Nelson v Mace

[2012] NZHC 581

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV2011-404-004006 [2012] NZHC 581

BETWEEN  JAMES NELSON AND SIMON KEMBER AS TRUSTEES OF THE JAMES NELSON FAMILY TRUST Plaintiffs/Respondents

ANDPHILIP MACE AND PRISCILLA MACE First Defendants/Applicants

ANDIVAN GLUCINA AND KARMELO GLUCINA

Second Defendants/Applicants

ANDBEVAN SMITH Third Defendant

ANDBRENT GOLDSCHMIDT Fourth Defendant

Hearing:         21 March 2012

Appearances: J M Watkins for the Plaintiffs/Respondents

M C Black for the First Defendants/Applicants
A Gilchrist for the Second Defendants/Applicants

Judgment:      26 March 2012

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was delivered by me on

26.03.12 at 4:30pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:

J M Watkins, Grimshaw & Co, Auckland – [email protected]
M Black, Barrister, Auckland – [email protected]

A Gilchrist, Barrister, Auckland – [email protected]

JAMES NELSON AND SIMON KEMBER AS TRUSTEES OF THE JAMES NELSON FAMILY TRUST V PHILIP MACE AND PRISCILLA MACE HC AK CIV 2011-404-004006 [26 March 2012]

[1]      The first and second defendants have applied for summary judgment upon the claims brought by the plaintiffs against them.  The first and second defendants say the plaintiffs’ claims against them cannot succeed; that they have a clear answer to the plaintiffs’ case which cannot be contradicted regardless of whatever evidence is offered in support of the plaintiffs’ claim.  The defendants assert they can satisfy the Court on the balance of probabilities that the claims cannot succeed against them, regardless of any assertions by the plaintiffs of disputed issues of material fact.

Background

[2]      On  24  May  2002  the  plaintiffs  agreed  to  purchase  the  first  defendants’

property for $680,000.

[3]      On 4 July 2011 the plaintiffs filed their proceeding claiming $332,238.95 inclusive of GST being the estimated cost of repairs to their home. The plaintiffs say the dwelling has suffered extensive moisture ingress and damage, and does not comply with the building code.

[4]      It is pleaded that the first defendants developed the property, and that the second defendants built the dwelling upon it.  By way of background the plaintiffs plead:

(a)      On 12 September 2000 the first defendants were the registered owners of the property, then a vacant section.

(b)On 6 October 2000 Auckland City Council (the Council) received a written application for building consent from Professional Building Certifiers Limited (PBC) on behalf of the first defendants to build a new dwelling.

(c)      PBC, as private certifiers processed the drawings and specifications and issued a building certificate.

(d)The Council processed the building consent application under s 34 of the Building Act 1991 (the Act).

(e)       On 11 October 2000 the Council issued a building consent.

(f)       A dwelling was built on the property between November 2000 and

June 2002.

(g)Construction   of   the   dwelling   was   inspected   on   nine   different occasions.

(h)On 13 June 2002 PBC issued a code compliance certificate under s 43 of the Act for the construction of the dwelling.

[5]      The  plaintiffs  plead  that  the  first  defendants  were  negligent  because  the dwelling was not constructed to a proper and workmanlike standard and was not completed in accordance with the plans and specifications, the building code, and applicable manufacturer’s specifications.

[6]      The claim against the second defendants pleads negligence in the alleged failure to exercise due skill and care when constructing the dwelling and managing the sub trades to ensure compliance with the building code.

The applications for summary judgment

[7] Both first and second defendants claim that none of the causes in the plaintiffs’ statement of claim can succeed, in that the proceedings are either statute barred under the provisions of the Limitation Act 2010 or the Building Act 2004, in that the plaintiffs’ causes of action accrued more than 10 years prior to the plaintiffs bringing the claim against the defendants.

First defendants’ evidence in support of summary judgment

[8]      Mr Mace deposes that between 26 October 2000 and early March 2001 he and his wife engaged the second defendants as builders for the construction of the

dwelling on their property.  He denies that he and his wife were “developers” – he is an accountant and his wife is a school teacher and otherwise they are not engaged in the building or development trade.

[9]      Mr Mace said the first defendants did not carry out any of the building work, that it was all done by the second defendants in conjunction with sub contractors who had either been recommended or introduced to them by the second defendants. He said the second defendants worked  on an  agreed  contract rate and progress payments and invoices were periodically forwarded to be paid.

[10]     Mr Mace has attached a Schedule of Events to his affidavit.   It refers to certain events done and certificates issued in the period August 2000 until 13 June

2002.

[11]     Included are the following:

27/10/2000                  Building consent issued

27/10/2000  Construction      contract      signed      by defendants

9/11/2000  Foundations passed for concreting

24/11/2000                  Concrete floor slab laid

18/1/2001  Inspection prior to lining internal walls

30/1/2001  External Hardietex cladding plastered

22/2/2001  Final   electrical   fitting   undertaken   and stove connected

1-2/3/2001  Final     jobs     completed     by     second defendants including fitting of doorknobs and putting in wardrobe organisers

4/3/2001  First defendants moved into property

8/3/2001  Telecom connected phone to property

9/3/2001  Electrical certificate of compliance issued

9/3/2001  Drainage approved

28/3/2001  Invoice from second defendant builders

7/4/2001  PBC’s   inspection   report   certifying   all building work to date was in accordance with the plans and specifications

3/5/2001  Gas fitting certification certificate issued for installation of space heater

31/5/2001  Gas fitting certificate issued after testing installation of instant hot water heater and hob

Various dates               PBC site inspection report

30/6/2002  Code compliance certificate issued

[12]     Mr Mace also reports that:

(a)       His carpet was laid in February 2001.

(b)      On 22 February 2001  Hines Electrical did the final fitting of the

‘lights and power points etc.’

(c)       He and Mrs Mace moved into their new dwelling on 3 and 4 March

2001 by which date the house had been completed although there was some landscaping, including a garden retaining wall, which was required to be completed for the CCC.

[13]     Referring to the Final inspection document he notes it does not refer to building issues which are relevant to the completion of the property, or items which allegedly relate to the plaintiffs’ claim involving defects.   He said they concern incidental matters that do not affect the property being habitable and which only relate to the issuing of a final code compliance certificate for electrical and gas installation.

[14]     Mr Crow a building consultant engaged to give evidence on behalf of the first defendants believes the final building inspection was made on 7 April 2001.

Second defendants’ evidence in support of summary judgment

[15]     Ivan Glucina says he and Karmelo Glucina were engaged as labour only contractors to do the building work at the direction of the first defendants; that their work was limited to the framing, the laying of the concrete foundation and the installation of the Hardietex cladding system.  He said they had no responsibility for the engagement or supervision of other contractors or subcontractors; that they were not responsible for the obtaining of any permits or getting any Council approvals or “sign  offs”.    He  said  that  they  worked  an  agreed  hourly rate,  and  periodically forwarded invoices for payment.

[16]     The second defendants say they were on the job between 26 October 2000 and 23 March 2001 which was the last day that they did any work of any nature whatsoever on the job.   He had retained his work diaries and these confirm the details he has provided regarding the second defendants’ work period.

[17]     Karmelo Glucina deposes that he has obtained from his bankers, the ASB Bank, a printout of transactions from 2 January 2001 through until 31 May 2001. They note that the last payments received from the first defendants were $5,096.25 on 5 February 2001 and $2,086.53 on 20 February 2001.  He confirms that their last visit to the property was on 23 March 2001.

Opposition to summary judgment applications

[18]     In opposition to the applications of both first and second defendants’, the plaintiffs assert it has not been shown that none of their causes of action can succeed, or that sufficient evidence of a clear answer has been provided by way of proof on a balance of probabilities test.

[19]     The plaintiffs say there are material disputes as to fact which cannot be resolved on affidavit evidence, and that the plaintiffs have made unequivocal statements which amount to an arguable defence.

[20]     The plaintiffs:

(a)      Claim that the proceedings are such that the opportunity should be given to allow full discovery or other interlocutory applications to be concluded, including from the liquidator of PBC.

(b)Assert the case involves complex issues of fact and law which ought to be tested at trial.

(c)      Say  the  first  defendants  were  the  owners  and  developers  of  the property and exercised direct involvement or control in the building process; that they engaged and paid the builder and subcontractors, liaised with the Council about requisite consents and certificates, and sold the property for a profit just over a year after it was completed.

[21]     The plaintiffs say that the first defendants involvement in the organising, controlling and overseeing of construction cast them as head contractors or project managers and were therefore parties which owed a duty of care to the plaintiffs not to  erect  a  non  complying  dwelling.    They  say  their  duty extended  beyond  the completion of the construction right up to the point where an application for a Code Compliance Certificate (CCC) was made and a certificate issued.

[22]     Concerning the second defendants’ application, the plaintiffs say they were responsible  for  the  building  work  until  the  issuance  of  the  CCC  in  June  2002 pursuant to the building agreement between the first and the second defendants dated

27 October 2000.

[23]     The plaintiffs assert the second defendants acknowledged by their building agreement they owed a continuing duty until the issue of the CCC to ensure that the house was constructed in a proper and workmanlike manner and was completed in accordance with the plans, specifications, Building Act 1991 and the building code.

Evidence of the plaintiffs’ in opposition to summary judgment

[24]     Mr J Nelson, a trustee of the James Nelson Family Trust, the owner of the property deposes that the property had a quotable value (QV) of $195,000 when the first defendants purchased it as a vacant residential section in June 2000; that he had purchased the property from the first defendants on 24 May 2002 for $680,000 when the  property had  a  capital  value  of  $600,000.    On  30  May 2002  his  solicitors obtained a Land Information Memorandum (LIM) which stated:

No Building Plumbing & Draining Consents and Permits recorded.

[25]     Mr  Nelson’s  solicitors  communicated  with  the  first  defendants’ solicitors about the lack of consents and permits recorded on the LIM, and received their promise to obtain a CCC prior to settlement.

[26]     Mr Nelson notes from the Council file that the private building certifiers completed final inspections of the building work on 13 December 2001, 30 April

2002, and 17 June 2002.

[27]     He deposes that the first defendants’ solicitors provided his solicitor with a

CCC and a building consent, on 19 June 2002.

[28]     Mr Nelson states he advertised the property for sale in early 2007; that a potential purchaser obtained an independent thermography inspection which identified raised moisture levels in five locations.   The potential buyer provided a copy of the report to Mr Nelson, but decided not to proceed with the purchase.

[29]     Mr Nelson said in early 2010 he took the property off the market and sought advice about how to repair the house.  In October a builder was engaged to remove the floor and any rotten structure timbers within.  Later and following completion of targeted repairs they sought and obtained a building condition report in February

2011 which advised that the dwelling had the attributes of a leaky home and that a full reclad would be required.

Relevant principles on defendant summary judgment applications

[30]     The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed at all, and for this purpose a defendant needs to do more than show that there are weaknesses with the plaintiff’s case. 1

[31]     Although a defendant has the onus of satisfying the Court that the plaintiff has no answer to the defence, the plaintiff cannot raise hypothetical difficulties, unsupported by any positive assertion or corroborated documents.   Further, where the defendant’s evidence is unchallenged, and there are no gaps to be filled, it is unnecessary for the defendant to lead further evidence. 2

[32]     The use of a defendant summary procedure will rarely, if ever, be appropriate where the outcome of the proceedings may depend on disputed issues of fact or conflicting accounts of the factual events. 3

Submissions supporting applications for summary judgment

[33]     Mr Black for the first defendant submits the facts in support of the limitation defence are not in dispute and also that both first and second defendants reject claims of the contractual capacities in which the plaintiffs have cast them.   For present purposes counsel accept arguments about contractual connection cannot be resolved at this time for the defendants claim it is the other who acted in that capacity from which any claim of a duty of care could arguably arise after completion of the building works.

[34]     Regardless, it is the position of both defendants that even if the allegations of

‘capacity’ in the statement of claim can be established, which they deny, they still

have an absolute defence under s 393 of the Building Act 2004.

[35] Section 393(2) (formerly s 91(2) of the Building Act 1991) provides:

1 Westpac Banking Corporation v M M Kembla New Zealand Limited [2001] 2 NZLR 298 (CA).

2 Ferrymead Tavern Limited v Christchurch Press Company Limited (13 PRNZ 616, Master Venning).

3 Attorney General v Jones (16 PRNZ) (PC).

393     Limitation defences

(1)       The Limitation Act 2010 applies to civil proceedings against any person if those proceedings arise from –

(a)     Building  work  associated  with  the  design,  construction, alteration, demolition, or removal of any building; or

(b)     The performance of a function under this Act or a previous re enactment    relating    to    the    construction,    alteration, demolition, or removal of the building.

(2)       However no relief may be granted in respect of civil proceedings relating to building work if those proceedings are brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.

[36]     Mr Black submits that the key fact supporting the limitation defence is the last date of the building work.  This date he says is the “act or omission” on which the proceedings are based.   Mr Mace deposed that the final completion invoice issued by the second defendants was on 28 March 2001.

[37]     Mr Ivan Glucina confirmed that the work was done by the second defendants between 26 October 2000 and 23 March 2001 – the latter date being “the last day that  we  did  any  work  of  any  nature  whatsoever  on  this  job...”.    The  second defendants produced diary records and referred to bank statements which they exhibited.

[38]     Mr  Crow  gave  evidence  as  an  expert  and  concluded  that  any  alleged defective workmanship occurred before the date the work was signed off.   He considered the work in question was completed by early 2001.

[39]     Counsel submits there is no dispute of fact that the second defendants’ last work on the property was done more than 10 years before the proceedings were issued.  Further the first and second defendants have already given full discovery to the plaintiffs and therefore counsel submit there are no issues that could have any bearings on the issue of liability.   The plaintiffs have not provided evidence to challenge the defendants’ claims of the date of the “last act or omission” concerning the  alleged  defective  building  work,  upon  which  the  plaintiffs’ proceedings  are based.

[40]     Mr Gilchrist submits that even if the second defendants were negligent on their very last day on the job (which they deny), that the very last day that they could have  been  negligent  was  23  March  2001  –  more  than  10  years  before  the proceedings were issued.

[41]     Nowhere in the plaintiffs’ affidavits is it claimed the second defendants did any building work after 23 March 2001, or that there was any building work done subsequently that could have come within the first defendants’ area of responsibility, as the plaintiffs pleaded.

[42]     Counsel  submit  there  is  no  benefit  or  need  for  any  further  evidence  or discovery because none exists to show any building at work has been done within the last 10 years by either of the defendants.  Any of the work revealed in the PBC reports after March 2001 have related to items quite unconnected to building work associated with the design, construction, alteration, demolition or removal of any building.

Considerations

[43]     The present issue for this Court concerns the fixing of that date from which the 10 year long stop limitation provision runs.  The plaintiffs’ case revolves around its claim of a continuing duty to the date of the issue of a CCC (in respect of the first defendants) and beyond (in respect of the second defendants).  The plaintiffs submit that where a contractor does defective work during the construction period no breach will occur, in the absence of an express provision, until purported completion and handover at the end of the period.   Therefore the limitation period in respect of defective work could run from completion and handover and not from the earlier date when the defective work was carried out.

[44]     The submission, reflects concern that owners could not be expected to point to an exact day on which the act or omission took place and therefore is a continuing omission until the date of completion during which the builder remains under a continuing duty to effect remedy.

[45]     Ms Watkins submits that in a negligence claim brought against a builder or developer, it is arguable that a duty continues until the final inspection is completed, and perhaps even until the development is completed by the issue of a CCC, on the principle that the duty continues so long as the defendant retains the practical ability to remedy its breach. 4

[46]     Ms Watkins submits that the doctrine of continuing breach is particularly appropriate when a certificate provides the signal that work has not been properly carried out for up to that point, the defective work remains capable of rectification. Adopting this argument, Ms Watkins submits that potentially the liability of the Maces and the Glucinas extended to the date of issuing the CCC on 13 June 2002, and certainly beyond 4 July 2001, being the date 10 years before the plaintiffs’ proceeding was filed.

[47]     In this case, as pleaded, the Maces and the Glucinas had continuing duties to the plaintiffs to ensure the property was not built with the weather tightness defects subsequently found to exist, and that have caused or contributed to the damage identified.  Therefore counsel submits it is open to the Court, for the purposes of the present application, to conclude that there is sufficient evidence of a continuing involvement of both defendants through to dates after 4 July 2001, and that the Maces  and  the  Glucinas  had  every opportunity  to  attend  to  the  rectification  of defective and non compliant building works in order to meet their duties to exercise reasonable skill and care.

[48]     Although it is the defendants’ position that no building work was undertaken

after 28 March 2001 at the latest, the plaintiffs contend:

(a)       There was evidence in fact of building work having been undertaken after March 2001.

4 Kerr v South Waiarapa District Council (Unreported, HC Wellington, CIV 2010-035-156, 9/12/11, Miller J).

(b)In any event the defendants are bound by a continuing duty of care until Council’s code compliance certificate was issued 15 months later on 13 June 2002.

[49]     The  first  element  of  the  plaintiffs’ opposition  focussed  upon  inspection

reports of PBC, the details of which I will review shortly.

[50]     The second element of the plaintiffs’ opposition draws support from case authority.   In my consideration of the case authority I will examine whether the plaintiffs’ claim of support from legal precedent, is indeed as strong as the plaintiffs assert.

Evidence of building work after March 2001

[51]     Ms Watkins for the plaintiffs submits that recently discovered documents disclose that on 4 March 2002 (about 11 months after the defendants say building work was completed), PBC’s certifier wrote to the first defendants about work requiring completion for the issue of the CCC:

(a)       Reduction of height of retaining wall. (b)        Paving to courtyard areas.

(c)       Surveyor’s certificate.

(d)      Electrical certificate.

[52]     The CCC was issued upon the first defendants’ request and it occurred in association with the first defendants’ sale of the property to the plaintiffs.  The sale and purchase agreement contained the usual vendor warranty clause that building works on the property were completed in compliance with an appropriate permit or consent, and where appropriate a CCC has issued.  The CCC was duly obtained for the purpose of providing a copy of same to the plaintiffs’ solicitors.

[53]     The plaintiffs’ claim against the first defendants is not a breach of contract claim.  Clearly the plaintiffs are out of time to bring a claim in contract.  Instead they allege the first defendants were the developers and in that capacity retained an element of supervisory control over the building works until the CCC was obtained. It is in this context the plaintiffs allege the first defendants owed a continuing duty of care throughout until the CCC issued.

[54]     In  the  case  of  the  second  defendants,  the  plaintiffs  allege  they  were responsible for the building work up until one month after the issuance of the CCC because  of  the  terms  of  their  building  contract  with  the  first  defendants.    The plaintiffs say the second defendants owed a continuing duty until completion of the works (in terms of their contract beyond the issuance of a CCC) to ensure the house was constructed in accordance with the plans, specifications, Building Act 1991 and the building code.  The plaintiffs submit that various events took place within the 10 year period including the final inspections, the completion of the paving and the issuance of a code compliance certificate.

[55]     Final inspections (and outcome noted) were undertaken on: (a)          13 December 2001 (fail).

(b)      30 April 2002 (fail). (c) 12 June 2002 (pass).

[56]     Ms Watkins submits it is reasonable to accept that between July 2001 to June

2002  the  Maces  liaised  with  the  certifiers,  Council  and  the  surveyor  about outstanding issues, including paving clearances and the height of the retaining wall, which required rectification in order for the CCC to be issued.

[57]     The paving and retaining wall were still not completed as at March 2002. The first defendants have not provided any evidence about how and when the paving and retaining wall work was completed and by whom.  The plaintiffs submit that the

lack of cladding clearances above the paving is a defect specifically pleaded as a building defect in the plaintiffs’ statement of claim.

[58]     Ms Watkins submits that in the circumstances it is premature for a Court to decide on the sufficiency of proof of the plaintiffs’ claim, before all evidence could reasonably be assembled through discovery, interrogatories and trial.

[59]     It is noteworthy in this case that both defendants have made full discovery to the extent they are able, and have provided the plaintiffs with copies of all documentation, well in advance of this hearing, but that no documents in response have been provided by the plaintiffs other than those which are attached to their affidavits.

[60]     In  her  submissions  to  me,  Ms  Watkins  contended  there  is  evidence  of building work being done post March 2001.  She refers to the paving work which in an inspection report was identified by reference to the height to which cladding should be fixed above it.  Ms Watkins submits there is sufficient in this to contend building work was identified in December 2001 as due to be done before a CCC could issue.  It follows, Ms Watkins adds, that such work must have been done for the CCC to have been issued.   As the second defendants were the builders, it is reasonable to assume it was they who attended to it, at a time well beyond that date they say they were last on the job.

[61]     I  do  not  think  that  the  inferences  drawn  by  the  plaintiffs  from  the circumstances identified, are at all reliable.

[62]     As earlier noted full discovery has been provided, to the extent the defendants have been able.  Mr Ivan Glucina deposed that he knows from these records that the second defendants had essentially finished the job on 23 February 2001 but then went back a month later on 23 March 2001 to do some minor follow-up work in relation to doorknobs and shelves and he states “We did not return after 23 March

2001, as our work was complete”.

[63]     Mr Karmelo Glucina was equally as assertive:

... and the last time that we visited the property, was 23 March 2001.

[64]     He, referring to bank statements obtained, referred to receipt of two payments in February 2001.  He said:

There were no subsequent payments received from the Maces.

[65]     The second defendants say they were never asked to return to the property to undertake any work, after the end of March 2001. There is no evidence they did.

[66]     Ms Watkins referred to the final inspection report.  This was provided on 13

December 2001.  It noted certification from the gas installer, the electrical installer and the surveyors had been provided and that the drainage had been completed.  It also noted:

Paving to external areas need to be completed to ensure levels between internal floor levels and external door opening comply.

[67]     Ms Watkins also made reference to PBC’s letter dated 4 March 2002 wherein

it is stated:

I note that the following work is requiring completion for use to issue the code of compliance.

Paving to the courtyard area to provide safe landing when exiting the building.

Surveyor’s certificate.

Electrical certificate.

Please advise us when the paving and the retaining wall has been completed to enable an inspection to be carried out.

[68]     Mr Crow is a principal of CEW Management (NZ) Limited Building and Dispute Resolution Consultants.   He has been a building consultant for over 40 years.   He offers evidence as an expert he having been requested by the first defendants to assess and establish when the property was completed and considered fit for habitation in terms of the Building Act and the building code applicable at the time of the construction.   He has reviewed documents obtained from the Council property file, and as well the documentary evidence provided by Mr Mace in connection with their occupation of the property.

[69]     He notes that PBC issued a building certifier’s inspection report on 7 April

2001 stating:

The building work has progressed to the extent specified in the attached “Inspection Report” (and that) the certifier is satisfied on reasonable grounds that at the date of the inspection the building work has been undertaken in accordance with the plans and specifications.

[70]     He has viewed PBC’s Schedule of Site Inspection Requirements for each stage of the construction that required inspection and approval.  He notes that except in relation to the heading ‘Final completion certificate’, each of the stages on the 7

April 2001 schedule detailed have been ‘ticked’, dated and initialled, confirming

when each of those items were approved.

[71]     The heading ‘Final completion certificate’ in that document noted:

Prior to professional building certifiers issuing the code compliance certificate.   The building’s internal linings are to be completed, grounds levels in relation to floor level complying, cesspits in place, retaining wall novacoils connected to stormwater system, all plumbing complete, hot water cylinder complete including strapping, all insulation in place and all previously requested documentation on file.

[72]     Mr Crow comments in relation to this that it does not refer to building issues which are relevant to the completion of the property, or items which allegedly relate to the plaintiffs’ claim involving defects.   He said they concern incidental matters that do not affect the property being habitable and which only relate to the issuing of a final CCC for electrical and gas installation.

[73]     Mr  Crow  noted  there  were  handwritten  notations  on  the  back  of  that inspection document referring to inspections undertaken subsequently. They indicate that there was an inspection on 30 April 2002 and on 12 June 2002. As to the former date there is a note:

Steps to external doors all complete paving to ensure drop to ground is not more than 280mm (ticked ok).

Also:

1.        [Waste] gullies to haunch [gully traps].

2.        Seal wastes where they pass through walls.

3.        Have you reduced the height of the retaining wall to southbound to

meet Council’s resource consent requirements.

4.        Please provide builder’s name and address.

[74]     The inspection on 12 June 2002 noted “final inspection approved”.

[75]     Mr Crow offers the opinion that the final building inspection was made on 7

April 2001.  He said any alleged defective workmanship occurred before the dates the work was signed off and this confirms the work was completed by early 2001 and probably in January 2001.  He draws for support the fact that the internal linings would have been inspected on 18 January 2001 when the house would have been watertight;  that  the external  plaster work  was  signed  off by the certifier on  30

January 2001; and that the building had rendered his final invoice for release of the retention allowance on 28 March 2001.

[76]     In summary and in relation the proposition that relevant building work was done post March 2001 the clear evidence is that there was none.  The inspections did not identify any need for such, rather they were concerned with issues which had no connection or relevance to building issues (i.e. relevant building work).  There is no evidence the builders were asked to return to the property after March 2001.   It follows that there was nothing beyond that date which affected any of that work which before then they had attended to.

[77]     The plaintiffs have focused on the requirement for paving to the courtyard

area [to provide safe landing when exiting the building] in PBC’s letter dated 4

March 2002.

[78]     In their statement of claim the plaintiffs pleaded the defects included cladding to less than 150mm from paved ground.

[79]     There is no suggestion of any relationship between the plaintiffs’ pleading and PBC’s reference in its letter of 4 March 2002. The latter is clearly not associated with cladding standards.   The plaintiffs have had plenty of opportunity to provide evidence to show the post March 2001 paving requirement had anything at to do with cladding requirements. A proper inference is that the paving matter had nothing

to do with cladding issues.    Besides there is Mr Crow’s careful and  calculated conclusion that relevant building work concluded ‘probably in January 2001’.

Whether a duty of care continued beyond completion of the building work

[80]     Ms Watkins submitted that the first defendants owed a continuing duty of care until the issue of a code compliance certificate and the second defendants beyond that issue.  She says as much is expressed by the building contract between the first and second defendants.  She also submits that the concept of a continuing duty of care has been endorsed by decisions of the High Court in New Zealand.

Defendants’ building contract

[81]     The parties are the first defendants (“the Owner”) and the second defendants

(“the Builder”).  It is dated 27 October 2000.  Under the interpretation provisions:

“Completion of the works” means the date on which the Owner receives a code compliance certificate or a building certifier’s code compliance certificate.

[82]     Clause 2.2. provided:

The  contract  price  shall  be  paid  by  progress  payments  comprising  the proportion to the contract price specified at the following times:

(a)       30% to be paid on completion of the concrete floor. (b)     30% to be paid on completion of roof.

(c)       30% to be paid on completion of the works. (d)     10% to be paid on rectification of defects.

[83]     Clause 9 provided:

9.        Procedure on completion of contract works

When the building has been completed in accordance with the plans and specifications and to the extent required by the building consent issued in respect of the building work:

...

(c)       Upon receipt of a code compliance certificate from the territorial authority or where a building certifier has been engaged, when the building certifiers code compliance certificate has been given to the territorial authority of the Owners shall without delay pay to the Builder the sum specified in clause 2.2(c) in accordance with the procedures specified in clause 2.  The Owner shall in any event pay the Builder if a code compliance certificate is not available through no default on the part of the Builder.

[84]     Clause 10 provided:

Release of final payment

10.1Without any undue delay of the builder’s own cost, the builder shall make good all defects to and omissions from the works which the owner reports in writing to the builder within one month after completion of the works.

10.2On making good all defects and omissions reported under the proceeding sub-clause the builder shall be entitled to claim the payment in clause 2.2(d).

[85]     What is clear from the evidence is that the second defendants state and accept that the final payment due to them under clause 2.2(d) was received on 20 February

2001.   Mr Karmelo Glucina said no subsequent payments were received from the

Maces – by implication, that all payments due were paid.

[86]     It is not clear for what purpose the plaintiffs contend the defendants’ building agreement supports in law the principle of a continuing duty of care.  That does not occur because the owner and builder have agreed upon terms intended to affect obligations between them concerning when payments were due.

Case authority supporting the principle of a continuing duty of care

[87]     Ms Watkins submission is that in actions brought against architects/engineers for breach of contract, the test for the start of the period can be extended by the “continuing relationship” view of professional duties, whereby the start of the period is postponed until the last possible date in the relationship between owner and the architect/engineer to remedy the breach.

[88]   Reliance for that proposition is obtained from Hudson’s Building and Engineering Contracts 5.  In paragraph 2 – 222 the authors referred to the problem in ascertaining a correct starting date of a limitation period for a particular complaint, “which can be considerably extended by the concept of a continuing professional duty until the end of the engagement, already discussed... in the context of the design duty.

[89]     The authors continued:

[2-223] In actions in tort for negligence, a reasonable discovery starting date was always resisted, [and finally discarded by the House of Lords] when   required   to   be   prepared   in   accordance   with   the   very complicated rules of the Standard Methods of Measurement in the two industries...

[4-293] Mention  should,  perhaps,  be  made  of  the  theory  of  “temporary disconformity” advanced in some recent judgments in England, to the effect that where a contractor does defective work during the construction period, no breach of contract will occur, in the absence of express provision, until purported completion and handover at the end of the period.  For a number of reasons, this view seems not only impractical in a construction context... but wrong in principle... However, if correct this would be an additional reason for the limitation period in respect of defective work to run from completion and handover and not from the earlier date when the defective work, however unrepairable after covering up, was carried out.

[90]     The learned authors expressed a view that due to the complexity of issues affected determination of the cause and occasion of a relevant building event, the exercise ought best be left to that time when the work was completed and contractual handover was achieved.

[91]     With respect I consider this to be a sound basis from which to proceed.  But,

the focus should be upon ‘completion’.

[92]     The plaintiffs draw support from the judgment of Tipping J in Johnson v

Watson 6. There the learned Judge stated:

The building work commenced on March 1990.  Thus a period of 10 years from the earliest relevant acts or omissions on Mr Watson’s part would have expired  in  March  2000.    Indeed,  in  a  case  like  the  present  where  the

5 (1995) United Kingdom: Sweet and Maxwell, 11th ed. at 2 – 222.

6 [2003] 1 NZLR 626 at para 27.

Johnsons could not be expected to point to an exact day on which the act or omission  took  place,  there  may  be  an  argument  for  saying  that  where original building work is faulty the builder is under a continuing duty to remedy  it  right  through  until  the  date  of  completion,  and  there  is  a continuing “omission” until that date...

[93]     The  plaintiffs  submit  there  is  an  element  of  a  continuing  duty  which continues until that date on which the code compliance certificate was issued.  Ms Watkins submits that the possibility of such a continuing duty of care was considered to be tenable in O’Callaghan & Ors v Drummond & Ors 7.

[94]     But, I think the plaintiffs have taken more from French J’s judgment than

there is there. At paragraph 17 the learned Judge stated:

Further,  if  the  concept  of  the  continuing  duty  is  as  novel  as  the  first defendant contends, then that is an issue that would in any event require consideration  of  the  full  factual  background.    For  my  part,  I  am  not convinced at this stage that the developer’s duty of care can be formulated in the terms suggested by the plaintiffs and the Council, but the argument is certainly tenable.

[95]     The learned Judge was dealing with an application to determine a limitation defence separately.  In refusing that application Her Honour noted that there was a dispute on the facts as to what physical building work was done and when.

[96]     The plaintiffs rely also on Soulis & Ors v Wellington City Council 8.  In that case Gendall AJ noted that the possibility of a continuing duty of care claim was considered to be tenable in O’Callaghan.  His Honour also referred to the Johnson v Watson case where reference was made to building dispute claimants not being expected to point to an exact day on which an act or omission took place.   The learned Judge concluded that whilst a claim that relevant acts or omissions took place some five years after an alleged defective act may face potential difficulties he was not prepared in context of a third party setting aside application to try and resolve issues better left for trial.

[97]     It does not appear French J was enthusiastic about claims of a continuing duty of care but Her Honour was prepared to consider it tenable in a situation where

7 Unreported, HC Christchurch CIV 2007-409-1441, 21/10/08, French J at para 17.

8 Unreported, HC Wellington CIV 2006-485-1164, 18/08/09, Gendall AJ at para 34.

matters of factual determination could not be resolved before her upon the matter she dealt with.   I consider Judge Gendall’s conclusion to be affected by the same considerations i.e. dispute of fact.   The learned Judges were prepared to entertain claims of a tenable argument – but clearly upon the grounds that in a proper context those could more appropriately be considered.

[98]     The plaintiff’s position is that in a negligence claim brought against a builder or developer it is arguable that the duty continues until the final inspection is completed, and perhaps even until the development is completed by the issue of a code compliance certificate, on the principle that the duty continues so long as the defendant retains the practical ability to remedy its breach.

[99]     I am not certain what was intended by the submission that the duty should continue “so long as the defendant retains the practical ability to remedy its breach”. I assume the submission contends that the practical ability to remedy a breach shall enure until the code compliance certificate issues.  It is clear from the judgment of the Court of Appeal in Johnson v Watson at paragraph 27 that the Court was referring to a continuing duty to remedy “until the date of completion”. Also in that case [para

1] the Court found that the building work was substantially completed by September

1990 and that the owners took possession on or about 16 December 1990, and it was on that basis the Court considered the owner had until December 2000 within which to sue.

[100]   The  plaintiffs  also  rely  upon  the  judgment  of  Miller  J  in  Kerr  v  South

Waiarapa District Council 9. At paragraph 20 the learned Judge stated:

As to when time began to run, I accept Mr Hazelton’s submission that the commencement date is that of the act or omission on which the proceedings are based.  But on a negligence claim brought against a builder or developer, it must be taken as arguable for summary judgment purposes that time did not run for so long as the builder or developer was under a continuing duty to remedy defects: Johnson v Watson.  I decline Mr Hazelton’s invitation to revisit that principle in the summary judgment setting; the precise extent and duration of the duty must rest on the factual context, and on policy considerations which the argument did not equip me to address.  It is further arguable that the duty continues until the final inspection is completed, and perhaps even until the development is completed by the issue of a code

9 Unreported, HC Wellington, CIV 2010-035-156, 9/12/11, Miller J at para 20.

compliance certificate, on the principle that the duty continues so long as the defendant retains the practical ability to remedy its breach.

[101]   Later at paragraph 23:

The plaintiffs say that summary judgment is both inappropriate and premature.  It is inappropriate because the claim rests on a continuing duty of care owed qua developer until at least the date when the code compliance certificate was issued.   On the evidence before me, all the building works were not completed, the final inspection was probably not undertaken, and code compliance was not achieved, until after 18 August 2000.  And it is premature because until discovery is had the Court cannot be sure that all relevant information has been considered.   The Court needs to know the nature of the joint venture and the roles of the parties in relation to the building at any relevant time.

[102]   Importantly, at paragraph 27 he stated:

More importantly for present purposes, it is enough to point to an act or omission giving rise to the claim.   The duty alleged includes a  duty to remedy the defects so long as it was within the defendant’s power to do so. It is at least arguable that the defendant’s duties subsisted until the final inspection had been held, and the evidence does not show that the inspection was done before 18 August 2000 [after that date when the defendant developer said the alleged defective work was completed].  On the contrary, it invites an inference that the inspection happened later.

[103]   I think it important to note some aspects of those paragraphs from which the plaintiffs invite the Court to consider there is an arguable case for a claim of a continuing duty in the present instance.

[104]   The reference to  a continuing duty to  remedy  defects  is  taken  from  the decision of Johnston v Watson where its context referred to work completion.

[105]   In  considering  that  it  was  inappropriate  and  premature  to  consider  an invitation to fix the date of the act or omission upon which the proceedings were based, His Honour stated that on the evidence before him, all the building works were not completed, the final inspection was probably not undertaken and code compliance was not achieved until after that date the defendant developer says the alleged defective work was completed by.

[106]   When commenting about the existence of a duty of care enduring for so long

as it was within the defendant’s power to do so, His Honour did not say it endured

until the issue of a CCC.  His reference was instead to an argument that the duty may have subsisted until the final inspection because it appeared work had been done beyond that date the defendant developer contended for.

Conclusions

[107]   Ms Watkins submits that the doctrine of continuing breach is particularly appropriate when a certificate provides the signal that work has been properly carried out for up to that point the defective work remains capable of rectification.  Counsel submitted this argument could potentially place the liability of the defendants at the date when the CCC issued on 13 June 2002, and certainly beyond 4 July 2001.  It could equally be argued from that expression of the doctrine of continuing breach that defective work remains capable of rectification until an inspection of that work certifies it has passed inspection.

[108] The issue of a CCC is not simply a step (albeit the final step) in the inspection process. Rather, it is a certification by the certifying authority that all relevant building and local authority requirements have passed the inspection process. The inspection process is one which is an enduring exercise involving at various stages certain elements of the overall work. It would, as a matter of principle, be wrong to impose a continuing duty of care until the issue of a CCC because sometimes the date of the issue of a CCC has little relationship to the date when the building work was completed. Although s 92 of the Building Act 2004 requires a property owner to apply for a CCC as soon as practicable after building work is completed that requirement does not exist for any purpose to identify the existence of a duty of care.

[109]   From the point of view of proving the existence of a duty it is appropriate to focus upon work completion dates and upon inspections undertaken.

[110]   In this case the second defendants completed the building duties by the end of March 2001.  They left and the evidence is they never returned.  By then they had received their final payment. Their contract was at an end.

[111]   The second defendants describe themselves as labour only contractors who did  not  assume  any  supervisory  function  because  all  the  sub  contractors  were engaged by the first defendants.  The first defendants do not dispute this account of things  although  the  parties’ contract  bound  the  second  defendants  to  provide  a quality product.   There is no dispute from the first defendants of the second defendants’ claims.   Indeed the first defendants also said all building work was completed by the end of March 2001.  It was the first defendants who engaged Mr Crow who said that all relevant building works were completed probably in January

2001.

[112]   The plaintiffs have endeavoured through an analysis of inspection reports to identify work done within the limitation period.  It is clear that there is nothing in the work the plaintiffs have sought to identify which has any connection at all to the alleged building defects that forms the substance of the plaintiffs’ claims.

[113]   I think in appropriate circumstances a proper foundation can be provided on a summary judgment application to determine whether defective work was or was not carried out in that period within 10 years of a plaintiffs’ proceeding being filed.  If the work period has been completed and beyond that date there has been no reason to recall the builder to attend to defects or relevant building work which may later be determined to be defective then it may be appropriate, and in this case I consider it is, to regard that duties of care are by that time completed, subject to limitation considerations.

[114]   In reaching this view, I adopt the approach taken by Robertson J in Hamilton

City Council v Rogers 10, and Doogue J in Price v Sanders and Nelson City Council

11.  In the Rogers case the Court dealt with a strike out application; His Honour [p.4]

noted:

It is clear from decisions such as Matai Industries v Jenson [1989] 1 NZLR

525 that where it is clear that relief eventually will not be granted because of a limitation provision, the matter should be brought to a conclusion sooner rather than later.

10 23/4/98, HC Hamilton A92/97.

11 CP18/98, 19 February 2001.

[115]   Later  [p.5]  he  noted  that  in  the  Building Act  1991  ‘building  work’ was

defined:

Means  work for  or in  connection  with  the construction  alteration, demolition, or removal of a building, and includes site work.

[116]   Then [p.6] referring to s 91 of the Building Act [in substance reiterated by s

393 of the Building Act 2004], His Honour asked “what is the ‘act or omission’ on

which the proceedings are based”.

[117]   He said:

... As a matter of policy [Parliament] has determined that where there are civil proceedings which relate to “building work”... there is to be a particular limitation regime which is to rooted at the date of “the act or omission on which the proceedings are based”.  I read that formula as taking parties back to the factual matter relating to the building work rather than to the legal concepts of when there was a breach of a civil duty.  It is not difficult to apprehend why Parliament was determined to achieve certainty and finality in respect of these sorts of matters, but whatever the imperatives driving the legislation, in my judgment, the function of the Court is to interpret the clear words which have been used...

[118]   And later [p.7]:

There has been clear policy shift to take the limitation period back to the  operative  act  or  omission  rather  than  to  the  date  of the  legal relationship arising between the present litigants or issues concerning discoverability with were pivotal (and difficult) in earlier cases...

... Section 91(2) is a regime apart from that which otherwise exists under the Limitation Act which is preserved in s 91(1).  I am satisfied on the plain reading of the words (and on the basis of ensuring that all the words have a meaning) that the acts or omissions referred to there are the fundamental base acts or omissions relating to the building work and not acts or omissions pertinent to the creation of the legal relationship.

[119]   In Price, Doogue J agreed with Robinson AJ. At [paras 19 and 20] he said:

... It [s 91(2)] refers solely to the actual date of the act or omission relied upon by the plaintiff.   Parliament must have intended the consequences of its clear language... There is no room to import into s

91 the methods by which the Court’s alleviated the strict consequences

of the general limitation law.   That is particularly so when s 91(2)

applies a 10 year period as opposed to the usual 6 year limitation period.

... There is no basis upon which the Court could infer that the legislation intended a different approach in respect of persons such as the first defendant from persons or bodies such as those referred to in sub sections (3), (4) and (4A) of s 91.   Indeed, if the plaintiff were correct, the limitation period in respect of a claim against a person such as a member of the first defendant might depend upon the chance of whether or not he was a building certifier for the purpose of the act. While it is inevitable in respect of legislation such as s 91 that there will be anomalies, the court cannot depart from the clear language of this section simply because of the hard case which has been brought before it in the present proceeding.

[120]   In  this  Court’s  assessment  the  contention  for  a  continuing  duty  of  care principle that  should  endure beyond  the  date  when  relevant  building  work  was completed, threatens to undermine the policy of the 10 year longstop limitation provision.  When a Court can be satisfied that building work was completed by a certain date then the 10 year longstop provision begins from that time.  The principle of a continuing duty of care best serves some purpose in instances where the Court cannot, as is often the case, upon summary judgment applications, fix with certainty a date for completion of the work that is relevant in a plaintiff’s claim of building defects.

Decision

[121]   The  claim  of  the  first  and  second  defendants’ for  summary judgment  is

granted.

[122]   The plaintiffs are to pay the costs of each of the first and second defendants’

on a 2B basis, together with disbursements as approved by the Registrar.

Associate Judge Christiansen