Southland Indoor Leisure Centre Charitable Trust v Invercargill City Council
[2014] NZHC 1439
•25 June 2014
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV 2010-425-588 [2014] NZHC 1439
BETWEEN SOUTHLAND INDOOR LEISURE
CENTRE CHARITABLE TRUST Plaintiff
AND
INVERCARGILL CITY COUNCIL First Defendant
ANTHONY STANLEY MAJOR Second Defendant
OMAHA INVESTMENTS NO. 1
LIMITED
First Third PartyMAURICE JOHN HARRIS Second Third Party
Hearing: 9 June 2014 Appearances:
No appearance by or for for Plaintiff
D J Heaney QC and K B Dillon for First Defendant
No appearance by or for Second Defendant
K Harkess for Third PartiesJudgment:
25 June 2014
JUDGMENT OF MANDER J
Introduction
[1] This is an application by the first and second third parties that causes of action in the first defendant’s statement of claim be struck out. The third parties submit that four of the five claims of action alleged are statute barred by s 393
Building Act 2004 (“the Act”), being civil proceedings relating to building work that have been brought more than 10 years after the dates of the acts or omissions on
which the proceeding is based.
SOUTHLAND INDOOR LEISURE CENTRE CHARITABLE TRUST v INVERCARGILL CITY COUNCIL & ORS [2014] NZHC 1439 [25 June 2014]
Background
[2] In 1999 the plaintiff, Southland Indoor Leisure Centre Charitable Trust (“the Trust”), was granted building consents by the first defendant, Invercargill City Council, to construct an indoor sport and leisure complex, Stadium Southland. The building consents were based on architectural plans which included structural plans prepared by a consulting engineer, Mr Major, the second defendant.
[3] During construction it became apparent that several of the steel trusses which spanned the roof of the community courts section of Stadium Southland (the “community courts trusses”) were visibly sagging. In November 1999, the Trust engaged the second third party’s firm of engineers, Harris Consulting Limited, to peer review the original design of the community courts trusses to ensure that the structure following remedial work was sound and within acceptable design standards. In December 1999, Harris Consulting Ltd, the first third party, provided a structural review report (“Structural Review”) which identified defects in the design of the trusses, concluding that they did not meet the loading requirements of the New Zealand Building Code.
[4] The consulting engineer, Mr Major, subsequently prepared a structural steel modification drawing (drawing 97139) which provided for modifications to be made to the community courts trusses. On 4 January 2000, Harris Consulting Ltd provided a producer statement – PS2 Design Review which incorporated remedial detail in respect of the modification work to the community courts trusses (“Design Review”). It also provided a letter dated 4 January 2000 which formed part of the producer statement and included the proposed remedial detail (“letter”). A producer statement was a statement that could be supplied under the Building Act 1991 (“the
1991 Act”) by or on behalf of an applicant for a building consent that work had been carried out in accordance with certain technical specifications and which could be accepted by a territorial authority as establishing compliance with the provisions of
the building code.1
1 Building Act 1991, ss 2 and 33(5).
[5] On 14 January 2000, the Council issued a building consent for the modification work to be completed in accordance with the revised design prepared by Mr Major as contained in drawing 97139. A condition of the building consent was that this design incorporated the remedial detail prepared by Harris Consulting Ltd. The building consent contained, inter alia, the following conditions:
4.Consulting engineer Mr Major to confirm in writing to council that the six community courts trusses precamber is in line with Harris Consulting letter dated 4.01.2000, and individual trusses measurements are to be included in the record.
5.Producer Statement Construction Review required from Mr Major for remedial work to the 6 Community Courts trusses.
[6] The modification work to the community courts trusses was subsequently carried out in January 2000. On 20 November 2000, the Council issued a code compliance certificate for the building consent for the community courts truss modification work. On 17 January 2001, Mr Major provided a further producer statement – construction (PS4) which certified, inter alia, that the community courts truss modification work had been generally constructed in accordance with the details shown in drawing 97139.
The events of 2006
[7] In April 2006, the Trust became aware of movement in the roofline of the stadium where the trusses spanned over the community courts. As a result, on 12
April 2006, the Trust engaged Mr Harris and his firm to review the roof structure to ensure that the building was safe in the event of snowfall on the roof. On 9 June, Mr Harris provided a report which confirmed:
That the strength of the trusses over the community courts was adequate to support the designed loads specified in the relevant codes when constructed. We have also had a look at the loads specified in AS/NZS1170 the loading code now being used. The loading changes for both wind and snow are not critical.
The collapse
[8] On 18 September 2010, Stadium Southland’s roof collapsed following a
heavy snowstorm. As a result, the Trust commenced proceedings against the
Council and the consulting engineer, alleging that the collapse of the roof was caused by the failure of the community courts trusses. In particular, the Trust claimed that the failure of the trusses was caused or contributed to by defects in the design and construction of the modification work carried out on the community courts trusses.
[9] The Council denied liability to the Trust and issued proceedings against
Mr Harris and his firm, Harris Consulting Ltd.
[10] The Council alleges that Mr Harris’s firm was engaged to provide structural engineering peer review services for the original design and redesign of the community courts roof trusses. The Structural Review of December 1999 and the Design Review and letter of 4 January 2000 provided to the Council, concluded that the redesign of the community courts trusses would comply with ultimate code loads once upgraded. In its statement of claim the Council pleads five causes of action against the first and second third parties. The five causes of action are as follows:
(a) Negligent advice: That Mr Harris and his engineering firm owed a duty of care to the Council and breached that duty of care in the advice provided in the Structural Review and Design Review and letter which the Council relied upon.
(b)Breach of Fair Trading Act 1986: The Structural Review and Design Review and letter contained statements that were misleading or deceptive and in breach of s 9 of the Fair Trading Act 1986. Compensation is sought pursuant to s 43(2)(d) of that Act.
(c) Breach of Fair Trading Act 1986: The third cause of action effectively repeats the second cause of action but relates to the report provided to the Council of 9 June 2006 which contained statements that the strength of the trusses over the community courts was adequate in the event of heavy snowfall.
(d) Concurrent tortfeasor – negligence: That the third parties owed the
Trust a duty to exercise reasonable skill and care in carrying out their
role as peer review structural engineer and providing remedial detail for a modified design in 1999/2000 and in the 9 June 2006 report.
(e) Concurrent tortfeasor – negligent advice: The advice in the Structural Review and Design Review and letter, together with the June 2006 report reviewing that design and providing an update on the adequacy of the loading on the roof, was provided in breach of the third parties’ duty of care owed to the Trust.
The application for strike out
[11] The third parties apply to strike out the Council’s claims against it insofar as the Council’s causes of action relate to the Structural Review and Design Review and letter. A claim, founded on an alleged breach of the Fair Trading Act 1986 based upon representations contained in the June 2006 report is not challenged.
[12] The strike out application is based on a submission that the Council’s third
party claims are statute barred by s 393 of the Act. That provision provides:
393 Limitation defences
(1) The Limitation Act 2010 applies to civil proceedings against any person if those proceedings arise from—
(a) building work associated with the design, construction, alteration, demolition, or removal of any building; or
(b) the performance of a function under this Act or a previous enactment relating to the construction, alteration, demolition, or removal of the building.
(2) However, no relief may be granted in respect of civil proceedings relating to building work if those proceedings are brought against a person after 10 years or more from the date of the act or omission on which the proceedings are based.
(3) For the purposes of subsection (2), the date of the act or omission is,—
(a) in the case of civil proceedings that are brought against a territorial authority, a building consent authority, a regional authority, or the chief executive in relation to the issue of a building consent or a code compliance certificate under Part
2 or a determination under Part 3, the date of issue of the
consent, certificate, or determination, as the case may be;
and
(b) in the case of civil proceedings that are brought against a person in relation to the issue of an energy work certificate, the date of the issue of the certificate.
[13] In reliance on s 393 the third parties submit:
(a) That the Council’s claims constitute civil proceedings relating to
building work; and
(b)Are brought against the third parties more than 10 years after the dates of the acts or omissions on which the proceedings are based.
Principles applicable to strike out applications
[14] The power to strike out civil proceedings is expressly conferred upon the
High Court by r 15.1 of the High Court Rules. That rule provides:
15.1 Dismissing or staying all or part of proceeding
(1) The court may strike out all or part of a pleading if it—
(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
(b) is likely to cause prejudice or delay; or
(c) is frivolous or vexatious; or
(d) is otherwise an abuse of the process of the court.
(2) If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.
(3) Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.
(4) This rule does not affect the court’s inherent jurisdiction.
[15] The threshold for a successful strike out application is a high one. The applicable principles were considered by the Court of Appeal in Attorney-General v Prince and Gardner where it was stated:2
A striking-out application proceeds on the assumption that the facts pleaded in the statement of claim are true. That is so even although they are not or may not be admitted. It is well settled that before the Court may strike out proceedings the causes of action must be so clearly untenable that they cannot possibly succeed (R Lucas and Son (Nelson Mail) Ltd v O'Brien [1978] 2 NZLR 289, 294-295; Takaro Properties Ltd (in receivership) v Rowling [1978] 2 NZLR 314, 316-317); the jurisdiction is one to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material (Gartside v Sheffield, Young & Ellis [1983] NZLR
37, 45; Electricity Corp Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641; but the fact that applications to strike out raise difficult questions of law, and
require extensive argument, does not exclude jurisdiction (Gartside v
Sheffield, Young & Ellis).
[16] Strike out applications were considered by the Supreme Court in Couch v
A-G where Elias CJ and Anderson J observed:3
It is inappropriate to strike out a claim summarily unless the court can be certain that it cannot succeed. The case must be “so certainly or clearly bad” that it should be precluded from going forward. Particular care is required in areas where the law is confused or developing. And in both X v Bedfordshire County Council and Barrett v Enfield London Borough Council liability in negligence for the exercise or non-exercise of a statutory power was identified as just such a confused or developing area of law. Lord Browne- Wilkinson in X thought it of great importance that such cases be considered on the basis of actual facts found at trial, not on hypothetical facts assumed (possibly wrongly) to be true for the purposes of the strike-out. Lord Slynn in Barrett was of the same view: the question whether it is just and reasonable to impose liability of negligence is not to be decided in the abstract for all acts or omissions of a statutory authority, but is to be decided on the basis of what is proved.
(Citations omitted)
[17] The applicable principles are succinctly summarised in McGechan on
Procedure:4
(a) Pleaded facts, whether or not admitted, are assumed to be true. This does not extend to pleaded allegations which are entirely speculative
and without foundation.
2 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267.
3 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
4 McGechan on Procedure (online looseleaf ed, Brookers) at HR15.1.02(1).
(b) The cause of action or defence must be clearly untenable.5
(c) The jurisdiction is to be exercised sparingly, and only in a clear cases.
This reflects the Court’s reluctance to terminate a claim or defence
short of trial.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law, requiring extensive argument.
(e) The Court should be particularly slow to strike out a claim in any developing area of law, perhaps particularly where a duty of care is alleged in a new situation... There is considerable authority that developments in negligence need to be based on proved rather than hypothetical facts. 6
[18] A Court should be more reluctant to allow an application in cases of a partial strike out.7 In such cases the Court should assess whether the time and expense of such an application will, overall, be a compellingly efficient use of the resources of all involved.8
[19] To successfully strike out causes of action for being statute barred, the third parties must establish that the Council’s causes of action are so clearly statute barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process. This requires the Court to be truly satisfied that the claim was commenced after the applicable period allowed for the particular cause of action. Tipping J in Murray v Morel & Co Ltd summarised the position as follows:9
I consider the proper approach, based essentially on Matai, is that in order to succeed in striking out a cause of action as statute-barred, the defendant must satisfy the court that the plaintiff's cause of action is so clearly statute-barred that the plaintiff's claim can properly be regarded as frivolous, vexatious or an abuse of process. If the defendant demonstrates that the plaintiff's proceeding was commenced after the period allowed for the particular cause
5 Couch, above n 3.
6 At [33].
7 See for example Whitman v Airways Corp of New Zealand Ltd (1994) 8 PRNZ 155.
8 See for example Apple Fields Ltd v New Zealand Apple and Pear Marketing Board HC Wellington CP35/94, 21 April 1994.
9 Murray v Morel & Co Ltd [2007] NZSC 27, [2007] 3 NZLR 721 at [33].
of action by the Limitation Act, the defendant will be entitled to an order striking out that cause of action unless the plaintiff shows that there is an arguable case for an extension or postponement which would bring the claim back within time.
First cause of action against the third parties – negligent advice
[20] The first cause of action relied upon by the council is one of negligent advice in relation to the Structural Review and the Design Review and letter. The claim clearly constitutes a civil proceeding for the purposes of s 393(2), and it is not contended otherwise. Nor is it suggested that the advice contained in those documents was provided to the Council less than 10 years since the commencement of the proceeding.
[21] Mr Heaney for the Council submitted that the Court could have no confidence on the material legitimately available to the Court on a strike out application, that the content of the advice constituted “building work” and that the so-called “longstop provision” contained in s 393 had application. In written submissions the Council contended that the 1999 report provided by the third party was supervisory and provided recommendations and parameters on proposed remedial redesign to be carried out by Mr Major. As such, it was argued that it could not be considered building work.
[22] In order for s 393(2) to have application, the proceeding must be “in relation to building work”. Section 7 of the Act defines building work as:
building work –
(a) means work—
(i) for, or in connection with, the construction, alteration, demolition, or removal of a building; and
(ii) on an allotment that is likely to affect the extent to which an existing building on that allotment complies with the building code; and
(b) includes sitework; and
(c) includes design work (relating to building work) that is design work of a kind declared by the Governor-General by Order in Council to be restricted building work for the purposes of this Act; and
(d) in Part 4, and the definition in this section of supervise, also includes design work (relating to building work) of a kind declared by the Governor-General by Order in Council to be building work for the purposes of Part 4
The term “construct” is defined in the same section as:
construct, in relation to a building, includes to design, build, erect, prefabricate, and relocate the building.
The term “design” is not defined in the Building Act 2004.
[23] The Council has pleaded that Stadium Southland was constructed between June 1999 and March 2000. During the course of its construction several of the steel community courts trusses which spanned the roof were observed to have visibly sagged. The Council has pleaded that the Trust engaged the third parties to peer review the original design of the community courts trusses and that in December
1999 its Structural Review identified defects in the design which meant the community courts trusses did not meet the loading requirements of the New Zealand Building Code. In January 2000, the third parties provided the Design Review and letter. The Council when issuing its building consent for this modification work required it to be completed in accordance with an identified modified drawing (drawing 97139) which incorporated the remedial detail prepared by the first and second third parties.
[24] On the hearing of the strike out application an issue arose as to the extent to which the Court could have regard to the documentary exhibits to the affidavits filed in support of the interlocutory application which originally included an application for summary judgment.
[25] Applications for strike out proceed on the basis of pleaded facts, whether or not admitted, which are assumed to be true. Affidavit evidence however may be received by a Court on such an application in a proper case.10 While factual issues which are genuinely in dispute will limit the reception of evidence, documents which are consistent with the pleadings and on their face uncontroversial as to their content,
can properly be received. In the course of submissions Ms Harkess for the third
10 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.
party made reference to the documentary record, in particular to the Structural Review and the Design Review and letter, in addition to the report of June 2006. Insofar as those documents provide further detail of the nature and substance of the work carried out by the third parties and the representations made by them to both the Trust and the Council, they are consistent with the Council’s pleadings. I have had regard to those documents.
[26] The third parties submit that the definition of “building work” includes design work on buildings by its inclusion as an element of the definition of construction. In Carter Holt Harvey Ltd v Genesis Power Ltd (No 8) (Carter Holt Harvey),11 Randerson J considered whether “design work” is captured by the longstop provision as it was then contained in s 91(2) of the 1991 Act. In examining the issue reference was made to the review of the legislative history of s 91(2) contained in the judgment of Glazebrook J in Klinac v Lehmann.12 It was apparent from the Parliamentary materials referred to in that decision that the intention of the
1993 amendments was to ensure that building designers obtained the same protection as other persons involved in the building process.13 While the 1991 Act did not contain any specific reference to design work in either the definition of “building work” or “construct” or “construction”, Randerson J observed that it was clear that building work associated with the design of any building was included under s 91(1) for the purposes of the Limitation Act 1950, and that since s 91(1) was subject to
subs (2) it was plain that when the expression “building work” was used in subs (2) it was intended to embrace design work in relation to any building. Subsections (1) and (2) could not sensibly be read together otherwise.
[27] Randerson J concluded that the position was more straightforward under the
2004 Building Act. Section 393(1)(a) was noted to clearly refer to building work
associated with the design of any building, and the expression “building work” in
subs (2) had to be read consistently with that.
11 Carter Holt Harvey Ltd v Genesis Power Ltd (No 8) HC Auckland CIV-2001-404-1974, 29
August 2008 [Carter Holt Harvey]..
12 Klinac v Lehmann (2002) 4 NZ ConvC 193, 547 at [13]-[26].
13 Carter Holt Harvey, above n 11, at [51].
[28] Mr Heaney submitted that whether the work carried out by the third parties was building work and in particular the type of design work that may be encompassed by s 393(2) was a question of fact. He submitted that until all the evidence was heard and the context in which the report was received that remained in issue. He referred to paragraph (c) of the definition of “building work” contained in s 7, which specifically includes design work of a kind declared by the Governor- General by Order in Council to be restricted building work for the purposes of the Act. Whether the design work in this case was of a type that was subject to such an Order in Council would in his submission need to be a fact specific enquiry dependent on the evidence called at trial.
[29] Mr Heaney did not take me to the Orders in Council to which paras 7(c) and (d) of the definition of “building work” refer. They are the Building (Definition of Restricted Building Work) Order 2011 and the Building (Design Work Declared to be Building Work) Order 2007. Neither of the orders have application to this case. The 2011 Order defines design work which constitutes restricted building work for the purposes of the Act, and the 2007 Order provides a definition of design work for the purposes of Part 4 of the Act which relates to the regulation of building practitioners.
[30] As observed by Randerson J in the Carter Holt Harvey case, from the beginning, the Act has defined the term “construct” as meaning:
… in relation to a building, includes to design, build, erect, prefabricate, and relocate the building
(Emphasis added)
It is clear that design work on buildings is incorporated in the definition of building work by its inclusion in the element of construction. The two specific types of design work identified in s 7(c) and (d) are in addition to the general design work carried out in connection with buildings. The work carried out by the third parties related to a specific building. No question arises regarding the relationship between a particular building and the work undertaken as was the case, for example, in
Deeming v EIG-ANSVAR Ltd14 which related to geotechnical reports for the design of earthworks for a planned subdivision, and the Minister of Education v Carter Holt Harvey Ltd15 which related to the quality of the manufactured cladding material supplied in respect of a number of building projects.
[31] The work carried out by the third parties was in relation to a specific building, namely Stadium Southland. Mr Heaney sought to submit that the work undertaken related to a building that had been constructed. The Council’s own amended statement of claim however pleads that Stadium Southland was constructed between June 1999 and March 2000.
[32] That the construction of the structure had progressed to the point where the community courts trusses, as originally designed, had been put in place prior to the fault becoming apparent and the subsequent involvement of the third parties, in my view, makes no difference. The building was still in a state of construction and it is not uncommon that during the course of that process there will be review and reassessment of the work done to date. That may include the design of the building or discrete parts of the structure. It would be quite artificial to suggest that because the community courts trusses had been put in place the building work in relation to that part of the stadium was complete. Clearly, it was not and I can discern no reason why, when further work was required to be undertaken in respect of that part of the building, and subsequently undertaken in purported rectification of the defects in the community courts trusses, the Act would not have application.
[33] I accept that what is “building work”, or more specifically “design work” will be a fact specific issue and will need to be assessed in each individual case. In Thomson v Christchurch City Council,16 Gendall J held:
The question of what is building work, or for that matter design work, within the meaning of the section must be a fact specific issue and entirely dependent upon an assessment of all the surrounding circumstances. At one end of the spectrum design of integral parts of a building such as elevators, staircases, lift wells, windows, would clearly come within that category.
14 Deeming v EIG-ANSVAR Ltd [2013] NZHC 955.
15 Minister of Education v Carter Holt Harvey Ltd [2014] NZHC 681.
16 Thomson v Christchurch City Council HC Christchurch CIV-2010-409-2298, 28 March 2011, at
[45].
Obviously, architectural design of a building to be constructed or altered, is building work. At the other end of the spectrum there may be products provided for use in the building, designed for a specific purpose, yet not being performed “in connection with” the design, construction, etc of the building.
[34] In that case, the Court was concerned with competing arguments regarding the interpretation and application of a manufacturer’s product specification. That type of issue however is to be contrasted with the type of design work considered by Randerson J in the Carter Holt Harvey case to which I have already referred and which was considered to be clearly covered by both the 1991 and 2004 Acts. In
reference to that case, Gendall J observed in Thomson that:17
“design work” is captured by the long stop provision as falling within the definition of building work. That will obviously be the case where the work is associated with a design of any building.
(Emphasis added)
[35] The definition of “building work” under s 7 of the Act requires work to be in connection with the construction (the design) of a building. In GPE Holdings Ltd v Tile ‘N’ Style Ltd,18 Collins J considered the term “in connection with” in the definition of “building work”. He held:
[34] The words “in connection with” have a wide meaning requiring merely a link or relationship between one thing (A) and another (B). It is not necessary, however, for there to be a causal relationship in order for (A) to be connected with (B).19
[35] It is also clear that in order for work (A) to be connected with the construction (design), alteration, demolition or removal of a building (B), the person performing (A) must have had (B) in mind. Usually this would involve, at the very least, plans and designs for the construction of (B). Any other conclusion would produce a non sequitur because (A) could not be connected with (B) if (B) did not exist at least in the form of plans and designs.
[36] Mr Heaney submitted that before determining whether the Structural Review and the subsequent Design Review and letter fall within the definition of building
work, it would be necessary to examine the evidence as to whether the work
17 At [44].
18 GPE Holdings Ltd v Tile ‘N’ Style Ltd [2014] NZHC 802.
19 Above at [34], citing Dustin v Weathertight Homes Resolution Service HC Auckland CIV-2006-
404-276, 25 May 2006; Davidson v Banks HC Auckland CIV-2006-404-6150, 23 March 2009;
Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465.
undertaken by the third parties did not constitute work relating to building method.
The Act defines “building method” as having the meaning attributed to it in s 20:
20Regulations may specify that there is only 1 means of complying with building code
(1) Regulations may be made under section 401 that specify that there is only 1 means of complying with all or any of the provisions of the building code.
(2) Without limiting subsection (1), the regulations may specify the means of compliance with the building code by requiring the use in the prescribed circumstances (if any) of all or any of the following:
(a) prescribed acceptable solutions: (b) prescribed verification methods:
(c) building methods, methods of construction, building design, or building materials (building methods or products) that have a current product certificate issued under section 269
Mr Heaney submitted that building work is not defined as including building method and sought to contrast the two statutory terms as being mutually exclusive. It was emphasised that the Design Review carried out by Mr Harris was to verify that the requirements of the building code had been met and it was in respect of this issue which he certified in the producer statement there had been compliance.
[37] In response, Ms Harkess, counsel for the third parties, submitted that the
1991 Act made no distinction between building work and building method and that the nature of the work which Mr Harris and his firm undertook should be considered against the regulatory regime in place at the time. A producer statement related to particular work in respect of a specified building which was the subject of a building consent. This is to be contrasted with s 20 of the Act which refers to prescribed acceptable solutions, verification methods, building methods, materials and products which may be specified by regulations as a means of complying with the building code but which are generic and do not relate to a particular building.
[38] The third parties’ work may have encompassed advice relating to prescribed building methods and in particular whether the methods of construction and building design used in respect of the community courts trusses complied with building code requirements. Such work however carried out in respect of a particular building, and
indeed in respect of a discrete design or construction issue, is encompassed by the statutory definition of building work, it being work for, or in connection with, the construction, alteration… of a building. Whether the work carried out by the third parties is described as being in respect of the design of the trusses or related to how the construction was to be carried out, or the building method to be used to secure compliance with the building code, the purpose of the work was to ensure the community courts trusses were fit for purpose to support the roof. Such work constituted building work within the terms of the statutory definition.
[39] The work carried out by the third parties related to a specific building. The design of the building and the methods of construction employed in the circumstances to meet the compliance requirements of this particular structure was work undertaken and advice given that was specific to the stadium. The Act has deemed work connected to actual design and construction processes for or on
specific buildings to be “building work” to which s 393(2) has application.20 I am
satisfied on the content of the pleadings and the documents upon which the cause of action is dependent that it is unarguable that the work carried out by the third parties in response to the evident failure of the steel trusses was other than building work within the meaning of that term and covered by s 393(2) of the Act.
[40] The purpose of the engagement of the third parties as consulting engineers was to identify the defects in the design and construction of the community courts trusses and provide design input into their modification or into the process by which they were to be constructed in order to meet the requirements of the New Zealand Building Code. As alleged in the Council’s amended statement of claim it was a requirement made by the Council that the remedial detail prepared by the third parties be incorporated into the design prepared by Mr Major contained in the structural steel modification drawing (drawing 97139). It was that design input which was the basis on which the modifications were made to the community court trusses and a condition precedent to obtaining consent approval.
[41] It follows that the Council’s first cause of action against both third parties,
based upon alleged negligent advice provided in December 1999 and January 2000
20 Minister of Education, above n 16, at [119].
and which is discrete to those acts or omissions, has been brought after the elapse of
10 years. Upon application of s 393(2) no relief can be granted in respect of that claim relating as it does to building work. The cause of action is therefore statute barred.
Fourth and fifth causes of action against the third parties - negligence and negligent advice – concurrent tortfeasor
[42] The Council alleges that the third parties owed the Trust a duty to exercise reasonable skill and care in carrying out its role as peer review structural engineer and providing remedial detail for a modified design and subsequently in the provision of the 9 June 2006 report. The Council alleges that the third parties breached their duty of care in carrying out this role and that the third parties have caused or contributed to the Trust’s losses. As a result of these breaches it is alleged the stadium was constructed with a roof unable to deal with the wind and snow loads it was likely to experience.
[43] Similarly, it is alleged that the third parties provided negligent advice to the Trust and that, in reliance upon the third parties’ advice, the Trust required the consulting engineer to modify the design of the community court trusses in accordance with the third parties’ advice. This design modification was in breach of the standards and provisions of the Building Act. Further, that the third parties owed a duty of care to the Trust to ensure it took reasonable skill and care in providing the
9 June 2006 report which they knew, or ought to have known, would be relied upon by the Trust. The Council alleges the third parties breached this duty of care when concluding that the community court trusses complied with the building code and the roof was safe in heavy snowfall.
[44] As a consequence the Council seeks contribution and/or indemnity from the third parties as tortfeasors, either under the Law Reform Act 1936 or in equity.
[45] No issue arises that this type of contribution claim constitutes a civil proceeding for the purposes of s 393(2) or its predecessor, s 91(2) of the 1991 Act. In the context of a claim for contribution pursuant to s 17(1)(c) of the Law Reform
Act 1936, Courtenay J in Dustin v Weathertight Homes Resolution Service,21
observed:
[29] …Whether a cause of action arises at common law, by statute or by virtue of contract, its nature as a civil proceeding does not alter. It is perfectly clear that a claim for contribution under s 17(1)(c) is a civil proceeding.
…
[31] While the immediate subject matter of the ACC’s claim for contribution is its own liability, rather than the building work itself, its liability does, in turn, relate to the building work as that is defined. It is well recognised that the phrase “…in connection with” has a very wide meaning and requires merely a relationship between one thing and another: Drayton
& Ors v Martin & Ors (1996) 9 ANZ Insurance Cases 61-322 at 76,597. In my view it easily accommodates a claim for contribution that is based on the
claimant’s own liability for building work. I therefore consider that the
ACC’s claim must be viewed as a civil claim relating to building work for
the purposes of s 91(2) Building Act 1991.
[46] The issue was further examined by Andrews J in Perpetual Trust Ltd v Mainzeal Property and Construction Ltd.22 The Court observed that Courtney J’s approach to the application of s 91(2) of the 1991 Act to contribution claims had been followed in a succession of High Court cases.23 In Body Corporate 169791, Lang J considered that Parliament had carefully chosen the wording of s 393(2) in order to capture every form of civil proceeding relating to building work including contribution proceedings and considered that this conclusion was supported by strong policy considerations.24 As a result, the Court reached the same conclusion as had Courtney J in Dustin that s 393(2) of the Building Act overrides s 17(1)(c) of the Law Reform Act and notably s 14 of the Limitation Act.25 Lang J saw no justification for distinguishing between a primary claim by a plaintiff against a defendant and a claim for contribution by a defendant against a concurrent tortfeasor.26 It is now well settled that s 393(2) applies to causes of action for
contribution and it was not submitted otherwise.
21 Dustin, above n 19.
22 Perpetual Trust Ltd v Mainzeal Property & Construction Ltd & Ors [2012] NZHC 3404.
23 At [33], citing Carter Holt Harvey Ltd v Genesis Power Ltd (No. 8) HC Auckland CIV-2001-
404-1974, 29 August 2008; Davidson v Banks, above n 19; Body Corporate 169791 v Auckland
City Council HC Auckland CIV-2004-404-5225, 17 August 2010.
24 Body Corporate 169791, above n 23, at [41]-[42].
25 At [56].
26 At [42].
[47] The Council argued that the 1999 Structural Review and the 2000 Design
Review and letter constituted a continuing act or omission which culminated in the
2006 report. An analogy was sought to be drawn with the liability that attaches to a local authority from the issue of a code compliance certificate based on a Council’s earlier work and inspections during the course of construction. In reliance on Body Corporate 188529 v North Shore City Council,27 Montgomery v Auckland Council28 and North Shore City Council v Attorney-General,29 it was submitted that the earlier acts and omissions by the third parties was akin to earlier inadequate inspections or
unsatisfactory procedures by a Council which wrongly informs the decision to issue a code compliance certificate and resulted in a continuing uncorrected representation by the third parties that the building was safe.
[48] Having regard to the conclusions I have reached in respect of the fourth and fifth causes of action, it is not necessary for me to determine this question, however it appears to me there is force in Ms Harkness’ submission that continuing duties cannot be created retrospectively as a result of a further event. The alleged continuing duty must have been an ongoing one from the outset and accepted as such until discharged. As has been pleaded in respect of the first two causes of action, the
1999 Structural Review and the 2000 Design Review and letter gave rise to discrete obligations and cannot be converted to a continuing or ongoing duty only because new instructions were received six years later albeit in relation to the same building and a similar design concern.
[49] I also agree that the circumstances in which a council issues a code compliance certificate are distinguishable from the present situation. A council’s obligation of monitoring regulatory compliance is a continuous process which culminates in its decision to issue the certificate. That decision is dependent upon and draws on its earlier inspections and its inspector’s previous assessment of the quality and standard of work undertaken and completed at a particular stage of the building’s construction. The nature of that process is reflected in s 393(3)(a) of the
Act which provides for the purposes of subsection (2), that the relevant date of the
27 Body Corporate 188529 v North Shore City Council [2008] 3 NZLR 479 (HC).
28 Montgomery v Auckland Council [2012] NZHC 1732.
29 North Shore City Council v Attorney-General [2012] NZSC 49, [2012] 3 NZLR 341.
act or omission in the case of civil proceedings brought against an authority in relation to the issue of a code compliance certificate is the issue of the certificate.
[50] The difficulty for the applicant third parties is that the causes of action against the third parties as concurrent tortfeasors also rest on the alleged acts and omissions that are said to have occurred in 2006. Particulars are pleaded in relation to the 1999 Structural Review and the 2000 Design Review and letter as part of the narrative relating to the advice provided in 2006 regarding the redesign of the community courts trusses and their compliance with ultimate code loads once upgraded.
[51] Ms Harkess submitted that the Council has conflated the events of 1999/2000 and 2006 into the same cause of action. That may be so, however it is not clear on the available facts disclosed in the pleadings, nor from the face of the documents referred to therein, the extent to which the design work undertaken by the third party in 1999/2000 fed into or was the basis of the report prepared in 2006.
[52] There may be a potential argument that the 2006 advice can be considered as giving rise to a liability in isolation to the work completed in 1999/2000 and that alleged negligence relating to the earlier work by the third parties can be severed from the 2006 report. There may be evidence at trial which will clarify whether, or the extent to which, the 2006 work was undertaken independently from the third parties earlier involvement with the building. I however am not in a position to unpick what will ultimately be an issue for the trier of fact, nor should I attempt to do so on a strike out application.
[53] Where the Council has pleaded a discrete cause of action based upon acts and/or omissions in 1999/2000 which constitutes building work for the purposes of s 393(2), the issue of limitation can be examined in relation to a particularised point in time. While it is open to a Court under r 15.1(1) to strike out part of a pleading, it has always been apparent that any review of the conduct and advice of the third parties in 2006 will inevitably necessitate an examination of the events of late 1999 and early 2000. The claims against the third parties as joint tortfeasors include, and predominantly so on my reading of the pleadings, breaches of duty arising out of its
conduct and advice in 2006. It will however be unavoidable that the third parties earlier involvement will have to be the subject of evidence at trial. As a result I see no prejudice to the third parties in terms of preparation for trial in keeping the fourth and fifth causes of actions intact as presently pleaded.
[54] It follows that I am not satisfied the plaintiff’s cause of action seeking contribution from the third parties as joint tortfeasors is so clearly statute barred that the plaintiff’s claim can properly be regarded as frivolous, vexatious or an abuse of process. It may be that upon the hearing of this matter those parts of the Council’s claim in relation to these causes of action can be clearly demarcated and s 393(2) applied to that part of the pleading which relates to the third parties building work which may be statute barred.
[55] My reluctance to strike out those parts of the claim that may be reliant on the events of late 1999/early 2000 is born out of a reluctance to do so without hearing the evidence, primarily the extent to which the third parties actions and advice in
2006 was based on their earlier design work, and in the knowledge that, even if those parts of the claims for contribution which can be discerned as relying on acts and omissions outside the 10 year period, evidence relating to those events will in any event have to be adduced at trial. My view in this regard is without prejudice to the merit of any argument based on s 393(2) which might be sought to be made by the third parties at trial.
Second cause of action against the third parties – Fair Trading Act 1986
[56] The Council claims that the Structural Review and the Design Review and letter provided to it by the third parties was misleading or deceptive, or likely to mislead or deceive, in breach of s 9 of the Fair Trading Act 1986 (“the FTA”). A further cause of action based on s 9 of the FTA relates to the provision of the report in 2006 reviewing the roof structure and is not the subject of any application.
[57] The applicant third parties submit that there is no basis for excluding statutory causes of action under the FTA from the effect of s 393(2). In support of
that proposition, the observation made by Courtney J in Dustin30 that whether a cause of action arises at common law, by statute or by virtue of contract, does not alter its nature as a civil proceeding. Ms Harkess also referred to the observation of the Court of Appeal in Gedye v South in relation to s 91(2) of the 1991 Act, “that the expression of s 91(2) is cause of action neutral.” 31
[58] The Court in Gedye, while expressing the need for caution when applyng the observations of its earlier decision in Johnson v Watson, made in response to an argument that fraudulent concealment of faulty building work postponed the commencement of the 10 year longstop period, agreed with the following statement
from that case:32
…Subsection (2) [of s 91] is in this respect a statutory bar which is self- contained, both as to the commencement of the period allowed and its duration. In short, s 91(2) means exactly what it says. A plaintiff cannot in any circumstances sue more than ten years after the act or omission on which the proceedings are based, if the case involves, as this one clearly does, building work associated with the construction of a building.
[59] Ms Dillon on behalf of the Council sought to submit that the term “civil proceedings” in s 393(2) was limited to claims for negligence or contribution claims arising out of negligence. By reference to Klinac v Lehmann33 and Gedye v South34 it was submitted that s 393(2) does not apply to a cause of action in contract as those cases confirmed that the act or omission is the breach of warranty in the contract. While it is correct that the relevant identified act or omission for contractual claims
will be the breach of contract or misrepresentation and not the prior faulty building work, s 393(2) still applies to those acts or omissions; contractual claims are not excluded.
[60] There is no direct authority on whether s 393(2) includes civil proceedings pleading causes of action based on breaches of the FTA. On its face the section
appears to apply. In Perpetual Trust Ltd v Mainzeal Property and Construction
30 Dustin, above n 19 at [29]; set out at [45] of this judgment.
31 Gedye v South [2010] NZCA 207, [2010] 3 NZLR 271 at [48].
32 At [45]-[46], citing Johnson v Watson [2003] 1 NZLR 626 (CA) at [8].
33 Klinac v Lehmann, above n 12.
34 Gedye, above n 31.
Ltd,35 Andrews J, after referring to a passage from the second reading of the
Building Act 1991 regarding the 10 year longstop provision observed:
[45] It is clear from the speech just cited that Parliament’s intention was that the 10 year longstop would apply to all claims against people in the construction industry. No distinction was made as to who was to make such claims, or in which form; that is, whether it was claims by owners against building professionals, or cross-claims as between building professionals. The intention was that building professionals should be able to obtain insurance cover, and such cover is required in respect of cross-claims between professionals as much as it is for claims by owners against building professionals.
(Emphasis added)
[61] The learned Judge then cited with approval Lang J’s conclusion in Body Corporate 169791 and adopted the following passage from His Honour’s reasoning:36
I consider that Parliament has worded s 91(2) [of the Building Act 1991] and s 393(2) [of the Building Act 2004] carefully. In using the phrase “civil proceedings”, it has endeavoured to capture every form of civil proceeding regardless of its source or makeup. Similarly, in using the words “relating to building work” Parliament has attempted to capture every civil proceeding that arises out of building work as that term is defined in s 2 of the Act. If Parliament had intended s 91(2) or s 393(2) to apply only to claims between a plaintiff and a defendant, it would have used wording that would have made that fact clear.
That conclusion is supported by powerful policy considerations. The enactment of s 91(2) and s 393(2) signalled that Parliament intended that civil proceedings relating to building work were to be subject to a 10 year longstop period. That policy decision was taken in the interests of achieving a higher goal, and its implementation has necessarily been at the expense of some claims that would otherwise have been valid. I see no justification for distinguishing in this context between a primary claim by a plaintiff against a defendant and a claim for contribution by a defendant against a concurrent tortfeasor.
(Emphasis added)
[62] The observations of Andrews and Lang JJ were made in the context of the application of the longstop provision to claims for contribution by a defendant
against a concurrent tortfeasor. The policy reasoning however in support of a wide
35 Perpetual Trust Ltd, above n 22.
36 At [46], citing Body Corporate 169791, above n 23, at [41]-[42].
application of the longstop provision to all civil proceedings, including those arising out of statute are equally applicable.
[63] The Council argued that the FTA prescribes its own limitation period and that this specific provision was intended to govern the issue. Reference was made to s 43A of the FTA which was inserted into the Act as from 18 December 2013 by s 32 of the Fair Trading Amendment Act 2013. Its predecessor, s 43(5) was not significantly different. Both provide that a person may apply to a Court for an order for compensation for a breach of s 9 of the FTA within three years after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered. Ms Dillon argued that this limitation provision which is part of a comprehensive statutory framework applies to claims based on s 9 notwithstanding that such a proceeding may relate to building work.
[64] Ms Dillon submitted s 33 of the Limitation Act 1950 reinforces the Council’s position that the FTA provides the applicable limitation period in respect of orders sought under that Act. Section 33 provides that the Limitation Act 1950 shall not apply to an action for which a period of limitation is prescribed by another enactment. The Council argued that s 33 of the 1950 Act gave pre-eminence to a period of limitation specifically prescribed in another enactment, here the FTA.
[65] The application of s 33 however only takes the Council so far. Section
393(1) of the Act recognises the application of the Limitation Act 2010 (which by application of s 59 of the 2010 Act provides for the continued application of s 33 of the 1950 Act) to civil proceedings in respect of matters with which the Act is concerned. The argument made by the Council is circular because s 393(2) provides that, notwithstanding the application of the Limitation Act to a civil proceeding arising from building work, no relief can be granted in respect of such proceedings after 10 years or more from the date of the act or omission. Furthermore, s 50 of the FTA provides:
50 Saving of other laws
(1) Nothing in this Act limits or affects the operation of any other Act.
(2) Nothing in this Act limits or affects any liability that any person may incur under any rule of law or enactment other than this Act.
(3) However, subsection (1) does not apply in relation to any provision in Part 4A that limits or affects the operation of the Sale of Goods Act 1908 or the Contractual Remedies Act 1979.
[66] Section 50 ensures that, notwithstanding the creation of new statutory bases for liability, contractual, tortious and other existing sources of liability are not affected. Equally, the provision contemplates the potential application of other legislation to a case which may involve the FTA and that the legislation is not to limit or affect the operation of that other legislation. Section 393(2) applies without restriction to civil proceedings which relate to building work. That category of case concerning a particular activity which is the subject of statutory definition is not otherwise qualified in any other way.
[67] As was submitted on behalf of the third parties by Ms Harkess and as observed by Courtney J in Dustin, it is an error to focus on the statutory nature of the cause of action because whether the cause of action arises at common law, by statute or by virtue of contract, by its nature the suit or action remains a civil proceeding. Parliament intended the provision to have wide application across the subject field. Its application was not intended to be determined by the legal footing or basis on which a party may choose to sue a building professional but by the statutory definition of the activity to which the limitation rule had application, namely “building work”.
[68] When this proposition is tested against other considerations the same result is reached, that s 91(2) and its successor s 393(2) are cause of action neutral. The policy reasons that sit behind the enactment of the longstop provision are equally applicable to civil proceedings relating to building work brought under s 9 of the FTA as for other causes of action. In particular, the need to curb the potentially temporally unlimited liability of those involved in the construction industry which was considered undesirable, based as it often was on the reasonable discovery test
for a claim in negligence. The longstop provision provided a balance between the interests of homeowners and those involved in the construction industry by setting a limitation period which provided a reasonable time for building faults to become apparent but limited the period during which building professionals remained liable. It was considered that the longstop provision would have benefits for builders and others involved in the construction industry, including architects and engineers who would more readily be able to obtain professional indemnity insurance at reasonable cost and would be an incentive to have proper cover to the benefit of the consumer
[69] The application of the longstop provision may not produce even results as is illustrated by its application to civil proceedings when based in contract, but in my view the intent of the legislation and policy considerations that sit behind its enactment are equally applicable to actions based on breaches of s 9 of the FTA. The purpose and effect of the Building Act longstop would be considerably undermined if claims based on historic building faults could be the subject of claims under the FTA because loss or damage has only relatively recently been discovered.
[70] While I accept the purpose of the FTA is to protect consumers and prohibit unfair conduct and practices in relation to trade, there is no reason to conclude the effectiveness of that legislation would be undermined by the application of the prohibition contained in s 393(2) to s 9 proceedings relating to building work. It is to be noted that the FTA provision limits the time for applying for an order for compensation to three years from the date the loss or damage was reasonably discoverable. That is less than provided for under the Limitation Act 1950, and the balance sought to be struck by the legislature in providing a 10 year longstop for civil proceedings relating to building work might be thought more favourable in the context of a s 9 claim under the FTA.
[71] Section 393(2) prohibits the granting of relief in respect of acts or omissions more than 10 years from the date of the proceedings notwithstanding the timing of the discovery of the loss or damage. The relevant section in the FTA will limit applications for compensation to a three year window from the time of reasonable discovery. This rule will continue to govern the limitation period for proceedings based on s 9 involving building work. It is only where the effect of that provision
would be inconsistent with s 393(2) that the longstop provision will trigger to prohibit a claim that relates to an act or omission of over 10 years. Section 393(2) does not extend the time period which commences when damage or loss is discovered or ought reasonably to have been discovered. The periods prescribed in the Limitation Acts and the FTA continue to apply. The effect of the longstop provision however is to place an overarching limit on liability based on when the act or omission actually occurred rather than when it was reasonably discoverable.
[72] Under the FTA the limitation period starts to run from when a plaintiff discovers (or ought reasonably to have discovered) that loss or damage has occurred as a result of a probable contravention by the defendant.37 The core policy reasons for the enactment of the longstop provision in the Building Act have equal application to a cause of action based on the FTA. If the statutory heads of liability which are provided for by that legislation are to fall outside the ambit of the
provision contained in s 393(2) of the Act, it would represent a not insignificant gap in the policy framework that sits behind the longstop provision. This could not have been Parliament’s intention, and the use by the legislature of the wide and encompassing term civil proceedings means that the limitation defence was designed to have comprehensive application subject only to the requirement that the civil proceeding related to building work as defined in the statute.
[73] I have concluded therefore that the Council’s second cause of action against both third parties based on breaches of s 9 of the FTA are statute barred under s 393(2) of the Act.
Result
[74] I make the following orders:
(a) The first causes of action against the first and second third parties based on a claim of negligent advice in relation to the Structural
Review and the Design Review and letter are struck out.
37 Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 at
[39].
(b)The second causes of action against the first and second third parties based on breach of the Fair Trading Act 1986 in relation to the Structural Review and the Design Review and letter are struck out.
(c) The application to strike out the fourth and fifth causes of action against the first and second third parties is dismissed.
Costs
[75] Costs are reserved. The third parties have been partially successful. The parties should confer on the question of costs. In the absence of agreement, counsel are to exchange and file memoranda not exceeding five pages within 15 working day of the date of this judgment.
Solicitors:
Heaney & Partners, Auckland
McElroys Litigation Lawyers, Auckland
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