Queenstown Lakes District Council v Dent
[2019] NZHC 2140
•29 August 2019
THIS IS THE REDACTED COPY OF THIS JUDGMENT. IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2015-425-000001
[2019] NZHC 2140
BETWEEN QUEENSTOWN LAKES DISTRICT COUNCIL
PlaintiffAND
GARY NEIL DENT
First Defendant
STEVEN MICHAEL DENT
Second DefendantMICHAEL MOFFAT
Third Defendant (Discontinued)
DARREN REX CRISP
Fourth DefendantSTEPHEN BRUCE MCLEAN
Fifth Defendant
Hearing: 26 August 2019 Appearances:
D J Barr and MMS Gray for Plaintiff
No Appearance for First, Second, and Fifth Defendants No Appearance by or for the Fourth Defendant
Judgment:
29 August 2019
JUDGMENT OF GENDALL J
This judgment was delivered by me on 29 August 2019 at 2 p.m. pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: 29 August 2019
QUEENSTOWN LAKES DISTRICT COUNCIL v DENT [2019] NZHC 2140 [29 August 2019]
The parties to this proceeding request that the amount of certain settlement sums relating to this judgment are confidential and should remain so notwithstanding their acceptance that these amounts needed to be disclosed to the Court. As a result, the unredacted copy of this judgment has been made available only to the parties and their counsel. This redacted copy of the judgment has also been released for general circulation.
Introduction
[1] The plaintiff Council’s claim in this proceeding relates to an apartment complex in Queenstown known as the Alta Apartments (the apartments). Unfortunately, these apartments were a leaky building.
[2] Some time ago, the Body Corporate for the apartments and the owners of eight of the 11 units, together with the owner of a 25 per cent share in one further unit (together the owners) filed proceedings against the plaintiff council, Rilean Construction (South Island) Limited (RCL) the head contractor for construction of the apartments and others.
[3] Soon after proceedings were commenced, RCL was placed into liquidation. The Council then joined several parties to the claim, including:
(a)the first, second and third defendants being a director and two employees of RCL;
and
(b)the fourth defendant Darren Rex Crisp (Mr Crisp) being a director of Cadex Finance Limited (Cadex), the development company responsible for the construction of the apartments.
[4]In around April 2017, the Council paid to the Body Corporate and the owners
$1.3 million to settle the claim against it.
[5] Subsequent to that settlement the Council did two things. First, it joined to its claim a further director of RCL (the fifth defendant, Mr McLean) and discontinued its claim against the third defendant, Mr Moffat.
[6] The Council has also now settled its present claim against the first, second and fifth defendants here, (the present settlement). As I understand it, the terms, although generally confidential, include the following which the parties accept can be recorded in this case:
(a)the Council will receive […] from the first, second and fifth defendants and has now sought leave to discontinue this proceeding against those defendants; and
(b)the present settlement expressly contemplates the Council continuing this proceeding against the fourth defendant, Mr Crisp.
[7] Leave to discontinue this proceeding by the Council against the first, second and fifth defendants was granted in this Court on 23 August 2019.
[8] Further, as I have noted above at [5], the proceeding has been discontinued against the third defendant Mr Moffat, leaving it alive only against the fourth defendant, Mr Crisp.
[9] Here, the Council seeks contribution from Mr Crisp to the remaining […] payment it has made to the owners and the Body Corporate pursuant to s 17 of the Law Reform Act 1936. To succeed the Council must show that Mr Crisp would have been liable to the plaintiffs had he been sued and, also, that the Council itself would have been liable to the plaintiffs.
Preliminary matters
[10] As I understand the position, the fourth defendant Mr Crisp has been bankrupted in Australia and at present he remains undischarged from this bankruptcy.
[11] As a result, a potential jurisdiction issue has been flagged in this proceeding relating to this bankruptcy. Submissions on this question have been advanced to me on behalf of the plaintiff and I now address this jurisdiction question.
[12] Mr Crisp has not been adjudicated bankrupt in New Zealand and, therefore, the provisions of s 76 Insolvency Act 2006 (NZ) in the first instance halting proceedings against him does not apply.
[13] Instead, given that Mr Crisp is currently undischarged from his Australian bankruptcy, regard may be had to the Insolvency (Cross-Border) Act 2006 (NZ). Schedule 1 of this Act provides rules applying to cross-border insolvency proceedings. Article 1 of Schedule 1 of this Act provides that these rules apply where:
(a)assistance is sought in New Zealand by a foreign court or a foreign representative in connection with a foreign proceeding; or
(b)assistance is sought in a foreign State in connection with a New Zealand insolvency proceeding; or
(c)a foreign proceeding and a New Zealand insolvency proceeding in respect of the same debtor are taking place concurrently; or
(d)creditors or other interested persons in a foreign State have an interest in requesting the commencement of, or participation in, a New Zealand insolvency proceeding.
[14] In this case there is nothing before the Court to indicate that any foreign court or representative has sought assistance in respect of Mr Crisp’s bankruptcy, nor does it seem that the claim against Mr Crisp might involve a “New Zealand insolvency proceeding”.
[15] I am satisfied, therefore, that none of these circumstances apply in the present case and there is no impediment here to the Council continuing with this proceeding against Mr Crisp. Mr Crisp’s bankruptcy in Australia, as I see it, has no effect on this proceeding and no grounds to suggest otherwise have been advanced before me.1
1 On these aspects see certain comments made in CIR v Compudign International Ltd (in rec and in liq) [2011] NZCCLR 6.
[16] In any event, if I may be wrong on these aspects and the Cross-Border Insolvency Rules might apply here, then in this case I am satisfied also that those Rules do not stay the Council’s claim against Mr Crisp.
[17]I reach this conclusion for the following reasons:
(a)in terms of the Rules a proceeding may be stayed:
(i)automatically if Mr Crisp’s bankruptcy is a “foreign main proceeding” under cl 1(a) of Article 20; or
(ii)upon request of a foreign representative under cl 1(a), Article 21 (for all other foreign proceedings).
However,
(b)A condition precedent to a stay under Articles 20 and 21 is the “recognition” of the bankruptcy of Mr Crisp as a “foreign proceeding” by the High Court of New Zealand.
(c)This “recognition” requires:
(i)an application to this Court by a foreign representative to recognise the foreign proceeding being the Australian bankruptcy (Article 15); and
(ii)a decision by the Court to recognise the foreign proceeding (Article 17).
[18] There is nothing to indicate that any such application has been made or granted in the present case.
[19] But, in any event, if the Court may have recognised the foreign proceeding, Article 20, cl 2(1) allows the Court (upon receiving an application) to order that a stay does not apply in the particular case in question.
[20] Here, the Council contends that this is a case where it would be appropriate to order that a stay does not apply because:
(a)the proceeding has merit and it has been on foot for a significant period of time prior to Mr Crisp’s bankruptcy in Australia;
(b)as Mr Crisp did not appear at this hearing, no funds were expended in defending the proceeding that could have otherwise been available for his creditors; and
(c)if the present claim is successful, then the Council’s claim will not rank higher than any other unsecured creditors Mr Crisp may have – that is the proceedings will not cause undue prejudice.
[21]In my view, there is merit in these arguments advanced for the Council.
[22] I am satisfied that this claim can properly proceed against Mr Crisp and that it neither infringes New Zealand insolvency requirements, nor the provisions of the Insolvency (Cross-Border) Act 2006 or otherwise.
[23] As a result, I conclude that jurisdiction does exist here for the plaintiff to continue its present claim against the fourth defendant and I proceed accordingly.
[24] I do note at this point that there was no appearance at the hearing before me by or on behalf of the fourth defendant, Mr Crisp. Although there was some suggestion from other counsel at an earlier stage that the fourth defendant might have wished to attend this hearing as a self-represented defendant by AVL, no such application or advice has been forthcoming. Instead, matters proceeded at the hearing of the plaintiff’s claim without an appearance by or argument for the fourth defendant.
[25] Notwithstanding this, as I note later, the fourth defendant, Mr Crisp, at an early stage in this proceeding, when he was represented by counsel, filed a form of statement of defence (as a third party). In addition, recently he has purported to file a further statement of defence in this matter. But, as I understand it, because of a failure to pay the filing fee, this pleading was not accepted for filing by the Registry of this Court.
[26] Notwithstanding this, I have that statement of defence before me and in all the circumstances I will regard it as a further form of defence provided by the fourth defendant and will take it and the earlier statement of defence filed into account accordingly. I do note, however, that no evidence of any kind has been provided by the fourth defendant here.
The plaintiff’s remaining claim
[27] As I have noted above, the Council seeks from Mr Crisp a contribution towards the remaining amount that is outstanding from the Council’s settlement with the owners pursuant to s 17 of the Law Reform Act 1936.
[28]Section 17 of the Law Reform Act 1936 relevantly states:
17Proceedings against, and contribution between, joint and several tortfeasors
(1)Where damage is suffered by any person as a result of a tort (whether a crime or not)—
(a)judgment recovered against any tortfeasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tortfeasor in respect of the same damage:
(b)if more than 1 action is brought in respect of that damage by or on behalf of the person by whom it was suffered, or for the benefit of the estate, or of the wife, husband, civil union partner, de facto partner, parent, or child of that person, against tortfeasors liable in respect of the damage (whether as joint tortfeasors or otherwise), the sums recoverable under the judgments given in those actions by way of damages shall not in the aggregate exceed the amount of the damages awarded by the judgment first given; and in any of those actions, other than that in which judgment is first given, the plaintiff shall not be entitled to costs unless the court is of opinion that there was reasonable ground for bringing the action:
(c)any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is, or would if sued in time have been, liable in respect of the same damage, whether as a joint tortfeasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability in respect of which the contribution is sought.
(2)In any proceedings for contribution under this section the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage; and the court shall have power to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall amount to a complete indemnity.
(3)For the purposes of this section—
(a)the expressions parent and child have the same meanings as they have for the purposes of the Deaths by Accident Compensation Act 1908, as amended by Part 2 of this Act:
(b)the reference in this section to the judgment first given shall, in a case where that judgment is reversed on appeal, be construed as a reference to the judgment first given which is not so reversed, and, in a case where a judgment is varied on appeal, be construed as a reference to that judgment as so varied.
…
[29] As I have noted, to succeed here, the Council must show that not only would it have been liable to the claimants in their leaky building action against it but also that Mr Crisp would have been liable to those claimants had he been sued.
[30] In this case the fourth defendant is a director of Cadex, the development company for the apartment complex and from all the evidence before the Court he was intimately involved in all matters concerning this development.
[31] Perhaps unusually in this case, the weathertightness and other defects were identified in the apartments whilst the contract for the construction was still operative, but before the Certificate of Practical Completion (which triggered settlement of various apartment sales) was issued by the project architect.
[32] As to this, RCL was obliged to remedy any construction defects. At some point around 2008 an arrangement was reached on this between RCL and Mr Crisp for Cadex whereby $50,000 payable to RCL under the construction contract was withheld by Cadex pending the remediation of defects in the complex.
[33] Some of the defects and in particular the weathertightness issues, however, were not remedied and instead the $50,000 retention was split by agreement 50/50 between Cadex and RCL.
[34] Mr Crisp, as a director and principal of Cadex, made two key decisions on all of this that resulted in the losses to the owners:
(a)First, he instructed the architect for the development to issue (and backdate) a Certificate of Practical Completion for the apartments when they were not weathertight, and at a time when it appears clear that he knew full well they were not weathertight.
(b)Secondly, he negotiated directly with a director of RCL and decided to release the $50,000 retention without ensuring the defects were remedied nor taking any steps to either require RCL to remedy the defects, or to employ some other contractor to complete remediation. In addition, at no time did he inform the owners of the defects.
[35] Those decisions each directly contributed to the owners’ losses in the following ways:
(a)The issue of the Practical Completion Certificate by the architect was a condition precedent to settlement of the various unit sales. Without practical completion the owners would not have acquired the units and would not have suffered loss.
(b)Had Cadex required RCL to remedy the defects, or had it otherwise engaged a contractor to complete remediation, the losses would have been avoided.
(c)The Council was itself liable in negligence to the owners, in any event, for carrying out negligent inspections and for wrongful issue of its Code Compliance Certificate, and the fourth defendant would have been jointly liable to the owners had he been sued. As a concurrent
tortfeasor, the Council here is entitled to contribution or indemnity from the fourth defendant.
Council’s liability to the owners
[36] The Council’s liability here, I am satisfied, is established by the unchallenged evidence of the owners, the experts provided by the owners and the Council experts.
[37] On 13 August 2007 the Council issued a Code Compliance Certificate (CCC) for the Alta Apartments. The Council was negligent in issuing the CCC and in carrying out inspections of the work on the apartments prior to this.
[38] Subsequent to the issue of the CCC, a few days later on 23 August 2007, Anna- Marie Chin (Ms Chin), the independent registered architect employed by Mr Crisp and Cadex for the development, issued Architect’s Direction 144 listing significant defects that had been observed on site. At that time, Ms Chin refused to certify Practical Completion of the apartments on the basis that weathertight defects and other problems required remediation.
[39] Then, in September 2007, Ms Chin issued two further Architect’s Directions, the second of which included a Schedule of Defects and Omissions that she considered required resolution prior to issue of a Practical Completion Certificate.
[40] Various site meetings and other meetings of all the parties took place around this time and in September, October and November 2007. In these all parties appeared to accept that there were problems with the development and the apartments.
[41] It was not until 17 October 2007 that Ms Chin certified Practical Completion of the apartments, but this was conditional upon rectification being required of certain outstanding defects which remained to be fixed. It seems clear that this rectification never occurred.
[42] Overall, written evidence which is before the Court from Mr Grant Hunt, an experienced building assessor, and from Mr Simon Paykel, a registered building surveyor (and a director of Maynard Marks Limited Building Surveyors) and, in
addition, the oral evidence given before me by Mr Paykel, confirms that the Council was clearly liable to the owners in negligence in this case both for inadequate inspections of the apartments and for the wrongful issue of the CCC.
[43] Mr Paykel, in his oral evidence in person before me, provided a critique of the detailed written evidence before the Court from Mr Hunt. Fundamentally, the evidence of Mr Paykel and that of Mr Hunt, as I have noted, confirmed without question the weathertightness defects which these apartments suffered and the failure on the part of the Council in particular to honour its obligations in issuing the Code Compliance Certificate when it should not have, and in negligently carrying out its inspections of the apartments.
[44] The owners’ evidence before me, generally accepted by all parties, establishes losses at the time of settlement, together with reasonable claims for costs and disbursements, as follows:
Estimated remedial costs $1,019,625.55 Consequential losses and general damages Unit 1 consequential losses $15,776.06 general damages $15,000.00 Unit 3 - consequential losses $13,437.24 Unit 4 - consequential losses $28,708.79 general damages $15,000.00 Unit 5 - consequential losses $17,377.96 general damages $15,000.00 Unit 6 - consequential losses $56,727.93 Unit 7 - consequential losses $16,660.68 Unit 8 - consequential losses $16,046.44 Unit 10 - consequential losses $21,285.30 general damages $15,000.00 Unit 11 - consequential losses $31,796.24 general damages $25,000.00 Subtotal
$1,322,442.19
Costs and disbursements Expert costs $88,813.09 Disbursements $74,052.38 Scale costs $39,917.00 Total
$1,525,224.66
[45] I am satisfied here that as this and other evidence which is before the Court makes clear, the full extent of monies required to rectify and remediate the defects and problems with the apartments so that a proper CCC would have been issued totalled something well in excess of $1.3 million. I conclude, therefore, that liability of the Council to the owners first, is clearly established here from the expert evidence before me and, secondly, that this liability of the Council significantly exceeded the
$1.3 million settlement sum paid by the Council. As I see the position, therefore, it was appropriate for the Council to settle, as they did, on this basis.
Duty of care of Mr Crisp as director of Cadex and his liability here
[46] In summary, I find that Mr Crisp, the fourth defendant, is liable here for certain decisions taken on behalf of Cadex (the company for which he is a director), on the basis that these are decisions over which he had personal control. In addition, Mr Crisp is liable here for assuming what I consider is overall personal responsibility over the development as a whole. All this occurs in the event of the breach of obligation that clearly is established here against his company, Cadex, as the developer.
[47] In this case, there can be no question that Mr Crisp, as a director of Cadex, owed a duty of care in respect of the decisions he made for the company in the course of the construction of the apartments.
[48] The decision in Morton v Douglas Homes2 is often quoted in this area and sets out the basis for liability of directors and employees. In that case Hardie Boys J held that the liability of a director, manager or employee of a company turns on the degree of control the individual has over the relevant acts that are the subject of the complaint. In particular, he said:
The relevance of the degree of control which a director has over the operations of the company is that it provides a test of whether or not his personal carelessness may be likely to cause damage to a third party, so that he becomes subject to a duty of care. It is not the fact that he is a director that creates the control, but rather that the fact of control, however derived, may create the duty. There is, therefore, no essential difference in this respect between a director and a general manager or indeed a more humble employee of the
2 Morton v Douglas Homes Ltd [1984] 2 NZLR 548 at 595.
company. Each is under a duty of care, both to those with whom he deals on the company’s behalf and to those with whom the company deals insofar as that dealing is subject to his control.
[49] This is consistent with the approach Courts have taken to the existence of a duty of care being an assessment of whether there is sufficient proximity which is most usually addressed as a question of control.3 Further, it is clear a tort cannot be committed by a company. Rather, a company can be vicariously liable for torts committed by its employees. The focus of tort law is on those individuals:
The primary tortfeasor is the natural person whose acts or omissions led to the harm in question. It is possible that the net of defendants might be widened to include others, such as employers or principals. The doctrine of vicarious liability is the means by which the law widens the net. But the primary focus is nonetheless on the individual or individuals whose acts or omissions caused the harm. It is right that the law of torts focuses on them, as a primary purpose of the law of torts, and in particular the tort of negligence, is to deter careless conduct.4
[50] The “degree of control” test outlined in Morton v Douglas Homes has been applied in a considerable number of cases in this Court in the recent past.5
[51]From the authorities, the following principles arise:
(a)The primary test for whether an individual such as Mr Crisp here is liable is whether they had a sufficient degree of control over the relevant acts or omissions resulting in the plaintiff’s loss; and
(b)A director may also be personally liable if they exercise such control over the development in a case such as the present that they then assume responsibility for it – as cases such as Body Corporate 202254 v Taylor,6 Body Corporate 188273 v Leuschke Group Architects Ltd7 and
3 Body Corporate No 207624 v North Shore City Council [Spencer on Byron] [2012] NZSC 83.
4 Body Corporate 202254 v Taylor [2008] NZCA 317 at [132].
5 On this, see Weaver v HML Nominees Ltd [2014] NZHC 2073 at [88]-[89]; North Shore City Council v Wightman (HC) Auckland CIV-2010-404-3942, 30 November 2010 at [17]; Conning & Balbooth v Martoni Ltd [2012] NZHC 401; Carrol v Equus Industries Ltd [2015] NZHC 942; and Spargo v Franklin (HC) Tauranga CIV-2010-470-91, 9 November 2011 at [83] – [93].
6 Body Corporate 202254 v Taylor, above n 4.
7 Leuschke Group Architects Limited (2007) 8 NZCPR 914.
Body Corporate No. 207624 v North Shore City Council [Spencer on Byron]8 touch upon.
(c)Assumption of responsibility, however, is not a precondition to liability of a director as to liability in a case such as this of a director in negligence.
[52] Turning now to the facts in the present case, Cadex was a developer here which clearly owed a non-delegable duty of care. In the present circumstances there is no limit on the responsibilities of Cadex that might limit the responsibilities of Mr Crisp as its director.
[53] The losses which have been suffered by the owners in this case were caused by a number of the defendants failing to remediate defects that had been identified in the apartments and made known to them and, in particular, by the failure of Mr Crisp as a director of Cadex to ensure that these defects were remediated.
[54] Applying the principles in Morton9 to this case, Mr Crisp as a director of Cadex is under a duty of care with respect to that company’s actions insofar as “that dealing” (as Hardie Boys J outlines in the Morton decision noted at para [48] above) is subject to Mr Crisp’s control.
[55] In this case, the relevant “dealing” represents the decisions taken by Mr Crisp to:
(a)instruct the architect Ms Chin to issue (and backdate) a Practical Completion Certificate for units that were not weathertight; and
(b)the decisions not to require RCL or to engage other contractors to remediate the defects which were clearly known and to unilaterally release and forfeit the $50,000 retention fund held specifically for this purpose.
8 Body Corporate No. 207624 v North Shore City Council [Spencer on Byron] above n 3.
9 Morton v Douglas Homes Ltd, above n 2.
[56] Indeed, what happened in this case must be seen as being well outside what was contemplated by the contractual arrangements between the parties and contrary to what would be expected of a reasonable developer. In this respect:
(a)First, as I have noted above, Mr Crisp on behalf of Cadex instructed Ms Chin to issue a Practical Certificate for apartments that were not weathertight simply so that Cadex was able to settle various sale contracts it had for a number of the apartments.
(b)Having sold a number of apartments in the development, Cadex remained responsible for ensuring defects in those apartments were rectified. Cadex’s experts had assessed the cost of remediating defects at $50,000 and this amount, at Mr Crisp’s direction, was held by Cadex from monies owed to RCL. This was for the purpose of ensuring that it would only be accessed to remedy the defects.
(c)Instead, Mr Crisp engaged directly with Mr McLean of RCL, sidelining the architect, Ms Chin, and they agreed to divide the $50,000 retention figure on a 50/50 basis. In other words, RCL was paid $25,000 and Cadex was relieved of the obligation to pay RCL the final $25,000. However, no remedial work had been undertaken at that point and Cadex, who was required to undertake remedial work that was previously the responsibility of RCL, had given up any contractual and financial leverage over RCL to have the remainder of the work completed. The decision to release this $50,000 taken by Mr Crisp made no sense whatever. The further decision by Mr Crisp on behalf of Cadex not to remediate any of the outstanding defects or to employ other contractors to do so was clear negligence on the part of Mr Crisp. He had removed the architect Ms Chin from the process and failed to ensure any other mechanism was in place to ensure the defects were remediated.
[57] I am satisfied Mr Crisp was the individual responsible for the relevant “dealing” of Cadex, being the decisions to bring the construction contract to an end and to take no further steps to rectify the outstanding matters.
[58] I am satisfied, too, that Mr Crisp, who attended almost all of the many site meetings at the operative time and provided all instructions then and otherwise to Ms Chin and others on behalf of Cadex, had real control over all aspects of the development. Indeed, I find on all the evidence before the Court, that he had a high level of involvement with all manner of decisions during the construction of the apartments and especially at the remediation stage, and, indeed, he had assumed overall responsibility for proper construction of the apartments. He had insisted on being copied into all correspondence and it seems he would not allow Ms Chin to issue an instruction without his approval.
[59] In this regard, the evidence here establishes that Mr Crisp had complete control over two key decisions (the dealings) that caused or contributed to the owners’ losses:
(a)The decision to insist that the architect issue the Practical Completion Certificate required under the various apartment sale contracts (despite the existence of known weathertight defects). The architect, Ms Chin, provided frank and clear evidence before me. This was to the effect that Mr Crisp instructed her to issue the Practical Completion Certificate and to backdate it, which she did only on a basis of clearly recording a number of strict conditions on which it was issued.
(b)The decision to split (between itself and RCL) the $50,000 retention held strictly by Cadex to ensure remediation of the defects, without requiring the known defects to be remedied at that point.
[60] I am satisfied too, as I have noted, that Mr Crisp exercised a sufficient level of control over the construction of the apartments to assume personal responsibility for the development. Ms Chin, the architect, in her evidence confirmed that she dealt throughout with Mr Crisp on behalf of Cadex and all instructions were taken from him. There is evidence and minutes before the Court of the many site meetings which
occurred, particularly when the construction problems and weathertight issues were arising. Mr Crisp attended nearly all these, he was the main point of contact, he played a large part in all discussions and effectively he was the natural person who made all decisions on behalf of Cadex as the developer.
[61] In conclusion then, I find here that there is concurrent liability on the part of the Council and all of the named defendants including Mr Crisp for the $1.3 million settlement which the Council entered into.
[62] Some brief amplification of one or two matters in the evidence that support this conclusion is usefully added here. I now do so.
[63] The site meeting minutes and correspondence in evidence before me establish that Mr Crisp was at all material times the key contact and decision-maker for Cadex, and regularly attended site. Together with the evidence of Ms Chin, the documents establish Mr Crisp’s control over all key decisions, and in particular his direct control over the two key decisions noted at [59] above that caused the owners losses.
[64] First, Mr Crisp’s decision to depart from the agreed contractual regime installed for the benefit of the owners, ultimately resulting in the defects not being remediated:
(a)The sale contracts for a number of the original apartment purchasers were entered into prior to the completion of the development. Those contracts contained further terms (as is usual with agreements to purchase off the plans) relating to the completion of the apartment.
(b)Those further terms included a provision that the sale to the original purchasers would not be completed until: title had issued under the Unit Titles Act; a CCC had been issued by the Council; and, Practical Completion had been achieved (and notified to the purchaser’s solicitor).
(c)Cadex also warranted, amongst other things, that the works have been constructed and completed:
(i)In accordance with the sound and accepted standards of workmanship;
(ii)Under the supervision of competent and properly qualified building architectural and/or engineering personnel; and
(iii)In a manner so that the building would be watertight at the date of practical completion.
[65] In other words, Cadex was responsible under the contract for ensuring the apartments:
(a)Were constructed in a sound and weathertight manner;
(b)Were constructed under the supervision of an architect; and
(c)That a weathertight construction was achieved prior to the issue of a Practical Completion Certificate.
[66] With the exception of the supervision of the architect, Ms Chin, those duties were consistent with Cadex’s non-delegable duty of care as a developer.
[67] However, the evidence shows that those duties (both contractual and tortious) were breached: Practical Completion (on a conditional basis) was issued, as instructed by Cadex, on 8 November 2007, backdated to 17 October 2007. The Practical Completion Certificate noted that the Certificate had been issued despite the existence of defects listed in the Architect’s Directions at numbers 144, 145 and 146. The defects listed included weathertight defects.
[68] The decisions taken by Mr Crisp caused purchasers to settle for apartments that Mr Crisp knew were not weathertight.
[69] This would not have been a significant issue, and no issue for Mr Crisp, had Cadex then ensured that all those defects were remediated. However, neither Mr Crisp nor Cadex ensured that this was done.
[70] While the correspondence shows that Mr Crisp, through Ms Chin, made some efforts to have the defects remedied, he did not see this through. Instead, Mr Crisp agreed with RCL to divide the remaining retentions prior to the defects being remedied. There is no evidence of any attempt to remediate the defects following the splitting of the retentions.
Quantum and apportionment
[71] Given the concurrent liability of both the Council and defendants here I record that the usual apportionment between councils and builders/developers in a leaky building case such as the present is, broadly speaking, 20 per cent to the Council and 80 per cent to the builders and developers. On this basis, the Council might be expected in this case to have recovered from the entire defendant group of builders, developers and the like, something in the region of about […] being around 80 per cent of the $1.3 million final settlement. Mr Crisp is liable to the Council jointly with the first, second and fifth defendants had this matter proceeded to trial.
[72] Here, as I note at para [6] above, the Council have already received […] from those other defendants pursuant to the settlement reached. This leaves some […] of the […] to be recovered from the fourth defendant here which I am satisfied is a just and equitable contribution in all the circumstances here and is consistent with the authorities on apportionment on an 80 per cent – 20 per cent split noted above.
[73] If judgment is to be entered here in favour of the Council against Mr Crisp it is my view on quantum that this […] figure is the appropriate one.
Fourth defendant’s defence
[74] I will now turn to address the defence advanced by the fourth defendant, Mr Crisp, as best I can tell from the documents he has filed in this proceeding, as I note at para [26] above.
[75] The first of these documents is a statement of defence dated 15 April 2017 filed by lawyers then acting on behalf of Mr Crisp in this matter (Charlotte Robertson of Kennedys, Solicitors). This statement of defence was filed in response to a statement of claim filed originally in this proceeding by Body Corporate 382657.
[76] In this statement of defence it is pleaded on behalf of Mr Crisp that although he “admits that he was a director of Cadex Finance Ltd, the developer of Alta Apartments, and that he attended some site meetings…otherwise, he denies the claims against him”. The pleading goes on and:
…says further that he has no construction qualifications and that he at all times relied on the contractor and the construction professionals and consultants to carry out and observe the construction and remediation works at the site.
[77]This claim noted above is repeated twice more in this statement of defence.
[78] Mr Crisp has advanced no evidence in this proceeding and the only other document he has purported to file, as I have noted, is the statement of defence said to be dated 15 March 2019. Although this statement of defence has not been accepted by the Registry for filing (on the basis that no filing fee had been paid) nevertheless, as I have said, I will consider and take into account matters that it purports to raise here.
[79] In this second statement of defence (filed in response to the Council’s second amended statement of claim) effectively Mr Crisp appears simply to deny the claims made against him. In doing so, he states on no less than eight occasions:
I have no construction qualifications and at all times relied on the contractor and the construction professionals and consultants to carry out and observe the construction and remediation works at the site.
This repeats the sentence in the earlier pleading filed on 15 April 2017 on his behalf by his then lawyers, Kennedys.
[80] As best I can tell from these “defences” advanced for Mr Crisp, it seems that he may be contesting first, that he had a sufficient “degree of control” with respect to matters involving Cadex and, secondly, that he had a sufficiently high level of involvement with decisions made during the construction of the apartments, to
establish any liability on his part in this case. As I have already noted, no evidence to support these contentions has been advanced by Mr Crisp. Nor has anything been put forward to properly question the Council’s position here and, in particular, the evidence provided by the architect Ms Chin, the building assessors Mr Hunt and Mr Paykel and the written evidence from other witnesses provided by the plaintiff here.
[81] Mr Crisp’s pleaded defences here make claims which are quite unsupported. They are also quite contrary to what I accept is clear evidence before the Court establishing in this case both Mr Crisp’s high degree of control over the relevant acts or omissions which were negligent and resulted in the plaintiff’s loss, and also his assumption of responsibility for controlling the apartment development here on behalf of Cadex. I conclude that nothing in these pleadings advanced for Mr Crisp is substantiated nor does it assist his position here.
Result
[82] For all the reasons outlined above, the Council’s claim against Mr Crisp here succeeds. An order is now made that Mr Crisp is to pay to the Council the sum of […] which I have outlined at [72] and [73] above.
Interest
[83] In their pleadings the Council seeks interest on any award this Court makes against Mr Crisp from the date it paid the $1.3 million settlement sum (24 April 2017) to the date of this judgment. Interest is sought either at the Judicature Act rate or, in the alternative, in accordance with the Interest on Money Claims Act 2016 (the IM Act).
[84] The IM Act came into force on 1 January 2018. Under s 5 it provides that the Act applies to every civil proceeding commenced after the 1 January 2018 commencement date.
[85] In the present case, the Council’s proceeding was commenced in 2015 well before 1 January 2018. The substantive provisions of the IM Act and its application, therefore, do not cover the present proceeding.
[86] Instead, in the IM Act itself, under Schedule 1 which deals with transitional, savings and related provisions, Part 1 addresses what are described as “Transitional Provisions Relating to Interest on Money Claims”.
[87]Paragraph 1 of that Part 1 states:
1Transitional provision for civil proceedings already commenced in senior court
Despite the repeal of section 87 of the Judicature Act 1908 by section 182(4) of the Senior Courts Act 2016, that section continues to apply to every civil proceeding commenced before this clause comes into force as if section 182(4) of the Senior Courts Act 2016 and this Act had not been enacted.
[88] It is clear, therefore, that the interest provisions in s 87 of the Judicature Act 1908 apply to the present case. The Council, therefore, is entitled to interest at the statutory rate provided for in terms of s 87 of the Judicature Act 1908 from the date of payment of the $1.3 million settlement sum by the Council (24 April 2017) to the date of this judgment on the […] judgment award noted at para [82] above.
[89] That interest amount is to be calculated in terms of s 87 of the Judicature Act 1908 and to be confirmed by the Registrar of this Court. An order to this effect is now made.
Costs
[90] As to costs, the Council here seeks costs on this proceeding against Mr Crisp on a category 2B scale basis.
[91] The Council, having been entirely successful in its present claim against Mr Crisp, is entitled to the costs it seeks.
[92] An order is now made that the fourth defendant, Mr Crisp, is to pay to the Council its reasonable costs on this proceeding relating to the claim against Mr Crisp on a category 2B scale basis together with reasonable disbursements as approved by the Registrar.
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Gendall J
Solicitors:
Simpson Grierson, Wellington RVG Law, Queenstown
Copies to:
Kelly Quinn, Barrister, Bankside Chambers, Auckland Darren Crisp, Fourth Defendant
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