had authority as a building certifier to issue building certificates and a code compliance certificate which it did, but the Council still accepted them and failed to take any steps such as inspection when the responsibility to do so fell back to the Council.
5. The matter can only be properly be determined at trial;
6. In respect of any summary judgment application by the [Council]:
(a)There are credible and material disputes of fact;
(b)Such claim in negligence is unsuitable for summary judgment determination ...
[54]Notice of Opposition to Application by Fourth Defendant for Orders, dated 5 February 2009, at [1].
For the purpose of the peremptory application ahead of determination of the facts at trial, argument in the High Court proceeded on three assumptions, some or all of which may be contested at trial:
·the limitation on ABC’s authority imposed by the Building Industry Authority on 4 December 2002 was known to the Council;[55]
·once the Building Industry Authority limited the authority of ABC, construction and completion of the house as designed was outside the scope of ABC’s authority to certify compliance with E2 in respect of moisture protection;[56]
·the fact that the method of construction used in the house in respect of moisture protection was outside the limited authority within which ABC was authorised to certify after 4 December 2002 was reasonably ascertainable from the plans for which the building consent had been granted.
[55]Indeed, the High Court judgment records at [55] that the Council accepted that it knew or was on sufficient notice or should have known of the limitation, for the purposes of its strike out application.
[56] See [5.9(e)] of the Third Amended Statement of Claim.
In the High Court, Associate Judge Christiansen declined the Council’s applications to strike out the proceedings and for summary judgment. He rejected the Council’s argument that it could not be said that a duty of care was owed by it to a purchaser in circumstances where a private certifier had been engaged. Judge Christiansen did not accept the Council’s contention that it had no supervisory or enforcement powers once a building owner elected to use a private certifier. He considered that “[t]he Act was not intended to supplant but rather to complement a [territorial authority’s] statutory obligations”:[57]
Unless a private certifier is expressly authorised to certify items of building works comply with the building code then the duty remains with and reverts to the [territorial authority]. A private certifier is either authorised to certify items of building work or not and if not, the duty remains with the [territorial authority].
Since the Council had accepted for the purposes of the strike out application that it knew or should have known of the limitations imposed on the certifier’s approval, there was “sufficient reason” to doubt the certificate.[58] Judge Christiansen therefore concluded that the claim must proceed to trial.
[57] At [49].
[58] McNamara (HC), above n 6, at [56].
The Court of Appeal, in a unanimous judgment, allowed the appeal by the Council.[59] It considered that the functions of the Council under the Act “did not in terms include monitoring information as to the scope from time to time of the authority of the certifier or whether a particular building work fell outside the certifier’s authority”.[60] Despite proceeding on the basis of the assumptions of fact referred to at [48] above,[61] the Court nevertheless considered that the claims could not succeed.[62]
[59]Review of the strike out determination was removed by consent directly into the Court of Appeal, to be heard with the Council’s appeal against refusal of summary judgment: see Minute of Venning J in Body Corporate 185960 v North Shore City Council HC Auckland CIV-2006-404-3535, 10 August 2009.
[60] McNamara (CA), above n 7, at [23].
[61] At [20] and [22].
[62] At [29]–[30].
It took the view that “[t]he clear pattern of the Act” was to give the owner “an election between the use (in whole or in part) of a certifier and the use (in whole or in part) of the territorial authority”. Where, as here, the owner had chosen to use a certifier for all inspections and certificates of compliance, the Council’s role “was limited to the administrative function of receiving and, no doubt retaining at least a record of, the owner’s advice of completion at the end of the works together with the certifier’s [certificate of code compliance]”.[63] The claim was said to seek imposition of a “residual liability”[64] or “backstop” responsibility[65] on the Council for the negligent performance of the duties of an independent certifier. The Court considered that the responsibilities of the territorial authority under the Act would revive only where the owner or the certifier notified it,[66] as they were obliged to do under s 57(3) of the Act when they became aware that the certifier was unable to continue:[67]
The owner, having turned its back on the territorial authority and chosen and paid another certifier, and thereby freed itself from the obligation to pay the authority the charges it would otherwise have received for assuming the inspection obligation, cannot reverse that election without giving the statutory notification under s 57.
[63] At [24].
[64] At [1].
[65] At [25].
[66] At [24].
[67] At [26].
The Court of Appeal acknowledged that “[n]o doubt” the case “could be different if a council well knew that a certifier was issuing certificates which it had no right to do” because, in that case, “[t]he purpose of the notification under s 57 would have been served and the territorial authority might be expected to set about performing the obligations cast upon it by that section”. It considered however “that scenario is not suggested in this case”.[68] This comment seems to have come as a surprise to the plaintiffs, who applied for recall of the judgment on the point. The application ran into some procedural difficulties because of the retirement of the judge who had delivered the judgment of the Court and the inability to reconvene the same bench. In the result, however, a new panel held that the point was more properly one for appeal (leave to appeal to this Court having by then been applied for).[69] The view that it had not been suggested that the Council knew that ABC was issuing certificates in respect of the Arney Crescent house which were beyond the scope of its authority is therefore disputed on the appeal to this Court. The Court of Appeal’s conclusion is inconsistent with pleading [5.10] in the amended statement of claim, quoted above at [44].
[68] At [27].
[69]McNamara v Auckland City Council [2010] NZCA 553 at [12]. The Court of Appeal’s judgment on this point was given on 25 November 2010; the Supreme Court granted leave to appeal on 30 November 2010: McNamara v Auckland City Council [2010] NZSC 144.
The Court of Appeal considered that a common law duty of care which treated a territorial authority as a “long-stop guarantor to certifiers” would be inconsistent with the scheme of the Act and with the lack of assumption of responsibility by the Council, given the owner’s election to use a private certifier, “in direct competition with the [territorial] authority for the business of inspection and issue of [certificates of code compliance]”.[70]
The facts as known
[70] At [25].
Because the appeal arises out of summary disposal of the claim, the factual background available to the Court is incomplete. It must be taken from untested assertions in the pleadings, from concessions made for the purposes of argument in the strike-out application, and from the limited material put before the Court in affidavits for the purposes of summary judgment. The information available as to the Council’s conduct of the building file relating to the Arney Crescent property is especially sparse. The Court has little information about the Council’s file and the knowledge of those who maintained and supervised it (including as to the inspection reports it received under s 57 of the Act and reg 8 of the Regulations as part of its ongoing responsibilities in relation to the building consent). Evidence given by affidavit on behalf of the Council was largely limited to information about the Council’s usual practices by Mr de Leur, who had no personal knowledge of the file and annexed extracts only from it. The statement of the facts compiled from the material available to the Court in what follows must therefore be regarded as tentative.
The application for building consent and the engagement of ABC
As has already been explained, certification under the Building Act that plans and construction complied with the building code was the responsibility either of the territorial authority or, at the option of the owner, could be undertaken by private certifiers approved for the purpose by the Building Industry Authority.[71] The developer of the property at Arney Crescent chose to engage ABC to certify the plans for consistency with the building code, to inspect for compliance with the provisions of the code during construction, to report to the territorial authority on a monthly basis as required by the regulations (in accordance with the schedule of inspections), and to certify final compliance with the building code on completion of construction. The Council was notified of the engagement of ABC as certifier in the application for project information memorandum in respect of the property and in the subsequent application for building consent. If the Council practice deposed to by Mr de Leur was followed, officers of the Council would have checked that the certificate was within the scope of the certifier’s authority against the register maintained by the Building Industry Authority. At the time ABC was engaged and at the time it applied for a building consent on behalf of the developer it was not subject to any material limitation of its authority to certify. There is accordingly no claim that there was any error in relation to the issue of the building consent.
[71] Section 43.
ABC first applied on 1 August 2001 to the Council for a project information memorandum in relation to the proposed development.[72] With its application for a project information memorandum, ABC supplied the Council with the plans and specifications for the proposed building work.[73] Although these plans and specifications may not have been necessary for the purposes of the project information memorandum (which was concerned with land use matters outside the scope of the Building Act),[74] it seems not to have been unusual for plans to be supplied at the project information memorandum stage, with later cross-reference being made to them under the subsequent building consent application. The forms specified under the Regulations for building consents and the Council’s form as used by ABC expressly adopted such cross-reference. On the basis of the forms, it seems that plans were provided with the application for building consent only if they had not previously been provided with the application for project information memorandum.[75] The forms completed by ABC indicate that course was followed here. Provision of the plans and specifications was necessary for the purposes of the building consent. They were necessary for code compliance purposes.
[72] Second Affidavit of Robert de Leur, dated 3 March 2008, at [14].
[73] As noted by Mr O’Callahan in oral argument.
[74] It is arguable that provision of the plans and specifications was required under s 30(3)(b).
[75] See the second option described below in [60].
The project information memorandum for the house was issued by the Council on 6 August 2001. ABC then applied to the Council on 10 August 2001 for a building consent, making cross reference to the project information memorandum application and the plans and specifications supplied with it.[76]
[76] Second Affidavit of Robert de Leur, dated 3 March 2008, at [17]–[18].
The building certificate completed by ABC under s 56 of the Act, dated 9 August 2001, was attached to the application for building consent. ABC, referring to the project information memorandum number in respect of 19 Arney Crescent, certified:
The building certifier has been engaged to certify specified building work in relation to listed provisions of the building code as detailed in the page headed “Scope of Building Certifier’s Engagement No P2563” attached to this notice.
The building certifier is satisfied on reasonable grounds that:
The proposed building work would comply with the listed provisions of the building code if properly completed in accordance with the listed plans.
This certificate can only have been understood as referring to the plans earlier supplied with the project information memorandum application, to which cross-reference was made on the completed form by reference to the project information memorandum file number.
ABC also provided a “Scope of Engagement” under s 53(4) of the Act which was referred to in and attached to the building certificate. The Scope of Engagement specified “[a]ll building work” and “[i]ssue of Code of Compliance certificate” as within scope and that “[t]he construction plans are in accordance with the PIM plans submitted. PIM No: AM/01/02750”. Such specification of the method of inspection of the building work was treated by the Act as part of the necessary “plans and specifications”.[77]
[77] Sections 33 and 2.
The linkage of project information memoranda and building consents was also indicated by s 30(3) of the Act. If a project information memorandum was not applied for under s 30(1), an application for building consent under s 33 was deemed to include an application for a project information memorandum. Although the information required to be supplied for the purposes of the project information memorandum was information required for decisions under any Act “other than the Building Act”, the linkage in the Act, the Regulations, and the forms makes it clear that plans and specifications had to be supplied for any building for which a consent was sought and that such necessary information for the purposes of the building consent could have been supplied with the project information memorandum. That was the course followed by ABC.
The building consent for the house was granted by the Council, apparently in August 2001. The exact date is not established on the material before the Court.
The Council’s practice in processing consent applications
There is no evidence of the actual processes followed by the Council officers in granting consent for the building work at 19 Arney Crescent beyond that which can be seen on the face of the consent. Mr de Leur, the Council’s manager of Building Policies, who provided affidavits for the Council in the High Court hearing, gave evidence of the usual practice of the Council on receipt of an application for building consent:[78]
27.At the time ABC applied on behalf of the owner of the property for a consent it was the council’s practice to firstly; review the information that was supplied and secondly; to check the building certifiers scope of engagement against the Building Industry Authority’s register of approved building certifiers.
28.If the building certifier making the application was acting within the scope of any limitations as shown [in] the register at that time the council would accept and rely upon the document that had been submitted.
29.It was the council’s understanding that it had no ability to question the authority of a building certifier in those circumstances.
Mr de Leur gave evidence that “at the time of processing the consent (August 2001) none of the limitations in effect impacted upon the processing of the consent”.[79]
[78] Affidavit of Robert de Leur, dated 14 November 2008 (emphasis added).
[79]Ibid. The limitations then in effect were concerned with compliance with fire access issues and food and hygiene restrictions. They did not impact on the provision of the building certificate.
In a second affidavit made in reply to expert evidence provided on behalf of the plaintiff, Mr de Leur accepted that if the council officers “knew that ABC was acting outside the scope of its certification powers”,[80] then building certificates should not have been accepted:[81]
I would expect a responsible member of my staff to alert me or another senior member if they knew a private certifier had abused its powers or otherwise acted without authority when it issued a certificate. If that occurred, the Building Division may have questioned the certificate and the matter would be referred to the [Building Industry Authority].
He accepted, too that any certificates that were “‘defective’ at face value” would “of course” be “rejected by the Council”, but explained “to articulate more clearly some of the statements ... made in my previous affidavit” that, although it was implicit in the legislation that the certificates should be checked for compliance with s 56(1), his opinion was that this entailed only checking the certifier’s name on the certificate “and did not require the Council to enquire behind the certificate”.[82] Indeed, he expressed the view that the Council staff “did not know the intricate details of individual projects to the extent they impacted on particular compliance requirements” and that documents received consisted “generally only ... of the building certificates and documentation given in support of the building consent application”, which “did not generally include the plans and specifications”.[83]
[80] Second Affidavit of Robert de Leur, sworn 3 March 2008, at [37].
[81] At [38].
[82] At [43].
[83] At [39]–[40].
Although the matter was untested and cannot be resolved in the present proceedings, the two statements made by Mr de Leur are not easy to reconcile: in the first he acknowledges that acceptance of a certificate was predicated on it being within the scope of the certifier’s limitation “as shown [in] the register”, and in the second he says any check was limited to whether the name of the certifier was on the register. It is not explained why it was simply the name of the certifier that was checked when it was only one of the matters required to be kept on the register. The suggestion made in the second affidavit that the building consent application material “did not generally include the plans and specifications” does not acknowledge the cross-referencing to the project information memorandum material permitted by the legislation and adopted in the present case.
But had the Council carried out either or both of these exercises, it would have been duplicating (either in whole or in part) the exercise which had earlier been carried out by the BIA and ABC for the purposes of s 57(3).
It must be borne in mind that an analysis of the plans would only have established whether the house, as designed, conformed to E2/AS1. So if the Council was subject to a Hamlin duty as contended for, it would also have been incumbent on Council staff to have inspected the completed house to see whether it had been built in a way which conformed to E2/AS1. Presumably those staff ought also to have considered whether the house was unacceptably “unusual” in the materials or building systems employed or in its general complexity. All of this would call for actions on the part of the Council and for the exercise of judgments which we see as well outside what was contemplated by the 1991 Act.
Given the building certificate issued by ABC, the Council had no occasion (or indeed entitlement) when deciding whether to issue a building consent to assess whether the plans for the house were in conformity with the building code. Because that building certificate made it clear that inspections would be carried out by ABC, there was no point in Council staff inspecting the building works. The text of s 57 is inconsistent with an expectation that the Council should have involved itself in this building project in the absence of a statutory notification by either the building owner or ABC. To put this more generally, there is nothing in the scheme of the 1991 Act to suggest that territorial authorities had a roving certifying or inspecting role and nothing happened to trigger the Council’s responsibilities under the statute.
At least from the point where the building consent was issued, there was no point in the process at which Council staff were required by the Building Act to exercise their own judgment in relation to the house. This is relevant to whether it is reasonable to impose a duty of care on the Council because the imposition of a duty of care would require the Council to go beyond the exercise of the functions specified by the Act. The same consideration is also relevant for the different reason that it means that there was no practical reason why purchasers could fairly be taken to have relied on the reasonable performance by the Council of its statutory functions; this for the simple reason that the Council had not performed (and had not been required to perform) any relevant function.
Given this statutory scheme, there was no relationship of proximity, no reliance and no assumption of responsibility as between potential purchasers of the house and the Council. And for these reasons (which in substance are the same as those given by the Court of Appeal), we are satisfied that the Hamlin claim against the Council must fail.
The Hedley Byrne claim
We accept that a territorial authority issuing a LIM owes a duty of care in relation to its accuracy[166] and we also accept that a similar duty arises in relation to responses to information requests which are associated with the LIM process. We are also prepared to assume, although we have some doubts, that the representation made by the Council officer that a code compliance certificate had been issued was relied on by the appellants. Our reservations as to this turn on the sequence of events already referred to above at [119] which may perhaps suggest that the appellants in fact just relied on the code compliance certificate issued by ABC and copied to their solicitors by the solicitors acting for Carmel.
[166] Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11 at [92]–[98].
We are, however, nonetheless persuaded that this claim too must inevitably fail. This is for a number of overlapping reasons:
(a)The code compliance certificate was regular on its face and the Council was required to accept it as establishing compliance, which in this context meant that it was not entitled to take actions which were premised on assumptions of non-compliance.
(b)Given this requirement, it cannot credibly be maintained that receipt of the code compliance certificate by the Council was negligent.
(c)The representation by the Council that a code compliance certificate had been issued was obviously true, in a literal sense.
(d)Such representation could not be construed (or reasonably acted on) as implying that the certificate had been issued in conformity with limitations on ABC’s certifying competence,[167] given that such an assessment was not a necessary part of any statutory functions which the Council was required to perform.
(e)Because there was nothing on the face of the certificate or associated circumstances to suggest invalidity, we can see no escape from the conclusion that the Hedley Byrne claim must in any event fail by reason of s 50(3).
Disposition
[167]See North Shore City Council v Body Corporate 188529 [2010] NZSC 158, [2011] 2 NZLR 289.
For those reasons the appeal should be dismissed with costs.
TIPPING J
I have had the advantage of considering in draft the reasons prepared by the Chief Justice and William Young J. Having done so, I prefer to confine my reasons to the good faith defence which territorial authorities had when they relied on a certificate given by a private certifier. The appellants seek to overcome that defence by alleging the Council knew or ought to have known that ABC, the certifier involved, was not qualified to issue the certificate in question.
Proof that the Council ought to have known of the alleged lack of authority would not establish that the Council failed to act in good faith. The “ought to have known” allegation is essentially one of negligence. It is a compressed way of saying that had the Council taken reasonable care it would or should have known of the asserted lack of authority. But negligence cannot, at least in the present context, amount to a lack of good faith. So to hold would rob the good faith defence of most, if not all, of its intended effect and purpose. It is hard to think what civil liability, other than liability for negligence, a territorial authority could incur as a result of relying on a certificate wrongly issued by a private certifier.
When regard is had to the statutory scheme of which the good faith defence is an integral part, it cannot have been Parliament’s purpose to leave territorial authorities vulnerable to allegations of negligence in respect of the correctness or provenance of certificates issued by private certifiers. The only basis on which the appellants can defeat the good faith defence available to the Council is by showing the Council knew that ABC lacked authority to issue the certificate. For present purposes it must be assumed that ABC did in fact lack authority, so that is not a problem for the appellants.
What is a problem for them is that they cannot and do not allege that any particular Council employee had actual knowledge of ABC’s lack of authority to issue the certificate. What the appellants seek to do in this situation is to say that the actual knowledge possessed by different employees, when added together and then attributed as a whole to the Council, amounted to actual knowledge on the part of the Council. This is a rather artificial way of looking at the matter, both in itself and particularly when the question is whether the appellants can overcome the Council’s good faith defence.
For this purpose I do not consider different forms of knowledge, each falling short of actual knowledge of ABC’s lack of authority, can be aggregated so as to impute to the Council actual knowledge of that lack of authority. To do so would be tantamount to saying that someone in the Council should be taken to have interviewed the individual employees and worked out from what those individuals knew, that ABC lacked authority. At most this is an allegation of negligence, not one of lack of good faith on the part of the Council.
Let me now relate these conclusions to the terms of s 50 of the Building Act 1991. Section 50(1) and (3) relevantly provided:
50 Establishing compliance with building code
(1)A territorial authority shall accept the following documents as establishing compliance with the provisions of the building code:
(a)A building certificate or code compliance certificate to that effect issued by a building certifier under section 43 or section 56 of this Act:
...
(3)For the avoidance of doubt, no civil proceedings may be brought against a territorial authority or a building certifier for anything done in good faith in reliance on a document set out in subsection (1) ... of this section.
Section 50(1) required a territorial authority to accept a certificate of the specified kinds as establishing compliance with the provisions of the building code. In order to qualify under the section the certificate must have been issued by someone who was a building certifier. A certificate that was issued by someone who was not, but purported to be, a building certifier could not count as a certificate for the purposes of s 50(1). To that extent territorial authorities had a not very onerous checking role. But what of a certificate that was issued by someone who was a building certifier but the certificate was beyond their authority?
I do not read the words “under section 43 or section 56 of this Act” as implying validity. They are simply words of description. Regard must also be had to s 50(3). It refers to “a document set out in subsection (1)”. In this way the two subsections are linked. They need to be read together in order to identify Parliament’s purpose. When this is done and regard is had to the statutory scheme in relation to private certifiers, I do not consider Parliament can have intended that territorial authorities should be obliged to look behind a certificate issued by a private certifier that was regular on its face. Such a requirement would not be consistent with Parliament’s clear purpose to protect territorial authorities from all forms of civil liability unless they failed to act in good faith. A territorial authority that had no actual knowledge of lack of authority, and relied on a certificate that was valid on its face cannot be regarded as having failed to act in good faith by doing so.
For these reasons I consider the appellants’ claim must fail. They have not put forward any reasonably possible basis for overcoming the respondent’s good faith defence. The Court of Appeal was right to enter summary judgment for the respondent. I would therefore dismiss the appeal on that basis. In the light of this conclusion there is no need for me to engage with the other issues which the Chief Justice and William Young J have addressed. I observe only that the broad thrust of the statutory scheme regarding building certifiers, as described by William Young J, suggests that his conclusions on both what he has called the Hamlin claim and the Hedley Byrne claim are correct.
Solicitors:
Carter & Partners, Auckland for Appellants
Heaney & Co, Auckland for Respondent
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