O'Hagan v Body Corporate 189855
[2010] NZCA 65
•22 March 2010
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IN THE COURT OF APPEAL OF NEW ZEALAND
CA506/2008
[2010] NZCA 65
BETWEENPATRICK JAMES O'HAGAN
Appellant
ANDBODY CORPORATE 189855
First RespondentANDPAULINE LOUISE HOUGH & ORS
Second RespondentsANDNORTH SHORE CITY COUNCIL
Third RespondentANDSTEPHEN FRANCIS SMYTHE
Fourth RespondentANDCENTRE OF ATTRACTION LIMITED (IN LIQUIDATION)
Fifth RespondentANDJOSEPH WALDEN & STACK NZ LTD
Sixth RespondentANDSTACK NEW ZEALAND LIMITED
Seventh RespondentANDANDREW PLASTERING CO (1994) LTD
Eighth Respondents
CA507/2008
AND BETWEEN NORTH SHORE CITY COUNCIL
Appellant
ANDBODY CORPORATE 189855
First RespondentANDPAULINE LOUISE HOUGH & ORS
Second RespondentsANDPATRICK JAMES O'HAGAN
Third RespondentANDSTEPHEN FRANCIS SMYTHE
Fourth RespondentANDCENTRE OF ATTRACTION LIMITED (IN LIQUIDATION)
Fifth RespondentANDJOSEPH WALDEN & STACK NZ LIMITED
Sixth RespondentANDSTACK NEW ZEALAND LIMITED
Seventh RespondentANDANDREW PLASTERING CO (1994) LIMITED
Eighth Respondent
Hearing:7-11 September 2009
Court:William Young P, Arnold and Baragwanath JJ
Counsel:M E Casey QC for Appellant in CA506/2008
G B Lewis and M C Josephson for First Respondent in CA506/2008
D J Goddard QC, S A Thodey and S B Mitchell for Third Respondent in CA506/2008
M A Gilbert SC for Fourth Respondent in CA506/2008
H M Macfarlane for Sixth Respondent in CA506/2008
G Andrew for Seventh Respondent in CA506/2008
D J Goddard QC, S A Thodey and S B Mitchell for Appellant in CA507/2008
G B Lewis and M C Josephson for First Respondent in CA507/2008
M A Gilbert SC for Fourth Respondent in CA507/2008
H M Macfarlane for Sixth Respondent in CA507/2008
G Andrew for Eighth Respondent in CA507/2008
Judgment:22 March 2010 at 10am
JUDGMENT OF THE COURT
This judgment may be cited as Byron Avenue [2010] NZCA 65.
CA506/2008
The judgments against Mr O’Hagan are set aside and the appeal by him and cross-appeal against him are dismissed by consent.
CA507/2008
AThe Council’s appeal is dismissed.
BThe cross-appeals by the second respondents against the trial Judge’s finding of contributory negligence are dismissed.
CThe awards to the second respondents of general damages are varied as set out in the reasons for judgment at [127] – [129].
DLeave to apply to this Court for further directions or clarifications is reserved in terms of [130] of the reasons for judgment.
ECosts are reserved.
____________________________________________________________________
REASONS
Baragwanath J [1]
William Young P [131]
Arnold J [183]BARAGWANATH J
Table of Contents
Para No
CONTEXT OF APPEAL [4]
FACTUAL SETTING [7]
THE INDIVIDUAL CLAIMS [13]
MR AND MRS MCCONVILLE UNIT 11 [14]
MR BLACKMORE AND MS SHEEHY – UNITS 13 AND 14 [16]
MR JUPP – UNIT 4 [17]
GYDICK INVESTMENTS LTD – UNIT 9 [18]Mr Kennett and Ms Blakie – unit 3 [20]
Ms Hough – unit 1 [23]
Mr Wilson and Ms Stewart – unit 7 [26]
RCA Investments – unit 5 [36]SUE BRADLEY PROPERTIES LTD – UNIT 12 [40]
MS CLARK AND THE TRUSTEES OF THE CLARK FAMILY TRUST – UNIT 8 [44]Ms Kim – unit 10 [53]
Discussion
(f) May a council which has not issued a code compliance certificate
be sued [55]
(g) What is the appropriate outcome when there is fault on the part
of purchasers, and what is the effect of the attribution of
knowledge of problems to purchasers? [64]Mr and Mrs McConville – unit 11; Mr Blackmore and Ms Sheehy –
units 13 and 14; Mr Jupp – unit 4; Gydick – unit 9; Ms Hough –unit 1 [69]
Mr Kennett and Ms Blakie – unit 3 [71]
Mr Wilson and Ms Stewart – unit 7 [72]
RCA – unit 5 [73]
Sue Bradley Properties Ltd – unit 12 [74]
Ms Kim – unit 10 [75]
(i) Unfamiliarity with New Zealand conditions [76]
(ii) Vicarious fault [81]
Discussion [83]
(i) The Bernina rule [88]
(ii) Sir Owen Dixon’s approach [92]
(iii) The policy approach [93]
(iv) Extension of the Bernina rule [94]
(v) Statutory support for Sir Owen Dixon’s approach [99]
(H) THE CLAIM BY THE BODY CORPORATE [101]
(I) THE INTERPRETATION AND EFFECT OF S 41 OF THE LOCAL GOVERNMENTOfficial Information and Meetings Act 1987 [106]
Damages for non-economic loss [110]
Conclusion [130]
[1] This judgment on appeal from a decision of Venning J concerns leaky apartments in the Byron development at 45 Byron Avenue Takapuna and is a counterpart of the Sunset Terraces[1] decision also delivered today. The principal appeal, CA507/2008 by the North Shore City Council (the Council), is against a judgment against it in favour of the first respondent, Body Corporate 189855 (the Body Corporate) and the second respondents who bought apartments in the development. It raises the same question of liability of a council for careless performance of its duties under the Building Act 1991 in respect of residential apartments, which we have answered in Sunset Terraces.
[1] Sunset Terraces [2010] NZCA 64.
[2] Employing the numbering in the Sunset Terraces decision at [6] further questions include:
(f)May a council which has not issued a code compliance certificate be sued?
(g)What is the appropriate outcome when there is fault on the part of purchasers, and what is the effect of the attribution of knowledge of problems to purchasers?
(h)May a body corporate under the Unit Titles Act 1972 sue?
(i)What is the effect on claims of the Local Government Official Information and Meetings Act 1987?
[3] An appeal CA506/2008 by Mr O’Hagan, the principal of Centre of Attraction Ltd which designed and performed restorative work on the apartments, against a personal judgment against him by the Body Corporate and the purchasers was settled before the hearing in this Court began. So too was an appeal against him by the Council in CA507/2008. The judgments against Mr O’Hagan are set aside and the appeal and cross-appeals against him are dismissed by consent.
Context of appeal
[4] The Council issued a building consent on 13 January 1998 and Council officers inspected the development at various stages of its construction and approved aspects of it. But it declined to issue a code compliance certificate for the development.
[5] Venning J found that the Council was not relevantly negligent in issuing the building consent even though the plans lacked detail. That was because it was entitled to expect that the builder would comply with the specifications which required compliance with manufacturers’ specifications and with the Building Code. But the Judge found that the less the detail required at the consent stage the greater the onus was on the Council to ensure compliance at the inspection stage. He held that, in failing to notice and respond to deficiencies requiring attention the Council’s inspector had breached a duty of care owed to purchasers of apartments. Judgment was entered against the Council in favour of ten purchasers of 11 apartments. The Council appeals against that judgment.
[6] The Council does not challenge on appeal the finding of carelessness on the part of its inspector or the further conclusion that carelessness on the inspector’s part was causative of the need to reclad the development. In Sunset Terraces we have rejected the Council’s primary argument. But the further issues remain.
Factual setting
[7] Stephen Smythe, an architect and developer, was a shareholder and director of two companies. One, Couldrey Properties Ltd (formerly Byron Developments Ltd), retained the other, Smythe Grant Architects Ltd, and later Mr Smythe personally, to design a 14 unit block of residential apartments to be built on Couldrey’s land at 45 Byron Avenue, Takapuna, Auckland.
[8] On 13 January 1998 the Council, acting under s 43 of the Building Act, issued a building permit to Couldrey. Couldrey engaged Bracewell Construction Ltd to construct the development and Stack New Zealand Ltd as an architectural representative and later as project manager.
[9] On 30 January 1998 the Council began its process of inspection, which entailed nearly 100 visits in all. The Judge found that there was carelessness in inspection during these visits.
[10] On 2 December 1999 and 30 November 2000 Prendos Ltd, experts who had been engaged to investigate water ingress into the building, reported to Couldrey identifying a number of defects and recommending recladding. Venning J later found that a full reclad was required to deal with the results of entry of water into the units.
[11] Venning J held that the Council had “largely approved the construction of work at 45 Byron Avenue and was at the point of issuing a code compliance certificate” when on 19 March 2002 Mr Smythe wrote to it on behalf of Couldrey drawing attention to:
... clear evidence of efflorescence on the exterior plaster cladding. Prendos have confirmed that this is caused by water ingress around the windows.
[12] The Council contends that in the absence of a code compliance certificate there was no basis for the conclusion underlying the judgment that the owners had relied upon it.
The individual claims
[13] I consider the claims in the sequence of the purchases or salient later events.
Mr and Mrs McConville – unit 11
[14] Mr and Mrs McConville contracted in March 1997 to buy unit 11 off the plans. The agreement provided for payment of a deposit of $5000 on execution of the agreement, a further $25,000 after pouring of the foundations and the balance, $219,000, upon issue by the vendor’s architect or quantity surveyor of a certificate that the unit was complete and capable of use for the purposes for which it was intended. They settled the purchase on 26 August 1998.
[15] No enquiry was made by Mr and Mrs McConville of the Council prior to purchase. So their claim rests on the proposition that the carelessness of the Council inspector in inspecting the development breached a duty of care owed to them before any code compliance certificate was issued. Because I accept that proposition their claim should succeed.
Mr Blackmore and Ms Sheehy – units 13 and 14
[16] Mr Blackmore and his wife Ms Sheehy contracted in November 1997 to buy units 13 and 14 off the plans and settled in August 1998. Their position is similar to that of Mr and Mrs McConville.
Mr Jupp – unit 4
[17] Mr Jupp, who bought unit 4 off the plans in January 1998 and settled in December 1998, is also in a similar position.
Gydick Investments Ltd – unit 9
[18] The directors of Gydick Investments Ltd, Mr and Mrs Dickie, contracted on February 1997 to buy unit 9 in their own names. Settlement was in August 1998. Had they retained ownership their position would have been the same as that of Mr and Mrs McConville. In December 1999 they transferred the unit to Gydick Investments Ltd. The Judge accepted the evidence of Mrs Dickie that, while they knew there was no code compliance certificate, the reason was that none could issue until completion of other units; they had no reason to have concerns about their unit.
[19] I do not regard Gydick’s position as different from that of Mr and Mrs Dickie.
Mr Kennett and Ms Blakie – unit 3
[20] By the time Mr Kennett and Ms Blakie entered an agreement on 19 June 2001 to buy unit 3, Couldrey had received the Prendos reports of 2 December 1999 and 30 November 2000 identifying a number of defects and recommending recladding. There is no suggestion that they saw the reports. Their agreement was conditional on their being satisfied with the Council records on the property and they made enquiry of a Council officer. He said the Council could issue approvals for individual units. They advised the land agent that they would not go unconditional unless the Council signed off the unit.
[21] On 21 June they received an email from Bracewell advising of work required to obtain a code compliance certificate. On 29 June the Council provided to the vendor’s solicitor a letter stating:
A final building, plumbing and drainage inspection was carried out [at unit 3]. The inspections confirm that all work has been completed as per the approved plans… A final code of compliance certificate will be issued when all units comply.
Having received it Mr Kennett and Ms Blakie confirmed that the agreement was unconditional and proceeded to settle.
[22] So unlike other purchasers they relied quite directly on the Council’s assurance. The Judge held that they could recover not only on the same basis as the others but also for negligent misstatement. I agree.
Ms Hough – unit 1
[23] On 1 March 2002 Ms Hough contracted on a Real Estate of New Zealand/Auckland District Law Society form to buy unit 1 and settled on 22 March. The form contained on its front page “LIM [land information memorandum] required: Yes/No” and she deleted the “Yes”. She had been told by the vendors that the apartment was only three years old and was well built. She knew that a code compliance certificate had not been issued. That was, she was told, because of problems with ground levels in front of the unit and damage to paving caused by trucks but these had been fixed and it was just a matter of time before the Council issued a code compliance certificate. She had signed the agreement before seeing a solicitor and did not obtain a LIM from the Council. Her solicitor obtained a set of body corporate rules before settlement.
[24] The Judge found that had she made enquiry of the Council she would have been told that the Council had reinspected on 5 March 2002 and approved the outstanding work. While the Council changed its position on 22 March, following receipt of Mr Smythe’s letter of 19 March, since the settlement occurred on that day we consider that a search prior to settlement would not have disclosed it. So the failure to secure a LIM is therefore immaterial.
[25] So Ms Hough is in the same position as the earlier purchasers who did not make enquiry of the Council.
Mr Wilson and Ms Stewart – unit 7
[26] Mr Wilson and his wife Ms Stewart contracted on 2 March 2002 to buy unit 7. They deleted the “Yes” against the reference to LIM. But they later instructed their solicitor to obtain a LIM. That document was dated 21 March 2002 and stated “final inspection not recorded”. Their solicitor advised them that the only outstanding matters were the repair of the footpath and dealing with the exterior wall of another apartment which was below ground level. Seeing a New Zealand Herald article about leaky buildings they made enquiry of the land agent. He said there had been no history of leaky building problems at Byron Avenue and that it had been differently constructed from classic leaky buildings.
[27] On 4 March they received from a member of the agent’s firm a fax saying “… sending you copy of: Final Inspection for Unit 7 …” Attached was a copy of a Council memorandum dated 30 October 2001 and signed by its Development Building Officer recording that inspections of unit 7 had been performed; that all work had been completed as per the approved plans; and that “unit 7 has now been cleared”.
[28] On 8 March the agent sent a further fax attaching the Development Building Officer’s Field Memorandum recording as at 18 January 2002 that further work was required on unit 2 and stating “All remaining units have been finalised”. It further recorded that on 5 March 2002 unit 2 work had been completed.
[29] I interpolate that the document had been sent to Couldrey on 6 March 2002 by Bracewell with a letter stating:
We are pleased to confirm that all works on the above development have now been completed to the Council’s satisfaction.
It recorded Bracewell’s belief that it had discharged its obligations. Given that the document was dated the previous day we infer that the Council had provided the document to Bracewell.
[30] Following its inspection on 22 March the Council advised Couldrey that it was not in a position to issue a code compliance certificate. But that information was not conveyed to Mr Wilson and Ms Stewart.
[31] Wishing to be fully sure, they then engaged a builder to examine the unit. He reported on 17 April that the unit was near new and in good condition. They settled two days later.
[32] Counsel for the Council cross-examined Mr Wilson on another document from its file and identical to the memorandum of 30 October 2001, but with the addition of “internal”, which counsel suggested meant that the signoff was restricted to internal parts of the unit. The Council officer who had prepared the document confirmed that it had been prepared for a former owner of unit 7 and confined to the internal aspects. The agent who provided the similar document to Mr Wilson and Ms Stewart was not called.
[33] The officer also gave evidence as to the Field Memorandum that by “All remaining units have been finalised” he intended that there would be a further “full overview” of the exterior. Cross-examined, he was unable to point to any record of outstanding items as at 5 March 2002.
[34] The Judge found that there was nothing to put Mr Wilson and Ms Stewart on notice or enquiry about the state of the unit. While aware that the code compliance certificate had not issued they left that in the hands of their solicitor. Given the documents they had received they had no reason to doubt that there had been proper inspections which would lead to the formal code compliance certificate.
[35] I agree with this conclusion as to liability and will return to the question of contributory negligence.
RCA Investments Ltd – unit 5
[36] On 14 November 2003 Mr and Mrs Coulthard signed an agreement to buy unit 5. They nominated as purchaser their company RCA Investments Ltd. The land agent said that there was no code compliance certificate but there would be one within 12 months. Mr and Mrs Coulthard learned that $8752 was owing to the body corporate for repairs, which they understood from the agent was by way of general maintenance work. So a clause on the agreement required that cost to be borne by the vendor. They employed a qualified conveyancer rather than a solicitor.
[37] No enquiry was made on behalf of RCA of the Council or of the Body Corporate. A LIM request or other enquiry of the Council would have alerted RCA to the decision to decline a code compliance certificate for the units, even though the repairs had been carried out. Mr Coulthard was not cross-examined about the failure to make enquiry of the body corporate and what consequences that would have had.
[38] Venning J reduced RCA’s award by 25 per cent for contributory negligence.
[39] The failure to seek a LIM is not in my view a deficiency of such magnitude as to constitute a bar to the claim. Parliament did not so state despite affording by s 41[2] protection as to a LIM’s contents. In my view the failure goes to contributory negligence to which I will return.
[2] Local Government Official Information and Meetings Act 1987, s 41.
Sue Bradley Properties Ltd – unit 12
[40] Ms Bradley bought unit 12 in April 2003. She was working overseas and made the purchase while in New Zealand on a visit. The agreement was subject to solicitor’s approval and she left the matter to her solicitor. She was then unaware of the significance of LIMs or code compliance certificates. The agreement form did not refer to LIMs. Following purchase she learned of an outstanding account for some $18,000 for work required to secure a code compliance certificate. She obtained payment from the vendor. I agree with Venning J that the Council is liable on the basis of general reliance subject to the question of contributory negligence.
[41] In May 2004 she sold the unit to her company. Her knowledge at that time must be imputed to it.[3]
[3] Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 3 NZLR 7 (PC).
[42] While aware of the past work, which had been completed, she thought that the problems had been dealt with. She made no enquiry of the Council.
[43] Venning J deducted 25 per cent for contributory negligence.
Ms Clark and the trustees of the Clark Family Trust – unit 8
[44] Ms Clark had bought unit 8 by an agreement of 20 March 1999. The price was $275,000. Nothing had occurred at that time to put her on enquiry. Apart from the cautious withholding of $2,000 because the code compliance certificate had not yet issued there is nothing to distinguish her personal position from that of the other early purchasers. I do not regard the withholding of $2,000 as material. But in 2002 she learned that Prendos had disclosed serious problems with the unit. She supported the instruction of Mr O’Hagan to identify the cause and deal with it. She paid for the completed repairs. She then, in October 2004, transferred the unit to herself and her solicitor Mr Cockcroft as trustees of her family trust. The price was $352,000.
[45] Venning J found for Ms Clark and did not find contributory negligence. I agree with both conclusions.
[46] The Council argues that the trustees cannot claim under Hamlin v Invercargill City Council[4] because they acquired the unit:
[4] Hamlin v Invercargill City Council [1994] 3 NZLR 513 (CA); [1996] 1 NZLR 513 (PC).
(a)after a cause of action had accrued to owners at latest in July 2002;
(b)with knowledge that there had been trouble with the building and that there was no code compliance certificate.
[47] Mr Goddard submitted that once a cause of action has accrued in favour of one owner there can be no claim by a later owner. But there is no authority or principle that supports the contention. I have disposed of this argument in Sunset Terraces.[5] Citation of Hamlin at 528 of the Privy Council decision, that a cause of action accrues when defects are reasonably discoverable, is beside the present point. That statement concerned when a limitation period for a claim in tort starts running under s 4 of the Limitation Act 1950. It says nothing about whether a subsequent owner has a cause of action. Ms Clark was aware that there had been problems. But she believed that the repairs she had paid for and seen performed had rectified the problem. There is no basis to believe that she and her co-trustee had any inkling of the underlying problem.
[5] Sunset Terraces [2010] NZCA 64 at [78]-[79].
[48] Since she had reason to believe that the work had rectified the problem there is no basis for claiming the trustees acted unreasonably in not making enquiry of the Council, whose recent knowledge of the conditions of what had been her apartment could scarcely be expected to exceed hers.
[49] But the Council’s argument fails for a further reason. Unlike a company, which is a different legal person from its shareholders, Ms Clark’s legal status as owner of the unit did not alter when she transferred it to herself and her co-trustee.
[50] In NZHB Holdings Ltd v Bartells it was stated:[6]
[6] NZHB Holdings Ltd v Bartells (2004) 5 NZCPR 506 (HC).
[34] Recent experience in more than one case suggests that the concept of trust is used more often than it is understood. Unlike a company or an incorporated society a “trust” is not a legal person recognised as distinct from the humans who direct their affairs…
...
[37] … [T]he Court of Appeal in In re Graham; Pitt & Bennett ex parte Nolan & Skeet (1891) 9 NZLR 617, 621 held that
There is no such thing recognised as that the trustees have an identity different from themselves individually, and that they themselves do not become liable when acting for the trust estate, unless there is an express contract to that effect.
That principle underlay Muirv City of Glasgow Bank,[7] which turned on whether the liability of a person sued as trustee was limited to the assets of the trust estate. It was held that the answer is no unless the contract expressly so provides. In that case Lord Cairns LC stated:[8]
[7] Muirv City of Glasgow Bank (1879) LR 4 App Cas 337 (HL).
[8] At 355.
… whether, in any particular case, the contract of a … trustee is one which binds himself personally, or is to be satisfied only out of the estate of which he is the representative, is … a question of construction, to be decided with reference to all the circumstances of the case; the nature of the contract; the subject-matter on which it is to operate, and the capacity and duty of the parties to make the contract in the one form or the other. I know of no reason why [such a person] … entering into a contract for payment of money with a person who is free to make the contract in any form he pleases, should not stipulate by apt words that he will make the payment, not personally, but out of the assets of the [trust property].
The speeches of Lord Cairns and four of the other Lords who gave reasons turned on the fact that the bank had no power to accept shareholders save on terms of personal liability. Accordingly the description of the appellants as “the trust disponees of [a beneficiary]” was construed so as to impose personal liability upon them.
[51] The judgment in Bartells continued:
[39] In the Court of Appeal of New South Wales in Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773 both Gleeson QC and Meagher QC for the competing parties accepted (at 774) the following propositions:
A trustee who enters into a contract will normally incur unlimited personal liability unless by appropriate language or express stipulation such liability is restricted.
A mere description of the capacity in which he contracts as that of trustee is insufficient to exclude full personal liability.
…
[42] So in New Zealand law, and in that of England and of New South Wales, in the absence of more limiting language the description of a contracting party simply as “trustee” renders that party personally liable. There is a presumption in favour of personal liability which must be refuted if a person contracting as “trustee” is to be relieved of liability beyond the extent of the trust assets.
[52] The fruit must accompany the rind. Just as a trustee is presumptively liable on contracts, because there is no difference in legal status between the individual as trustee and in his or her own right, so also for the purpose of the law of tort that status does not alter when the person transfers an asset to him or herself as trustee. Both liability for tort and entitlement to sue in tort remain unaltered.
Ms Kim – unit 10
[53] Ms Kim, who is Korean, bought unit 10 in May 1995. After signing the agreement she instructed a lawyer to handle the purchase and was not advised about LIMs, of which she had never heard. The agreement form did not mention them. She made no enquiry of the Council.
[54] Venning J reduced the damages by 25 per cent for contributory negligence, to which I will return later ([75] below).
Discussion
(f) May a council which has not issued a code compliance certificate be sued?
[55] The Hamlin cause of action is at common law rather than for breach of statutory duty. But it must during the term of the Building Act be premised on carelessness by a council officer in the performance of the obligations imposed on it by that Act.
[56] It is to be noted that Parliament particularly contemplated that council liability would “arise out of the issue of a building consent, [or] a code compliance certificate” for which explicit provision is made in s 91(3):
91 Limitation defences
(1) Except to the extent provided in subsection (2) of this section, the provisions of the Limitation Act 1950 apply to civil proceedings against any person where those proceedings arise from—
(a) Any building work associated with the design, construction, alteration, demolition, or removal of any building; or
(b) The exercise of any function under this Act or any previous enactment relating to the construction, alteration, demolition, or removal of that building.
(2) Civil proceedings relating to any building work may not be brought against any person 10 years or more after the date of the act or omission on which the proceedings are based.
(3) For the purposes of subsection (2) of this section if—
(a) Civil proceedings are brought against a territorial authority, a building certifier, or the Authority; and
(b) The proceedings arise out of the issue of a building consent, a building certificate, a code compliance certificate, or an Authority determination—
the date of the act or omission is the date of issue of the consent or certificate or determination.
(Emphasis added.)
[57] There is no explicit reference to a negligence claim based on careless inspection prior to the date of the code compliance certificate. But such negligence is covered by the general language of s 91(2). It is in my opinion to be inferred from both Hamlin and the inclusion of negligence both at the first stage, issue of building consent and at the third stage, issue of code compliance certificate, that Parliament contemplated a general common law liability for Hamlin negligence. There is no policy to be inferred from s 91 that there could be liability only for consents and compliance certificates and not for negligence in performing the vital work of inspection which is what gives rise to a claim for issue of issue of a de compliance certificate. I repeat the citation of Dicks v Hobson Swan from Sunset Terraces:[9]
[9]Sunset Terraces at [35], citing Dicks v Hobson Swan Construction Ltd (2006) 7 NZCPR 881 (HC).
… Parliament conferred on the Council:
(1) The obligation within ten days to grant or refuse a building consent;
(2) The power to charge for the cost of doing so;
(3) The power to defer its decision until necessary information was provided;
(4) The power to take all reasonable steps to ensure that building work was performed in accordance with the consent;
(5) The duty of issuing a certificate of compliance if satisfied on reasonable grounds that the work complied with the Building Code, such compliance including conformity with its weather-proofness and durability provisions; and
(6) The duty in the event of non-compliance to issue a notice to rectify.
[75] In order to be able to be satisfied as to compliance in relation to work that would be covered during of construction the Council must obviously make periodic inspections. The number and intensity of such inspections would be determined by application of the proportionality provisions of s 47.
That statutory scheme places responsibility firmly on the shoulders of councils.
[58] In this case the Judge acquitted the Council of negligence in issuing a building consent but found it liable for careless inspection. The Council argues that it could not reasonably be relied upon until the code compliance certificate stage, which was never reached.
[59] I agree with the Judge’s decision. I consider that the Hamlin principle imposes on councils in respect of residential apartments a duty of reasonable care when inspecting work that is going to be covered up and so becomes impossible to inspect without destruction of at least part of the fabric of the building, even before issuing a code compliance certificate (or advice serving the same function). The effect of carelessness in the inspection phase was to lock in a defective condition which was not reasonably detectable by purchasers. They were entitled to rely on due performance by the Council of its inspection function, whether performed by itself or by an expert. That entitlement arose from the concept of general reliance described by Richardson J in Hamlin[10] and by Lord Hoffmann in Stovin v Wise[11] and discussed in Sunset Terraces.[12]
[10] At 526.
[11] Stovin v Wise [1996] AC 923 (HL) at 924.
[12]At [72], citing Dicks v Hobson Swan Construction Ltd at [74] – [75].
[60] But there is need to examine the extent of the right of general reliance. I agree with the Judge that, in the period prior to issue of a code compliance certificate, failure to seek a LIM which would have disclosed problems or alternatively to make other enquiry of the Council goes to contributory negligence rather than constituting a bar to claim.
[61] The Council’s failure to inspect was a wrong with consequences which would continue to operate until either a purchaser acquired the property with relevant knowledge of the defects or the limitation period cut in. That period would run for six years[13] from the date a plaintiff knew that the unit was seriously defective or should have known that to be the case; and, even without such actual or imputed knowledge, at ten years from there could be no further claim.
[13] Limitation Act 1950, s 4.
[62] It was once the law that a plaintiff who had the so-called “last opportunity” and carelessly failed to avoid the consequences of the defendant’s carelessness was debarred from claiming. In Joint Torts and Contributory Negligence Glanville Williams argued that the so-called last opportunity rule had been abolished by the contributory negligence legislation, in New Zealand the Contributory Negligence Act 1947. [14]
[14] Glanville Williams Joint Torts and Contributory Negligence (Stevens, London, 1951) at 279.
[63] If contributory negligence is sufficiently great the reduction will be of 100 per cent, which may take the case into the zone embraced by voluntary assumption of risk.
(g) What is the appropriate outcome when there is fault on the part of purchasers, and what is the effect of the attribution of knowledge of problems to purchasers?
[64] I have numbered and emphasised four essential elements in the Contributory Negligence Act:
3 Apportionment of liability in case of contributory negligence
(1) Where any person suffers damage (i) as the result partly of (ii) his own fault and partly of (iii) the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced to such extent as the Court thinks just and equitable having regard to the claimant's share in (iv) the responsibility for the damage:
(Emphasis added.)
“Fault” is defined:
Fault means negligence, breach of statutory duty, or other act or omission which gives rise to a liability in tort or would, apart from this Act, give rise to the defence of contributory negligence.
[65] Williams argues that in (i) “result” introduces the notion of causation (in the ordinary or scientific sense of that word) and also the law of remoteness of damage.[15] He reasons that “fault” in (ii) has a different meaning from in (iii). There is a signal difference between the fault of the tortfeasor, who carelessly injures someone to whom he is said to owe a duty of care, and that of the injured person who fails properly to look after his own interests.[16]
[15] At 317.
[16] At 318.
[66] The “duty of care” concept has its problems. It is commonly said that a duty of care is imposed on a defendant who is liable in damages for breach of that duty. The formulation is convenient but can mask the truth exposed by Professor Buckland,[17] see also Hepple,[18] that “duty” is a fifth wheel: if a defendant injures a plaintiff carelessly and the injury was a foreseeable consequence and of a kind that the law regards as actionable there is liability. It is unnecessary to add that there was a duty and that it was breached. “Duty” is no more than an expression that there is legal liability if injury is caused. The real point in the present context is that a defendant has intruded on the life of the plaintiff, even in this class of case where the care by the council to which the plaintiff is entitled is withheld; the plaintiff by contrast has had to respond to unlawful conduct by the defendant.
[17] Professor Buckland “The Duty to Take Care” (1935) 51 LQR 637.
[18] Bob Hepple Negligence: The Search for Coherence (1997) 50 Current Legal Problems 69.
[67] In common with most judges, Williams rejects the view of Hilbery J in Smith v Bray[19] that “responsibility” means that damages are to be apportioned on the basis of causation and not on the respective degrees of negligence of the parties.[20] Rather, as Denning LJ said in Davies v Swan Motor Co Ltd:[21]
[19] Smith v Bray (1939) 56 TLR 200.
[20] At 157.
[21] Davies v Swan Motor Co Ltd [1949] 2 KB 291 (CA) at 326.
Whilst causation is the decisive factor in determining whether there should be a reduced amount payable to the plaintiff, nevertheless the amount of the reduction does not depend solely on the degree of causation. The amount of the reduction … involves a consideration, not only of the causative potency of a particular factor, but also of its blameworthiness.
It was common in pre-Accident Compensation Act damages claims for juries to be directed when considering contributory negligence to take account both of causative potency and moral blameworthiness. With their considerable experience in this sphere the Australian courts have rejected the test of moral blameworthiness and preferred “the degree of departure from the standard of the reasonable person”.[22] Since the test is objective, subject to the point that the reasonable person is, in general, attributed with the characteristics of the plaintiff ([79] below), the Australian test has obvious appeal. I incline to the view that the formulations express the same point in different language.[23] It is unnecessary in this case to choose between them; here they lead to the same result.
[22]Pennington v Norris (1956) 96 CLR 10; Melbourne & Metropolitan Tramways Board v Postneck [1959] VR 39; JP Bourke “Damages: Culpability and Causation” (1956) 30 ALJ 283.
[23]See for example Pennington v Norris, where the High Court of Australia, despite rejecting moral blameworthiness as the criterion in apportioning damages, relied at 16 on the plaintiff’s not having endangered the life of any other person in increasing the overall award against the defendant. The Court stated that “the fact that the conduct did not endanger the defendant or anybody else is a material consideration”, which might be thought to be the same as a “moral blameworthiness” test.
[68] Of course departure from the standard of the reasonable person/moral blameworthiness is not something altogether distinct from causation; it is taken into account when causation and not only contributory negligence is under discussion. As Hart and Honoré argue,[24] an act may be blameworthy (one may add, in the sense of entailing such departure) because it has caused harm to others. A broad judgment embracing both elements is required. There is a further question about application of the objective standard, which is more conveniently discussed in the specific context of Ms Kim’s claim.[25]
[24]HLA Hart and Tony Honoré Causation in the Law (2nd ed, Clarendon, Oxford, 1985) at 59 and 271.
[25] [75] below.
Mr and Mrs McConville – unit 11; Mr Blackmore and Ms Sheehy – units 13 and 14; Mr Jupp – unit 4; Gydick – unit 9; Ms Hough – unit 1;
[69] Here I agree with Venning J that there was no contributory negligence and, a fortiori, no relevant voluntary assumption of risk on the part of Mr and Mrs McConville. They were owed the general duty of care; it was breached by the Council; they did not fail to take reasonable care for their own safety. They must recover in full.
[70] The same is the case with Mr Blackmore and Ms Sheehy, Mr Jupp, Gydick Investments Ltd and Ms Hough.
Mr Kennett and Ms Blakie – unit 3
[71] The position of Mr Kennett and Ms Blakie is even stronger. They succeed not only on the ground of general reliance but on the specific advice from the Council which sustains in full their claims both in negligence and for negligent misstatement.
Mr Wilson and Ms Stewart – unit 7
[72] I agree with the Judge that Mr Wilson and Ms Stewart acted reasonably. Although deleting the “Yes” against the reference to LIM in the agreement they later instructed their solicitor to obtain a LIM ([26] above). While that stated “final inspection not recorded” they later received a document, which we infer was provided by the Council, stating that all works had been completed to its satisfaction
([29] above). So Mr Wilson and Ms Stewart not only relied on legal advice, as did Ms Kim, and also secured a builder’s report but, vitally, received what must be treated as a Council’s assurance on which they could rely. Their position is therefore distinguishable from that of Ms Kim ([75] below) who relied only on her solicitor. It is unnecessary to consider what would have been their position had they not received the Council assurance.RCA Investments Ltd – unit 5
[73] The sum of nearly $9,000 owing for repairs was substantial. The company’s failure to make any consequential enquiry of the Council was both morally blameworthy, as a failure to take care and causatively potent, since enquiry would have revealed that the Council had reason to withhold its code compliance certificate because the repair work had not cured the problem. But it does not in my view exceed the 25 per cent fixed by the Judge.
Sue Bradley Properties Ltd - unit 12
[74] Like the Judge, I see Sue Bradley Properties Ltd’s position as similar to that of RCA’s. I agree with the 25 per cent deduction.
Ms Kim – unit 10
[75] Ms Kim did not personally examine the LIM which would have drawn problems to her attention. It was submitted for her that as a relative newcomer to New Zealand she should be treated more leniently than someone who is familiar with New Zealand conditions and might have know about LIMs. There is an interesting and important further question: is she vicariously liable for her solicitor’s negligence and thus, for purposes of contributory negligence, within the concept of “his own fault” and liable for that reasons to have her damages against the Council reduced?
(i) Unfamiliarity with New Zealand conditions
[76] The first issue concerns her unfamiliarity with New Zealand conditions. There is high authority that:[26]
[26]Glanville Williams Joint Torts and Contributory Neglidence (Stevens, London, 1951) at 353 – 354.
The standard required of a defendant (in determining original negligence) is that of the reasonable man, which means at least that of the average man; there is now considerable authority for saying that the standard is an ideal or ethical one which is not necessarily kept down to the level of the mass. In theory the same standard should be required of a plaintiff (in determining contributory negligence), but one cannot help feeling in reading the cases that the actual standard required has often been lower, and has rarely exceeded an average level of care. In a word, the reasonable defendant is not allowed to have lapses, but the reasonable plaintiff is. This indulgence is particularly found in master and servant cases ... but is not confined to them. Now that contributory negligence is no longer an absolute defence, the courts may feel themselves freer to register disapproval of slight departures from the norm on the part of the plaintiff.
The High Court of Australia in Astley v Austrust stated:[27]
[27] Astley v Austrust Ltd (1999) 197 CLR 1 at 16.
The standard of care required of a plaintiff is determined objectively by reference to what a reasonable person would have done in all the circumstances of the case. As Lord Denning MR pointed out in Froom v Butcher [1976] QB 286 at 294:
In determining responsibility, the law eliminates the personal equation. It take no notice of the views of the particular individual or of others like him. It requires everyone to exercise all such precautions as a man of ordinary prudence would observe.
[77] Later in Joslyn v Berryman the High Court applied an objective test to an intoxicated passenger who travelled with a drunken driver and because of his condition failed to discern her incapacity. In that case McHugh J stated:[28]
[28] Joslyn v Berryman [2003] HCA 34, (2003) 214 CLR 552 at [32].
Contributory negligence, like negligence, eliminates the personal equation and is independent of the idiosyncrasies of the particular person whose conduct is in question.
An objective test, that of a sober passenger, was applied.
[78] Lord Denning’s statement in Froom v Butcher was in the context of a decision that failure to wear a seatbelt constitutes contributory negligence. Judgments are to be read according to their circumstances. In cases like Froom and Joslyn v Berryman, where the Court is concerned with the commonplace of behaviour on the road, the policy of the law should impose common standards for plaintiffs as for defendants. That is because, as Lord Denning emphasised, of practical reasons for avoiding the need to appraise the questions afresh in every case. Even so, it may be noted that he exempted pregnant and fat people from that requirement.[29]
[29] At 295.
[79] The principle requires an objective test but expressed in terms of the person’s own general characteristics.[30] In the related sphere of damages a defendant must take the plaintiff as is and pay greater damages to someone who possesses a thin skull than to another who does not. In principle, there should be a finding of no or reduced departure from the relevant standard/“moral blameworthiness” on the part of someone who, without any or much personal fault, acts in a manner that would be held careless in the case of another plaintiff. I consider that to be a better justification for the kinder view that is conventionally taken of the conduct of children who may be morally blameless where an adult would not. So in Daly v Liverpool Corporation Stable J observed:[31]
[30]These, like characteristics in the former criminal law partial defence of provocation, (the former s 169 of Crimes Act 1961, repealed by s 4 of the Crimes (Provocation Repeal) Amendment Act 2009), do not extend to specific characteristics such as indolence.
[31] Daly v Liverpool Corporation [1939] 2 All ER 142 at 143.
The plaintiff in this case is an elderly woman. She was trying to cross the road, and I think that she was doing her best. For one of that age, I do not think that it was at all a bad best, but it was not good enough. Although her inability to see the bus and to think as quickly as younger people could have done, and to take the necessary action, would not occur in younger men and women, what she actually did was the best, she could. I cannot believe that the law is quite so absurd as to say that, if a pedestrian happens to be old and slow and a little stupid, and does not possess the skill of the hypothetical pedestrian, he or she can only walk about his or her native country at his or her own risk. One must take people as one finds them. There is no hypothetical standard of care. We must all do our reasonable best when we are walking about.
[80] Certainly anyone who comes to New Zealand and engages in what in any society is a relatively sophisticated engagement with local legal norms should be required to take such reasonable steps to discern what they are. But given her precaution of instructing a solicitor I see no basis for ascribing moral blame to Ms Kim (or departure from the standard of a reasonable person with her characteristics).
(ii) Vicarious fault
[81] The remaining issue is: what content should the courts ascribe to the expression “his own fault” in s 5 of the Contributory Negligence Act? Should vicarious liability be imposed on Ms Kim because of negligence on the part of her solicitor in failing to obtain a LIM? For reasons that follow in my view the answer is yes.
[82]In summary, I would resolve this issue by the analysis:
(a)the LIM regime was introduced by the 1991 amendment introducing s 44A of the Local Government Official Information and Meetings Act as a means of disclosing material facts of which the council is aware.[32]
[32]Section 44A, as in force at the time of the Council’s negligent inspections and Ms Kim’s purchase, provided:
(b)The courts should give effect to the policy of that measure by requiring a purchaser who wishes to escape contributory negligence to perform or have performed the relevant search. So a person who undertook personally the significant task of handling a property purchase would commit relevant “fault” in terms of s 3 of the Contributory Negligence Act by failing to ascertain that a LIM is needed and by failing to obtain the LIM.
(c)The policy considerations underlying (a) include that of limitation of a council’s liability when a LIM would reveal relevant information. Those considerations would not receive adequate weight if the plaintiff were exonerated from deduction because a lawyer had been instructed but carelessly failed to obtain a LIM.
(d)It must follow that, exceptionally, the plaintiff is not entitled to rely upon her unfamiliarity with New Zealand conditions to resist deduction for contributory negligence. Her prudent act of instructing a solicitor cannot be permitted to remove the Council’s entitlement to such limitation. Rather the solicitor’s error must be attributed to her as her “fault” for the purposes of s 3 of the Contributory Negligence Act. Her remedy is against the solicitor.
Discussion
[83] It is difficult to find either principle or authority to assist in determining whether the lawyer’s negligence can be attributed to Ms Kim as contributory negligence. There is no case closely in point. One aspect of the common law of England which at first sight could be relevant was stated by the House of Lords in The Bernina. A collision between two ships was caused by negligence on the part of the master and crew of each. The issue was whether the negligence on the part of those navigating the vessel, because of which a crew member and passenger were drowned, should be attributed to those victims so that claims by the estates of the deceased against the owners of the other vessel would fail. The answer was no. Lord Herschell distinguished the case from one in which: [33]
... there is contributory negligence on the part of any third person standing in such a legal relation towards the deceased men as to cause the acts of that third person, on principles well settled in our law, to be regarded as their acts, as, eg, the relation of master and servant, or employer and agent acting within the scope of his authority.
[84]Lord Watson stated:[34]
... an ordinary passenger by an omnibus, or by a ship, is not affected, either in a question with contributory wrongdoers or with innocent third parties, by the negligence, in the one case, of the driver and in the other of the master and crew by whom the ship is navigated, unless he actually assumes control over their actions, and thereby occasions mischief. In that case he must, of course, be responsible for the consequences of his interference.
[33] At 5 – 6.
[34] At 16 – 19.
[85] The Law Lords adopted what has become known as the “both ways” test: negligence of an agent is imputed to a plaintiff as contributory negligence – “his fault” in the language of s 3 – only if the agent’s conduct could give rise to vicarious liability if the plaintiff were sued as a defendant.
[86] On facts such as The Bernina no case has been found across the common law jurisdictions of New Zealand, England, Australia, Canada and the United States which has departed from the two way test, which applies the same rule to a claim by a defendant of contributory negligence by a plaintiff.[35]
[35] See P S Atiyah Vicarious Liability in the Law of Torts (Butterworths, London, 1967):
Nor does there appear to be any case in which a person employing an independent contractor, in circumstances in which the employer would be liable to third parties for the contractor’s negligence, has been held to be identified with the contractor for purposes of contributory negligence. If there really is a general principle to the effect that vicarious responsibility for contributory negligence is co-extensive with vicarious liability then it would no doubt follow that a person employing an independent contractor could be vicariously responsible for his contributory negligence in certain circumstances, and it would not be surprising if a court so held. But it is really doubtful whether this would be satisfactory for it is hard enough to justify all the existing cases in which a person is held liable for independent contractors without this additional complication.
It seems clear from the dicta in The Bernina that there can never be vicarious responsibility for contributory negligence where there is not also vicarious liability, although, as stated above, it is not yet clear whether there can be vicarious liability but no vicarious responsibility.
Todd at [21.2.06] cites The Bernina’s “both ways” test as being of general application.
[87] But there is greater reason to apply the two-way test to a bus or ship passenger than to a house buyer. It is easier to give instructions to one’s solicitor than to a bus driver or ship’s captain. Regard must also be had to the specifics of s 44A. Does the Bernina rule as stated to date cover the present case? If not should the rule be extended to do so? There is a range of possible approaches.
(i) The Bernina rule
[88] The Corpus Juris Secundum states what is essentially the rule in The Bernina: [36]
... the general rule is that negligence in the conduct of another will not be imputed to the person injured if he or she neither authorized such conduct nor participated therein nor had the right or power to control the conduct of such person.
[36] Corpus Juris Secundum (2000) vol 65, § 268.
[89] A bus or ship passenger does not authorise or participate in carelessness in its operation nor have any right or power to control the conduct of the driver or master. The passenger is not liable for loss caused by the manner of operation. There is good reason to apply the two ways rule. But what of a solicitor’s client? The client’s relationship with the solicitor is a mixture of convention and specific agreement. Here the retainer was to handle the purchase of the apartment. It was open to the client to adopt a standard package embracing all services conventionally provided or to widen or narrow its scope. So the case may be said to lie nearer the edge of the general rule than do the facts of The Bernina.
[90] The Bernina rule applies to contributory negligence the test as to a defendant’s vicarious liability for tort. It is conventionally stated that, with the exception of cases of borrowed employees and ultra hazardous activities, a defendant is vicariously liable in negligence only for the acts of his or her officers or employees and not for the acts of the employees of his or her independent contractor: a recent statement is that of the Court of Appeal of England and Wales in Biffa Ltd v Machinenfabrik Ernst Hese GmbH.[37] So why not adapt the Bernina two ways approach and apply it to a plaintiff’s vicarious liability for contributory negligence?
[37] Biffa Ltd v Machinenfabrik Ernst Hese GmbH [2008] EWCA Civ 1257, [2009] QB 725 at [2].
[91] Such approach would be convenient but blinkered. It does not analyse whether the situations are in reality the same.
(ii) Sir Owen Dixon’s approach
[92] A more nuanced approach was taken by Dixon J in Colonial Mutual[38] and adopted by Bowstead and Reynolds on Agency:[39]
There should be vicarious liability for the tort of an agent “when the function entrusted is that of representing the person who requests his performance in a transaction with others, so that the very service to be performed consists in standing in his place and assuming to act in his right not in an independent capacity.”
[38]Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Cooperative Co of Australia Ltd (1931) 46 CLR 41.
[39]FMB Reynolds Bowstead and Reynolds on Agency (18th ed, Sweet & Maxwell, London, 2006) at [8-182] citing Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Cooperative Co of Australia Ltd (1931) 46 CLR 41 at 48-49 per Dixon J.
There is however much authority that the term “agent” should not be used in relation to the law of tort.[40] I am attracted to the view that performance of a LIM search is the task of the purchaser; that Dixon J’s analysis in Colonial Mutual should make the search (or failure to search) conduct attributable to Ms Kim personally; and that the “both ways” rule can and should be applied to cast on her responsibility for the failure.
(iii) The policy approach
[40]Bowstead and Reynolds at [8-176]; Jane Swanton “Master’s Liability for the Wilful Tortious Conduct of his Servant” (1985) UWA Law Rev 1 at 16-17.; DJ Stevens “Vicarious Liability of the Principal for the Unauthorised Conduct of his Agent” [1974] CLP 59 at 61. In Morgans v Launchbury [1973] AC 127 at 135 Lord Wilberforce stated: “ ...‘agency’ in contexts such as these is merely a concept, the meaning and purpose of which is to say , ‘is vicariously liable’”.
[93] The President at [144] adopts the policy argument, that the local authority should be no worse off where the representative of the plaintiff, the solicitor, has carelessly failed to make a search. Arnold J at [189]-[190] endorses that argument to which he adds the factors that requiring the council to seek a contribution from the solicitor involves some procedural awkwardness; and that the purchaser selects the solicitor.
(iv) Extension of the Bernina rule
[94] Another possible approach is to reason there is advantage in extending the Bernina rule so long as there is no injustice. The cost and uncertainty of abandoning the clarity of the settled rule are considerations of importance. So too is abandonment by New Zealand of the international jurisprudence. Such a course might be thought undesirable unless the present simple rule produced such injustice as to warrant the complications of that course. In this case it does not.
[95] That is because a defendant council can plead that the plaintiff failed to take proper advice when undertaking the purchase. Since the relevant facts are within the knowledge of the plaintiff the Court will presumed such failure unless the plaintiff pleads and proves the contrary: [41]
It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.
[41](1774) 1 Cowp 63, 98 ER 969 at 971 cited with approval by the Supreme Court of Canada in Snell v Farrell [1990] 2 SCR 311 at 328, and by Lord Bingham in Fairchild v Glenhaven Funeral Services Ltd [2003] 1 AC 32 at 13.
[96] If the plaintiff failed to do so there would be a finding of contributory negligence. If the plaintiff could show that legal advice was taken the council could join the solicitor as a third party.
[97] If a plaintiff declined to identify the solicitor or the advice given, even though the legal privilege cannot be overridden there is a principled reason for imposing contributory negligence. In R v E[42] this Court discussed the case where a criminal appellant alleges miscarriage of justice by reason of incompetence of trial counsel but declines to provide a waiver of privilege to permit the Crown to interview such counsel. Citing Blatch v Archer it stated:
[43] In [that] situation, the appellant should be made aware that, in the event that trial counsel claims that privilege prevents the giving of evidence, the Court has no power to compel this. If the Crown indicates that it is unable to respond to the ground of appeal in the absence of assistance from trial counsel, the Court will consider how it should respond. It is bound to determine the case. While the deep-seated principle of legal professional privilege prohibits it from compelling evidence from the appellant's former counsel, it is fully entitled to take into account that the appellant, who had the means of permitting such evidence to be called, has declined to do so.
ARNOLD J
[183] I have read the judgments of William Young P and Baragwanath J in draft. At [132] above William Young P identifies five general issues for resolution in the present case (in addition to those determined in the Sunset Terraces appeals). I summarise my conclusions by reference to that list:
(a) I agree with the reasoning of William Young P in relation to:
·The significance of the absence of a code compliance certificate;
·The significance of the failure to obtain a land information memorandum (LIM) or the body corporate minutes;
·The extent to which the negligence of a solicitor engaged to advice and act on the sale and purchase can be attributed to the purchaser;
·Appropriate levels of damages for non-economic loss.
(b)I agree with Baragwanath J, who largely adopts the reasoning of Venning J, on the question whether a reduction in damages is appropriate where there is a transaction involving related parties after damage becomes manifest.
[184] Before setting out my conclusions on the individual claims I will comment briefly on two of these general points – attribution of solicitor’s negligence and the effect of transactions between related parties.
Attribution of solicitor’s negligence
[185] This issue arises in respect of Ms Kim, a Korean who was not aware of leaky building syndrome and who instructed a lawyer to act for her on the sale and purchase (May 2005). Her lawyer did not obtain a LIM or advise Ms Kim to obtain one. Like William Young P and Baragwanath J, I consider that, in the circumstances, this constituted negligence.
[186] The question of whether a plaintiff will be held to have been contributorily negligent as a result of a third party’s negligent conduct is usually determined in accordance with the “both ways” or “identification” principle. That is, the fault of the third party will only be attributed to the plaintiff if the plaintiff would be liable to another for the third party’s wrongful conduct: see for example the discussion in Bartlett “Attribution of Contributory Negligence”[66] and Todd The Law of Torts in New Zealand.[67] So a person may be held to have been contributorily negligent on the basis of an employee’s wrongful conduct but not on the basis of an independent contractor’s wrongful conduct.
[66] Andrew Bartlett “Attribution of Contributory Negligence” (1998) 114 LQR 460.
[67] Stephen Todd (ed) The Law of Torts in New Zealand (5th ed, Brookers, Wellington, 2009) at [21.2.06].
[187] However, as Bartlett points out, the principle is not always articulated in this way in the cases, although it seems to explain most of them.[68] Bartlett argues that the principle can be justified as a matter of policy, although he acknowledges that its application in respect of agents is controversial.[69]
[68] At 464 – 465.
[69] At 469 – 471.
[188] As William Young P notes,[70] the position in relation to solicitors is complicated by the fact that, although a solicitor acting on (for example) a conveyancing transaction may bind his or her client, there will be limited situations where the client will be vicariously liable for the solicitor’s negligence. Applying the “both ways” principle, this suggests that Ms Kim should not be held responsible for her solicitor’s negligence in failing to obtain a LIM.
[70] See [143] above.
[189] However, I consider that there are strong policy reasons to attribute the solicitor’s negligence to Ms Kim in the context of assessing whether she was contributorily negligence for the purposes of her claim against the Council, leaving it to her to sue her lawyer for loss resulting from his wrongful conduct.
[190] First, as noted by William Young P,[71] it is difficult to see why, as a matter of principle, a territorial authority should be in a worse position where a solicitor acting for a purchaser fails to make appropriate enquiries than it would be if the purchaser (acting for him or herself) failed to make those enquiries. Second, the purchaser is the party with the relationship with the solicitor. The purchaser selects the solicitor, deals with him or her and expects to benefit from his or her expertise. The solicitor is not simply an independent contractor, but is (for some purposes at least) the client’s agent in the transaction, and the client will be bound even though the solicitor acts negligently. Accordingly it seems reasonable as a matter of policy that the client should bear the responsibility for the solicitor’s default in the present context, and should seek to recover any resulting loss from the solicitor. Any other approach will involve difficult “line drawing” exercises as to the circumstances in which a solicitor’s negligence in the conduct of a transaction will or will not bind the client. Third, as William Young P says,[72] requiring the territorial authority to seek a contribution from the solicitor involves some procedural awkwardness, and in cases such as the present is unlikely to be a realistic option.
[71] See [145] above.
[72] Ibid.
[191] Accordingly, I would uphold the Judge’s finding of contributory negligence in respect of Ms Kim.
Transactions between related parties
[192] This point is relevant to the claims by RCA Investments Ltd and Sue Bradley Properties Ltd. In these instances, the individual purchasers arranged for their companies to purchase the properties after the damage to their respective units became manifest. In the case of RCA Investments Ltd, the individuals involved, Mr and Mrs Coughlan, nominated the company as the purchaser in the sale and purchase agreement. In the case of Sue Bradley Properties Ltd, Ms Bradley purchased her unit and subsequently transferred it to the company on the advice of her accountant, presumably for tax reasons. (I exclude Ms Clark and the Clark Family Trust from this analysis, for the reasons given by Baragwanath J).[73]
[73] At [49] – [52] above.
[193] I do not agree with William Young P’s view that these related party arrangements should be ignored in this context.[74] To take Ms Bradley as an example, she entered into the sale and purchase transaction with her company intending that it have legal effect, and to obtain a benefit from it. In my view, it is wrong as a matter of principle that the legal effect of such a transaction should be ignored in the present context. I accept that because the individuals involved played dual roles – as individuals and as officers of their respective corporate entities – there is a degree of artificiality in the analysis, but consider that it is no greater than the artificiality commonly involved in analysing the operations of one person companies. Accordingly, like Baragwanath J,[75] I agree with Venning J’s findings of contributory negligence in relation to RCA Investments Ltd and Sue Bradley Properties Ltd.
Conclusion
[74] At [175] above.
[75] See [41] above.
[194] In the result, then, like William Young P and Baragwanath J I consider that the Council is liable, without any reduction for contributory negligence, to Mr and Mrs McConville (unit 11), Mr Blackmore and Ms Sheehy (units 13 and 14), Mr Jupp (unit 4), Gydick Investments Limited (unit 9), Mr Kennett and Ms Blakie (unit 3), Ms Hough (unit 1), Mr Wilson and Ms Stewart (unit 7) and Ms Clark and the trustees of the Clark Family Trust (unit 8).
[195] I consider that the Council is also liable to RCA Investments Ltd (unit 5), Sue Bradley Properties Ltd (unit 12) and Ms Kim (unit 10), subject in each case to a reduction of 25 per cent for contributory negligence.
[196] As to quantum, I agree with the figures proposed by the other members of the Court.
[197] I also agree that the Body Corporate was entitled to sue for damage to common property but not for economic loss, for the reasons given by Baragwanath J.
Solicitors:
McVeagh Fleming, Albany for Appellant in CA506/2008
Heaney & Co, Auckland for Appellant in CA507/2008
Grimshaw & Co, Auckland for Respondents
Land information memorandum
(1) A person may apply to a territorial authority for the issue, within 10 working days, of a land information memorandum in relation to matters affecting any land in the district of the authority.
(2) The matters which shall be included in that memorandum are—
(a) Information identifying each (if any) special feature or characteristic of the land concerned, including but not limited to potential erosion, avulsion, falling debris, subsidence, slippage, alluvion, or inundation, or likely presence of hazardous contaminants, being a feature or characteristic that—
(i) Is known to the territorial authority; but
(ii) Is not apparent from the district scheme under the Town and Country Planning Act 1977 or a district plan under the Resource Management Act 1991:
...
(d) Information concerning any consent, certificate, notice, order, or requisition affecting the land or any building on the land previously issued by the territorial authority (whether under the Building Act 1991or any other Act):
(e) Information concerning any certificate issued by a building certifier pursuant to the Building Act 1991:
(f) Information relating to the use to which that land may be put and conditions attached to that use:
...
(3) In addition to the information provided for under subsection (2) of this section, a territorial authority may provide in the memorandum such other information concerning the land as the authority considers, at its discretion, to be relevant.
(4) An application for a land information memorandum shall be in writing and shall be accompanied by any charge fixed by the territorial authority in relation thereto.
(5) In the absence of proof to the contrary, a land information memorandum shall be sufficient evidence of the correctness, as at the date of its issue, of any information included in it pursuant to subsection (2) of this section.
(6) Notwithstanding anything to the contrary in this Act, there shall be no grounds for the territorial authority to withhold information specified in terms of subsection (2) of this section or to refuse to provide a land information memorandum where this has been requested.
41