Minister of Education v Higgs Construction Limited
[2016] NZHC 1836
•9 August 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-002650 [2016] NZHC 1836
IN THE MATTER of ARANUI HIGH SCHOOL
Christchurch
BETWEEN
MINISTER OF EDUCATION First Plaintiff
SECRETARY FOR EDUCATION Second Plaintiff
BOARD OF TRUSTEES OF ARANUI HIGH SCHOOL
Third Plaintiff
AND
HAWKINS CONSTRUCTION NORTH ISLAND LIMITED
First Defendant (DISCONTINUED)
HIGGS CONSTRUCTION LIMITED Second Defendant
IAN KRAUSE ARCHITECTS LIMITED Third Defendant
PAUL FRANCIS SAVAGE
Fourth Defendant (DISCONTINUED)CHRISTCHURCH CITY COUNCIL First Third Party
Hearing: 26 July 2016 Appearances:
W Potter and R Gibson for First, Second and Third Plaintiffs
K W Clay and M Pozza for Second DefendantJudgment:
9 August 2016
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS ON APPLICATION FOR STRIKE OUT
MINISTER OF EDUCATION (ARANUI HIGH SCHOOL) & ORS v HIGGS CONSTRUCTION LTD & ORS [2016] NZHC 1836 [9 August 2016]
[1] The third plaintiff is the Board of Trustees of Aranui High School, Christchurch. The first and second plaintiffs are responsible for protecting the Crown’s ownership interest in land and buildings occupied by schools. In 2002 the plaintiffs engaged the third defendant to provide architectural and building supervisory services for the design, development and construction of a new Administration Block at the school. He duly prepared relevant drawings and in due course a building consent was issued for the building of a new Administration Block. In March 2002 the plaintiffs engaged the second defendant, Higgs Construction Limited (Higgs), to construct this building and between that month and January 2003 it did so, under the supervision of the third defendant.
[2] Subsequently, the plaintiffs identified a number of defects in the Administration Block, the consequence of which is that it leaked and suffered significant damage. In this proceeding the plaintiffs claim the cost of remediation of the Administration Block from both Higgs and the third defendant.
[3] Higgs applies for an order dismissing this claim.
Procedure
[4] Higgs has brought its application to dismiss the proceeding in an unorthodox manner. It is brought under r 5.49 of the High Court Rules which provides a procedure for a defendant who objects to the jurisdiction of the Court hearing and determining a proceeding to file an appearance, which does not operate as a submission to the jurisdiction of the Court. The rule then provides a procedure for determination of the defendant’s contention. This can result in the proceeding being dismissed. In the present case Higgs has filed a statement of defence and has not filed an appearance and objection to jurisdiction. The procedure set out in r 5.49 is not therefore applicable. The rule which deals with an application to dismiss or stay a proceeding is r 15.1. This provides:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it –
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
(2) If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3) Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4) This rule does not affect the court’s inherent jurisdiction.
[5] The inherent jurisdiction of the Court is preserved and has been applied by the Court, for example, in cases where it has been found that New Zealand is not the forum conveniens, an issue going to the heart of the jurisdiction of this Court.
[6] It will be apparent from the next section of this judgment that Higgs’ application is either within the terms of r 15.1(1)(d), so could be decided under that rule, or may be considered under the Court’s inherent jurisdiction, because the foundation of the argument presented for Higgs is that the Building Act 2004 contains a statutory bar to the Court entertaining this proceeding.
The basis of the application
[7] The Building Act 2004 came into force in two stages, on 30 November 2004 and 31 March 2005. On the latter date the Building Act 1991 was repealed. The purposes of the Act are set out in s 3. They are two-fold, first to provide for the regulation of building work, establishment of a licensing regime for building practitioners and setting the performance standards for buildings to ensure certain stated outcomes. The second purpose is to promote the accountability of owners, designers, builders and building consent authorities who have responsibilities for ensuring that building work complies with the building code.
[8] Section 400 states that the Governor-General may, on the recommendation of the Minister of the Crown who is responsible for administration of the Act, make regulations, which are to be known as the building code, which prescribe functional requirements for buildings and the performance criteria that buildings must comply
with in their intended use. This provision mirrors the provision in s 48 of the Building Act 1991. Pursuant to s 48 a building code was promulgated and came into force in 1992.1 This was the code in force when Higgs built the Administration Block.
[9] This proceeding was filed after the Building Act 2004 came into force. The application presently before the Court is derived from the procedure set out in ss 176 to 190 by which the Chief Executive of the Ministry of Business, Innovation, and Employment (who is responsible for administration of the Act) may make certain determinations. Section 182(1) provides that a person may not commence proceedings in a District Court or the High Court if the matter that gives rise to those proceedings can be the subject of a determination. Mr Clay, for Higgs, says that the matter that gives rise to this proceeding is non-compliance with the building code. Under s 177, the question of whether particular matters comply with the building code is one of the issues on which a party may apply to the Chief Executive for a determination.
[10] The issue for decision on this application is whether this proceeding should now be dismissed on the basis that it should not have been commenced in this court.
Relevant provisions of the Building Act 1991
[11] Section 7 of the Building Act 1991 provided that all building work is to comply with the building code to the extent required by the Act, whether or not a building consent is required in respect of it. It then provides:
Except as specifically provided to the contrary in any Act, no person, in undertaking any building work, shall be required to achieve performance criteria additional to or more restrictive in relation to that building work than the performance criteria specified in the building code.
[12] The equivalent provision in the Building Act 2004 is s 18. This provides:
18 Building work not required to achieve performance criteria additional to or more restrictive than building code
1 Building Regulations 1992.
(1) A person who carries out any building work is not required by this Act to –
(a) achieve performance criteria that are additional to, or more restrictive than, the performance criteria prescribed in the building code in relation to that building work; or
(b) take any action in respect of that building work if it complies with the building code.
(2) Subsection (1) is subject to any express provision to the contrary in any
Act.
[13] This provision is materially different from s 7 of the Building Act 1991. Now, the limitation on any requirement to achieve performance criteria additional to or more restrictive than those prescribed in the building code is confined to any provisions there may be in the Building Act 2004 that so require.
[14] This difference may be relevant to the extent of a duty of care imposed on
Higgs in tort, or implied into a contract of engagement of a builder. Under the 1991
Act the terms of the duty could not require achievement of performance criteria additional to the performance criteria specified in the building code. In s 18 of the Building Act 2004 that circumscription is not repeated. Rather, s 18 sets an upper limit for performance as far as the Act is concerned, but not otherwise. The effect of s 7 on Higgs’ duty of care is an issue that may require determination if this case proceeds to trial. For present purposes it is sufficient to note that whether or not the
ambit of any duty of care is restricted, the Act preserves liability in tort.2
The second amended statement of claim
[15] In the second amended statement of claim, the cause of action by the plaintiffs against Higgs is pleaded in negligence.
[16] At paragraph 70 the plaintiffs plead:
70. Higgs owed a duty of care to the plaintiffs:
(a) To ensure that reasonable skill and care was exercised in the construction of the Administration Block Work; and
2 Noted by Elias CJ (dissenting) in North Shore City Council v Attorney General [2012] NZSC 49, [2012] 3 NZLR 341 by reference to s 91 which provides for limitation defences to civil proceedings arising from, inter alia, construction of buildings.
(b) To construct reasonably sound buildings using good materials and workmanlike practices in accordance with the New Zealand Building code, relevant legislation and consistent with the terms of the Higgs contract.
[17] In paragraph 71 the plaintiffs plead the facts and circumstances out of which they say this duty of care arose, one of which is that Higgs was required to carry out its functions in accordance with the Building Act 1992 and the New Zealand building code.
[18] In paragraph 72 the plaintiffs plead:
72. In breach of its duties, Higgs failed:
(a) To ensure that reasonable skill and care was exercised in the construction of the Building Work:
(i) The Administration Block was constructed with the
Defects/Damage set out above; and
(ii) The Administration Block Work does not comply with the
New Zealand Building code.
(b) To build a reasonably sound structure using good materials and workmanlike practices in accordance with the New Zealand Building code and the Building Act 1991.
[19] In paragraph 45 of the second amended statement of claim the plaintiffs plead
19 identified defects with the building which they say are the responsibility of Higgs. At paragraph 46 they plead that the Administration Block Work (which is defined in paragraph 16 as “the design, development and construction of a new Administration Block”) does not comply with “the functional and performance requirements of at least Part B2 and E2 of the New Zealand Building code”.
The case for Higgs
[20] Mr Clay says that the allegations in paragraph 72 are entirely based on alleged breaches of the New Zealand building code. The first alleged breach (failure to ensure that reasonable skill and care was exercised in the construction of the building work) is expanded by two particulars, which are conjunctive, not alternative: it is said the Administration Block Work was constructed with the defects/damage which has been pleaded, and that work does not comply with the
New Zealand building code. Mr Clay says that these conjunctive particulars result in the reasonable care and skill pleaded in this paragraph being tied to performance as required by the building code.
[21] Mr Clay says the second alleged breach of duty is based entirely on failure to comply with the code: Higgs did not build a reasonably sound structure using good materials and workmanlike practices in accordance with the code.
[22] Based on these pleadings Mr Clay submits that the Court is being asked to make a determination on whether the Administration Block work complied with the building code, which is within the definition of “determination” in s 177(1)(a). As a result he says that s 182(1) prevented the plaintiffs from commencing this proceeding: his argument is that “the matter that gives rise to [this proceeding] can be the subject of a determination”.
The case for the plaintiffs
[23] Mr Potter for the plaintiffs says that the matter that gives rise to this proceeding is the negligence of Higgs in building the Administration Block with defects, which include the 19 defects identified in paragraph 45 of the second amended statement of claim. He says that non-compliance with the building code is a fact in support of the plaintiffs’ case that Higgs was negligent, but is not of itself the matter which gave rise to the proceedings in terms of s 182(1) of the Building Act 2004. He says that the allegation that Higgs also failed to comply with the building code is supplementary, the building code being “only an objective standard, which assists in informing the content of Higgs’ duty and against which Higgs’ deficiencies can be measured by other building experts”.
Discussion
[24] The persons who may apply to the Chief Executive for a determination are defined in s 176 Building Act 2004. They include the owner or owners of the building in question. Thus the present plaintiffs were eligible to apply to the Chief Executive for a determination of “whether particular matters comply with the building code” in terms of s 177(1)(a). No guidance is given by the Act on what
may be included within the ambit of “particular matters”. It seems clear to me, however, that the matters that could be taken to the Chief Executive for a determination are any matters which relate to the building code, whether those matters have arisen from building work already underway or completed, or whether they relate to intended building work. To the extent that the plaintiffs maintain that the building work undertaken by Higgs does not comply with the code, they could have sought a determination from the Chief Executive.
[25] That, however, does not answer the issue now before the Court. The ban on commencement of proceedings set out in s 182(1) does not apply unless “the matter that gives rise to [the] proceedings” can be the subject of a determination. This provision would prevent a proceeding being brought in order to determine whether particular matters comply with the building code in terms of s 177(1)(a), because that question would, in that event, give rise to the proceeding.
[26] That is not the position in this case. In my opinion, the matter which has given rise to this proceeding is the condition of the Administration Block. Because of that condition the plaintiffs maintain that the workmanship of Higgs is not up to the standard that it was required to deliver in order to comply with its duty of care in tort. They also maintain that the work does not comply with specific provisions of the building code in force at the time of the building work, but that is not a matter which has given rise to this proceeding. Rather, it is one of the two objective tests of Higgs’ workmanship on which the plaintiffs rely in order to establish that Higgs’ work was not up to the required standard.
[27] This view is reached as a matter of construction. It is supported by s 393 of the Building Act 2004 which provides for limitation defences in relation to civil proceedings arising from building work associated with the design, construction, alteration, demolition or removal of any building. Plainly the Act envisages that there will be civil proceedings so arising. The present proceeding is one of them. The wording of s 393(1)(a) differs materially from s 177(1)(a). The former refers to proceedings arising from building work, the latter to an issue arising over whether particular matters comply with the building code. Had it been the intention of
Parliament that the issues described in s 393(1)(a) should be the subject, first, of a determination by the Chief Executive, s 177(1)(a) would have so provided.
[28] Section 182 only requires, of course, that a determination is sought first in relation to matters which are within s 177. Proceedings in this court may follow, but this order of events need only be followed if the matter giving rise to the proceeding can be the subject of a determination. It is on this point that Higgs’ application founders. As well, taking sequential steps as Higgs argues the Act requires would achieve nothing in this case or similar cases where civil liability for breach of duty (in tort or contract) is alleged, with non-compliance with the building code also
pleaded. In Weaver v HML Nominees Ltd,3 the plaintiffs, owners of a leaky home,
had sought and obtained a determination from the Chief Executive on whether building consents and code compliance certificates should have been issued in respect of remediation work to their home. At trial of their subsequent proceeding for damages, Katz J was required to decide whether the plaintiffs were estopped from relitigating the issues which had previously been determined by the Chief Executive. She found that this would be unfair to the plaintiffs. She described the determination procedure in these terms:
[123] The MBIE determination process provides an efficient and cost effective mechanism for appealing or reviewing certain decisions made by councils (or other building consent authorities) … It simply provides the parties with certainty on a particular regulatory issue, such as whether a building consent should be issued or whether certain work complies with the building code …
[125] The streamlined determination process under the Building Act can be contrasted with the much more in-depth factual and legal review undertaken in civil proceedings in the District or High Court …
[127] In this case I am satisfied that it would be unfair for an issue estoppel to be recognised, given the very different nature, scope and purposes of the initial determination process and the subsequent civil proceedings in this Court. Factual findings made during an MBIE determination process, for a fairly narrow and limited purpose, should not automatically preclude a deeper and more extensive factual analysis being subsequently undertaken by a court faced with determining different legal issues, albeit arising out of some of the same broad factual context.
3 Weaver v HML Nominees Ltd [2015] NZHC 2080.
[29] The effect of this decision, with which I respectfully agree, is that even if the plaintiffs had referred to the Chief Executive questions over whether the Administration Block had been built in compliance with the building code, the decision of the Chief Executive would not have had any effect in the civil proceedings now before this Court. All that would have occurred is that there would have been a delay before this proceeding was commenced while that process was followed through, but to no practical avail. In the end, however, this is not the point. The point is that no-one is prevented from commencing a proceeding in this court unless the matter that gives rise to it can be the subject of a determination, and the matter which gives rise to this proceeding is not compliance with the building code, or otherwise. It is the condition of the Administration Block. Whether or not it was built in accordance with the building code is a factual issue which may be relevant to determining whether or not Higgs is responsible in tort for that condition.
[30] Other decisions cited by counsel support the view that the determination procedure in the 1991 Act does not apply to a contractual dispute between two parties,4 and that Parliament did not intend this procedure to operate as a mandatory
referral system of every building dispute.5 These are consistent with the description
of the procedure in the 2004 Act by Katz J.
[31] The only case counsel were able to refer to with an observation to the contrary is Flynn v Scotson.6 This is a two page ruling in which the Judge stayed a proceeding pending determination of one of the issues raised in it, which he regarded as within the terms of the determination process provided in the Building Act 1991. The ruling was made on an application for an adjournment of a trial. The reasoning is brief. The decision is not binding on this Court and with respect to the Judge, I do
not find it of any assistance in interpreting and applying s 182 of the Building Act
2004 to the present case.
Outcome
[32] The application is dismissed.
4 Maggs v In Accord Properties Ltd HC Auckland M1115/SW02, 7 April 2003 per Paterson J.
5 Gouveia v Clifford DC Auckland NP2555/97, 12 February 1998 per Judge Field.
6 Flynn v Scotson DC Tauranga NP1098/00, 28 May 2002 per Judge I B Thomas.
[33] The plaintiffs are entitled to costs. They seek costs on an increased basis. They describe the application as having been unreasonably brought, without any prospect of success, and brought far too late in the proceedings. They say they notified Higgs in writing that if this application were pursued they would seek costs on an increased basis.
[34] In my view, the appropriate starting point for an award of costs is on a 2B basis. Rule 14.6 provides, however, that the Court may order the payment of increased costs in certain circumstances. The application by the plaintiffs comes down to alleging, in terms of r 14.6(3)(b)(ii), that Higgs took and pursued an unnecessary step or argument that lacked merit.
[35] In my opinion the plaintiffs’ submission is sound. The application could only succeed if alleged breaches of the building code were the matters which gave rise to this proceeding. Mr Clay relied on the particulars in paragraph 72 of the second amended statement of claim to support his submission that this was the case. A more holistic assessment of the case brought by the plaintiffs readily leads to the conclusion I have reached, that the matter which gave rise to the proceeding is the condition of the Administration Block, liability for which is said by paragraph 72 to lie at the feet of Higgs because of breach of its duty of care and non-compliance with the building code. It is an unduly pedantic interpretation of the pleading as it stands to say that the breach of the tortious duty of care which is pleaded in s 72 is founded entirely on breach of the building code. It is pleaded in tolerably clear terms that the Administration Block was constructed with specified defects and damage, and that it does not comply with the New Zealand building code. These are pleaded as two specific faults. It is open to the Court to find, depending on the evidence produced, that Higgs failed to ensure that reasonable skill and care was exercised in construction of the Administration Block, because it was constructed with the defects and damage specifically pleaded, and also that it did not comply with the New Zealand building code. It would be sufficient to found liability if the former of these were proved, but not the latter (subject to the point raised in [14] above). As a matter of interpretation this pleading does not lead to a conclusion that the matter giving rise to this proceeding is non-compliance with the building code.
[36] In my opinion an increase over costs on a scale 2B basis of 25 per cent is appropriate. I direct that Higgs will pay to the plaintiffs costs on a scale 2B basis
plus 25 per cent, and disbursements fixed, if necessary, by the Registrar.
J G Matthews
Associate Judge
Solicitors:
Meredith Connell, Auckland
Helmore Ayers, Christchurch
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