North Shore City Council v Attorney-General
[2012] NZSC 49
•27 June 2012
| For a Court ready (fee required) version please follow this link |
| IN THE SUPREME COURT OF NEW ZEALAND |
| SC 77/2010 [2012] NZSC 49 |
| BETWEEN NORTH SHORE CITY COUNCIL |
| AND THE ATTORNEY-GENERAL AS SUCCESSOR TO THE ASSETS AND LIABILITIES OF THE BUILDING INDUSTRY AUTHORITY |
| Hearing: 1, 2 and 3 November 2011 |
| Court: Elias CJ, Blanchard, Tipping, McGrath and William Young JJ |
| Counsel: D J Goddard QC, S B Mitchell and N K Caldwell for Appellant |
| Judgment: 27 June 2012 |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe appellant is to pay the respondent costs of $40,000 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 [92]
Tipping J [214]
ELIAS CJ
The Building Industry Authority was established by the Building Act 1991 to provide general supervision of the regulatory system for building work. The appeal is brought from a decision of the Court of Appeal, on summary application before trial, holding that the Building Industry Authority did not owe duties of care in the exercise of its statutory responsibilities either to territorial authorities or to building owners.[1] The claimed liability of the Building Industry Authority arose in respect of failures to meet the standards for moisture control set by the building code, which have led to leaks and consequential damage. Such failures have been so widespread as to raise questions about systemic error in the regulatory system, in which the Building Industry Authority’s statutory role was key. They have also presented substantial challenges to the New Zealand legal system.
[1]Attorney-General v North Shore City Council [The Grange] [2010] NZCA 324, [2011] 1 NZLR 178.
The Grange apartments were developed under a building consent granted by the North Shore City Council on 28 April 1999. The design of the building entailed face-fixed monolithic cladding over untreated timber frames. That method of construction is now known to have been used in very many buildings which failed to meet the performance standard specified by standard E2 of the code.[2] As a result, there have been a significant number of cases where moisture ingress has led to rot in buildings, especially where ventilation was inadequate.
[2]The stated objective of E2 (in the Building Regulations 1992, sch 1) was “to safeguard people from illness or injury that could result from external moisture entering the building”. The “[f]unctional requirement” specified in the standard required “adequate resistance to penetration by, and the accumulation of, moisture from the outside”. Performance requirements concerned: the ability of roofs to shed moisture; impermeability of roofs and exterior walls to water that could cause undue dampness, damage to building elements or both; similar impermeability of walls, floors and structural elements in contact with or close proximity to the ground; protection from the adverse effects of moisture entering the space below suspended floors; construction of concealed spaces and cavities to prevent moisture accumulation or transfer causing “condensation, fungal growth, or the degradation of building elements”; capacity to dissipate excess moisture at completion of construction without permanent damage to building elements; allowance in construction for the consequences of failure, the effects of uncertainties resulting from construction or its sequencing; variation in the properties of the materials and in the characteristics of the site. (Emphasis removed.)
During construction of The Grange, the North Shore City Council inspected the building work for code compliance. It granted the owner a certificate of code compliance on 6 April 2000, on completion of the building work. When the building was later found to have suffered substantial damage through leaks, the owners brought proceedings for damages against the Council, alleging negligence in its inspections and certification. The Council joined the Building Industry Authority as third party claiming indemnity or contribution from it.
The Council claimed that the Authority had breached duties of care arising out of its functions under the Act when it reported in 1995 that the Council’s processes were adequate to assess compliance with the building code adopted under the Act. This report (the result of a review by the Building Industry Authority under its statutory responsibilities) is said to have led the territorial authority to believe, wrongly, that its procedures were adequate at the time it issued the building consent and compliance certificates for The Grange.
The Building Industry Authority carried out its functions of review by a rolling survey of territorial authorities. The North Shore City Council was not reviewed again until 2001 (when the report was similar to that received in 1995) and then 2003, after public reports about the incidence of leaks in new buildings (when the report was highly critical of the Council). On its reviews, the Building Industry Authority consultants inspected a relatively small sample of building projects. No complaint is made of this method of proceeding. Rather, the complaint is that the review undertaken in 1995 should have identified the deficiencies in the North Shore City Council’s procedures as the subsequent review in 2003 (undertaken after the extent of the problem with leaky buildings had become public knowledge) was to do. The Council seeks under the first three causes of action to recover damages to cover its liability to the building owners but at the hearing in this Court accepts that its claim at trial would be abated to the extent of its own contributory negligence.
The first two causes of action claim negligence by the Building Industry Authority in preparing the 1995 report and negligent misstatement in it. They proceed on the basis that the Council’s procedures were not adequate to identify failure to attain the performance measure specified in E2 of the building code and that the Building Industry Authority would have reported the deficiencies had it discharged its duties of care. In that event, the Council would have modified its approach (as it did following the report in 2003 critical of the Council’s procedures) so that it would have identified the failures in code compliance in respect of The Grange.
In a third cause of action it is claimed that the Building Industry Authority had become aware by 1998 of the risks associated with the type of construction used in The Grange and the fact that the failure to meet code standards was widespread (suggesting existing inspection and certification procedures had been inadequate) but failed to alert the Council, which continued to rely on the 1995 report in believing that its system was adequate to identify non-compliance with the building code. The third cause of action differs from the first two in the claim of knowledge on the part of the Building Industry Authority. It is an alternative claim in which the additional circumstance of knowledge is evidently put forward to meet possibilities on which the first two causes of action may fail. Two such are if the combination of the statutory scheme and the 1995 report are held insufficient foundation for a duty of care without more; and if the Council should be unsuccessful in establishing breach of duty (perhaps because the Authority in 1995 could not reasonably be expected to have discovered the deficiencies in the system the Council employed). If the first two causes of action fail on the grounds of insufficient proximity between the Authority and the Council, the additional circumstance of knowledge of risk is then relied on in combination with the statutory responsibilities of the Building Industry Authority and the report earlier provided to establish sufficient relationship of proximity to justify a duty of care. Similarly if the claim fails on the first two causes of action because the Authority is not shown to have acted in breach of duty, then actual knowledge of risk in 1998 may well be significant in establishing breach under the third cause of action.
A fourth cause of action is based, not on duties of care claimed to have been owed by the Building Industry Authority to the Council, but on a duty of care the Authority is said to owe directly to owners of buildings. In this cause of action it is claimed that the Building Industry Authority’s knowledge of the risk of failure to achieve the standards set by the code and its statutory functions gave rise to a duty of care to owners to take steps under its statutory powers to address the risk (which included the provision of information), but that it failed to do so. In respect of this claim, the Council seeks contribution from the Building Industry Authority as a joint tortfeasor under the provisions of the Law Reform Act 1936.
The North Shore City Council has accepted liability and paid compensation to the owners of The Grange in settlement of their claims. The appeal concerns the Council’s third party claims against the Authority.
The Building Industry Authority was abolished when the 1991 Act was replaced with the Building Act 2004. Under s 419 of the 2004 Act, the rights, assets, liabilities and debts of the Authority have devolved upon the Crown. The Attorney-General was accordingly named as defendant in the Council’s claims. He applied to strike out all claims. The application was unsuccessful in relation to the first three causes of action in the High Court (where Andrews J considered that the claims were not untenable[3]), although succeeded in the fourth cause of action[4] (where Andrews J considered that she was bound by Attorney-General v Body Corporate 200200 (Sacramento)[5]). All four causes of action were struck out in the Court of Appeal.[6]
[3]Body Corporate No 195843 v North Shore City Council HC Auckland CIV-2004-404-1055, 1 October 2008 (Andrews J).
[4]At [8].
[5]Attorney-General v Body Corporate 200200 [2007] 1 NZLR 95 (CA) [Sacramento].
[6]Attorney-General v North Shore City Council [The Grange], above n 1.
It is established by the line of authority affirmed by this Court in North Shore City Council v Body Corporate 188529 (Sunset Terraces) that territorial authorities may owe duties of care to owners in the discharge of their statutory responsibilities in respect of building consents and inspections.[7] Whether duties of care were owed in turn in the exercise of its functions by the Building Industry Authority to territorial authorities (as is claimed in the first three causes of action) has not before arisen for determination. Whether the Building Industry Authority owed duties of care to owners (as is necessary under the fourth cause of action) was however a question that arose in the comparable circumstances of a third party claim brought by a private building certifier liable to owners in Sacramento, where it was rejected as untenable in law. Whether Sacramento should be followed in this Court is an issue on the appeal.[8]
[7]North Shore City Council v Body Corporate 188529 [2010] NZSC 158, [2011] 2 NZLR 289 [Sunset Terraces] at [6] and [25].
[8]Although this Court refused leave to appeal in Sacramento, it was for reasons which do not affect the present claim or prevent reconsideration of the reasons of the Court of Appeal in Sacramento: Ellerslie Park Holdings Ltd v Attorney-General [2006] NZSC 44, (2006) 18 PRNZ 376 [Sacramento (SC)].
I have read in draft the reasons of the other members of the Court, delivered by Blanchard J and Tipping J. They would uphold the decision of the Court of Appeal, with the effect that all causes of action are struck out as untenable in law on the basis that the Building Industry Authority did not owe the alleged duties of care to the North Shore City Council or to the building owners. I have come to different conclusions. For the reasons that follow I would allow the appeal and reinstate all claims. I do not think it can be said that the claims are untenable in law and I am of the view that they are not suitable for peremptory rejection. I consider that sufficient relationship of proximity to found duties of care to owners and to territorial authorities arises out of the distinct statutory functions of the Building Industry Authority and that no reasons of policy prevent the recognition of such duties of care. I would decline to follow the approach taken in Sacramento, which is I think is not supported by the scheme and purpose of the Building Act.
The scheme of the Building Act 1991 and the functions of the Building Industry Authority
The Building Act 1991 is the context which is relied on as giving rise to sufficient proximity between the Building Industry Authority on the one hand and the territorial authority and owners on the other. The purposes of the Building Act 1991 were to provide for “[n]ecessary controls relating to building work and the use of buildings, and for ensuring that buildings are safe and sanitary and have means of escape from fire”.[9] The “necessary controls relating to building work” were achieved under the Act by requiring all building in New Zealand to comply with the building code enacted under the legislation.[10] A statutory policy of keeping regulation and the costs of complying with it within reasonable bounds was achieved by specifying that building work was not required to conform to standards which were more onerous than those specified in the code.[11] The principal regulatory mechanisms provided by the Act for achieving compliance with the code were through the requirement of certification of code compliance (which could be undertaken either through private certifiers or through a territorial authority)[12] and through imposing upon each territorial authority the responsibility within its district of ensuring compliance with the code.[13] The responsibilities of the territorial authority were backed up by statutory powers of inspection of building work and to compel compliance.[14]
[9]Building Act 1991, s 6(1)(a).
[10]Section 7.
[11]Section 7(2).
[12]Section 43.
[13]Section 24(e).
[14]Section 76.
The Building Industry Authority was a public body set up under the Building Act 1991 with general functions which included “advising the Minister on matters relating to building control”, “[u]ndertaking reviews of the operation of territorial authorities and building certifiers in relation to their functions under this Act”, “[a]pproving building certifiers”, “[g]ranting accreditations of building products and processes”, “[d]isseminating information and providing educational programmes on matters relating to building control”, and “[g]enerally taking all such steps as may be necessary or desirable to achieve the purposes of [the] Act”.[15]
[15]Section 12.
The building code (“for prescribing the functional requirements for buildings and the performance criteria with which buildings must comply in their intended use”)[16] and regulations prescribing the procedures to be followed and the forms and documents used in building consents were required by s 48(3) to be made “on the advice of the Minister following the recommendation of the Authority”. The Authority itself was empowered by s 49 to approve “document[s] for use in establishing compliance with the provisions of the building code” which could be relied on as achieving code compliance. It was under this power that the Authority approved “acceptable solutions” in respect of some performance standards specified by the code. No such “acceptable solution” was approved in respect of monolithic face-fixed cladding attached to untreated timber. It is claimed in the fourth cause of action that one of the steps available to the Authority (and which it is said it was negligent in omitting to use when it became aware in 1998 of the leaky building problem) was to provide an “acceptable solution” which would have addressed the risks and provided a safe harbour for those (including territorial authorities and certifiers) who kept to it. Similarly, the Authority was empowered by ss 58–63 to provide accreditation for building products or processes. Such accreditation was also treated by the legislation as achieving code compliance, if used under the conditions specified.
[16]Section 48(1).
The Building Industry Authority did not have direct powers of intervention comparable to those of the territorial authority to ensure code compliance in respect of particular building work. Its responsibilities were to supervise the operation of the national system of regulation put in place by the legislation. In that, it fulfilled a central role in the statutory scheme.
Although it operated at a level more abstracted from the day to day supervision of building work by which territorial authorities ensured code compliance within their districts and although the Authority also had responsibilities in setting standards and acceptable solutions, it would be wrong to see the Authority as being concerned with high level policy development. The members of the Building Industry Authority were required by s 11(2) to have relevant knowledge and experience, including of “[b]uilding construction, architecture, engineering, and other building sciences”. It operated at a practical level of implementation of the legislative policies, including in relation to actual building work, as is shown by:
· The functions of the Authority provided under s 12(1):
(a) After consultation with appropriate persons and organisations, advising the Minister on matters relating to building control:
(b) Approving documents for use in establishing compliance with the provisions of the building code:
(c) Determining matters of doubt or dispute in relation to building control:
(d) Undertaking reviews of the operation of territorial authorities and building certifiers in relation to their functions under this Act:
(e) Approving building certifiers:
(f) Granting accreditations of building products and processes:
(g) Disseminating information and providing educational programmes on matters relating to building control:
(h) Generally taking all such steps as may be necessary or desirable to achieve the purposes of this Act:
(i) Any other functions specified in this Act.
·The mandatory requirement under s 15 that the Authority report to the Minister when of the belief that a territorial authority was “not fulfilling its functions under this Act” and in the statutory function under s 12 to undertake reviews of the operation of territorial authorities and building certifiers in relation to their functions, both of which necessitated review of a territorial authority’s judgments of code compliance in the case of performance standards (because such standards entailed judgment and interpretation).
·The duties and powers conferred on the Authority by ss 17–21 in order for it to fulfil its s 12(1)(c) functions of “determining matters of doubt or dispute in relation to building control”. These required the Authority to determine the practical application of the code in relation to actual building projects if required to do so by territorial authorities, building certifiers, and owners affected.
·The requirement under s 50(1)(b) for territorial authorities and building certifiers to accept determinations of code compliance by the Authority as “establishing compliance with the building code” and excusing the territorial authority or the building certifier from civil proceedings “for anything done in good faith in reliance” on such determination.
The last two points are important in understanding the role played by the Authority in the scheme of the Act. Three comments of relevance to the matters in issue may immediately be made. First, the Authority is not properly to be seen as remote from implementation of the code in actual building work. When disputes or doubts arose about code compliance (for the purposes of building consents or certificates or more generally), the Authority was given a direct and authoritative role in establishing whether there was compliance in the particular case.[17] Secondly, the determination procedure could be invoked by owners as well as territorial authorities, establishing a direct connection between the Building Industry Authority and owners.[18] Thirdly, in the context of the code’s reliance on performance standards (requiring judgment and interpretation in many cases), the scheme of the Act did not leave territorial authorities, certifiers, or owners adrift and vulnerable in cases of difficulty as to whether “particular matters comply with the provisions of the building code”.[19] At their option, they could obtain an authoritative determination from the Authority which established code compliance and which removed their exposure to claim.
[17]Section 17.
[18]Section 17(1).
[19]Section 17(1)(a).
This scheme is significant in considering questions of proximity generally under the first and second causes of action. It is also significant in relation to the proximity pleaded to arise under the third cause of action when the Authority became aware of the risk of failure, if such knowledge can be established. Withholding such information, as is alleged in respect of the third and fourth causes of action, could effectively deprive those affected (including territorial authorities, certifiers, and building owners) of the safety of a determination. The possession of knowledge of risk by someone with the statutory responsibilities of the Authority in such circumstances bears directly on whether there is a relationship of sufficient proximity on the facts which makes it reasonable to recognise a duty of care to provide the information.
While determinations of the Authority relieved territorial authorities and certifiers from exposure to liability, it is clear from the limitation defences provided in s 91(3) that civil liability of the Building Industry Authority for its determinations was envisaged by the legislation (although members of the Authority and its employees were shielded from civil proceedings “for an act done in good faith under this Act” under s 89). This explicit acknowledgment of liability forestalled any argument that the function was “quasi-judicial” and thus not appropriately subject to liability in tort and also overcame doubts as to whether the Authority would be liable for determinations expressed in the report of the Commission which preceded the Act.[20] As explained below at [59], however, I do not think the explicit reference to circumstances in which Parliament made it clear that the Authority would be liable in tort sets up a comprehensive scheme of liability, excluding by implication tortious responsibility for other actions of the Authority which cause loss to those to whom it owes on general principles a duty of care.
[20]The Commission’s report is discussed at [22].
It seems to me that the Act sets up an interlocking scheme for assurance of code compliance in which owners, builders, certifiers, territorial authorities and the Building Industry Authority have distinct responsibilities. There is nothing in the Act to suggest failure to exercise reasonable care by an agency with responsibility to play its distinct part in checking for compliance, if causative of loss to someone within its contemplation as liable to be harmed, does not give rise to civil liability. Indeed, the generally expressed limitation and immunity defences[21] (which are not confined to liability in respect of determinations or accreditation) suggest such liability was envisaged. This conclusion is consistent with the legislative history to be obtained from the report of the Building Industry Commission which preceded the Building Act 1991.
The legislative history provided by the report of the Building Industry Commission
[21]Sections 89 and 91.
The scheme of the Act described in [13]–[21] is consistent with that proposed in the report of the Building Industry Commission, on which the legislation was based.[22] The Commission saw the Building Industry Authority as a national body which would provide “a single source for referral and review that does not exist in the present fragmented system”:[23]
It affords a centralised and readily accessible forum to which central and local government, the industry and the public can look for rulings on interpretation of the principles embodied in the Code and the need for amendment of control provisions and procedures.
[22]Building Industry Commission Reform Of Building Controls: Volume 1 – Report To The Minister Of Internal Affairs (Building Industry Commission, Wellington, 1990).
[23]At [4.29].
The Authority was to have the role of “monitor[ing] and direct[ing] the administration of the code” and approving the new and innovative “techniques and solutions”, which were a principal aspiration of the reform.[24] It would have “powers of decision-making in matters of interpretation, approval and monitoring of the control system” rather than being an advisory body to territorial authorities or others affected.[25] It would rule on matters of code interpretation and approval of new products and procedures and techniques. The Commission envisaged that the Authority could be liable in negligence for loss caused to others if its decisions as to approval of new solutions or accreditations of new products and techniques were taken without proper care.[26] It was rather more doubtful as to whether the Authority would be liable in negligence in respect of its determinations as to code compliance. As I have indicated at [20], however, the subsequent legislation as enacted made it clear that claims in negligence could be brought in respect of determinations of code compliance.
[24]At [4.30].
[25]At [4.35].
[26]At [4.37]–[4.39].
Not all the recommendations of the Commission were carried through in its draft legislation or adopted in the legislation as eventually enacted. But the system by which the Building Industry Authority was set up as an authoritative source of determinations, including about code compliance, was adopted. The expectation expressed by the Commission (that the Authority could be liable in negligence for loss caused in exercise of its functions without proper care) was adopted in the legislation.
The approach to strike out
It is not necessary to traverse again the approach to exercise of the strike out jurisdiction.[27] It is enough for me to say of the peremptory procedure here adopted that a claim is not suitable for summary dismissal ahead of trial and before discovery unless, even on repleading,[28] it is clearly untenable as a matter of law (in which case the pleadings should be struck out) or unless there is a complete and incontrovertible answer on the facts (in which case summary judgment may also be entered for the defendant).
The recognition of duties of care in cases not covered by existing authority
[27]I have had occasion to review it in Couch v Attorney-General (No 2) [2010] NZSC 27, [2010] 3 NZLR 149 at [35]–[38] and McNamara v Auckland City Council [2012] NZSC 34 at [80]–[82].
[28]Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [31]–[32] and [114].
Nor is it necessary to review at any length the principles applied in recognising duties of care in cases not covered by existing authority. They have been recently considered by this Court in Couch v Attorney-General[29] and McNamara v Auckland City Council.[30] I am content to follow the approach described by Cooke P in South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations.[31] On that basis, whether a duty of care is owed “depends on a judgment, not a formula”, requiring close consideration of all material facts in combination and turning on policy considerations as well as the likelihood and seriousness of foreseeable harm.[32] I do not think it necessary to review all factors that have been influential in other cases[33] because, as I explain at [58] below, I consider the claims are closely analogous to the line of authority confirmed in Sunset Terraces in relation to duties and responsibilities under the same statute.[34]
[29]At [41]–[72].
[30]McNamara v Auckland City Council, above n 27.
[31]South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282 (CA).
[32]At 295.
[33]In respect of which Kirby J has described the “cornucopia of verbal riches” that have been employed to identify when a duty of care is owed (invoking concepts such as vulnerability, power, control, generality or particularity of the class, the resources of and demands upon the public authority, the core or non-core functions or whether a matter is one of policy or of executive action “and so on”). See Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54, (2002) 211 CLR 540 at [236].
[34]North Shore City Council v Body Corporate 188529, above n 7, at [6] and [25].
Where a duty of care falls to be considered in a statutory context, the statute may cover “the field to the exclusion of the common law”[35] or it may be inconsistent with a private law claim (perhaps because the remedies provided in a statute leave no room for liability in tort).[36] Where however the statute does not exclude tortious liability, its terms in themselves may well provide sufficient relationship of proximity between plaintiff and defendant. This is not to invoke “public law concepts”.[37] The general principle is that public authorities are liable when they cause harm to others on the same basis as private individuals are liable, except where such liability would be inconsistent with the statutory scheme.[38]
[35]South Pacific, above n 31, at 297 per Cooke P.
[36]As in Fleming v Securities Commission [1995] 2 NZLR 514 (CA) Richardson J thought to be a consequence of the careful statutory apportionment of civil and criminal liability under the Securities Act 1978: at 530.
[37]Compare Sacramento (CA), above n 5, at [47]–[49] per William Young J for the Court.
[38]The Mersey Docks and Harbour Board Trustees v Gibbs (1864–1866) 11 HLC 686 at 711, 11 ER 1500 (HL) at 1510; the principle was applied in Home Office v Dorset Yacht Co Ltd [1970] AC 1004 (HL) at 1032 per Lord Reid and at 1036 per Lord Morris.
In the end, whether the defendant was under a duty of care to the plaintiff may be incapable of more helpful general encapsulation than that proposed in the High Court of Australia by Kirby J (who acknowledged some circularity) in Graham Barclay Oysters Pty Ltd v Ryan: a duty of care is owed if “a reasonable person in the defendant’s position could have avoided damage by exercising reasonable care and was in such a relationship to the plaintiff that he or she ought to have acted to do so”.[39]
The pleadings
The first and second causes of action
[39]At [240].
The first two causes of action, arising out of the Authority’s 1995 review, overlap substantially. They differ in that the first is based on the exercise in 1995 of the Building Industry Authority’s statutory power to review the Council’s operations while the second, alleging negligent misstatement, is based on the Council’s reliance on the report of the review, which was sent by the Authority to the Council (although it was not obliged to do so by the statute), in what the Council claims was an assumption of responsibility by the Authority upon which the Council was reasonably able to rely.
The particulars given in the pleadings assert that no material inadequacies were discovered or reported by the Building Industry Authority in the North Shore City Council’s processes. There was no recommendation of change in respect to inspection practices for monolithic style cladding construction, no identification of the “inherent danger of allowing fibrous cement sheets to be direct fixed to stud”, no identification of the “inherent danger of allowing untreated timber to be used in residential construction”, no identification of “the inadequacy of allowing face fixed joinery” or the inadequacies “associated with allowing sealant in lieu of mechanical flashings as an acceptable solution under the Building Code” and no identification of “the need for a cavity [for ventilation] in monolithic clad buildings”.[40] Nor did the review “identify the need for the Council to have in place a system of inspections that would adequately identify breaches in the building code.”[41] These were later matters in respect of which the performance of the Council was subjected to criticism in a subsequent report, written in 2003 after the scale of the leaky building problem had received publicity. The Council claims that, in the meantime (and during the period of construction of The Grange), it reasonably treated the Authority’s 1995 review[42] as having given its processes in ensuring code compliance a “clean bill of health”. The Council says that, if warned of the inadequacies later identified in 2003, it would have taken steps to set in place appropriate checks which would have revealed the non-compliance that led to its liability to the owners of The Grange.
The third cause of action
[40]Amended Statement of Claim by First Defendant Against First, Second, Third, Fourth and Fifth Parties at [68.2]–[68.7].
[41]At [68.8].
[42]Which was consistent with a subsequent report undertaken by the Authority in 2001.
The third cause of action contains the significant additional pleading that:[43]
Prior to the issue of building consent and/or issue of a code compliance certificate in respect of the Grange, the BIA was aware or should reasonably have been aware of the issues and concerns referred to in paragraph 68.1 to 68.8 above.
[43]At [77].
The “issues and concerns referred to in paragraph 68.1 to 68.8 above” are those particulars I have summarised in [30].
The allegation of knowledge of deficiencies in achieving code compliance in respect of monolithic face-fixed cladding attached to untreated timber frames lacking adequate ventilation cavities is supported in the affidavits by reference to correspondence and papers supplied to the Building Industry Authority from 24 April 1998 until 27 July 2000. The pleadings claim that as a result of the information supplied to the Building Industry Authority about leaky buildings “and as a result of BIA’s own building knowledge”:[44]
[T]he BIA knew or ought to have known that construction of residential buildings in a manner the same as or similar to The Grange would result in water ingress and/or non-compliance with the building code.
[44]At [77.2].
In the third cause of action it is alleged that the Authority failed to advise the Council that its “clean bill of health statements were incorrect in 1998/1999 by which time it was aware or should reasonably have been aware of that fact”. As a result it is said that the Council “reasonably continued to rely on the clean bill of health statements ... up to and including the times at which it issued a building consent and code compliance certificate in respect of The Grange” as the BIA knew or ought to have known it would do.[45] In this it is claimed that the BIA “failed to exercise the skill and care that could reasonably be expected of the expert body responsible for the administration of the Act” and that, if the Council is liable to the plaintiffs, such liability arose “or was contributed to by the BIA negligently failing to correct the clean bill of health statements”.[46]
[45]At [79]–[80].
[46]At [81]–[82].
By the third cause of action therefore it is claimed that the Authority was aware of the problems arising out of the fixing of monolithic cladding before the building consent was given for construction of The Grange and before a final certificate of code compliance was given for it. Despite having such knowledge, it is claimed that the Authority failed to correct the impression given in its earlier report that the Council processes were adequate to ensure code compliance. The Authority’s failures to correct the impression earlier given or to warn the Council are claimed to have been in breach of a duty of care owed to the Council.
The fourth cause of action
The fourth claim brought by the Council is that the Authority owed the plaintiff owners “a duty to perform its functions with the skill and care that could reasonably be expected of the expert body responsible for the administration of the Act, and to use reasonable skill and care to ensure that its performance of its functions was consistent with the objectives of the Act”.[47] In particular such reasonable care and skill was a duty owed to the owners when the BIA:
·Advised the Minister on matters relating to building control (s 12(1)(a));
·Approved documents for use in establishing compliance with the provision of the building code (s 12(1)(b));
·Disseminated information and provided educational programmes on matters relating to building control (s 12(1)(g));
·Conducted reviews of the operations of the territorial authorities (s 12(1)(d)).
[47]At [84].
It is claimed, again, that the Authority had received the information detailed in the particulars (summarised in [30] above) which identified that it was inappropriate to use untreated timber framing and that there were deficiencies with monolithic cladding systems “of the type recorded on the plans lodged with the council and constructed at The Grange”.[48] Because of the Authority’s knowledge of the deficiencies as pleaded and because of “the BIA’s own building knowledge” it is claimed that the Authority “knew or ought to have known that construction of residential buildings in a manner the same as or similar to The Grange would result in water ingress and/or non-compliance with the building code”.[49]
[48]At [85].
[49]At [86].
The BIA is said to have breached its direct duty of care to the owners by, among other things:
87.1 Failing to advise the Minister that the use of untreated kiln dried radiata timber and monolithic cladding systems such as the cladding system used in The Grange, breached the provisions of the building code and should not therefore be permitted in their then approved form.
87.2 Failing to approve a document which had the effect of ensuring that untreated timber and monolithic cladding systems complied with the provisions of the building code. Such a document could have required that the timber framing be waterproofed and any monolithic cladding system included a dried and ventilated cavity.
87.3 Failing to publish or disseminate information concerning untreated timber and monolithic cladding systems to those parties in the building industry who use such products, with the result that contractors and other affected parties did not change their practices so as to use products which complied with the building code.
87.4 Failing to take all reasonable steps (such as those detailed above) which were necessary to achieve the purposes of the Building Act 1991 and the Building Code.
87.5 Failing to properly review the practices and procedures of the Council as set out in paragraphs 57 to 68 above.
It is claimed that if it had not been for this breach of the direct duty of care owed to the plaintiff owners, then:
88.1 The plaintiffs, the building industry and the territorial authorities would have been made aware of the systemic failure now attributable to monolithic clad building such as the development at The Grange;
88.2 The Council would not have issued a building consent and code compliance certificate in respect of The Grange;
88.3 The plaintiffs would not have suffered the loss for which they now claim.
The Council therefore claimed contribution or indemnity for its liability to the owners from the Building Industry Authority pursuant to s 17(1)(c) of the Law Reform Act 1936 on the basis that the Building Industry Authority was, with it, a joint tortfeasor.
The issues on the appeal
The issues for determination on the appeal are whether the statutory scheme and the circumstances of the 1995 report, either alone or in combination, placed the Authority and the Council in sufficient proximity to found a duty of care for the first three causes of action. In the third cause of action, the combination of circumstances relied on also includes the claimed knowledge by the Building Industry Authority by 1998 of the failures in achieving standard E2. The issue in relation to the fourth cause of action is whether in the circumstances of the statutory scheme, the 1995 report, and the claimed knowledge of the Building Industry Authority as to the risk associated with the type of construction used in buildings like The Grange, a duty of care was owed to owners.
The 1995 review must be treated as materially deficient
The 1995 review examined six sample building works (one of which was a building with monolithic cladding). The reviewers reported that they had not found errors requiring correction before a code compliance certificate was issued and that “compliance to the Building Code had been satisfactorily achieved”.[50] It must be accepted for the strike out determination that in the 1995 review the Building Industry Authority carelessly failed to identify material deficiencies in the inspection procedures followed by the Council. Whether that is so cannot be resolved without evidence. The Solicitor-General acknowledged as much in argument.
[50]Building Industry Authority Review Of Technical Operation In Relation To The Issuing Of Building Consents: Report For North Shore City Council (October 1995) at 6.
At trial it might be expected that the conclusions of the report (that there were no errors in the Council’s inspections for code compliance) would be tested against actual compliance to check whether the review was adequate. They could also be expected to be tested against the review conducted by the Building Industry Authority in 2003, which was highly critical of the Council and specifically identified the consent scrutiny and inspection for compliance with the weather-tightness standards as being deficient. The 2003 review criticised the checklists used by the Council for building consents and inspections (which were said to be “not robust enough to address current construction methodology”),[51] lack of a clear policy as to “how weathertightness compliance will be verified”,[52] the adequacy and frequency of inspections for weather-tightness compliance, inconsistency of approach, and inadequate audit.[53] No doubt there is much in the 2003 review that is prompted by the understanding then current, but the discrepancy with the 1995 report in relation to the Council’s processes may require explanation.
[51]Building Industry Authority Technical Review Of North Shore City Council (July 2003) at 4.
[52]At 6.
[53]At 4–5.
For the purposes of summary disposition, however, the Building Industry Authority’s 1995 review must be treated as having passed practices which were not adequate to discover non-compliance with standard E2. It is necessary to accept for present purposes that the pleaded errors were made in the report and that, if a duty of care was owed by the Authority to the Council, the Authority was in breach of any such duty of care.
Was the Council entitled to rely on reports of the Building Industry Authority under s 12?
All causes of action claim that the Building Industry Authority failed to identify deficiencies in the processes being followed by the Council in inspecting buildings for compliance with the building code. The background is the open-ended performance standards specified by the code under standard E2, in which the judgments being exercised on inspection were critical to achieving the standards.
Whether under the statutory scheme it was reasonable for territorial authorities to treat the Authority’s reports as some assurance for the purposes of their own functions bears on proximity (and therefore duty of care) and may be critical to causation of loss. It is the crucial issue on the appeal. For the reasons given in [58]–[74] I conclude that the statutory scheme is supportive of a duty of care imposed on the Authority to territorial authorities in undertaking reviews and in reporting on them. The purpose of such reviews must be seen in the context of the open-ended performance standards provided by the legislation and the setting up of the Authority as the expert body to provide national standards instead of the earlier fragmented approach referred to by the Commission. Since performance standards entailed judgment, assurance that the territorial authority was approaching such assessments correctly and in conformity with the approaches of other territorial authorities will have been of great importance to each territorial authority.
Could the 1995 report reasonably have provided assurance to the Council?
In addition to their view that there was insufficient relationship of proximity in relation to the report between the Authority and territorial authorities based on the statutory responsibilities of each, other members of this Court consider that the report in its terms could not reasonably have been relied on by the Council as indicating that its procedures were adequate. This consideration properly seems to be directed at a conclusion that any deficiency in the 1995 review was not causative of the claimed loss. I do not think it is possible to be confident that this question of fact can properly be resolved without any contextual inquiry. More importantly, I do not think the terms of the report exclude the reasonable inference that the Council was fulfilling its statutory responsibilities adequately.
It is true that the 1995 report identified some areas in which the Council’s discharge of its responsibilities could be improved. It recommended an internal audit system to monitor performance in ensuring code compliance and it commented that the field inspectors appeared to be “short of resource”.[54] It also identified some shortcomings in respect of inspection of compliance with manufacturers’ installation instructions and approved documents.[55] It may therefore be an overstatement to say, as the pleadings do, that the report on the review provided the Council with a “clean bill of health”. But it certainly did not ring any alarm bells about the critical question in issue (inspection for compliance with standard E2) and, overall, the outcome of the report was reassuring and may well reasonably have been taken to suggest to the Council that it was on track. Nothing flagged any issue around deficiencies in inspection which might have averted the catastrophic failures that ensued in relation to weather-tightness and which were identified in the 2003 report. I do not think the claimed reliance on the report as providing reassurance to the Council can be summarily rejected. Whether it was reasonable in the particular circumstances is not something we are called upon to decide ahead of trial.
[54]Building Industry Authority Review Of Technical Operation In Relation To The Issuing Of Building Consents: Report For North Shore City Council, above n 50, at 10.
[55]At 10.
Whether the Council could reasonably have continued to rely in 1998 on the report as giving it assurance that its approach was adequate is a subject for investigation on the evidence at trial. It may ultimately turn on what was known by the Council itself in 1998 about failures to comply with standard E2. For present purposes it is sufficient to say that I do not think the question can be peremptorily decided against the Council on the basis of the terms of the report. It is I think arguable that the report created or contributed to the risk that eventuated.
The claimed duty of care to owners
The issue in relation to the fourth cause of action is whether in the circumstances of the statutory scheme, the 1995 report, and the claimed knowledge of the Building Industry Authority as to the risk associated with the type of construction used in buildings like The Grange, a duty of care was owed to owners. For the reasons given in [85]–[89] I conclude that such duty cannot be excluded. In reaching a different view, the Courts below followed the recent decision of the Court of Appeal in Sacramento and added little additional reasoning. It is therefore necessary to deal directly with that decision. Since the reasoning adopted in Sacramento also impacts on the first three causes of action and was relied on in respect of those claims by the Court of Appeal, it is convenient to refer to Sacramento before dealing with the reasons why I would reinstate all causes of action.
Sacramento
In Sacramento the claim was brought by a building certifier against the Building Industry Authority for damages arising out of the certifier’s liability to building owners of a leaky apartment building. The issue, as in the fourth cause of action here, was whether the Building Industry Authority owed duties of care to the owners. The Court of Appeal took the view that, if it owed a duty of care, it was “at least arguable (on the basis of what we have seen) that the BIA was negligent”.[56] It accepted that the Authority “could have foreseen that adoption by the building industry of defective building systems had the potential to cause substantial economic loss”.[57] It accepted further that the Building Industry Authority had the ability to:
put an end to (or at least limit) practices which were producing outcomes which did not conform to the building code. It could have achieved this in various ways, either by its use of its specific statutory powers (for instance, by promoting an amendment to the building code, under its s 17 jurisdiction to determine disputes or perhaps by way of review of the operation of building certifiers) or alternatively by disseminating information under its general s 12(g) power.[58]
It might well have been the case that the Building Industry Authority could and should have acted more promptly. Nevertheless, the Court of Appeal took the view that the Authority was under no duty of care to building owners, considering that there was insufficient proximity for four principal reasons:
·The relationship between the Building Industry Authority and the building owners was “extremely limited”.[59]
·Responsibility rested “far more directly” on the developers, designers, builders and code compliance certifiers than on the Building Industry Authority.[60]
·The report of the Building Industry Commission (on which the 1991 Act was based) envisaged building owners being responsible and it was “difficult to see building owners as being particularly vulnerable to inaction on the part of the BIA”.[61]
·Inaction on the part of the BIA in relation to a particular building system could not fairly be taken as amounting to a warranty that the building system produced code-compliant outcomes. Where such a warranty (in substance) was to be given, specific statutory processes (as to approved solutions or accreditation) were provided for.
·Analogous cases were against the imposition of a duty of care. The closest analogy was thought to be the decision of the High Court of Australia in Graham Barclay Oysters.[62] It was said that “the drift of judgments in that case are very much against the body corporate”.[63]
[56]Sacramento (CA), above n 5, at [59].
[57]At [58].
[58]At [58].
[59]At [61(a)].
[60]At [61(b)].
[61]At [61(c)].
[62]Graham Barclay Oysters Pty Ltd v Ryan, above n 33.
[63]At [61(d)].
The Court of Appeal also considered that policy reasons would militate against liability, even if sufficient proximity had been found:
· Many of the roles of the Building Industry Authority under the legislation were “of a quasi-legislative or quasi-judicial nature”, “largely off limits in terms of imposing duties of care” and in the case itself a “strong pointer against the imposition of a duty of care”.[64]
· The Act set up a division of responsibilities. Where building certifiers were involved, “their certificates were conclusive”[65] (as, here, the certificate of the territorial authority was conclusive):
There is no indication in the 1991 Act, or in its precursor report, to suggest that the BIA had a long-stop liability where building certifiers had negligently certified compliance. The imposition of such long-stop liability would have incentivised the BIA to adopt a vigilant approach to the approval of certifiers and their insurance arrangements which may have made it impracticable for building certifiers to operate. Such a consequence would have been contrary to the purpose of the Act.
· Since the primary complaint was of lack of action, “[a] positive duty of care extending to general superintendence over the building industry in New Zealand would have significant resource implications which would, in all probability, require the Courts to review the reasonableness of the resources allocated to the BIA by the responsible ministers”.[66]
[64]At [62(a)].
[65]At [62(b)].
[66]At [62(c)].
Dealing with what it described as “[t]he alleged situational duty” (in which it was contended that the Authority’s knowledge of the leaky building syndrome created or contributed to the existence of sufficient proximity, in similar manner to the claims in the present case in respect of the third and fourth causes of action)[67] the Court of Appeal acknowledged that if the Building Industry Authority was on notice of the failure to meet the code “but just sat on its hands”:[68]
[T]his would have involved a significant error of judgment and a major departure from legitimate expectations as to how even a light-handed regulator might be expected to behave.
[67]At [67].
[68]At [68].
Although it was “tempting” in those circumstances to conclude that the conduct attributed to the Authority was outside the scope of what the legislature intended (so that a duty of care would not be inconsistent with the Act), the Court considered that it was “‘trite’ that maladministration by a public body is not in itself a ground for awarding damages”.[69] The Court considered the proximity considerations already referred to were applicable to the situational duty as well as to the alleged “overarching duty”.[70] It added that similar argument as to situational duties would not be confined to face-fixed monolithic cladding over untreated timber but “could be raised in relation to any building system (or product, builder, territorial authority or building certifier for that matter) about which (or whom) complaint had been made to [the Authority]. As well, the ability of the BIA to respond to concerns about the use of face-fixed monolithic cladding systems over untreated timber framing was limited and would have required decisions to be made as to the allocation of resources”.[71] The Court of Appeal drew heavily on the majority judgment in Fleming v Securities Commission in this connection[72] and in concluding that the argument as to the “situational duty alleged” was untenable.[73]
[69]At [69].
[70]At [69].
[71]At [69].
[72]Fleming v Securities Commission, above n 36, at 525–533 per Richardson J.
[73]At [70]–[71].
I am able to summarise here my disagreement with the reasons given in Sacramento (as it is necessary for me to return to the points in support of my eventual conclusions below):
· As will be apparent from the discussion of the statute (and as is further developed at [85] below), I do not agree that the relationship between the Building Industry Authority and owners is “extremely limited”.[74] I consider that the statute sets up a system of assurance which establishes proximity between building owners and those with responsibilities under the Act (as was recognised by this Court in Sunset Terraces).[75]
· The fact that others (such as developers, designers, builders and certifiers) may have primary responsibility or (in the case of certifiers who are part of the statutory assurance scheme) prior responsibility does not preclude recognition of a relationship of sufficient proximity.[76]
· The report of the Building Industry Commission (as discussed at [22]–[24]) envisaged that the Authority would owe duties of care in respect of its formal determinations, which could be sought by owners as well as territorial authorities and certifiers. The Act also recognises, more generally, that common law remedy in tort is available against the Authority.[77] Here, the claims are concerned with actions taken by the Authority in reviewing the performance of the Council and inaction by failure to correct its 1995 report when it knew of the particular risk (pleaded in respect of the third and fourth causes of action). Neither set of claim (with or without knowledge of the risk) seeks to hold the Building Industry Authority to a “warranty” of code compliant outcomes.[78]
· Graham Barclay Oysters is not an authority in point in respect of the present claims. In Graham Barclay Oysters the claim against the local authority was for failure to exercise a wide statutory power conferred for general protection of the public and in circumstances where there was no known risk.[79] It does not compare with the detailed responsibilities, including supervisory responsibilities in respect of territorial authorities, imposed on the Building Industry Authority here. Nor did the statute in Graham Barclay Oysters contemplate liability in tort, as the Building Act 1991 did.
[74]Compare Sacramento (CA), above n 5, at [61(a)].
[75]See above n 7.
[76]City of Kamloops v Nielsen [1984] 2 SCR 2 [Kamloops] at 15 per Wilson J. See also Anns v Merton London Borough Council [1978] AC 728 (HL) at 758–759 per Lord Wilberforce and 767–768 per Lord Salmon. And see [60] below.
[77]Section 91.
[78]Compare Sacramento (CA), above n 5, at [61(c)].
[79]There had been no previous outbreak of hepatitis to suggest risk to those consuming oysters. See below n 128, at [10] per Gleeson CJ. See also [40] per Gleeson CJ, [99] per McHugh J, [154] per Gummow and Hayne JJ, [250] per Kirby J, and [327] per Callinan J.
Similarly, I do not agree with the policy reasons upon which in Sacramento a duty of care would also have been rejected:
· I doubt whether classifying the functions performed by a public body as “quasi-legislative” or “quasi-judicial” is the right way to approach questions of duty of care.[80] Indeed, the functions conferred on the Building Industry Authority which arguably would attract those labels are ones in respect of which the legislation specifically provides for tortious liability (determinations and accreditation, which may be seen to have overtones of adjudication and legislation respectively). It seems to me preferable to avoid such classification and the view that there are “no go” areas for tortious liability.[81] But, more importantly, I do not think the functions and powers of the Authority, and particularly those in issue in the pleadings, are properly so classified. The Authority itself was an important part of the system of checks adopted by the legislation. And its functions are operational and routine, rather than involving high policy development.
· The division of responsibilities under the Act overlapped, but that is not inconsistent with the distinct liability of each of those with responsibilities. The liability of the Authority for its own actions did not impose on it “long-stop” liability for the negligence of others,[82] for the reasons discussed at [60]. This is in substance the same argument as is made in relation to proximity and is contrary to the authorities I have cited in footnote 76.
· The duty contended for here does not extend to “general superintendence over the building industry in New Zealand”.[83] Moreover, if a duty of care is otherwise appropriate, the cost of liability is not reason to reject it in the case of a public authority such as the Building Industry Authority. Such costs must be borne by private tortfeasors and, under the Building Act, by territorial authorities. (A similar point was made by Cooke P in Fleming,[84] and by Gleeson CJ in Graham Barclay Oysters.[85])
· This is not, as is suggested, in Sacramento, to impose liability for “maladministration”.[86] It is liability in tort for loss carelessly caused by a body with statutory responsibilities that bring the plaintiff into sufficient relationship with the statutory body.[87]
The causes of action are not untenable
[80]Sacramento (CA), above n 5, at [62(a)].
[81]As Lord Nicholls suggested in Stovin v Wise [1996] AC 923 (HL) at 938.
[82]Sacramento (CA), above n 5, at [62(b)].
[83]At [62(c)].
[84]Fleming, above n 36, at 519.
[85]Graham Barclay Oysters, above n 33, at [14].
[86]At [69].
[87]Of the kind accepted in Couch, above n 26, and Sunset Terraces, above n 7.
I consider that the scheme of the Building Act and analogy with existing authority make it impossible to reject any of the four claims as untenable. I refer first to the general considerations common to the three causes of action based on duties owed to the Council before referring to the additional claim of knowledge in relation to the third and fourth causes of action and the additional circumstances applicable to the claim based on duty of care owed by the Authority directly to owners. I consider that the claim of knowledge of risk on the part of the Building Industry Authority, which is cumulative on the considerations attaching to the first and second causes of action, adds to the strength of the claimed duty of care under the third and fourth causes of action. I also take the view that the claim based on a duty to owners is closely analogous to the recognised duties of care owed by territorial authorities to owners and properly attaches to the Building Industry Authority’s distinct functions under the Act. I deal separately with these distinct additional considerations which are cumulative on the considerations applying to all causes of action. I address them in this section under nine subheadings.
The liability in negligence of the Building Industry Authority is analogous to the established liability of territorial authorities within the same legislative framework
The regulatory scheme of the Act has not been held to be in itself inconsistent with the tortious liability of public authorities acting under it in supervising building work. Claims by those owners affected by the careless discharge of the statutory responsibilities of territorial authorities were confirmed by this Court in Sunset Terraces.[88] Under the Building Act 1991, responsibilities for assuring code compliance are distributed between the Building Industry Authority and territorial authorities. If, as is established, territorial authorities are in sufficient relationship of proximity to owners affected in the exercise of its functions to be under a duty of care to them, there is little stretch from existing authority if, similarly, the Building Industry Authority may be in sufficient relationship of proximity to those foreseeably harmed by careless discharge of its functions. Such functions are directed to the same end as the functions discharged by territorial authorities: achieving code compliance. I deal in what follows with the view that the relationship between the Building Industry Authority and territorial authorities and owners is not comparable to the relationship between territorial authorities and owners, but the present point is that the recognition that those with statutory responsibilities are under duties of care is not novel in this statutory context. It can therefore be contrasted with those cases in which claims by individuals or classes of the public have foundered because the statute relied on as establishing a relationship of sufficient proximity has been held to be concerned with protection of the public as a whole and for which public agencies exercising powers under it are accountable only through the political processes or under distinct statutory regimes of accountability.[89] The Building Act 1991 is not such a statute.
The statute does not expressly or by implication exclude liability in tort
[88]Above n 7, at [6] and [25].
[89]See, for example, Fleming, above n 36, at 530.
The Building Act, unlike for example the securities legislation considered in Fleming,[90] does not exclude liability in tort by setting up a system of criminal and civil remedies which leaves no room for tortious claim. Indeed, so far from excluding liability, the Act specifically envisages and provides for liability in tort for those discharging responsibilities under it: the Building Industry Authority, territorial authorities, and certifiers.[91] While specific provisions indicate that the Building Industry Authority may be liable for breach of care in accreditation of products and in determinations of code compliance (on referral in cases of doubt), such specific reference removes doubt about the appropriateness of subjecting those particular functions to liability in tort. They do not detract from the general reliance on tortious responsibility assumed by the limitation provisions and in the immunities (which in the case of the Authority are not confined to liability in respect of determinations or accreditation, suggesting wider exposure).[92] Nor is there any obvious policy which might make it appropriate for the Authority to be liable in respect of its determination and accreditation functions (those most analogous to judicial and legislative functions) and not others.
The claim against the Authority is in respect of its own functions
[90]Securities Act 1978.
[91]See s 91(3)(a).
[92]Section 89.
The claims do not seek to impose on the Authority a “long-stop liability” for the carelessness of the Council or certifiers or owners, as the Court of Appeal in Sacramento suggested.[93] It is the consequences of its own acts or omissions which are claimed to make the Authority liable for the materialisation of harm reasonably foreseeable. For the same reason, the liability of the Authority does not cut across the functions or responsibilities (and separate liability) conferred upon territorial authorities, even where there is overlap. Despite the territorial authority’s powers and responsibilities to make inquiries and intervene to ensure code compliance within its district, it was entitled to look to the Authority to co-ordinate national information and standards, as the Building Industry Commission report had envisaged[94] and as the scheme of the statute required. I do not overlook the fact that the legislation does not require report by the Building Industry Authority to territorial authorities reviewed. Such report is however implicit in the function contained in s 12 and consistent with the scheme of the Act. In the present case, of course it was a responsibility assumed by the Authority. The terms of the report described its purpose as being to establish how selected territorial authorities were “coping with the Building Act requirements” and proposed “results and conclusions of the review work would be made available to the Territorial Authorities to assist them in evaluating their own internal procedures and to assist with the achievement of national uniformity and the increased efficiency envisaged by the Building Control Reforms”.[95]
[93]At [62](b)].
[94]Building Industry Commission Reform Of Building Controls: Volume 1 – Report To The Minister Of Internal Affairs, above n 22, at [4.29].
[95]Building Industry Authority Review Of Technical Operation In Relation To The Issuing Of Building Consents: Report For North Shore City Council, above n 50, at [1.02].
Nor does it matter that the primary responsibility for achieving code compliance may have been that of a third party, the builder. The statute sets up a system of assurance so that deficiencies by builders are picked up and corrected. The point was made in the Supreme Court of Canada by Wilson J in Kamloops.[96]There, too, a public body was liable in tort to the owner for errors discharging its responsibility to vet the work of the builder and protect the owner from the builder’s negligence:[97]
The builder’s negligence, it is true, was primary. He laid the defective foundations. But the City, whose duty it was to see that they were remedied, permitted the building to be constructed on top of them. The City’s negligence in this case was its breach of duty in failing to protect the plaintiff against the builder’s negligence.
[96]See above n 76.
[97]Kamloops, above n 76, at 15.
In the same way, I do not think the fact that the territorial authority itself owes a duty of care to owners absolves the Authority of its own responsibilities. If they are imposed to guard against the very eventuality which occurs, breach of the duty properly gives rise to liability to those who suffer it. The fact that others may be liable does not absolve the Building Industry Authority of liability for its part under a statutory system of checks. If they are imposed in part to provide reasonable assurance to territorial authorities and ultimately to owners (as the scheme of the statute and the legislative history here suggest), overlapping liability is consistent with the statutory purpose and sets up the relationship of proximity between those with responsibilities.
The Building Industry Authority had operational responsibilities
It cannot be determinative, in the interlocking assurance provided by the scheme of the Act, that the Building Industry Authority, unlike territorial authorities, had no powers to intervene in particular building work. It had the powers to support its own statutory functions which included providing information[98] and which were sufficient to discharge its duty of care. The scheme of the Act gave the Authority powers in relation to the provision of information and supervision of the discharge of the statutory functions of the territorial authorities,[99] which did have such powers to intervene. Careless supervision which allowed territorial authorities to believe that the inspection regime they had adopted was adequate to ascertain non-compliance with the performance standards of the code or failure to pass on information relevant to the exercise of the powers of intervention conferred upon territorial authorities could well deprive territorial authorities of information they needed to discharge their own functions. Depriving them such information or giving them a wrong steer on compliance with the performance standards of the code was inconsistent with the system of interlocking assurance provided by the scheme of the Act and could foreseeably cause loss to territorial authorities and ultimately owners.
Failure to perform its functions with care precluded recourse to code determinations
[98]Section 79.
[99]See ss 12(1)(g) and 12(1)(d). See also s 79.
Territorial authorities, certifiers, and owners were able to obtain authoritative determinations from the Building Industry Authority where there was doubt about code compliance.[100] This was important because the building code contained a number of performance standards, in which detailed prescription of materials and methods (such as had been the approach of earlier statutory regulation of the building industry) was replaced by statements of specified outcomes. The Building Industry Authority supplemented this regulation through its power to specify “acceptable solutions”, compliance with which was accepted to achieve the more general performance standards of the code and which could be relied upon by territorial authorities, certifiers and those responsible for building work without the need for further assessment.[101]
[100]Section 17.
[101]Section 12(1)(b); see also s 50.
Both performance standards set by the code and some of the “acceptable solutions” set by the Building Industry Authority entailed the exercise of judgment in assessing compliance with specified outcomes. Checks of the performance of the territorial authority’s inspection responsibilities as required by s 12(1)(d) therefore in turn required some assessment of the judgments being made by the territorial authority and in respect of which it was entitled on the system set up by the Act to look to the Authority for authoritative direction. This is not to suggest that the Authority was responsible for giving general advice to territorial authorities (a function the Commission had rejected). It meant, however, that in discharging its formal statutory functions it could be relied upon. And in cases of doubt, the territorial authority or the owner could obtain a determination which absolved it of responsibility for assessing code compliance.
A careless report that the territorial authority was assessing the performance standards appropriately (as is arguably the effect of the 1995 report) could conceal questions of doubt which, if acknowledged, might have enabled the territorial authority to seek a determination.
It is not correct to say that the Building Industry Authority was remote from actual building work. Its decision-making powers meant that it was concerned with code compliance in actual cases where questions of doubt arose.[102] And its powers to prescribe acceptable solutions were practical powers not rightly seen as high level policy development such as might properly inhibit imposition of a duty of care.[103] The Authority did have control of what mattered. The allegations in the present claim are of failings in respect of its operational duties and responsibilities.
[102]Section 17.
[103]Sections 12(1)(b) and 49.
The present case is very different from the Securities Act regime under consideration in Fleming, an authority relied upon in Sacramento[104] (and in the reasons of the Court of Appeal).[105] In Fleming, the argument for liability (that the Securities Commission should have intervened to prevent publication of non‑complying public advertisements) would have turned the Commission into a guarantor of the “general probity of advertisements” in the absence of any statutory foundation for a specific responsibility in relation to such advertisements owed to potential investors.[106] The scheme of the Building Act is different because of the nature of the controls and functions exercised by the Building Industry Authority over an area of specialist knowledge and directed at the administration of code compliance in building work.
If the Building Industry Authority owes no duty of care there is an unaccountable gap in responsibility
[104]At [45]–[46] and [70].
[105]Attorney-General v North Shore City Council [The Grange] (CA), above n 1, at [51] (footnote 81) and [58] (footnote 87).
[106]Fleming, above n 36, at 530 per Richardson J.
If the Building Industry Authority does not owe a duty of care in the exercise of its functions to those directly affected (and who are specifically contemplated by the statute as being directly affected), there is a gap in the system of accountability in the Act. No legislative policy suggests that territorial authorities and the Building Industry Authority should be treated so differently for the purposes of liability arising out of the exercise of their statutory responsibilities under the Building Act. As discussed at [20]–[21] above the liability of the Building Industry Authority in tort for its determinations is envisaged in the limitation and immunity provisions of the Act.
The fact that the Act contemplates the Authority will be liable in tort for carelessness in its determinations[107] (while shielding territorial authorities, certifiers, and owners if they rely in good faith on the Authority’s determination)[108] is an indication that the statutory scheme treats owners, certifiers, and territorial authorities as being in a relationship of proximity with the Authority arising out of that function sufficient for the purposes of a duty of care. It is difficult to see any basis on which liability can be said to be clearly untenable on strike out if foreseeable harm is occasioned to any of these affected people through discharge of the other functions of the Authority. The statute sets up the necessary proximity.
Liability of the Building Industry Authority sets up no conflict with the purposes of the Act
[107]Section 91(3)(a).
[108]Section 50.
Nor would liability set up a conflict with the purposes of the Act. Here, the Act requires code compliance, to the end that there is assurance of the structural integrity of the building work undertaken to that standard. Given that all with responsibilities under the Act are working to the same end, there is no question of the Building Industry Authority being inhibited through exposure to tortious liability in carrying out its statutory responsibilities, including that of reporting on the discharge of the responsibilities of territorial authorities.[109]
[109]Attorney-General v North Shore City Council [The Grange] (CA), above n 1, at [53].
The Act requires code compliance, but no more than is necessary to achieve it.[110] A duty of care on the Building Industry Authority in playing its part does not therefore set up a clash with the purpose of the Act in minimising regulatory cost. Liability in tort in such circumstances is wholly consistent with the statutory purpose. Indeed, without such liability, territorial authorities might be pushed to excessive caution, substituting effectively an additional layer of local regulation. That would be contrary to the policy of the Act that a national code would supply the standards, and would potentially add to the costs of regulation, duplicating effort, and undermining the role envisaged for the Authority by the Commission in providing “a single source for referral and review that does not exist in the present fragmented system”.[111]
The Authority was set up to protect against the very risk that eventuated
[110]Section 7(2).
[111]See [22] above.
The risk of damage through failure to achieve code compliance for moisture was a real risk, not one that would not influence the mind of a reasonable person.[112] Although in Sacramento such consideration was deprecated as “reasoning backwards” from breach,[113] I do not think such criticism is valid.[114] The fact that the risk was not fanciful and was the very type of eventuality the Act and the functions assigned to the Building Industry Authority were designed to guard against is I think a factor pointing towards the existence of a duty of care. The duty and the statutory purposes are consistent with responsibility and liability.
Policy considerations
[112]Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty [1967] 1 AC 617 (PC) at 642 per Lord Reid.
[113]Sacramento (CA), above n 5, at [43]–[46].
[114]Couch v Attorney-General, above n 28, at [42].
I touch on some additional considerations which weighed with the Court of Appeal in holding that a duty of care was untenable. Some factors could equally or preferably be considered as bearing on breach. As I mentioned in Couch, where liability for negligence is determined at trial it may not matter whether questions of policy are considered as going to duty of care or its breach.[115] On strike out on a threshold question of duty of care, however, it may matter a great deal.[116] The policy factors held by the Court of Appeal to count against a duty of care[117] are factors which may well be best assessed when considering breach. In referring to policy factors some repetition is inevitable because of the overlap between factors bearing on proximity and policy.
· The imposition of a duty of care and potential liability in negligence does not cut across established principles of law in fields other than negligence or statutory defences or alternative provisions for relief (as was the case in Fleming[118] and in South Pacific[119]).
· As already indicated in [71], I am unable to accept the view expressed by the Court of Appeal that the imposition of a duty of care should be declined for policy reasons because the prospect of liability would inhibit the free flow of advice from the Authority to the Minister.[120] The review and reporting functions of the Building Industry Authority are a practical check on the exercise of the functions of the territorial authority, directed to the same end as the functions undertaken by the territorial authority: code compliance. There is no conflict in the ends pursued which might inhibit proper review or reporting. And a principal feature of the role of the Authority in the system of administration provided by the Act is to provide assurance to owners and to territorial authorities in the performance of their functions.
· Nor do I accept the significance the Court of Appeal attached to what it described as the “quasi-judicial functions” of the Building Industry Authority,[121] in application of a characterisation adopted in Sacramento.[122]I do not think such characterisation should mark off a “no go” zone for liability in tort.[123] But in any event I do not think it accurate in its application to the Authority which was set up to have a central role in the operation of the Act (as the Building Industry Commission had envisaged)[124] and with the functions of disseminating information and providing authoritative determinations and acceptable solutions. The tortious liability recognised by the Act in respect of determinations and accreditations is contrary to such immunity for reasons of policy.
· Although there was speculation in the reasons of the Court of Appeal about the cost implications of liability, I do not consider that such consideration could be determinative in the circumstances. In Fleming Cooke P regarded as unconvincing the argument that Parliament could not have intended liability in such a case because the Commission “consisted only of a full-time chairman and four part-time members and had a total staff of only seven”.[125] While the resources available to a public body may be relevant if the body is operating at a level of high policy, the Building Industry Authority was not in that camp, for the reasons already given. And, as explained by Gleeson CJ in Graham Barclay Oysters, as is referred to in above, private individuals and organisations, too, operate under budgetary constraints and with lack of resources.[126] Any financial constraints upon the Authority may indeed perhaps be better considered as bearing on breach, as Cory J suggests in Just v British Columbia.[127]
· Nor would liability set up incentives contrary to the purpose of the legislation or necessarily entail resources beyond those available to the Authority. It is only in the discharge of its own functions that the Building Industry Authority could have liability. Those functions do not entail discretion to impose higher compliance than is required by the code. And they might have been discharged in the particular case simply by the provision of information.
A Hamlin/Sunset Terraces general reliance by the plaintiff owners cannot apply in the case of the BIA because under the Act it had neither a responsibility to inspect their property nor any power of inspection in relation to an individual building (save its power with respect to randomly chosen buildings in the context of carrying out its reviews). The building levies were paid to enable the BIA to fund itself in the performance of the functions it was required to perform under the Act. As those did not include the administration of the code in the Council’s district, there could hardly be any general reliance on the BIA in that respect by building owners. The fact that there were specific statutory functions for the BIA to perform in approving building products and processes can have no force when the plaintiffs’ claims did not relate to them.
The fourth head of claim was correctly struck out.
A limitation defence
We conclude with mention of a matter to which it has not been necessary to refer in disposing of the appeal. By consent, the Attorney-General was granted leave to raise a ground of opposition to the Council’s appeal which was not argued below. It was whether s 393(2) of the Building Act 2004 precluded relief from being granted in respect of the first, second and third heads of claim because they related to building work and the third-party notice was filed more than 10 years from the date of the act or omission on which the claims in it were based. In view of the conclusion already reached that these causes of action were properly struck out, it is not necessary to determine this question. We will, however, express a provisional view.
Section 393 of the Building Act 2004 reads:
393 Limitation Defences
(1)The provisions of the Limitation Act 1950 apply 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 enactment relating to the construction, alteration, demolition, or removal of the building.
(2)However, civil proceedings relating to building work may not be brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.
(3)For the purposes of subsection (2), the date of the act or omission is,—
(a)in the case of civil proceedings that are brought against a territorial authority, a building consent authority, a regional authority, or the chief executive in relation to the issue of a building consent or a code compliance certificate under Part 2 or a determination under Part 3, the date of issue of the consent, certificate, or determination, as the case may be; and
(b)in the case of civil proceedings that are brought against a person in relation to the issue of an energy work certificate, the date of the issue of the certificate.
There is a definition of “building work” in s 7 of the Act:
building work—
(a)means work—
(i)for, or in connection with, the construction, alteration, demolition, or removal of a building; and
(ii)on an allotment that is likely to affect the extent to which an existing building on that allotment complies with the building code; and
(b)includes—
(i)sitework; and
(ii)building design
The argument for the Attorney-General was that the three causes of action were “civil proceedings relating to building work” within the meaning of s 393(2).[248] As they all concerned the report in 1995, and the third-party notice was not filed until 30 March 2007, the ten-year period had already expired, it was submitted, and the claims were statute-barred by subs (2).
[248]It was not suggested that the Limitation Act 1950 itself barred the claim.
Adoption of that argument would mean that the time under subs (2) had begun to run in 1995 before any cause of action in tort existed, and indeed before time began to run under the Limitation Act 1950, since The Grange was not granted a building consent and constructed until 1999, so that no loss could possibly have been caused to the Council by any conduct of the BIA before the latter time. It seems unlikely that Parliament would have wanted to produce such an unusual and unfair result.
In fact, it seems plain enough that when “relating to building work” is read in the context of the whole of s 393, and especially subs (1), it does not extend to a claim made for what the BIA did in 1995. We say this because “building work” in subs (2) is surely the same as the building work referred to in subs (1)(a), namely work associated with “any building” – that is, any individual building. That is consistent with the definition in s 7 which also contemplates construction , alteration, demolition, or removal of “a building”. It is in fact subs (1)(b) which is applicable to the position of the BIA, with its reference to “performance of a function under this Act or a previous enactment”, but the words “relating to the construction ... of the building” must be a reference back to the specific building in para (a).[249] It is to be noted also that subs (3) is clearly dealing with a specific building when, for the purposes of subs (2), it makes the date of the act or omission in the cases with which it deals the date of issue of the consent, certificate, or determination. That could relate only to an actual building.
[249]This was even clearer in s 91 of the 1991 Act, where subs (1)(b) spoke of “that building”.
It therefore appears that subs (2) cannot have any application to the BIA’s performance of its functions (its acts or omissions) in 1995, since they were not related to The Grange.
The third head of claim concerned the BIA’s failure to correct in 1998 the misapprehension allegedly created within the Council by the 1995 report. That again was not something done or omitted by the BIA in relation to any specific building and, even if it had been, the third-party notice was issued within 10 years of 1998.
The Solicitor-General submitted, however, that because the plaintiff owners’ claims against the Council were undoubtedly in relation to specific building work, and there are restrictions in r 4.4(1) of the High Court Rules on when third-party notices may be brought, the Council’s claim must, for its notice to be valid, also have been brought in relation to that building work. We are not, for the reasons given, persuaded that it was. If it follows that the notice may not have complied with the rule, that would raise a different question concerning its validity that would fall outside what was envisaged by the Court when permitting argument to be advanced on the possible application of s 393(2). We had no written submissions on this further point, which is not without its difficulties, nor did we hear full argument on it. It would not be appropriate to express a view on it in these circumstances, especially as it cannot be determinative of the appeal.
Result
We would dismiss the appeal with costs of $40,000 to the Attorney-General, together with his reasonable disbursements as fixed by the Registrar.
TIPPING J
I have had the advantage of reading in draft the reasons prepared by Blanchard J and the Chief Justice. I do not disagree with the process of reasoning which has led Blanchard J to the conclusion that this appeal should be dismissed. I agree with that conclusion but see the crucial issue as being in a somewhat narrower compass. Before I develop my reasons, I wish to express my agreement with the way Blanchard J has discussed the Chief Justice’s articulation of the third cause of action.[250] I, too, do not consider the third cause of action can be allowed to proceed on the basis of the Chief Justice’s analysis.
[250]See his [199].
As presently pleaded, the third cause of action alleges a duty to correct misstatements said to have been made in the 1995 report. It presupposes there were such misstatements upon which the Council reasonably relied. The Chief Justice’s analysis, as I read it, does not depend on there having been misstatements in the 1995 report which required correction. It suggests an independent duty to provide information; a duty which does not depend on the Council having been misled by its reliance on the 1995 report. Such an approach would allow the Council to raise a new cause of action out of time.
As a first step in its case as framed, the Council seeks to make the Building Industry Authority liable for negligence in respect of what was said and not said in the report written on behalf of the Authority in 1995. The Council contends that it relied on that report and, as a consequence, did not take steps that it would otherwise have taken and which, if taken, would have prevented it from itself becoming liable to the owners of apartments in The Grange, a building which has suffered from leaky building problems.
At this stage of the proceedings the focus is on whether the Authority owed the Council any duty of care in respect of the contents of the report. If no such duty was owed, the proceedings must be struck out. If a duty was or might have been owed, the duty question and whether any applicable duty was breached and all consequential issues must go to trial.
In the present case the asserted duty of care does not fall within any previous category of case where a duty has been recognised. The ultimate question is therefore whether it is fair, just and reasonable for a duty of care to be imposed on the defendant, in respect of the loss or damage suffered by the plaintiff. The conventional phrase – fair, just and reasonable – could well be shortened so as to inquire simply whether it is reasonable to impose a duty. Reasonableness as the sole criterion is apt and sufficient to include issues of fairness and justice. It could hardly be reasonable to impose a duty of care if to do so would be unfair or unjust.
In order to answer the ultimate question whether it is reasonable to impose the asserted duty of care the court examines two aspects. The first looks at the question from the point of view of each of the parties concerned and the relationship between them. The second looks at the question from the point of view of the wider interests of society generally. These two aspects are conventionally referred to as involving questions of proximity and policy. They could equally be referred to as relating to the parties and to the public interest.
For a duty of care to be reasonable as between the parties, the loss or damage involved must have been reasonably foreseeable. If it was not, it would not be reasonable to impose a duty. But the fact that the loss is foreseeable does not of itself make it reasonable to impose a duty. In a case involving an asserted liability for words it will seldom, if ever, be reasonable to impose a duty on the speaker or writer, unless that party ought reasonably to have foreseen that the other party would rely on what was said or left unsaid. Furthermore, any such reliance must itself have been reasonable. Hence the concept of foreseeable and reasonable reliance usually lies at the heart of whether it is reasonable to impose a duty of care in a case involving words negligently written or not written, customarily called a case of negligent misstatement. A feature of the foregoing analysis that is particularly important in the present case is that it is not usually reasonable for a party to whom words are addressed for one purpose to rely on them for a different purpose.[251]
[251]Attorney‑General v Carter [2003] 2 NZLR 160 (CA) at [26].
The report which lies at the heart of the Council’s first three causes of action was written in the circumstances and in the terms more fully discussed in the reasons which Blanchard J has given. It was supplied to a party, the Council, which cannot be regarded as being in a vulnerable position, vis-à-vis the Authority. The relevant legislation does not suggest that the Authority was expected to have any materially greater role in relevant respects than a territorial authority. Indeed the Council was under its own substantial statutory duties and responsibilities to administer the building code in its district.
Specifically it was the Council that was required to deal with individual building consent applications. It, not the Authority, was required to satisfy itself that buildings in its district were constructed in accordance with the national code and acceptable practices. The legislation does not suggest that the Authority had any advisory role as regards the performance by territorial authorities of their statutory functions. This is consistent with the approach of the Building Industry Commission whose report formed the basis of the Building Act 1991. The Commission said that the proposed Authority was not to be an advisory body, except to the Minister.[252]
[252]At [4.35].
The problems that were experienced with monolithic cladding were not inevitably inherent in that type of product. It was, however, necessary that particular care be taken, both by way of design and construction, when monolithic cladding was being used. At best, the Council’s complaint about the report can only be that the need for particular design and construction steps to be taken, when monolithic cladding was being used, was not drawn to its attention by the Authority in the 1995 report or subsequently until 2003.
This is a case in which the relationship between the parties derives from the statutory framework in which they were each operating. In such circumstances the existence and ambit of any common law duty of care is profoundly influenced by that statutory framework.[253]The same general point was made in Carter.
[253]See X (Minors) v Bedfordshire County Council [1995] 2 AC 633 (HL) at 739 per Lord Browne‑Wilkinson.
I will not reiterate the statutory provisions set out and discussed by Blanchard J in his reasons. They lead me to the conclusion that the Authority’s role, as regards the operations and activities of territorial authorities, was intended to be a limited one. The primary focus was on informing the Minister of any significant deficiencies in a territorial authority’s performance of its duties. The Authority had no direct control over the activities of a territorial authority, in contrast to the position which applied in relation to independent building certifiers.
The Authority could be expected to inform a territorial authority of any concern which justified its reporting the matter to the Minister. But the statutory framework does not suggest that the Authority had any general advisory role upon which it would have been reasonable for territorial authorities to rely, so as to shift responsibility, in whole or in part, to the Authority for any breach by councils of their own clear statutory duties in individual cases. Indeed, as I have said, the statutory framework militates against any such conclusion.
It must be accepted, for present purposes, that the Council did rely on the report, on the basis alleged in its statement of claim. But, in view of the legislative scheme, I cannot accept that it was reasonable for the Council to have done so as to shift responsibility for the performance of its own responsibilities in the administration of the legislation. The Council is effectively seeking to do this by claiming that the Authority must contribute to the losses it has suffered as a result of its own negligence.
Furthermore, I do not consider that the contents of the report[254] were such that it was reasonable for the Council to rely on the report so as to relieve it, in whole or in part, from its own statutory duties and responsibilities. The report made it clear that the Council still had to carry out the duties placed upon it by the legislation. It was not reasonable for the Council to draw the conclusion from the report’s silence on the key issue of monolithic cladding that it gave the Council a “clean bill of health” on that issue into the future.
[254]As discussed in Blanchard J’s reasons at [195]–[196].
As it was not reasonable for the Council to rely on the report for the purpose for which it seeks to do so, it would not be reasonable to impose a duty of care on the Authority in respect of the loss or damage the Council claims to have suffered from that reliance. That assessment can properly be made on the pleadings, and in the light of the terms of the report, without the need for the case to go to trial.
This conclusion means that, as between the parties, it would not be reasonable to impose on the Authority a duty of care of the kind and ambit asserted in the three causes of action under consideration. The Authority cannot be deemed to have assumed any relevant responsibility to the Council, whether in respect of the report itself or any correction of it. The result, in conventional terms, is that there is no sufficient proximity between the parties in any relevant respect. The potential, often realised, for some overlap between proximity and policy issues is demonstrated in this case by its being equally possible to say that, in policy terms, it would not be reasonable to impose a duty of care when the reliance a plaintiff seeks to place on a defendant’s statement is not, in the circumstances, reasonable reliance. To do so could well have substantial economic and social repercussions.
Either way, it is important for analytical purposes to recognise the different focus of proximity and policy issues. The outcome of any duty inquiry must depend on the court’s assessment of whether the imposition of the asserted duty is appropriate both as between the parties and from a wider perspective. That involves a value judgment which the court must make on behalf of society after careful consideration of all salient features of the case. Unless the party asserting the duty can satisfy the proximity and policy requirements, it will not be reasonable to impose any duty. My conclusion thus far means that the Council’s first three causes of action must be struck out, as the Court of Appeal ordered.
I turn briefly to the fourth cause of action. A comparison between the Council’s first three causes of action and its fourth brings out the contrast between specific reliance and general reliance. The first three causes of action are ultimately based on the specific reliance the Council said it placed on the 1995 report. In its fourth cause of action the Council relies on what it claims to be the general reliance which owners of apartments in The Grange were entitled to place on the Authority to give appropriate advice and information to territorial authorities. This is an attempt to extend substantially the basis upon which the Hamlin line of authority is founded. In cases of that kind it has been held that home owners are entitled to rely on councils to take reasonable care in their inspection role so as to ensure that the building code and acceptable practices are followed.
It is inherent in the Hamlin jurisprudence that the key feature is the Council’s direct power of control over the construction process. The same power of control was not given to the Authority, no doubt because of the existence of the power vested in the Council. Duality of control would have been anomalous and awkward, to say the least. The suggested extension of the general reliance doctrine would stretch the present jurisprudence beyond breaking point. In both legal and practical respects the relationship between owners of residential apartments and the Authority is much more remote than the relationship between such owners and their territorial authority.
It would be inconsistent and unpersuasive to hold that the specific reliance which the Council says it placed on the Authority was not reasonable but it was nevertheless reasonable for apartment owners to place general reliance on the Authority. To extend the Hamlin reasoning so as to place a duty of care on the Authority to such an owner would be a step too far. By parity of reasoning with the first three causes of action, it cannot have been reasonable for apartment owners to rely on the Authority to protect them from the consequences of their apartments having been negligently constructed, on the premise that, had the Authority properly informed the Council, it would have done its job better and thus avoided the owners’ losses. Furthermore the necessary causation chain inevitably runs up against the same difficulties as arise in respect of the first three causes of action. I therefore agree that the fourth cause of action was correctly struck out.
For these various reasons the Council’s appeal should be dismissed with costs as proposed by Blanchard J.
Solicitors:
Heaney & Co, Auckland for Appellant
Crown Law Office, Wellington
72
5
0