Minister for Education v YQT Limited (previously named Canam Construction Limited)

[2014] NZHC 2198

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-003190 [2014] NZHC 2198

BETWEEN

THE MINISTER FOR EDUCTION

First Plaintiff

THE SECRETARY OF EDUCATION Second Plaintiff

WESTERN SPRINGS COLLEGE BOARD OF TRUSTEES

Third Plaintiff

THE AUCKLAND PERFORMING ARTS CENTRE AT WESTERN SPRINGS INC Fourth Plaintiff

AND

YQT LIMITED (previously named Canam

Construction Limited) Defendant

Hearing:	10 September 2014
Appearances:	J M Hanning for the Plaintiffs No appearance for Defendant
Judgment:	10 September 2014

ORAL JUDGMENT OF VENNING J

Solicitors:           Kensington Swan, Auckland

THE MINISTER FOR EDUCTION v YQT LIMITED [2014] NZHC 2198 [10 September 2014]

[1]      The plaintiffs in  this  proceeding seek  judgment  by way of formal  proof against the defendant.  The plaintiffs allege that the defendant was negligent in the construction of a building and seek damages as a consequence of the defendant’s alleged breach of duty to them.

Parties

[2]      The land on which the building is constructed is owned by the Crown.  The first   and   second   plaintiffs,   the   Minister   and   Secretary   of   Education   have responsibility for the land generally.   The third plaintiff, the Board of Trustees, operates and manages the school and buildings on the property in accordance with the  provisions  of  the  Education Act  1989.    The  fourth  plaintiff,  The Auckland Performing Arts Centre (TAPAC) entered a licence with the third plaintiff Board of Trustees and made a contract with the defendant to have the building in question built.

[3]      As discussed with counsel during the course of the hearing following an assignment between TAPAC and the third plaintiff, TAPAC have assigned all their rights and interests absolutely to the third plaintiff.   As such no separate and independent  right  to  judgment  subsists  in  TAPAC.    The  assignment  document records that TAPAC has assigned to the third plaintiff all its rights, title and interest in any cause of action arising from or associated with the relevant construction agreement and its rights in the proceedings and any damages or costs awarded in the proceedings.

Formal proof

[4]      The proceeding was filed on 14 June 2013 and served on the defendant on 26

June 2013.  The defendant has taken no steps to file a statement of defence or indeed to take any other steps in the proceeding.  The plaintiffs were granted leave to pursue the claim by way of formal proof.

[5]      In support of the application for formal proof counsel has filed a helpful and full synopsis of submissions and there is affidavit evidence before the Court as follows:

(a)      Barbara Kay Ward has provided background to the construction of the building and the engagement of the defendant as lead contractor;

(b)Todd Keir Jones has provided evidence of the defects and damage to the building;

(c)      Dr Adrien Spiers has confirmed the analysis of timber samples taken from the building and the damage to the timber apparent from those samples;

(d)Frederick  Alastair  Hansford  has  provided  details  of  the  repairs required;  and

(e)      Anthony Paul Phillips has provided evidence of the estimated costs to carry out the necessary repairs.

The repair work has not yet been carried out.

Background to the defendant’s involvement

[6]      In or about July 2002 TAPAC engaged the defendant pursuant to a written construction contract to construct the building at the College on the Crown land. Between approximately August 2002 and July 2003 the defendant carried out construction of the building.  Ultimately a Code Compliance Certificate was issued by the Council.

[7]      In 2011 and as part of a nationwide audit the Ministry of Education engaged Hampton Jones Property Consultancy Limited (Hampton Jones) to inspect the building for weathertightness defects and damage.  As a result of the inspection the plaintiffs became aware that the building contained construction defects which had in turn allowed water ingress to cause damage to the building.  The building does not comply with the Building Code and requires repair.

[8]      A builder owes a duty of care in tort to owners or subsequent owners of buildings to ensure buildings are constructed free from defects.1   The Supreme Court have  confirmed  in  Body  Corporate  No.  207624  v  North  Shore  City  Council2 (Spencer on Byron) that Bowen is not restricted to residential dwellings.  The Court confirmed there is no distinction between commercial buildings and other non- residential premises.  While the Spencer on Byron case was an appeal concerning

council liability the position of the liability of a builder to the owners of the building is a fortiori.  In Minister of Education v Econicorp Holdings Limited in declining to strike out  a claim  brought  by the Minister of  Education  against  a builder of a defective school hall the Court stated:3

[43]     … there can be little doubt that the requirement for foreseeability is met in this case. When it built the hall, [the builder] must have realised that a lack of care on its part could result in the owner of the building having to incur  costs  to repair  or  replace  the  hall.    …  I consider  it  likely that  a reasonable builder … would have foreseen that a lack of care on its part could result in loss to the hall’s owner …

[9]      Similar  comments  were  made  by Asher  J  in  the  decision  of  Mt  Albert Grammar School Board of Trustees v Auckland City Council where he noted that those responsible contractually for the design and building, (I interpolate here the builder  as  in  this  case)  must  be  seen  as  those  who  have  the  most  proximate

relationship, (and I interpolate again, consequent liability).4    I am satisfied in this

case that the defendant  as builder owed  a duty of care to the first  and second plaintiffs as the parties representing the owner of the land in which the building was constructed and clearly to TAPAC as its contracting party.  As noted, the interest of TAPAC has vested in the third plaintiff quite independent of whatever other interest or rights the third plaintiff as the party having the responsibility under the Education Act for the operation and management of the buildings would have been.   I am satisfied the defendant owed a duty of care in relation to the first three plaintiffs.

[10]     I turn to the issue whether there has been a breach in this case.  In relation to that there is the evidence of Mr Jones.  Mr Jones is a project manager employed by

1      Bowen v Paramount Builders (Hamilton) Ltd [1977] 1 NZLR 394 (CA).

2      Body Corporate No. 207624 v North Shore City Council [2013] 2 NZLR 297 at [87].

3      Minister of Education v Econicorp Holdings Limited [2012] 1 NZLR 36.

4      Mt Albert Grammar School Board of Trustees v Auckland City Council HC Auckland CIV-2007-

404-4090, 25 June 2009 at [49].

the Greenstone Group Auckland LP presently.  He was employed by Hampton Jones as a building surveyor from January 2011 to December 2011 and investigated the defects in the building.

[11]     Mr  Jones  has  a  degree  in  construction  with  a  major  in  construction management and has completed the New Zealand Institute of Building Surveyors training modules.  He is an expert witness and has deposed that he has complied with the Code.

[12]     In Mr Jones’ opinion the principal defects for which the builder is liable, which have caused damage in this case, are:

(a)       poorly constructed roof penetrations;

(b)      inadequate venting to membrane roof areas; (c)           inadequate fall to parapet flashings;

(d)poorly constructed junctions between concrete and timber framed wall sections;

(e)       poorly weatherproofed penetrations through fibre cement cladding;

and

(f)       poorly installed aluminium window joinery.

[13]     As a consequence of those defects Mr Jones has confirmed that in his opinion the building does not comply with the Building Code.

[14]     I am satisfied on the evidence that the defendant has breached its duty of care to the plaintiffs.

Issue of loss

[15]     Repairs are required in order to remedy the damage, to ensure compliance with the Building Code and to prevent further damage.  Mr Phillips, an experienced quantity surveyor and regional manager at Hampton Jones has given evidence of the cost of repairs he estimates as required to be carried out to the building.   He has provided evidence of a remedial estimate based predominantly on market rates.  In relation to that he estimates that the total cost of repairs will be $1,810,177 excluding GST and fees.  Mr Phillips notes that that estimate includes some provision for fire rating upgrade works estimated at $92,041 excluding GST.  The fire rating upgrade works relate to standards required by the Ministry of Education which exceed the requirements of the Building Code.   To that extent Mr Phillips considers and the plaintiffs concede the fire rating work represents betterment and should be deducted from the sum claimed against the defendant.

[16]     In the absence of any evidence to the contrary I accept the evidence of Mr

Phillips as to the appropriate cost of repairs.

[17]     The plaintiffs make out their case for the damages they seek.

Conclusion

[18]     The first three plaintiffs jointly and severally will have judgment against the defendant for the sum of $1,718,136 plus GST.  The judgment sum may be grossed up to reflect that figure.

[19]     The defendant is to pay interest on that sum from the date of judgment at the judicature rate.

Costs

[20]     The plaintiffs are entitled to costs.   They are to have costs on a 2B basis calculated at $11,940 together with disbursements of $1,329.20.

Venning J